EX-99.1 2 a06-2833_1ex99d1.htm EXHIBIT 99

Exhibit 99.1

 

BRIGGS & STRATTON CORPORATION REPORTS RESULTS FOR THE SECOND QUARTER AND FIRST SIX MONTHS OF FISCAL 2006

 

MILWAUKEE, January 19, 2006/PR Newswire/-Briggs & Stratton Corporation (NYSE:BGG)

 

Briggs & Stratton today announced second quarter fiscal 2006 consolidated net sales of $574.3 million and consolidated net income of $21.8 million or $.42 per diluted share.  The second quarter of fiscal 2005 had consolidated net sales of $503.7 million and net income of $7.1 million or $.14 per diluted share.  The majority of the $70.6 million, or 14%, increase in consolidated net sales was due to the inclusion of $63.4 million of sales of end product associated with our acquisition of certain assets of Murray, Inc. (“Murray”), which was completed in February of 2005.  Consolidated net income increased $14.7 million between years.  The improvement reflects that last year’s second quarter results contained a $30.0 million ($19.8 million after tax) expense for a bad debt expense.  Without the effect of the bad debt expense, consolidated net income for the second quarter was lower this year than in the same period a year ago.  The reduction was due to increased professional fees and fringe benefits, primarily in the Engines Segment.

 

For the first six months of fiscal 2006, the Company had consolidated net sales of $1.086 billion and consolidated net income of $26.5 million or $.51 per diluted share.  For the same period a year ago, consolidated net sales were $942.7 million and consolidated net income was $5.6 million or $.11 per diluted share.  All of the $143.3 million or 15% increase in consolidated net sales was due to the inclusion of sales from the Murray acquisition.  Consolidated net income increased $20.9 million over the same period a year ago.  The improvement reflects that the results for the first six months of fiscal 2005 contained a $40.0 million ($26.4 million after tax) expense for a bad debt and the first six months of fiscal 2006 had a $6.4 million ($4.2 million after tax) gain on the sale of a manufacturing property.  Without the effect of the bad debt and property sale, consolidated net income for the first six months of fiscal 2006 was lower than in the same period a year ago for the same reasons identified above for the second quarter.

 

Engines:

 

Fiscal 2006 second quarter net sales were $380.9 million versus $374.9 million for the same period a year ago, an increase of 2%.  The increase resulted from a 4% increase in engine unit shipments between quarters that were partially offset by a mix of product that favored lower priced units.  Sales for the first half of fiscal 2006 were $666.3 million versus $629.0 million in the prior year, a 6% improvement.  The factors contributing to the increase are the same as those described for the second quarter, with engine unit shipments being up 9% for the first six months of fiscal 2006.

 

Income from operations for the second quarter of fiscal 2006 was $35.7 million, up $21.2 million from the same period in the prior year.  The major reason for the increase in income from operations was the absence of the prior year’s $30.0 million bad debt expense.  Without the bad debt expense, income from operations was lower than the same period a year ago.  The benefit from the unit volume increase and ongoing cost improvement projects was offset by a mix of shipments that favored lower margined product and increased expenses for professional fees and employee fringe benefits, primarily pension and stock option related.

 

Income from operations for the first half of fiscal 2006 was $44.5 million, up $34.6 million from the same period a year ago.  The major reason for the increase in income from operations was the absence of the prior year’s $40.0 million bad debt expense offset, by the same factors described above.

 

Power Products:

 

Fiscal 2006 second quarter net sales were $256.6 million, an $87.5 million increase over the same period a year ago.  A majority of the increase in net sales was the result of adding $63.4 million of sales from the Murray asset acquisition.  The remainder of the increase was primarily generator sales resulting from continued replenishment of retail inventories that were depleted by the active hurricane season.

 

Net sales for the first six months of fiscal 2006 were $557.2 million, a $166.0 million increase over the same period a year ago.  A majority of the increase in net sales was the result of adding $143.4 million of sales from the Murray acquisition.  The remaining increase is the result of strong generator product shipments associated with the significant hurricane season and the resulting replenishment demand offset by lower first quarter 2006 premium lawn and garden equipment sales.

 



 

Income from operations for the second quarter of fiscal 2006 was $5.6 million, up $6.2 million from the same period in the prior year.  The majority of the improvement was driven by higher sales and production volume for generator product.  In addition, operating income improved on premium lawn and garden equipment, primarily due to the absence of purchasing accounting adjustments in fiscal 2006.  Offsetting these improvements was $2.5 million in losses associated with the wind down of operations at Murray.

 

Income from operations for the first six months of fiscal 2006 was $5.7 million, an increase of $1.2 million from the operating income generated for the same period a year ago.  Operating income improved $11.9 million as a result of higher sales and production volumes for generator product, offset by $10.7 million in expenses associated with the wind down of Murray.  Through six months, operating losses associated with premium lawn and garden equipment are essentially flat.

 

General:

 

Interest expense was higher in the second quarter and first six months of fiscal 2006 because outstanding debt was higher than last year.  The second quarter and year to date effective tax rate is at 35% versus the 34% used in the comparable periods last year.

 

Other Matters:

 

We intend to reduce salaried headcount by a range of 6% to 8% by February 15, 2006.  Our goal is to streamline our operations to reflect organizational and workflow changes that have occurred over the last several years.  We believe the reduction will result in approximately $10 to $15 million of annual, pretax savings beginning in fiscal 2007.

 

Outlook:

 

We are adjusting our forecasts of net income for fiscal 2006 to incorporate both today’s announcement of the headcount reduction, but more importantly our current assessment of the direction of our business for the 2006 lawn and garden season.  At the start of the fiscal year we indicated that engine volume would be flat between years and we would pursue price increases to offset the increased costs of raw materials and components.  We now forecast that unit volume will be down from last year 1% to 2% in response to the price increase.  An additional response to the price increase has been to power lawn and garden equipment with lower priced, smaller displacement engines that will create a mix issue that has an impact on both the top and bottom line results.  These changes to our engine shipment and production projections now result in the change in consolidated net sales being approximately 4% for the year and a current net income forecast for the year in a range of $144 to $150 million, or $2.75 to $2.87 per diluted share.

 

We project that third quarter consolidated net sales will be approximately 3% greater than last year, while net income is projected to be $67 million or $1.28 per diluted share.  These results reflect a negative impact of $ .03 per diluted share related to the global workforce reduction.  For fiscal 2006 the impact of the workforce reduction is projected to be neutral to net income.

 

The Company will host a conference call at 10:00 AM (EST) on January 19, 2006 to review this information. A live web cast of the conference call will be available on its corporate website: http://www.briggsandstratton.com/shareholders. Also available is a dial-in number to access the call real-time at (866) 206-6509. A replay will be offered beginning approximately two hours after the call ends and will be available for one week. Dial (888) 266-2081 to access the replay. The pass code will be 827266.

 

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”, “may”, “objective”, “plan”, “project”, “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, the ability to successfully forecast demand for our products and appropriately adjust our manufacturing and inventory levels; changes in our operating expenses; changes in interest rates; the effects of weather on the purchasing patterns of consumers and original equipment manufacturers (OEMs); actions of engine manufacturers and OEMs with whom we compete; the seasonal nature of our business; changes in laws and regulations, including environmental, tax, pension funding and accounting standards; work stoppages or other consequences of any deterioration in our employee relations; work stoppages by other unions that affect the ability of suppliers or customers to manufacture; acts of war or terrorism that may disrupt our business operations or those of our customers and suppliers; changes in customer 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; our customer’s ability to successfully obtain financing; the actions of customers of our OEM customers; actions by potential acquirers of certain OEMs; the ability to successfully realize the maximum market value of acquired assets; new facts that come to light in the future course of litigation proceedings which could affect our assessment of those matters; 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.

 



 

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

 

Consolidated Statements of Earnings for the Fiscal Periods Ended December

(In Thousands, except per share data)

(Unaudited)

 

 

 

Second Quarter

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

2005

 

2004

 

NET SALES

 

$

574,313

 

$

503,700

 

$

1,086,022

 

$

942,695

 

COST OF GOODS SOLD

 

456,961

 

397,558

 

887,362

 

765,735

 

Gross Profit on Sales

 

117,352

 

106,142

 

198,660

 

176,960

 

 

 

 

 

 

 

 

 

 

 

ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

78,722

 

92,658

 

148,999

 

160,618

 

Income from Operations

 

38,630

 

13,484

 

49,661

 

16,342

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

(11,305

)

(8,795

)

(21,333

)

(16,914

)

OTHER INCOME, Net

 

6,223

 

6,081

 

12,487

 

9,014

 

Income before Provision for Income Taxes

 

33,548

 

10,770

 

40,815

 

8,442

 

 

 

 

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

11,730

 

3,710

 

14,270

 

2,870

 

Net Income

 

$

21,818

 

$

7,060

 

$

26,545

 

$

5,572

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding

 

51,695

 

51,193

 

51,714

 

51,361

 

BASIC EARNINGS PER SHARE

 

$

0.42

 

$

0.14

 

$

0.51

 

$

0.11

 

 

 

 

 

 

 

 

 

 

 

Diluted Average Shares Outstanding

 

52,066

 

51,751

 

52,093

 

51,906

 

DILUTED EARNINGS PER SHARE

 

$

0.42

 

$

0.14

 

$

0.51

 

$

0.11

 

 

Segment Information

(In Thousands)

(Unaudited)

 

 

 

Second Quarter

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

2005

 

2004

 

NET SALES:

 

 

 

 

 

 

 

 

 

Engines

 

$

380,901

 

$

374,874

 

$

666,330

 

$

628,986

 

Power Products

 

256,609

 

169,108

 

557,216

 

391,262

 

Inter-Segment Eliminations

 

(63,197

)

(40,282

)

(137,524

)

(77,553

)

Total*

 

$

574,313

 

$

503,700

 

$

1,086,022

 

$

942,695

 

 

 

 

 

 

 

 

 

 

 

*Includes international sales of

 

$

149,551

 

$

110,715

 

$

265,088

 

$

171,963

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT ON SALES:

 

 

 

 

 

 

 

 

 

Engines

 

$

93,503

 

$

88,681

 

$

153,187

 

$

132,926

 

Power Products

 

26,472

 

17,849

 

45,976

 

42,047

 

Inter-Segment Eliminations

 

(2,623

)

(388

)

(503

)

1,987

 

Total

 

$

117,352

 

$

106,142

 

$

198,660

 

$

176,960

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS:

 

 

 

 

 

 

 

 

 

Engines

 

$

35,699

 

$

14,528

 

$

44,466

 

$

9,852

 

Power Products

 

5,554

 

(656

)

5,698

 

4,503

 

Inter-Segment Eliminations

 

(2,623

)

(388

)

(503

)

1,987

 

Total

 

$

38,630

 

$

13,484

 

$

49,661

 

$

16,342

 

 



 

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

 

Consolidated Balance Sheets as of the End of Fiscal December

(In Thousands)

(Unaudited)

 

 

 

2005

 

2004

 

CURRENT ASSETS:

 

 

 

 

 

Cash and Cash Equivalents

 

$

39,759

 

$

24,078

 

Accounts Receivable, Net

 

467,248

 

330,954

 

Inventories

 

644,840

 

563,806

 

Deferred Income Tax Asset

 

94,719

 

74,418

 

Other

 

29,029

 

25,139

 

Total Current Assets

 

1,275,595

 

1,018,395

 

 

 

 

 

 

 

OTHER ASSETS:

 

 

 

 

 

Goodwill

 

253,663

 

249,396

 

Investments

 

47,879

 

45,190

 

Prepaid Pension

 

-

 

83,102

 

Deferred Loan Costs, Net

 

5,223

 

5,744

 

Other Intangible Assets, Net

 

95,520

 

97,370

 

Other Long-Term Assets, Net

 

27,046

 

4,304

 

Total Other Assets

 

429,331

 

485,106

 

 

 

 

 

 

 

PLANT AND EQUIPMENT:

 

 

 

 

 

At Cost

 

1,018,825

 

975,437

 

Less - Accumulated Depreciation

 

578,477

 

545,041

 

Plant and Equipment, Net

 

440,348

 

430,396

 

 

 

$

2,145,274

 

$

1,933,897

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Accounts Payable

 

$

149,278

 

$

139,382

 

Short-Term Borrowings

 

138,060

 

164,077

 

Current Maturity on Long-Term Debt

 

40,000

 

-

 

Accrued Liabilities

 

201,335

 

206,908

 

Total Current Liabilities

 

528,673

 

510,367

 

 

 

 

 

 

 

OTHER LIABILITIES:

 

 

 

 

 

Deferred Income Tax Liability

 

106,900

 

106,190

 

Accrued Pension Cost

 

53,304

 

21,768

 

Accrued Employee Benefits

 

15,687

 

14,487

 

Accrued Postretirement Health Care Obligation

 

80,811

 

78,530

 

Other Long-Term Liabilities

 

15,778

 

15,148

 

Long-Term Debt

 

441,754

 

360,941

 

Total Other Liabilities

 

714,234

 

597,064

 

 

 

 

 

 

 

SHAREHOLDERS’ INVESTMENT:

 

 

 

 

 

Common Stock and Additional Paid-in Capital

 

61,318

 

55,156

 

Retained Earnings

 

1,033,114

 

915,884

 

Accumulated Other Comprehensive Income (Loss)

 

(45,836

)

6,289

 

Unearned Compensation on Restricted Stock

 

(2,942

)

(1,753

)

Treasury Stock, at Cost

 

(143,287

)

(149,110

)

Total Shareholders’ Investment

 

902,367

 

826,466

 

 

 

$

2,145,274

 

$

1,933,897

 

 



 

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

 

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

 

 

 

Six Months Ended Fiscal December

 

 

 

 

 

 

 

2005

 

2004

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net Income

 

$

26,545

 

$

5,572

 

Depreciation and Amortization

 

38,373

 

35,837

 

(Gain) Loss on Disposition of Plant and Equipment

 

(5,402

)

1,279

 

Provision for Deferred Income Taxes

 

(9,362

)

(29,392

)

Increase in Accounts Receivable

 

(106,462

)

(76,021

)

Increase in Inventories

 

(175,175

)

(165,404

)

(Increase) Decrease in Other Current Assets

 

(1,254

)

994

 

Decrease in Accounts Payable and Accrued Liabilities

 

(3,426

)

(11,920

)

Other, Net

 

8,286

 

5,086

 

Net Cash Used in Operating Activities

 

(227,877

)

(233,969

)

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Additions to Plant and Equipment

 

(34,354

)

(39,382

)

Proceeds Received on Disposition of Plant and Equipment

 

10,696

 

332

 

Investment in Joint Venture

 

(900

)

-

 

Proceeds Received on Sale of Certain B&S Canada Assets

 

-

 

4,050

 

Cash Paid for Acquisition, Net of Cash Received

 

-

 

(223,113

)

Refund of Cash Paid for Acquisition

 

6,347

 

-

 

Net Cash Used in Investing Activities

 

(18,211

)

(258,113

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Net Borrowings (Repayments) on Loans and Notes Payable

 

132,617

 

160,950

 

Dividends

 

(11,379

)

(8,694

)

Proceeds from Exercise of Stock Options

 

2,367

 

17,648

 

Net Cash Provided by Financing Activities

 

123,605

 

169,904

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES

 

669

 

3,862

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(121,814

)

(318,316

)

CASH AND CASH EQUIVALENTS, Beginning

 

161,573

 

342,394

 

CASH AND CASH EQUIVALENTS, Ending

 

$

39,759

 

$

24,078