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 29, 1996March 30, 1997
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
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(Exact name of registrant as specified in its charter)
A Wisconsin Corporation 39-0182330
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12301 West Wirth Street, Wauwatosa, Wisconsin 53222
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(Address of Principal Executive Offices) (Zip Code)
414/259-5333
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(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 10,May 12, 1997
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COMMON STOCK, par value $0.01 per share 28,927,000 Shares
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets -
December 29, 1996,March 30, 1997 and June 30, 1996 and
December 31, 1995 3
Consolidated Condensed Statements of EarningsIncome -
Three Months and SixNine Months Ended
December 29,March 30, 1997 and March 31, 1996 and December 31, 1995 5
Consolidated Condensed Statements of Cash Flow -
SixNine Months Ended December 29,March 30, 1997 and
March 31, 1996 and
December 31, 1995 6
Notes to Consolidated Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 1112
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands of dollars)dollars except amounts per share)
ASSETS
Dec. 29March 30 June 30
Dec. 311997 1996
1996 1995
------- ------- ----------------- -----------
(Unaudited)
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 3,254 $150,63962,871 $ 6,323150,639
Receivables, net 234,525276,405 119,346 270,142
Inventories -
Finished products and parts 179,857114,699 96,078 156,117
Work in process 45,42637,830 36,932 44,087
Raw materials 5,1414,866 4,393
4,560
-------- -------- ----------------- ----------
Total inventories 230,424157,395 137,403 204,764
Future income tax benefits 32,87033,607 29,589 31,744
Prepaid expenses 14,78213,571 15,725
11,062
-------- -------- ----------------- ----------
Total current assets 515,855543,849 452,702
524,035
-------- -------- ----------------- ----------
OTHER ASSETS:
Prepaid pension cost 7,4588,471 4,682 727
Deferred income tax asset 5,3635,403 2,883 4,157
Purchased software 9,04510,217 3,685
3,734
-------- -------- ----------------- ----------
Total other assets 21,86624,091 11,250
8,618
-------- -------- ----------------- ----------
PLANT AND EQUIPMENT -
Cost 788,453802,764 776,638 759,178
Less - Accumulated depreciation 403,777410,871 402,426
387,056
-------- -------- ----------------- ----------
Total plant and equipment, net 384,676391,893 374,212
372,122
-------- -------- --------
$922,397 $838,164 $904,775
======== ======== ========--------- ----------
$ 959,833 $ 838,164
========= ==========
The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
CONSOLIDATED CONDENSED BALANCE SHEETS (Continued)
(In thousands of dollars)dollars except amounts per share)
LIABILITIES & SHAREHOLDERS' INVESTMENT
Dec. 29March 30 June 30
Dec. 311997 1996
1996 1995
----------- -------------------- -----------
(Unaudited)
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 62,09177,680 $ 65,642 $ 62,251
Domestic notes payable 43,970 5,000 101,5585,000
Foreign loans 16,44017,533 14,922 20,066
Current maturities onof long-term debt 15,000 15,000
-
Accrued liabilities 99,146106,535 82,932 94,602
Dividends payable 7,810 - 7,521
Federal and state income taxes 17,25230,231 6,683
12,815
-------- -------- ------------------ ---------
Total current liabilities 261,709259,789 190,179
298,813
-------- -------- ------------------ ---------
OTHER LIABILITIES:
Deferred revenue on sale of plant and equipment 15,996 -15,981 -
Accrued employee benefits 19,46519,982 18,431 17,260
Accrued postretirement health care obligation 69,03469,853 69,049
69,143
Long-TermLong-term debt 60,000 60,000
75,000
-------- -------- ------------------ ---------
Total other liabilities 164,495165,816 147,480
161,403
-------- -------- ------------------ ---------
SHAREHOLDERS' INVESTMENT:
Common stock-
Authorized 60,000,000 shares, $.01 par value
Issued and outstanding 28,927,000 shares 289 289
289
Additional paid-in capital 40,70540,533 40,898 41,327
Retained earnings 455,477494,181 459,666 403,209
Cumulative translation adjustments (278)(775) (348)
(266)
-------- -------- ------------------ ---------
Total shareholders' investment 496,193534,228 500,505
444,559
-------- -------- --------
$922,397 $838,164 $904,775
======== ======== ========---------- ---------
$ 959,833 $ 838,164
========== =========
The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGSINCOME
(In thousands of dollars except amounts per share)
(Unaudited)
Three Months Ended SixNine Months Ended
------------------ ----------------
Dec. 29 Dec.---------------------- ------------------------
March 30 March 31 Dec. 29 Dec.March 30 March 31
1997 1996 19951997 1996
1995
------- ------- ------- --------------- -------- -------- ---------
NET SALES $299,664 $329,357 $461,395 $518,834$ 475,955 $ 460,201 $ 937,350 $ 979,035
COST OF GOODS SOLD 242,807 263,594 386,569 433,930
-------- -------- -------- --------368,836 356,119 755,405 790,049
---------- ---------- ---------- ----------
Gross profit on sales $ 56,857 $ 65,763 $ 74,826 $ 84,904107,119 104,082 181,945 188,986
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 28,071 24,801 54,132 49,284
-------- -------- -------- --------30,847 30,055 84,979 79,339
---------- ---------- ---------- ----------
Income from operations $ 28,786 $ 40,962 $ 20,694 $ 35,62076,272 74,027 96,966 109,647
INTEREST EXPENSE (2,408) (2,919) (4,360) (4,976)(2,691) (2,879) (7,051) (7,855)
OTHER INCOME, net 536 541 2,098 2,620
-------- -------- -------- --------1,453 1,798 3,551 4,418
---------- ---------- ---------- ----------
Income before provision
for income taxes $ 26,914 $ 38,584 $ 18,432 $ 33,26475,034 72,946 93,466 106,210
PROVISION FOR INCOME TAXES 10,220 14,660 7,000 12,640
-------- -------- -------- --------28,520 27,720 35,520 40,360
---------- ---------- ---------- ----------
Net income $ 16,69446,514 $ 23,92445,226 $ 11,43257,946 $ 20,624
======== ======== ======== ========65,850
========== ========== ========== ==========
PER SHARE DATA* -
Net income $ .581.60 $ .821.57 $ .402.00 $ .71
====== ====== ====== ======2.28
======= ======= ======= =======
Cash dividends $ .27 $ .26 $ .54.81 $ .52
====== ====== ====== ======.78
======= ======= ======= =======
* Based on 28,927,000 shares outstanding.
The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
Increase(Decrease) in Cash and Cash Equivalents
(In thousands of dollars)
(Unaudited)
SixNine Months Ended
-------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: Dec. 29,March 30, 1997 March 31, 1996
Dec. 31, 1995
--------------------------- --------------
Net income $ 11,43257,946 $ 20,62465,850
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation 21,578 20,93832,278 31,704
Loss on disposition of plant and equipment 1,537 6802,201 1,318
(Increase)decrease in operating assets -
Accounts receivable (115,179) (176,026)(157,059) (179,194)
Inventories (93,021) (64,090)(19,992) 10,399
Other current assets (2,338) 1,400(1,864) (1,589)
Other assets (10,616) (3,066)(12,841) (5,961)
Increase(decrease) in liabilities -
Accounts payable and accrued
liabilities 31,042 6,33766,999 45,780
Other liabilities 1,019 (357)
--------- ---------2,355 493
---------- ----------
Net cash used in
operating activities $(154,546) $(193,560)
--------- ---------(29,977) (31,200)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment $ (33,687) $ (51,423)(52,423) (65,341)
Proceeds received on sale of plant and equipment 112 928163 1,006
Proceeds received on sale of
Menomonee Falls, Wisconsin facility 15,99615,981 -
--------- ------------------- ----------
Net cash used in investing activities $ (17,579) $ (50,495)
--------- ---------(36,279) (64,335)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from domestic and
foreign loans $ 40,488 $ 95,2212,611 7,556
Dividends (15,621) (15,042)(23,431) (22,563)
Purchase of common stock for treasury (301) (547)(550) (1,032)
Proceeds from exercise of stock options 108 176
--------- ---------185 335
---------- ----------
Net cash provided fromused in financing activities $ 24,674 $ 79,808
--------- ---------(21,185) (15,704)
---------- ----------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS $ 66 $ (78)
--------- ---------(327) (251)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS $(147,385) $(164,325)(87,768) (111,490)
CASH AND CASH EQUIVALENTS, beginning 150,639 170,648
--------- ------------------- ----------
CASH AND CASH EQUIVALENTS, ending $ 3,25462,871 $ 6,323
========= =========59,158
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 4,2177,051 $ 4,596
========= =========7,905
========== ==========
Income taxes paid $ 2,07517,766 $ 2,576
========= =========15,795
========== ==========
The accompanying notes are an integral part of these statements.
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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. 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.
The new balance sheet caption entitled "Purchased Software" represents
costs of software purchased for use in the Company's business. Amortization of
Purchased Software is computed on an item-by-item basis over a period of three
to ten years, depending on the estimated useful life of the software.
Accumulated amortization amounted to $3,562,000,$3,972,000 and $3,367,000 and $2,666,000 as of December 29, 1996,March 30,
1997 and June 30, 1996, and December 31, 1995.respectively. Purchased Software on prior period
balance sheets was reclassified from Prepaid Expense to the current caption.
The sale of the Company's Menomonee Falls, Wisconsin facility for
$16.3approximately $16.0 million (less costs to sell) was completed at the beginning of the second fiscal
quarter.quarter ended December 29, 1996. The provisions of the contract state that the
Company will continue to own and occupy the warehouse portion of the facility
for a period of up to ten years (the "Reservation Period"). The contract also
contains a buyout clause, at the buyer's option and under certain
circumstances, of the remaining Reservation Period. GivenUnder the provisions of
the contract,Statement of Financial Accounting Standards No. 66, "Accounting for Sales of
Real Estate", the Company is required to account for this as a financing
transaction.transaction as the Company continues to have substantial involvement with the
facility during the Reservation Period or until the buyout option is exercised.
Under this method, the cash received is reflected as a deferred liability, and
the assets and the accumulated depreciation remain on the Company's books.
Depreciation expense continues to be recorded each period, and imputed interest
expense is also recorded and added to the deferred liability. Offsetting this
is the imputed fair value lease income on the non-Company occupied portion of
the building. A pretax gain, which will be recognized at the earlier of the
exercise of the buyout option or the expiration of the Reservation Period, is
estimated to be $10 million to $12 million. The annual cost of operating the
warehouse portion of the facility is not material.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share."
This statement establishes a new standard for computing and presenting earnings
per share in financial statements. The Company will adopt the new standard in
its fiscal 1997 year end financial statements. The impact of adoption of this
standard will not be material to the Company's results of operations.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following is Management'smanagement's discussion and analysis of certain
significant factors which have affected the Company's
results of operations and financial condition duringfor the periods included in the
accompanying consolidated condensed financial statements.
RESULTS OF OPERATIONS
SALES
Net sales for the second fiscal quarter ofthree months ended March 30, 1997 decreased 9%increased 3% or $29,693,000$15.8
million compared to the same period in the precedingprior year. The primary reason for
this change was an increase of 2% in engine unit shipments. Engine sales
dollars increased at the same rate as the unit increase. The additional 1%
sales dollar increase is the result of higher service sales volume.
Net sales for the nine months ended March 30, 1997 decreased 4% or $41.7
million compared to the same period in the prior year. The primary reason for
this decline in sales dollars was a 15%7% decrease in engine unit shipments. TheThis unit decrease is
the result of lawn and garden equipment manufacturers building products later
and as close as possible to the time they are needed by retailers. The
Company's largest customers have increased their peak production capacity,capacities
which allows them to concentrate more of their production in winter and early
spring. The result was lessThis resulted in reduced demand for engines in the second quarter.
The decrease in unit volume was primarily in small engines which have lower
selling prices. Accordingly, the Company experienced a favorable mix impact
which partially offset the unit volume decline.
Net sales for the sixnine months ended
December 1996 decreased 11% or
$57,439,000March 30, 1997 as compared to the same period in the prior year. Unit engine sales
were down 16%. The same reasons as described above apply to this six-month
period.Most of the
volume decrease was in the Company's small engines which have a lower selling
price, and thus there was a favorable price and mix impact of 3% which offset
part of the unit volume decline.
GROSS PROFIT
Gross profit decreased 14%for the three months ended March 30, 1997 increased $3.0
million or $8,906,000 between comparable quarters,
primarily because of3% when compared to the reduced volume described above.same period in the preceding year, also due
to the increase in sales. The gross profit rate declined from 20% last year to 19%was 23% in each three-month
period. For the three months ended March 30, 1997, the impact of increases in
the current year. This decrease was
principallyunit price of aluminum totaling $1.2 million, and additional warranty
expenses of $4.6 million due to a change of an accounting estimate totaling $3,477,000 for
employees who had accepted an early retirement window in fiscal 1995 and
subsequently canceled their acceptanceclaims experience, were offset by lower labor
costs in the second quarter of fiscal 1996.Company's new engine plants.
Gross profit for the sixnine months ended December 1996March 30, 1997 decreased 12%4% or $10,078,000, also$7.0
million compared to the same period in the prior year due to the reduction in
sales. The gross profit rate was 16%19% in each six-monthnine-month period. IfFor the credit for the retirement window is removed
from the comparison,nine
months ended March 30, 1997, the gross profit rate would have shown a 1% improvementwas negatively impacted by
increases in the unit price of aluminum totaling $1.8 million, increases in
warranty expenses totaling $4.8 million due to claims experience, and the
absence in the current year, primarily due to net lower costsnine-month period of the $3.5 million credit for
employees who had accepted an early retirement and canceled their acceptance in
the current year related
tosecond quarter of fiscal 1996. Savings from lower labor costs at the
Company's new engine plants becausefully offset the preceding factors impacting the
gross profit rate.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Engineering, selling, general and administrative expenses for the three
months ended March 30, 1997 increased 3% or $.8 million compared to the same
period in the prior year. This increase was primarily due to costs incurred in
new engine development which accounted for approximately one-half of labor rate savings.this
increase.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSESEngineering, selling, general and administrative expenses for the nine
months ended March 30, 1997 increased 7% or $5.6 million compared to the same
period in the prior year. This category of expenses increased 13% or $3,270,000 between the second
fiscal quarter of 1997 and 1996. Thisincrease was primarily due to increases inincreased
salaries of $1.2 million, and planned increases in manpower and other costs of
$2.0 million relating to new venture activities.
The 10% or $4,848,000 increase in this category for the six-month
comparison was due to the same factors as described above, partially offset by a
reduction in marketing costs due to timing during the year.
INTEREST EXPENSE
Interest expense decreased 7% or $.2 million for the three months ended
March 30, 1997 compared to the same period in both the three-monthprior year and decreased 10%
or $.8 million for the nine months ended March 30, 1997 compared to the same
period and six-month
period. This wasin the prior year. Both of these decreases were due primarily to the
impact of lower borrowings offset, in part, by higher average
interest rates.borrowings.
PROVISION FOR INCOME TAXES
The effective income tax rate usedwas 38% in all periods was 38.0%, whichperiods. This reflects
management's estimate of the rate for the entire year.
OUTLOOK
The changing seasonal pattern of sales described earlier should resultLIQUIDITY AND CAPITAL RESOURCES
Cash used in increased demand inoperating activities was $30.0 million during the second half of the year. Based on customer
expectations, orders actually placed,nine months
ended March 30, 1997 and favorable econometric forecasts, and
assuming normal spring weather, management expects unit shipments$31.2 million for the full
fiscal year to be somewhat higher than forsame period in the preceding
year. Seasonal increases in accounts receivable were $157.1 million in the
nine months ended March 30, 1997 and $179.2 million in the nine months ended
March 31, 1996. This increase in accounts receivable was offset by funds
generated by net income before depreciation ($90.2 million in the nine months
ended March 30, 1997 and $97.6 million in the nine months ended March 31, 1996)
and an increase in accounts payable and accrued liabilities ($67.0 million in
the nine months ended March 30, 1997 and $45.8 million in the nine months ended
March 31, 1996). The larger increase in accrued liabilities in the nine months
ended March 30, 1997 is primarily attributable to lower payments of profit
sharing accruals in that period as compared to the same period in 1996.
Cash used in investing activities was $36.3 million in the nine months
ended March 30, 1997 and $64.3 million in the same period in 1996. This
decrease was caused by $12.9 million less of additions to plant and equipment in
the nine months ended March 30, 1997 as compared to the nine months ended March
31, 1996. The first nine months of fiscal 1996 contained expenditures for four
new plants which were completed in that year. Proceeds received on the sale of
plant and equipment totaled $16.1 million in the nine months ended March 30,
1997 and $1.0 million in the nine months ended March 31, 1996. The nine-month
1997 amount contains the proceeds received on the disposition of the Company's
Menomonee Falls facility, as described in the footnotes accompanying the
financial statements contained herein. Management expects capital expenditures
for reinvestment in equipment and new products to total approximately $65
million in the full 1997 fiscal year--all expected to be financed from internal
resources and the Company's credit facilities.
Cash used in financing activities totaled $21.2 million in the nine months
ended March 30, 1997 and $15.7 million in the nine months ended March 31, 1996.
The Company will offer a final early retirement windowincreased its short-term borrowings by $2.6 million in late fiscalthe nine
months ended March 30, 1997 and $7.6 million in accordance with the current union contract withnine months ended March 31,
1996 to finance its Milwaukee hourly
employees. It is unknown how many employees will accept this offer. All
elections under this window must be completedseasonal working capital needs. Dividends were $23.4
million and $22.6 million in June 1997. If all eligible
employees elect to take this window, the charge to earnings could total a
maximum of $53 million before taxes.nine months ended March 30, 1997 and March 31,
1996, respectively.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
FINANCIAL CONDITION
Cash used in operating activities was $154,546,000. This resulted from
increased accounts receivable of $115,179,000 and increased inventories of
$93,021,000 due to the normal seasonality of the business. This was offset by
depreciation of $21,578,000 and an increase in accrued liabilities as a result
of the timing of payments.
Cash used in investing activities was $17,579,000 which was comprised of
additions to plant and equipment, offset by proceeds received on the disposition
of our Menomonee Falls facility as previously discussed. Additions to plant and
equipment totaled $33,687,000 through December 1996. Management expects capital
expenditures for reinvestment in equipment and new products to total
approximately $65,000,000 in the current fiscal year--all to be financed from
internal resources and the Company's lines of credit.
During the six-month period the Company increased its short-term borrowings
by $40,488,000 under its lines of credit, primarily to finance seasonal
increases in working capital. The Company also paid $15,621,000 of dividends
during the period.
The Company will make the first of five annual installments on its long-term debt9.21%
notes in June 1997. TheseThe first installment of these payments will total $15,000,000$15.0
million and areis shown as Current Maturities onof Long-Term Debt in the
accompanying balance sheet.
PLANNED REPURCHASE OF COMMON STOCK
On April 16, 1997, the Company's Board of Directors authorized the Company
to repurchase its common stock pursuant to a "dutch auction" self-tender offer.
The self-tender is for up to 5.875 million shares of the Company's common
stock. The tender offer price is from $43 to $51 per share in cash. The offer
commenced on Tuesday, April 22, 1997, and will expire at 5:00 p.m. New York
City time on Tuesday, May 20, 1997, unless extended.
The tender offer is subject to various terms and conditions described in
offering materials distributed to shareholders. Under the terms of the tender
offer, the Company's shareholders have been given the opportunity to specify
prices within the Company's stated price range at which they are willing to
tender their shares. Upon receipt of tenders, the Company will determine a
final price that enables it to purchase up to the stated amount of shares from
those shareholders who agreed to sell at or below the selected purchase price.
All shares purchased will be at the determined price. If more than 5.875
million shares are tendered at or below the purchase price, there will be a
proration. The offer will not be contingent upon any minimum number of shares
being tendered. The Company currently has 28,927,000 shares of common stock
outstanding. The Company has entered into a new credit facility allowing
borrowings of up to $250 million (which replaces the Company's domestic lines
of credit) to finance a portion of the tender offer and its seasonal working
capital needs. The term of the new credit facility is five years, and it
contains certain restrictive covenants.
The Company expects to offer $75 million of unsecured and unsubordinated
five-year notes and $100 million of unsecured and unsubordinated ten-year notes
subject to effectiveness of an SEC registration statement. The net proceeds of
the offering will be used to reduce borrowings under the credit facility
described above.
The Company's results of operations and financial position will be
significantly impacted by the debt offering, the tender offer and the Company's
new credit facility. The Company will experience increased interest expense as
a result of the offering and from increased borrowings under the Company's new
credit facility to fund seasonal working capital requirements as the Company
expects to use $127 million of available cash to fund a portion of the tender
offer. The foregoing transactions will result in a more leveraged financial
position for the Company relative to its historical position. The repurchase
of common stock pursuant to the tender offer is expected to result in the
Company paying less total cash dividends in relation to historical aggregate
cash dividend amounts. Management believes that the new credit facility and
cash generated from operations will be adequate to fund the Company's working
capital requirements for the foreseeable future.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
OTHER MATTERS
The sale of the Company's Menomonee Falls, Wisconsin plant was completed
at the beginning of the second quarter.quarter of the 1997 fiscal year. The required
accounting for this transaction is described in a footnote on page 7.the footnotes accompanying the
financial statements contained herein. The move from the manufacturing portion
of this building to available space in the Company's Wauwatosa, Wisconsin plant
was completed by the end of the quarter.second fiscal quarter of the 1997 fiscal year.
EMISSION STANDARDS
The Federal Environmental Protection Agency (EPA) is developing national
emission standards under a two phase process for equipment powered by small air
cooled engines. In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation." This standard establishes financial accounting and reportingEPA promulgated its Phase One emission standards, for stock-based employee compensation. The Company adopted the pro
forma disclosure requirements of the statement
which will be presentedreflected in the fiscal year-end 1997 annual report, and will continue to apply the accounting
provisions of Accounting Principles Board Opinion No. 25, as allowed by the new
standard.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
EMISSION STANDARDSCompany's 1998 model year engines. The U.S. Environmental Protection Agency (EPA)EPA and
several engine manufacturers, including Briggs & Stratton Corporation,the Company, recently announced an
agreement in principle to further cut pollution emitted by gasoline engines.
These reductions are expected to be incorporated into the EPA's Phase Two
emission standards to be issued later in 1997 and to be phased in from 2001 to
2005. While it is impossible to precisely quantify the cost of compliance
until the standards are actually issued, the Company believes compliance with the new
standards will not have a material adverse effect on its financial position or
results of operations.
The California Air Resources Board (CARB) has also adopted emission
standards to be effective in two tiers. Tier One was effective as of August
1995. Changes to engine models that were necessary to comply with Tier One
have been made. Recently CARB has granted the Company's request that the
California standard for carbon monoxide be modified to harmonize it with that
adopted by the EPA. As a result of this change, a wider range of the Company's
engines will meet California's current emission standards. The costs to comply
with the Tier One California standards did not have a material adverse effect
on the Company's financial position or results of operations.
Tier Two of the CARB engine emission standards will not be effective until
1999 or later. CARB has directed its staff to review its Tier Two standards in
light of technological and economic issues raised by the industry. In the
event the Company is unable to comply with future standards and they remain
unchanged, the Company believes that any resulting downturn in sales will not
have a material adverse effect on the Company's financial position or results
of operations.
OUTLOOK
The lawn and garden equipment selling season is off to a strong start
because of an early spring in the Southeast. Retailers are reporting
significant sales increases. Equipment manufacturers did not reach full
production levels until the second half of the Company's third quarter and will
have to maintain peak levels well into May to meet strong demand from
retailers. If favorable weather continues in the Southeast and spreads to the
Midwest and Northeast, the Company believes that it should have a good fourth
quarter. Management believes that unit shipments for the full fiscal year will
be up modestly despite being down 7% for the nine months.
The Company will offer an early retirement window in late fiscal 1997 in
accordance with the present union contract with its Milwaukee hourly employees.
It is unknown how many employees will accept this offer. All elections under
this window must be completed in June 1997. The Company has made preliminary
estimates of the cost of this window. Those estimates total approximately $40
million to $45 million before taxes which will be charged to earnings during the
last quarter of fiscal 1997.
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12
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements in the Outlook, Financial Condition"Outlook", "Liquidity and Emission
StandardsCapital Resources",
"Repurchase of Common Stock" and "Emission Standards" sections of Management's
Discussion and Analysis of Results of Operations and Financial Condition and in
the Notes to Consolidated Condensed Financial Statements may containare forward-looking
information (as definedstatements that involve risks and uncertainties that could cause actual results
to differ materially from those in the Private Securities Litigation Reform Act of 1995)
that involves risk and uncertainty.forward-looking statements. The words
"anticipate", "believe", "estimate", "expect", "objective","intend" and "think" or"expect" and similar
expressions are intended to identify such forward-looking statements. Company results may differ
materially from those projected in the forward-looking statements. AnyThe
forward-looking statements are based on management'sthe Company's current views and
assumptions and involve risks and uncertainties that could significantly affect
final results. These uncertainties could include, among other
things, the effects of weather;weather on the purchasing patterns of the Company's
customers and end use purchasers of the Company's engines; the seasonal nature
of the Company's business; actions of competitors; changes in laws and
regulations, including accounting standards; employee relations; customer
demand; prices of purchased raw materials and parts; domestic economic
conditions, including housing starts and changes in consumer disposable income;
and foreign economic conditions, including currency rate fluctuations. Some or
all of the factors are beyond the Company's control.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
------------- -----------
11 Computation of Earnings Per Share of Common Stock
(Filed herewith)
12 Computation of Ratio of Earnings to Fixed Charges
(Filed herewith)
27 Financial Data Schedule
(Filed herewith)
(b) Reports on Form 8-K.
There were no reportsOn April 17, 1997, the Company filed a report on Form 8-K regarding
(as disclosed in Item 5. thereof) a Company press release dated April 16,
1997 that discloses, among other things, a self tender offer for up to
5.875 million shares of common stock, the declaration of a dividend and
the unaudited operating results of the Company for the secondthird fiscal
quarter ended December 29,
1996.
-11-of 1997.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION (Continued)
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 10,May 12, 1997 /s/ R. H. Eldridge
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R. H. Eldridge
Executive Vice President & Chief
Financial Officer,
Secretary-Treasurer
Date: February 10,May 12, 1997 /s/ J. E. Brenn
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J. E. Brenn
Vice President and Controller
-12--13-
14
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Description
--------- -----------
11 Computation of Earnings Per Share of Common Stock
(Filed herewith)
12 Computation of Ratio of Earnings to Fixed Charges
(Filed herewith)
27 Financial Data Schedule
(Filed herewith)
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