-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TAC7ukAKs7oP2G1IiEsCIEaJoqtJ5QpSSRppDMvO6CEg7w2TRPSw1BgFxAh/FCL0 67gpC1N3dJ81DYl8f1brgQ== 0000950124-01-500550.txt : 20010430 0000950124-01-500550.hdr.sgml : 20010430 ACCESSION NUMBER: 0000950124-01-500550 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010401 FILED AS OF DATE: 20010427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRIGGS & STRATTON CORP CENTRAL INDEX KEY: 0000014195 STANDARD INDUSTRIAL CLASSIFICATION: ENGINES & TURBINES [3510] IRS NUMBER: 390182330 STATE OF INCORPORATION: WI FISCAL YEAR END: 0627 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01370 FILM NUMBER: 1612693 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 c61929e10-q.txt QUARTERLY REPORT 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 April 1, 2001 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) Wisconsin 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 April 23, 2001 - -------------------------------------------------------------------------------- COMMON STOCK, par value $0.01 per share 21,598,983 Shares 1 2 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES INDEX
Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Condensed Balance Sheets - April 1, 2001 and July 2, 2000 3 Consolidated Condensed Statements of Income - Three Months and Nine Months ended April 1, 2001 and March 26, 2000 5 Consolidated Condensed Statements of Cash Flow - Nine Months ended April 1, 2001 and March 26, 2000 6 Notes to Consolidated Condensed Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13 Signatures 13
2 3 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands)
ASSETS ------ April 1, July 2, 2001 2000 ------------ ----------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 30,126 $ 16,989 Accounts receivable, net 386,617 140,097 Inventories - Finished products and parts 224,379 181,800 Work in process 65,635 70,908 Raw materials 4,887 5,066 ----------- ----------- Total inventories 294,901 257,774 Future income tax benefits 41,296 39,138 Prepaid expenses and other current assets 20,026 17,999 ----------- ----------- Total current assets 772,966 471,997 ----------- ----------- OTHER ASSETS: Investments 49,631 50,228 Prepaid pension 27,018 5,506 Capitalized software 6,808 6,934 ----------- ----------- Total other assets 83,457 62,668 ----------- ----------- PLANT AND EQUIPMENT: Cost 863,549 838,655 Less accumulated depreciation 464,031 443,075 ----------- ----------- Total plant and equipment, net 399,518 395,580 ----------- ----------- $ 1,255,941 $ 930,245 =========== ===========
The accompanying notes are an integral part of these statements. 3 4 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Continued) (In thousands)
LIABILITIES & SHAREHOLDERS' INVESTMENT -------------------------------------- April 1, July 2, 2001 2000 ------------ ------------ (Unaudited) CURRENT LIABILITIES: Accounts payable $ 106,030 $ 117,556 Domestic notes payable 336,770 48,809 Foreign loans 13,908 13,356 Accrued liabilities 132,242 128,438 Dividends payable 6,696 - Federal and state income taxes 17,099 4,619 ----------- ----------- Total current liabilities 612,745 312,778 ----------- ----------- OTHER LIABILITIES: Deferred revenue on sale of plant and equipment 15,574 15,679 Deferred income tax liability 12,226 4,011 Accrued pension cost 12,557 11,428 Accrued employee benefits 13,180 12,607 Accrued postretirement health care obligation 65,584 65,765 Long-term debt 98,666 98,512 ----------- ----------- Total other liabilities 217,787 208,002 ----------- ----------- SHAREHOLDERS' INVESTMENT: Common stock- Authorized 60,000 shares, $.01 par value, Issued 28,927 shares 289 289 Additional paid-in capital 36,043 36,478 Retained earnings 745,421 721,980 Accumulated other comprehensive loss (5,690) (3,931) Unearned compensation on restricted stock (331) (226) Treasury stock at cost, 7,328 and 7,181 shares, respectively (350,323) (345,125) ----------- ----------- Total shareholders' investment 425,409 409,465 ----------- ----------- $ 1,255,941 $ 930,245 =========== ===========
The accompanying notes are an integral part of these statements. 4 5 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited)
Three Months Ended Nine Months Ended --------------------- -------------------- Apr. 01 Mar. 26 Apr. 01 Mar. 26 2001 2000 2001 2000 --------- --------- --------- --------- NET SALES $ 430,221 $ 468,678 $ 978,857 $1,189,849 COST OF GOODS SOLD 343,826 366,838 797,058 932,904 --------- --------- --------- ---------- Gross profit on sales 86,395 101,840 181,799 256,945 ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 33,649 33,285 100,017 96,121 --------- --------- --------- ---------- Income from operations 52,746 68,555 81,782 160,824 INTEREST EXPENSE (8,804) (6,816) (21,689) (15,151) GAIN ON DISPOSITION OF FOUNDRY ASSETS - - - 16,545 OTHER INCOME, net 3,497 5,027 8,970 10,645 --------- --------- --------- ---------- Income before provision for income taxes 47,439 66,766 69,063 172,863 PROVISION FOR INCOME TAXES 17,550 24,710 25,550 63,960 --------- --------- --------- ---------- NET INCOME $ 29,889 $ 42,056 $ 43,513 $ 108,903 ========= ========= ========= ========== EARNINGS PER SHARE DATA - Average shares outstanding 21,599 22,842 21,600 23,021 ====== ====== ====== ====== Basic earnings per share $ 1.38 $ 1.84 $ 2.01 $ 4.73 ====== ====== ====== ====== Diluted average shares outstanding 21,612 22,866 21,614 23,104 ====== ====== ====== ====== Diluted earnings per share $ 1.38 $ 1.84 $ 2.01 $ 4.71 ====== ====== ====== ====== CASH DIVIDENDS PER SHARE $ 0.31 $ 0.30 $ 0.93 $ 0.90 ====== ====== ====== ======
The accompanying notes are an integral part of these statements. 5 6 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (In thousands) (Unaudited)
Nine Months Ended ---------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Apr. 01, 2001 Mar. 26, 2000 ------------- ------------- Net income $ 43,513 $ 108,903 Adjustments to reconcile net income to net cash used for operating activities - Depreciation and amortization 41,685 38,158 Equity in earnings of unconsolidated affiliates (5,092) (8,209) Loss (gain) on disposition of plant and equipment 371 (16,271) Increase in prepaid pension (21,512) (9,223) Provision (credit) for deferred income taxes 6,611 (4,062) Change in operating assets and liabilities - Increase in accounts receivable (249,365) (239,750) Increase in inventories (37,128) (103,852) Decrease (increase) in prepaid expenses and other current assets 2,341 (1,928) Increase in accounts payable and accrued liabilities 12,457 57,160 Other, net 1,571 (177) ----------- ----------- Net cash used in operating activities (204,548) (179,251) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to plant and equipment (48,645) (53,861) Proceeds received on disposition of plant and equipment 2,770 23,882 Other, net 2,933 5,141 ----------- ----------- Net cash used in investing activities (42,942) (24,838) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings on loans and notes payable 288,513 216,957 Dividends (20,072) (20,683) Purchase of common stock for treasury (6,118) (43,188) Proceeds from exercise of stock options 275 5,561 ----------- ----------- Net cash provided by financing activities 262,598 158,647 ----------- ----------- EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,971) (1,559) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13,137 (47,001) CASH AND CASH EQUIVALENTS, beginning 16,989 60,806 ----------- ----------- CASH AND CASH EQUIVALENTS, ending $ 30,126 $ 13,805 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 21,362 $ 16,217 =========== =========== Income taxes paid $ 6,574 $ 58,657 =========== ===========
The accompanying notes are an integral part of these statements. 6 7 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. All of these adjustments are of a normal recurring nature. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto which were included in the Company's latest Annual Report on Form 10-K. Financial Accounting Standard No. 130, "Reporting Comprehensive Income", requires the reporting of comprehensive income in addition to net income from operations. Comprehensive income is a more inclusive financial reporting method that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Total comprehensive income is as follows (in thousands):
Three Months Ended Nine Months Ended ------------------ --------------------- Apr. 1, Mar. 26, Apr. 1, Mar. 26, 2001 2000 2001 2000 ---------- ---------- ---------- ------------ Net income $ 29,889 $ 42,056 $ 43,513 $ 108,903 Unrealized (loss)gain on marketable securities (66) 1,602 (866) 2,755 Foreign currency translation adjustments (1,092) (1,024) (2,082) (1,656) Gain on derivative instruments 2,945 - 1,189 - ---------- ---------- ---------- ------------ Total comprehensive income $ 31,676 $ 42,634 $ 41,754 $ 110,002 ========== ========== ========== ============
The components of Accumulated Other Comprehensive Loss are as follows (in thousands):
Apr. 1, July 2, 2001 2000 --------- --------- Unrealized (loss)gain on marketable securities $ (672) $ 194 Cumulative translation adjustments (6,207) (4,125) Gain on derivative instruments 1,189 - --------- --------- Accumulated other comprehensive loss $ (5,690) $ (3,931) ========= =========
At the beginning of the fiscal first quarter, the Company adopted Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). This statement requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Any changes in fair value of these instruments are recorded in the income statement or other comprehensive income. The impact of adopting FAS 133 on Accumulated Other Comprehensive Loss resulted in a loss of $15 thousand. For both the quarter and the nine months, the Company reclassified derivative gains of $2.5 million to the income statement. The cumulative effect of adopting FAS 133 on the results of operations was immaterial. 7 8 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES The Company enters into derivative contracts designated as cash flow hedges to manage its foreign currency exposures. These instruments generally do not have a maturity of more than thirteen months. During the nine months, there were no derivative instruments that were deemed to be ineffective. The amounts included in Accumulated Other Comprehensive Loss will be reclassified into income when the forecasted transaction occurs, generally within the next twelve months. These forecasted transactions represent the exporting of products for which the Company will receive foreign currency and the importing of products for which the Company will be required to pay in a foreign currency. In September 2000, the Emerging Issues Task Force (EITF) issued EITF Abstract No. 00-10 "Accounting for Shipping and Handling Fees and Costs". EITF No. 00-10 prescribes guidance regarding the income statement classification of costs incurred for shipping and handling fees and costs. This guidance requires shipping fees to be recognized in revenue and shipping costs to be recognized in cost of sales. This statement is to be effective during the fourth quarter of fiscal 2001. The Company will reclassify shipping fee revenue out of cost of sales, where it currently is classified as a reduction of shipping costs, and into revenue. In January 2001, EITF Abstract No. 00-22 "Accounting for `Points' and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to be Delivered in the Future" was issued. EITF No. 00-22 prescribes guidance requiring certain rebate offers and free products that are delivered subsequent to a single exchange transaction to be recognized when incurred, and reported as a reduction of revenue. The adoption of EITF No. 00-22 will not impact the results of operations because the Company's past and current accounting policy is to report such costs as reductions of revenue. The effective dates of EITF No. 00-10 and EITF No. 00-22 are June 30, 2001. The Company does not believe that the adoption of EITF No. 00-10 and EITF No. 00-22 will have a material effect on the results of operations of the Company. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of the Company's financial condition and results of operations for the periods included in the accompanying consolidated condensed financial statements: RESULTS OF OPERATIONS SALES Net sales for the third fiscal quarter totaled $430 million, a decrease of $38 million or 8% compared to the same period of the preceding year. A major portion of the decrease was the result of an unfavorable mix change in engines sold of $18 million. Sales of small horsepower engines remained about the same between comparable periods but fewer larger horsepower engines were sold. Larger engines are used primarily on riding mower equipment. There appears to be adequate inventory of riding equipment at original equipment manufacturers and at retail to handle this season's anticipated demand; therefore, fewer of these engines have been shipped this quarter. Sales declined $10 million between years due to lower shipments of service parts and replacement engines as the Company's distributors have adequate stocks for the upcoming repair season and are controlling their inventory levels. The impact of a weaker Euro compared to fiscal 2000 caused revenues to be $6 million lower than last year. 8 9 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES Net sales for the nine months totaled $979 million, a decrease of $211 million or 18% compared to the first nine months of the prior year. This decline resulted from an unfavorable mix change in engines sold of $93 million, a 7% decrease in engine unit sales amounting to $80 million, $21 million due to the weak Euro, and lower service parts and replacement engines sales of $18 million. The unfavorable mix and volume decrease were caused by the lower sales of larger horsepower units for riding mowers as described above and lower sales of engines for generator applications. The entire generator market has been weak due to excess inventories left over from Y2K buildup. GROSS PROFIT MARGIN The gross profit rate decreased to 20% in the current quarter from 22% in the preceding year's third quarter. The major reasons for the decrease were a 12% decrease in engine unit production resulting in $7 million of lower absorption and $6 million due to the weak Euro. Production volumes were lowered to address the decreased unit sales and to control the level of the fiscal year-end finished goods inventory. Offsetting the reduction in gross profit were lower costs in labor benefits resulting from higher pension income of $4 million and lower profit sharing expenses of $3 million. The gross profit rate for the nine-month period decreased to 19% in the current year from 22% in the preceding year. This decrease resulted primarily from the same factors discussed above for the quarter. The impact of the Euro was $21 million of the decrease and an 8% decrease in production volume created $15 million of lower spending efficiencies and $12 million of lower absorption. These decreases were offset by a favorable impact of $10 million of additional pension income and $6 million of lower profit sharing expenses. ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES The engineering, selling and administrative expenses remained the same between the third fiscal quarters of 2001 and 2000. Although expenses were similar in total, there was an increase of about $5 million due to planned expansions of staff and expenditures for business development and introduction of new product. Offsetting these increases were lower costs in labor benefits resulting from lower profit sharing expenses of $4 million and an additional $1 million of pension income. The $4 million or 4% increase for the comparative nine-month periods was due primarily to the same factors discussed above for the quarter. This reflects approximately $13 million for additional manpower and expenditures relating to new product and business development offset by $7 million of lower profit sharing costs and an additional $3 million of pension income. INTEREST EXPENSE Interest expense increased 29% or $2 million between years for the third quarter and 43% or $7 million between years for nine months. These increases were the result of the Company's higher level of short-term borrowings to fund increased seasonal working capital needs. 9 10 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES GAIN ON DISPOSITION OF FOUNDRY ASSETS At the end of August 1999, the Company contributed its two ductile iron foundries to Metal Technologies Holding Company, Inc.,(MTHC), in exchange for $24 million in cash and $45 million aggregate par value convertible preferred stock. The provisions of the preferred stock include a 15% cumulative dividend and conversion rights into a minimum of 31% of MTHC common stock. Pursuant to Emerging Issues Task Force Abstract No. 86-29, the Company considered this contribution to be a monetary transaction, given the significant amount of cash received, and recorded the consideration received at fair value. The preferred stock received was determined to have a fair value of $22 million based on provisions of the stock and the prevailing market returns for similar investments, estimated to be 30%, as of the date of the transaction. PROVISION FOR INCOME TAXES The effective tax rate used in both the third quarter and nine-month periods for the current year was 37%. This is management's estimate of what the rate will be for the entire 2001 fiscal year. Last year's rate was also 37% in both periods. PROPOSED GENERAC PORTABLE PRODUCTS, INC., ACQUISITION The Company announced on March 1, 2001, that it had signed a letter of intent to acquire Generac Portable Products, Inc., (Generac), of Jefferson, Wisconsin, for $55 million cash and subject to approximately $210 million of outstanding Generac debt. On March 22, 2001, the Company signed a definitive agreement to acquire Generac on terms consistent with the letter of intent previously announced. Generac is a leading designer, manufacturer and marketer of engine-powered products. Generac's two principal product lines are portable generators and pressure washers. The acquisition is slated to close in the fourth quarter of fiscal 2001 and the Company expects to fund it with debt financing. LIQUIDITY AND CAPITAL RESOURCES Cash flows used in operating activities for the nine-month periods of fiscal 2001 and fiscal 2000 were $205 million and $179 million, respectively, a $25 million increase in requirements between the years. The fiscal 2001 cash flow from operating activities reflects decreased net income of $65 million, including lower gains on the disposition of plant and equipment of $17 million. The lower gains on disposition of plant and equipment were because fiscal 2000 contained the disposition of the foundry assets. The increase in inventories was $67 million less in fiscal 2001 compared to fiscal 2000. This decrease was the result of planned inventory increases in fiscal 2000 to replenish abnormally low inventories to more normal levels. The increase in accounts payable and accrued liabilities was $45 million less in fiscal 2001 compared to fiscal 2000. The decrease was due to timing of payments in accounts payable, accrued salaries, and accrued payroll taxes and lack of accruals for profit sharing due to lower performance. The $12 million increase in prepaid pension is attributable to the Company's over funded pension plan. Also due to the timing of payments was the $10 million increase in accounts receivable in fiscal 2001 compared to fiscal 2000. Net cash used in investing activities totaled $43 million and $25 million in fiscal 2001 and fiscal 2000, respectively. The $18 million increase is attributed primarily to $24 million of cash received from the foundry transaction in fiscal 2000, offset by a $5 million decrease in capital expenditures in fiscal 2001. 10 11 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES Net cash provided by financing activities amounted to $263 million and $159 million in fiscal 2001 and 2000, respectively, an increase of $104 million. These financing activities reflect higher levels of short-term borrowings in fiscal 2001 to fund seasonal working capital requirements, primarily inventory, causing a $72 million increase in debt between the periods. Also, the Company repurchased fewer common shares in fiscal 2001 compared to fiscal 2000. FUTURE LIQUIDITY AND CAPITAL RESOURCES The Company has remaining authorization to buy up to 1.8 million shares of company stock in open market or private transactions under the June 2000 Board of Directors' authorization to repurchase up to 2.0 million shares. The Company did not purchase any shares in the third quarter of fiscal 2001 and does not anticipate repurchasing additional shares for the remainder of fiscal 2001 or fiscal 2002. Due to expected higher working capital requirements and lower available cash, the Company arranged for an additional line of credit amounting to $140 million during the second fiscal quarter of 2001. This line expires in November 2001. In connection with the proposed acquisition of Generac, the Company expects to issue long-term debt to make the acquisition, replace the outstanding Generac debt and replace the credit line expiring in November 2001. The Company also plans to operate in the first half of fiscal 2002 with working capital requirements for inventory that are lower than those in the comparable period of fiscal 2001. The increased debt that results from the Generac acquisition and the replacement of the expiring credit line is presently expected to increase interest expense to approximately $50 million for fiscal 2002. Management expects cash flows for capital expenditures to total approximately $65 million in fiscal 2001 and $65 to $70 million for fiscal 2002. These capital expenditure levels provide for base replacement, new product, and capacity and cost reduction requirements. They will be funded using available cash and short-term borrowings. The Company currently intends to increase future cash dividends per share at a rate approximating the inflation rate, subject to the discretion of its Board of Directors, any applicable restrictions on the payment of dividends and requirements of applicable law. The Company believes that available cash, cash generated from operations, existing lines of credit and access to debt markets will be adequate to fund its capital requirements for the foreseeable future. OUTLOOK The Company projects fourth quarter net sales for the engine business to be down 5-8% between years. Generac sales after the completion of the acquisition are anticipated to add $50 to $55 million of sales in the fourth quarter, assuming the acquisition closes as scheduled. The gross profit percentage is expected to be in the 15.5% to 16.5 % range, lower than last year's fourth quarter percentage. This is driven by an estimate of 35% to 45% lower engine production as the Company reflects weaker shipments and brings inventories to a level lower than they were last fiscal year-end. The Company's engineering, selling and administrative expenses for the fourth quarter are projected to decrease around 15% from last year's level because of lower benefit costs in fiscal 2001. However, Generac will add $9 to $10 million of expenses to this category. Finally, interest expense is anticipated to be higher than last year by $5 million. About $4 million of this increase is due to the debt associated with the Generac acquisition. These projections for the fourth quarter should result in a range of net income for the full year that is now expected to be $55 to $60 million. 11 12 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES Fiscal 2002 will be the first full year combining Generac's and the Company's results. At the current time consolidated net sales are estimated to approach $1.7 billion. This number reflects the belief that both generator sales and engine sales for generators will return to a more normal level, and engine sales for lawn and garden equipment will remain stable between fiscal 2001 and 2002. The projection reflects a continued weak Euro. Gross profits are anticipated to improve primarily because of higher engine unit sales, and greater production that will spread fixed costs over more units. Gross profit margins are expected to be approximately 20%. Engineering, selling and administrative expenses are estimated at 11% of net sales. This percentage is higher than the Company's traditional target because of the higher percentage of sales committed to selling expenses at Generac. Depreciation is expected to be $58 million and goodwill amortization $8 million. OTHER MATTERS On October 5, 2000, it was announced that one of the Company's largest customers, the Murray Group, was acquired by Summersong Investments, Inc. The Company does not expect this acquisition to adversely impact its annual supply arrangement with the Murray Group for the current outdoor power equipment-selling season. CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS Certain statements in Management's Discussion and Analysis of Financial Condition and Results of Operations may contain 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", "intend", "may", "objective", "plan", "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, our ability to successfully forecast demand for our products and appropriately adjust our manufacturing levels; changes in our operating expenses; our ability to complete our proposed acquisition of Generac Portable Products, Inc. and successfully integrate it into our operations; changes in interest rates; the effects of weather on the purchasing patterns of consumers and original equipment manufacturers ("OEMs"); changes in the expected speed and timing of the reduction of generator inventories of Generac and other generator manufacturers and retailers which had been built up in anticipation of Y2K concerns; actions of engine manufacturers and OEMs with whom we compete; the seasonal nature of our business; changes in laws and regulations, including accounting standards; work stoppages or other consequences of any deterioration in our employee relations; changes in consumer and OEM demand; changes in prices of raw materials and parts that we purchase; changes in domestic economic conditions, including housing starts and changes in consumer disposable income; changes in foreign economic conditions, including currency rate fluctuations; and other factors that may be disclosed from time to time in our SEC filings or otherwise. 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes since the September 7, 2000 filing of the Company's Annual Report on Form 10-K. 12 13 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit Number Description 2 Agreement and Plan of Merger, dated as of March 21, 2001, by and among Briggs & Stratton Corporation, GPP Merger Corporation, Generac Portable Products, Inc. and the Beacon Group III - Focus Value Fund, L.P. (incorporated herein by reference to Exhibit 2 to Briggs & Stratton Corporation's Current Report on Form 8-K dated March 21, 2001). 11 Computation of Earnings Per Share of Common Stock* 12 Computation of Ratio of Earnings to Fixed Charges* *Filed herewith (b) Reports on Form 8-K. On March 1, 2001, the Company filed a report on Form 8-K dated March 1, 2001, to report the signing of a letter of intent to acquire Generac Portable Products, Inc. On March 23, 2001, the Company filed a report on Form 8-K dated March 21, 2001, to report that it had signed a definitive agreement to acquire Generac Portable Products, Inc. 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: April 26, 2001 /s/ James E. Brenn --------------------------------------------------- James E. Brenn Senior Vice President and Chief Financial Officer and Duly Authorized Officer 13 14 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES EXHIBIT INDEX Exhibit Number Description 2 Agreement and Plan of Merger, dated as of March 21, 2001, by and among Briggs & Stratton Corporation, GPP Merger Corporation, Generac Portable Products, Inc. and the Beacon Group III - Focus Value Fund, L.P. (incorporated herein by reference to Exhibit 2 to Briggs & Stratton Corporation's Current Report on Form 8-K dated March 21, 2001). 11 Computation of Earnings Per Share of Common Stock* 12 Computation of Ratio of Earnings to Fixed Charges* *Filed herewith 14 EX-11 2 c61929ex11.txt COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK 1 EXHIBIT 11 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK (In thousands except per share data)
Quarter Ended Nine Months Ended ----------------------------------------------------- April 1, March 26, April 1, March 26, 2001 2000 2001 2000 ------- ------- ------- -------- Computations for Statements of Income Net income $29,889 $42,056 $43,513 $108,903 ======= ======= ======= ======== Basic earnings per share of common stock: Average shares of common stock outstanding 21,599 22,842 21,600 23,021 ======= ======= ======= ======== Basic earnings per share of common stock $ 1.38 $ 1.84 $ 2.01 $ 4.73 ======= ======= ======= ======== Diluted earnings per share of common stock: Average shares of common stock outstanding 21,599 22,842 21,600 23,021 Incremental common shares applicable to common stock options based on the common stock average market price during the period 9 24 10 81 Incremental common shares applicable to restricted common stock based on the common stock average market price during the period 4 - 4 2 ------- ------- ------- -------- Average common shares assuming dilution 21,612 22,866 21,614 23,104 ======= ======= ======= ======== Fully diluted earnings per average share of common stock, assuming conversion of all applicable securities $ 1.38 $ 1.84 $ 2.01 $ 4.71 ======= ======= ======= ========
EX-12 3 c61929ex12.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in thousands)
Nine Months Ended --------------------------------------------- April 1, 2001 March 26, 2000 -------------------- -------------------- Net income $ 43,513 $ 108,903 Add: Interest 21,689 15,151 Income tax expense and other taxes on income 25,550 63,960 Fixed charges of unconsolidated subsidiaries - 89 -------------------- -------------------- Earnings as defined $ 90,752 $ 188,103 ==================== ==================== Interest $ 21,689 $ 15,151 Fixed charges of unconsolidated subsidiaries - 89 -------------------- -------------------- Fixed charges as defined $ 21,689 $ 15,240 ==================== ==================== Ratio of earnings to fixed charges 4.18 x 12.34 x ==================== ====================
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