Exhibit 99.1
BRIGGS & STRATTON CORPORATION REPORTS RESULTS FOR THE
FIRST QUARTER OF FISCAL 2006
Milwaukee, WI October 20, 2005/PR Newswire/-Briggs & Stratton Corporation (NYSE:BGG)
Briggs & Stratton Corporation today announced first quarter consolidated net sales of $511.7 million and net income of $4.7 million or $.09 per diluted share. Consolidated net sales increased $72.7 million or 17% over the prior year while net income increased $6.2 million over the same period a year ago.
The $72.7 million consolidated net sales increase was primarily due to the inclusion of sales of end product associated with our acquisition of the assets of Murray, Inc. (“Murray”), which was completed in February of 2005.
The $6.2 million improvement in net income reflects that last year’s fiscal first quarter results contain a $10.0 million ($6.4 million after tax) expense for an increase in the reserve for uncollectible receivables. In addition, the fiscal 2006 first quarter results reflect a $6.4 million ($4.2 million after tax) gain on the sale of a manufacturing property. Offsets to the major items that improved net income were increased operating costs related to fringe benefits (i.e., health care, pension and stock option costs) and wind down expenses associated with the exit of the Transition Services Agreement (“TSA”) made in conjunction with the Murray transaction.
Engines:
Fiscal 2006 first quarter net sales were $285.4 million, a $31.3 million or 12% improvement over the prior year. This increase is primarily due to increased unit shipments to Europe for lawn equipment and generator manufacturers for portable generators.
Income from operations was $8.8 million, an increase of $13.4 million from the loss reported for the same period a year ago. The decrease in the bad debt expense between years and this year’s gain on the sale of the manufacturing property were two major factors in the improvement. Operationally, the increased margin on strong engine sales was offset primarily by increased fringe benefit costs, higher than anticipated transportation costs and planned increases for professional services.
Power Products:
First quarter net sales were $300.6 million, a $78.5 million or 35% increase over the same period a year ago. The increase in net sales was the result of having $79.9 million of sales related to lawn and snow equipment produced by Murray under the TSA. Generator sales were positively impacted by two hurricanes in the first quarter of fiscal 2006, but the increase was offset by the combination of lower pressure washer unit sales and significantly lower unit sales of premium lawn and garden equipment. Premium lawn and garden equipment decreases were caused by low replenishment due to higher dealer inventories in certain areas of the country where retail sales for the past season were hampered by dry weather conditions.
Income from operations was $.1 million, a decrease of $5.0 million or 97% from the prior year. Operating income on generators and pressure washers improved over 50% between years driven by improved revenue per unit, better utilization of the assets producing generators and pressure washers and increased generator volume. Volume for premium lawn and garden equipment was lower for both units shipped and produced, increasing the first quarter loss related to these products. Finally, the major factor for the decline in operating income between years was the cost of effectively closing down operations under the TSA arrangement with Murray. The Murray related operations negatively impacted the first quarter operating income by $8.2 million.
General:
Interest expense was higher in the first quarter of fiscal 2006 because outstanding debt was higher than last year. The effective tax rate is at 35% versus the 36% used in the first quarter last year.
Outlook:
At this time, we are not changing the outlook for fiscal 2006 that we provided in August 2005. While the Power Products Segment has seen more strength in portable generators than originally anticipated, it has also experienced greater costs than planned to affect the shut down of the Murray operations. In addition, the status of orders for the
Engine Segment’s business is later in developing this year because retailers are making their product line-up decisions later this year.
We project that second quarter fiscal 2006 consolidated net sales will be approximately $560 million and operating margins are estimated to be near 7.2%. The effective tax rate is estimated at 35.0%. Our forecast for net income is $.44 per diluted share.
The Company will host a conference call today at 10:00 AM (EDT) to review this information. A live web cast of the conference call will be available on our corporate website: http://www.briggsandstratton.com/shareholders. Also available is a dial-in number to access the call real-time at (866) 219-5268. 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 785571.
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 September
(In Thousands, except per share data)
(Unaudited)
| | Three Months Ended Fiscal September | |
| | | | | |
| | 2005 | | 2004 | |
NET SALES | | $ | 511,709 | | $ | 438,995 | |
COST OF GOODS SOLD | | 430,401 | | 368,177 | |
Gross Profit on Sales | | 81,308 | | 70,818 | |
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | | 70,277 | | 67,960 | |
Income from Operations | | 11,031 | | 2,858 | |
INTEREST EXPENSE | | (10,028 | ) | (8,119 | ) |
OTHER INCOME, Net | | 6,264 | | 2,933 | |
Income (Loss) before Provision (Credit) for Income Taxes | | 7,267 | | (2,328 | ) |
PROVISION (CREDIT) FOR INCOME TAXES | | 2,540 | | (840 | ) |
Net Income (Loss) | | $ | 4,727 | | $ | (1,488 | ) |
| | | | | |
Average Shares Outstanding | | 51,695 | | 51,191 | |
BASIC EARNINGS PER SHARE | | $ | 0.09 | | $ | (0.03 | ) |
| | | | | |
Diluted Average Shares Outstanding | | 52,158 | | 51,191 | |
DILUTED EARNINGS PER SHARE | | $ | 0.09 | | $ | (0.03 | ) |
Segment Information
(In Thousands)
(Unaudited)
| | Three Months Ended Fiscal September | |
| | | | | |
| | 2005 | | 2004 | |
NET SALES: | | | | | |
Engines | | $ | 285,429 | | $ | 254,112 | |
Power Products | | 300,607 | | 222,154 | |
Inter-Segment Eliminations | | (74,327 | ) | (37,271 | ) |
Total* | | $ | 511,709 | | $ | 438,995 | |
| | | | | |
*Includes international sales of | | $ | 115,537 | | $ | 61,248 | |
| | | | | |
GROSS PROFIT ON SALES: | | | | | |
Engines | | $ | 59,684 | | $ | 44,245 | |
Power Products | | 19,504 | | 24,198 | |
Inter-Segment Eliminations | | 2,120 | | 2,375 | |
Total | | $ | 81,308 | | $ | 70,818 | |
| | | | | |
INCOME FROM OPERATIONS: | | | | | |
Engines | | $ | 8,767 | | $ | (4,676 | ) |
Power Products | | 144 | | 5,159 | |
Inter-Segment Eliminations | | 2,120 | | 2,375 | |
Total | | $ | 11,031 | | $ | 2,858 | |
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of the End of Fiscal September
(In Thousands)
(Unaudited)
| | 2005 | | 2004 | |
CURRENT ASSETS: | | | | | |
Cash and Cash Equivalents | | $ | 84,567 | | $ | 28,857 | |
Accounts Receivable, Net | | 343,650 | | 270,125 | |
Inventories | | 572,645 | | 456,948 | |
Deferred Income Tax Asset | | 97,498 | | 57,506 | |
Other | | 35,001 | | 24,958 | |
Total Current Assets | | 1,133,361 | | 838,394 | |
| | | | | |
OTHER ASSETS: | | | | | |
Goodwill | | 253,066 | | 252,520 | |
Investments | | 46,640 | | 45,299 | |
Prepaid Pension | | - | | 82,488 | |
Deferred Loan Costs, Net | | 5,650 | | 6,049 | |
Other Intangible Assets, Net | | 96,062 | | 93,546 | |
Other Long-Term Assets, Net | | 28,031 | | 4,754 | |
Total Other Assets | | 429,449 | | 484,656 | |
| | | | | |
PLANT AND EQUIPMENT: | | | | | |
At Cost | | 1,006,145 | | 959,539 | |
Less - Accumulated Depreciation | | 564,899 | | 534,239 | |
Plant and Equipment, Net | | 441,246 | | 425,300 | |
| | $ | 2,004,056 | | $ | 1,748,350 | |
| | | | | |
CURRENT LIABILITIES: | | | | | |
Accounts Payable | | $ | 142,037 | | $ | 145,426 | |
Short-Term Borrowings | | 4,721 | | 3,004 | |
Current Maturity on Long-Term Debt | | 40,000 | | - | |
Accrued Liabilities | | 203,396 | | 180,531 | |
Total Current Liabilities | | 390,154 | | 328,961 | |
| | | | | |
OTHER LIABILITIES: | | | | | |
Deferred Income Tax Liability | | 111,295 | | 105,289 | |
Accrued Pension Cost | | 50,806 | | 21,282 | |
Accrued Employee Benefits | | 15,468 | | 14,363 | |
Accrued Postretirement Health Care Obligation | | 80,091 | | 76,641 | |
Other Long-Term Liabilities | | 15,940 | | 15,372 | |
Long-Term Debt | | 446,510 | | 360,752 | |
Total Other Liabilities | | 720,110 | | 593,699 | |
| | | | | |
SHAREHOLDERS’ INVESTMENT: | | | | | |
Common Stock and Additional Paid-in Capital | | 59,176 | | 55,120 | |
Retained Earnings | | 1,022,677 | | 917,584 | |
Accumulated Other Comprehensive Income | | (41,684 | ) | 4,037 | |
Unearned Compensation on Restricted Stock | | (2,946 | ) | (1,874 | ) |
Treasury Stock, at Cost | | (143,431 | ) | (149,177 | ) |
Total Shareholders’ Investment | | 893,792 | | 825,690 | |
| | $ | 2,004,056 | | $ | 1,748,350 | |
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
| | Three Months Ended Fiscal September | |
| | | | | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | 2005 | | 2004 | |
Net Income | | $ | 4,727 | | $ | (1,488 | ) |
Depreciation and Amortization | | 19,424 | | 17,769 | |
(Gain) Loss on Disposition of Plant and Equipment | | (6,156 | ) | 716 | |
Provision for Deferred Income Taxes | | (7,746 | ) | (13,377 | ) |
Decrease (Increase) in Accounts Receivable | | 17,136 | | (15,192 | ) |
Increase in Inventories | | (102,980 | ) | (58,546 | ) |
(Increase) Decrease in Other Current Assets | | (5,450 | ) | 755 | |
Decrease in Accounts Payable and Accrued Liabilities | | (7,303 | ) | (30,920 | ) |
Other, Net | | 3,266 | | 4,798 | |
Net Cash Used by Operating Activities | | (85,082 | ) | (95,485 | ) |
| | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | |
Additions to Plant and Equipment | | (16,317 | ) | (17,695 | ) |
Proceeds Received on Disposition of Plant and Equipment | | 10,474 | | 56 | |
Proceeds Received on Sale of Certain Assets of a Subsidiary | | - | | 4,050 | |
Cash Paid for Acquisitions, Net of Cash Received | | - | | (222,548 | ) |
Refund of Cash Paid for Acquisition | | 6,347 | | - | |
Net Cash Provided by (Used in) Investing Activities | | 504 | | (236,137 | ) |
| | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | |
Net Borrowings (Repayments) on Loans and Notes Payable | | 4,278 | | (123 | ) |
Proceeds from Exercise of Stock Options | | 2,366 | | 17,648 | |
Net Cash Provided by Financing Activities | | 6,644 | | 17,525 | |
EFFECT OF EXCHANGE RATE CHANGES | | 928 | | 560 | |
NET DECREASE IN CASH AND CASH EQUIVALENTS | | (77,006 | ) | (313,537 | ) |
CASH AND CASH EQUIVALENTS, Beginning | | 161,573 | | 342,394 | |
CASH AND CASH EQUIVALENTS, Ending | | $ | 84,567 | | $ | 28,857 | |
