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 March 30,September 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period fromfrom_______________ to --------------- ---------------_______________
Commission file number 1-1370
BRIGGS & STRATTON CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 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 May 12,November 6, 1997
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COMMON STOCK, par value $0.01 per share 28,927,00024,943,289 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 -
March 30, 1997 and June 30, 1996 3
Consolidated Condensed Statements of Income -
Three Months and Nine Months Ended
March 30, 1997 and March 31, 1996 5
Consolidated Condensed Statements of Cash Flow -
Nine Months Ended March 30, 1997 and
March 31, 1996 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 12
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets -
September 28, 1997 and June 29, 1997 3
Consolidated Condensed Statements of Income -
Three Months ended September 28, 1997 and
September 29, 1996 5
Consolidated Condensed Statements of Cash Flow -
Three Months ended September 28, 1997 and
September 29, 1996 6
Notes to Consolidated Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
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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 except amounts per share)thousands)
ASSETS
March 30Sept. 28 June 3029
1997 1996
---------- -----------1997
-------- -------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 62,871 $ 150,6394,825 $112,859
Receivables, net 276,405 119,346121,534 129,877
Inventories -
Finished products and parts 114,699 96,078156,305 83,361
Work in process 37,830 36,93243,556 37,922
Raw materials 4,866 4,393
--------- ----------4,942 4,674
-------- --------
Total inventories 157,395 137,403204,803 125,957
Future income tax benefits 33,607 29,58931,523 31,602
Prepaid expenses 13,571 15,725
--------- ----------15,618 18,121
-------- --------
Total current assets 543,849 452,702
--------- ----------378,303 418,416
-------- --------
OTHER ASSETS:
Prepaid pension cost 8,471 4,682
Deferred income tax asset 5,403 2,883
Purchasedassets 16,673 16,975
Capitalized software 10,217 3,685
--------- ----------11,066 10,532
-------- --------
Total other assets 24,091 11,250
--------- ----------27,739 27,507
-------- --------
PLANT AND EQUIPMENT -
Cost 802,764 776,638809,182 796,714
Less - Accumulated depreciation 410,871 402,426
--------- ----------411,199 400,448
-------- --------
Total plant and equipment, net 391,893 374,212
--------- ----------
$ 959,833 $ 838,164
========= ==========397,983 396,266
-------- --------
$804,025 $842,189
======== ========
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 except amounts per share)thousands)
LIABILITIES & SHAREHOLDERS' INVESTMENT
March 30Sept. 28 June 3029
1997 1996
------------- -----------1997
-------- --------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 77,68062,630 $ 65,64282,166
Domestic notes payable 5,00012,980 5,000
Foreign loans 17,533 14,92211,936 13,359
Current maturities of long-term debt 15,000 15,000
Accrued liabilities 106,535 82,93292,634 87,553
Dividends payable 7,8107,001 -
Federal and state income taxes 30,231 6,683
---------- ---------8,490 10,916
-------- --------
Total current liabilities 259,789 190,179
---------- ---------210,671 213,994
-------- --------
OTHER LIABILITIES:
Deferred revenue on sale of plant and equipment 15,981 -15,951 15,966
Accrued pension cost 31,208 31,891
Accrued employee benefits 19,982 18,43112,496 12,324
Accrued postretirement health care obligation 69,853 69,04974,717 74,020
Long-term debt 60,000 60,000
---------- ---------142,948 142,897
-------- --------
Total other liabilities 165,816 147,480
---------- ---------277,320 277,098
-------- --------
SHAREHOLDERS' INVESTMENT:
Common stock-
Authorized 60,000,00060,000 shares, $.01 par value,
Issued and outstanding 28,927,00028,927 shares 289 289
Additional paid-in capital 39,389 40,533 40,898
Retained earnings 494,181 459,666481,049 490,682
Cumulative translation adjustments (775) (348)
---------- ---------(1,276) (1,033)
Treasury stock at cost, 4,000 and 3,513 shares,
respectively (203,417) (179,374)
-------- --------
Total shareholders' investment 534,228 500,505
---------- ---------
$ 959,833 $ 838,164
========== =========316,034 351,097
-------- --------
$804,025 $842,189
======== ========
The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands of dollars except amounts per share)share data)
(Unaudited)
Three MonthsFirst Quarter Ended
Nine Months Ended
---------------------- ------------------------
March 30 March 31 March 30 March 31
1997 1996-----------------------
Sept. 28 Sept. 29
1997 1996
-------- --------
-------- ---------
NET SALES $ 475,955 $ 460,201 $ 937,350 $ 979,035$170,557 $161,731
COST OF GOODS SOLD 368,836 356,119 755,405 790,049
---------- ---------- ---------- ----------144,146 143,762
-------- --------
Gross profit on sales 107,119 104,082 181,945 188,986$ 26,411 $ 17,969
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 30,847 30,055 84,979 79,339
---------- ---------- ---------- ----------
Income29,174 26,061
-------- --------
Loss from operations 76,272 74,027 96,966 109,647$ (2,763) $ (8,092)
INTEREST EXPENSE (2,691) (2,879) (7,051) (7,855)(3,794) (1,952)
OTHER INCOME, net 1,453 1,798 3,551 4,418
---------- ---------- ---------- ----------
Income2,315 1,562
-------- --------
Loss before provisioncredit
for income taxes 75,034 72,946 93,466 106,210
PROVISION$ (4,242) $ (8,482)
CREDIT FOR INCOME TAXES 28,520 27,720 35,520 40,360
---------- ---------- ---------- ----------(1,610) (3,220)
-------- --------
Net incomeloss $ 46,514(2,632) $ 45,226 $ 57,946 $ 65,850
========== ========== ========== ==========(5,262)
======== ========
PER SHARE DATA*DATA -
Net incomeloss $(0.10) $ 1.60 $ 1.57 $ 2.00 $ 2.28
======= ======= ======= =======(.18)
====== ======
Cash dividends $ .28 $ .27
$ .26 $ .81 $ .78
======= ======= ======= ============= ======
Weighted average number of shares outstanding 25,165 28,927
====== ======
* 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)thousands)
(Unaudited)
Nine MonthsFirst Quarter Ended
-----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: March 30,-----------------------------
Sept. 28, 1997 March 31,Sept. 29, 1996
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net incomeloss $ 57,946(2,632) $ 65,850(5,262)
Adjustments to reconcile net incomeloss to net
cash provided by operating activities -
Depreciation 32,278 31,70410,928 10,698
Amortization of discount on long-term debt 51 -
Loss on disposition of plant and equipment 2,201 1,3181 515
(Increase)decrease in operating assets -
Accounts receivable (157,059) (179,194)8,343 15,889
Inventories (19,992) 10,399(78,846) (79,527)
Other current assets (1,864) (1,589)2,582 1,954
Other assets (12,841) (5,961)(232) (874)
Increase(decrease) in liabilities -
Accounts payable and accrued
liabilities 66,999 45,780(9,880) 2,557
Other liabilities 2,355 493
---------- ----------186 649
--------- --------
Net cash used in
operating activities (29,977) (31,200)
---------- ----------(69,499) (53,401)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (52,423) (65,341)(12,855) (14,171)
Proceeds received on sale of plant and equipment 163 1,006
Proceeds received on sale138 129
Purchase of Menomonee Falls, Wisconsin facility 15,981short-term investments - ---------- ----------(15,183)
--------- --------
Net cash used in investing activities (36,279) (64,335)
---------- ----------(12,717) (29,225)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowingsborrowings(repayments) from domestic
and foreign loans 2,611 7,5566,557 (628)
Dividends (23,431) (22,563)(7,001) (7,810)
Purchase of common stock for treasury (550) (1,032)(26,396) (120)
Proceeds from exercise of stock options 185 335
---------- ----------1,209 40
--------- ---------
Net cash used in financing activities (21,185) (15,704)
---------- ----------(25,631) (8,518)
--------- ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS (327) (251)
---------- ----------(187) 25
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (87,768) (111,490)(108,034) (91,119)
CASH AND CASH EQUIVALENTS, beginning 112,859 150,639
170,648
---------- ------------------- ---------
CASH AND CASH EQUIVALENTS, ending $ 62,8714,825 $ 59,158
========== ==========59,520
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 7,0512,051 $ 7,905
========== ==========1,952
========= =========
Income taxes paid $ 17,766857 $ 15,795
========== ==========422
========= =========
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 $3,972,000 and $3,367,000 as of March 30,
1997 and June 30, 1996, 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
approximately $16.0 million was completed at the beginning of the fiscal
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. Under the provisions of
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 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 end1998 second quarter 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's discussion and analysis of the Company's
results of operations and financial condition for the periods included in the
accompanying consolidated condensed financial statements.
RESULTS OF OPERATIONS
SALES
Net sales for the three months ended March 30,September 1997 increased 3%were 5% or $15.8$8.8
million compared tohigher than in the same period of the preceding year. This sales
increase was the result of a 1% increase in sales to original equipment
manufacturers (OEMs) and a 4% increase in service parts sales.
Engine unit shipments to OEMs were 8% higher in the priorcurrent year.
The primary reason for
this change was an increase of 2% in engine unit shipments. Engine sales
dollars increased atHowever, the same rate as the unit increase. The additional 1% sales dollar increase isto OEMs was smaller than the unit increase
because the mix was more heavily weighted toward lower horsepower, lower
selling price engines.
The increase in service parts sales was 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 periodincreased volume
that would normally occur later in the priorfiscal year.
The primary reason for
this decline was a 7% decrease in engine unit shipments. This 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 capacities
which allows them to concentrate more of their production in winter and early
spring. This resulted in reduced demand for engines for the nine months ended
March 30, 1997 as compared to the same period in the prior year. 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 for the three months ended March 30, 1997 increased $3.0
million or 3% when compared to the same period in the preceding year, also due
to the increase in sales.
The gross profit rate was 23% in each three-month
period. For the three months ended March 30, 1997, the impact of increases in
the unit price of aluminum totaling $1.2 million, and additional warranty
expenses of $4.6 million dueincreased to claims experience, were offset by lower labor
costs in the Company's new engine plants.
Gross profit for the nine months ended March 30, 1997 decreased 4% or $7.0
million compared to the same period in the prior year due to the reduction in
sales. The gross profit rate was 19% in each nine-month period. For the nine
months ended March 30, 1997, the gross profit rate was 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
absence15% in the current nine-month period of the $3.5 million credit for
employees who had accepted an early retirement and canceled their acceptanceyear from 11% in
the second quarter of fiscal 1996. Savings from lower labor costs at the
Company's new engine plants fully offset the preceding factors impacting thelast year. This resulted in additional gross profit rate.totaling $8.4 million
between years. Better absorption of fixed expenses which totaled $3.2 million,
additional profits of $2.9 million from the higher margin service sales and
$2.3 million in reductions in various plant operating costs accounted for this
improvement.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Engineering, selling, generalThis category increased 12% or $3.1 million between years.
Approximately $2.2 million of this increase is related to the continuing costs
of design and administrative expensesimplementation of a new company-wide information system. The
remaining increase is due primarily to planned increases in manpower costs
related to new venture activities.
INTEREST EXPENSE
Interest expense increased $1.8 million when comparing the two years.
This is due to the interest expense on the Company's 7.25% Notes Due 2007,
which were issued in the fourth quarter of fiscal 1997 in connection with the
Company's dutch auction tender offer for the three
months ended March 30, 1997its common stock.
OTHER INCOME
This category increased 3% or $.8 million compared to the same
periodbetween years. This change was
evenly split between a reduction in the prior year. Thislosses experienced on the disposition
of plant and equipment and an increase was primarily due to costs incurred in new engine development which accounted for approximately one-half of this
increase.the equity income from joint
ventures.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
Engineering, 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 increase was primarily due to increased
salaries of $1.2 million, and planned increases in manpower and other costs of
$2.0 million relating to new venture activities.
INTEREST EXPENSE
Interest expense decreased 7% or $.2 million for the three months ended
March 30, 1997 compared to the same period in the prior year and decreased 10%
or $.8 million for the nine months ended March 30, 1997 compared to the same
period in the prior year. Both of these decreases were due primarily to the
impact of lower borrowings.
PROVISION FOR INCOME TAXES
The effective income tax rate used in both years was 38% in all periods.38.0%. This reflectsrate is
management's estimate of what the rate will be for the entire fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow used in operating activities was $30.0$69.5 million during the nine months
ended March 30,in 1997 and
$31.2$53.4 million forin 1996. The primary use of these funds was the same periodseasonal
increases in inventories of $78.8 million and $79.5 million in the preceding
year. Seasonal increasesrespective
years. Earnings before depreciation and decreases 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.these inventory increases.
Cash used in investing activities was $36.3$12.7 million in the nine monthsquarter
ended March 30, 1997in the current year and $64.3$29.2 million in the same period in 1996. This
decrease was caused by $12.9 million lessquarter of additionsthe
preceding year. 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
planttotaled $12.9 million and
equipment totaled $16.1$14.2 million in the nine months ended March 30,respective years. The prior year also contained an
expenditure for the purchase of $15.2 million of short-term investments.
Cash used in financing activities totaled $25.6 million in 1997 and
$1.0$8.5 million in 1996. This increase was primarily the nine months ended March 31,result of the purchase
of common stock for $26.4 million, which is described later. Dividends in the
first quarter totaled $7.0 million in 1997 and $7.8 million in 1996. The
nine-month
1997current year's smaller amount containsis due to the proceeds received ondecrease in the dispositionoutstanding shares.
FUTURE LIQUIDITY AND CAPITAL RESOURCES
In the previous fiscal year, the Company's Board of Directors
authorized the purchase of up to $300 million of shares of common stock of the
Company. As of November 6, 1997, the Company has made purchases totaling
$211.1 million. Any future purchases will depend on many factors, including
the market price of the shares, the Company's Menomonee Falls facility, as described in the footnotes accompanying thebusiness and financial statements contained herein.position,
and general economic and market conditions. The Company intends to fund future
purchases of its common stock through a combination of available cash and
additional borrowings.
Management expects capital expenditures to total $56 million in fiscal
1998 for reinvestment in equipment and new productsproducts. The Company is also
implementing a new company-wide information system, the expenditures for which
are expected to total approximately $65$25 million over the next five years. Among other things,
the implementation of this new information system addresses the issues related
to the year 2000.
Management believes that available cash, the credit facility, cash
generated from operations, existing lines of credit and access to public debt
markets will be adequate to fund the Company's capital requirements for the
foreseeable future.
OUTLOOK
The seasonal pattern of sales is expected to continue with a
concentration in the full 1997third and fourth fiscal year--all expectedquarters. Most retailers have
made their sourcing decisions, and the Company does not expect any significant
net change in its market share. Fiscal 1998 sales should be good if weather
conditions are normal, and retail sales in the spring of 1998 are anticipated
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 increased its short-term borrowings by $2.6 million in the nine
months ended March 30, 1997 and $7.6 million in the nine months ended March 31,
1996 to finance its seasonal working capital needs. Dividends were $23.4
million and $22.6 million in the nine months ended March 30, 1997 and March 31,
1996, respectively.modestly higher than 1997.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
The Company1998 fiscal year will makenot contain the first of five annual installments on its 9.21%
notes in June 1997. The first installment of these payments will total $15.0$37.1 million and is shown as Current Maturities of Long-Term Debtcharge related
to the early retirement window which was contained 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 of the
1997 fiscal year. The required
accounting for this transactionTherefore, the gross profit rate is described in the footnotes accompanying the
financial statements contained herein. The move from the manufacturing portion
of this buildinganticipated to available space in the Company's Wauwatosa, Wisconsin plant
was completed by the endincrease
year to year. Interest expense is expected to continue to increase because of
the 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 1995, the EPA promulgated its Phase One emission standards,
which will be reflected in the Company's 1998 model year engines. The EPAnew long-term debt and several engine manufacturers, including 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 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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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)less available cash.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements in the "Outlook", "Liquidity and Capital 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 arepages 8
through 10, may contain forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
in the forward-looking statements. The words "anticipate", "believe",
"estimate", "intend""expect, "objective", and "expect" and"think" or similar expressions are
intended to identify such 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 effects of
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 aremay be beyond
the Company's control.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders on October 15, 1997, the only
item of business was the election of directors.
(a) Election of three directors:
The following schedule indicates the votes cast for and
withheld with respect to each nominee for director.
Name of Nominee* For Withheld
--------------- --- --------
Robert J. O'Toole 20,838,337 93,564
John S. Shiely 20,867,117 64,784
Charles I. Story 20,854,286 77,615
*Nominees were elected to a three-year term expiring in 2000.
Directors whose terms of office continue past the Annual Meeting of
Shareholders are:
Michael E. Batten, Robert H. Eldridge, Eunice M. Filter, Peter A.
Georgescu, Clarence B. Rogers, Jr., and Frederick P. Stratton, Jr.
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11
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION (Continued)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
-------
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.
On April 17, 1997, the Company filed a reportThere were no reports 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 third fiscalfirst quarter ofended
September 28, 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: May 12,November 6, 1997 /s/ R. H. Eldridge
--------------------------------------------------------------------------
R. H. Eldridge
Executive Vice President & Chief
Financial Officer, Secretary-Treasurer
Date: May 12,November 6, 1997 /s/ J. E. Brenn
--------------------------------------------------------------------------
J. E. Brenn
Vice President and Controller
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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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