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)
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| Second Quarter |
| Six Months |
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| 2005 |
| 2004 |
| 2005 |
| 2004 |
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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 |
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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 |
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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 |
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PROVISION FOR INCOME TAXES |
| 11,730 |
| 3,710 |
| 14,270 |
| 2,870 |
| ||||
Net Income |
| $ | 21,818 |
| $ | 7,060 |
| $ | 26,545 |
| $ | 5,572 |
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Average Shares Outstanding |
| 51,695 |
| 51,193 |
| 51,714 |
| 51,361 |
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BASIC EARNINGS PER SHARE |
| $ | 0.42 |
| $ | 0.14 |
| $ | 0.51 |
| $ | 0.11 |
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Diluted Average Shares Outstanding |
| 52,066 |
| 51,751 |
| 52,093 |
| 51,906 |
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DILUTED EARNINGS PER SHARE |
| $ | 0.42 |
| $ | 0.14 |
| $ | 0.51 |
| $ | 0.11 |
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Segment Information
(In Thousands)
(Unaudited)
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| Second Quarter |
| Six Months |
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| 2005 |
| 2004 |
| 2005 |
| 2004 |
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NET SALES: |
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Engines |
| $ | 380,901 |
| $ | 374,874 |
| $ | 666,330 |
| $ | 628,986 |
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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 |
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*Includes international sales of |
| $ | 149,551 |
| $ | 110,715 |
| $ | 265,088 |
| $ | 171,963 |
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GROSS PROFIT ON SALES: |
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Engines |
| $ | 93,503 |
| $ | 88,681 |
| $ | 153,187 |
| $ | 132,926 |
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Power Products |
| 26,472 |
| 17,849 |
| 45,976 |
| 42,047 |
| ||||
Inter-Segment Eliminations |
| (2,623 | ) | (388 | ) | (503 | ) | 1,987 |
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Total |
| $ | 117,352 |
| $ | 106,142 |
| $ | 198,660 |
| $ | 176,960 |
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INCOME FROM OPERATIONS: |
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Engines |
| $ | 35,699 |
| $ | 14,528 |
| $ | 44,466 |
| $ | 9,852 |
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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 |
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of the End of Fiscal December
(In Thousands)
(Unaudited)
|
| 2005 |
| 2004 |
| |||
CURRENT ASSETS: |
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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 |
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OTHER ASSETS: |
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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 |
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PLANT AND EQUIPMENT: |
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At Cost |
| 1,018,825 |
| 975,437 |
| |||
Less - Accumulated Depreciation |
| 578,477 |
| 545,041 |
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Plant and Equipment, Net |
| 440,348 |
| 430,396 |
| |||
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| $ | 2,145,274 |
| $ | 1,933,897 |
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CURRENT LIABILITIES: |
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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 |
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OTHER LIABILITIES: |
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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 |
| |||
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SHAREHOLDERS’ INVESTMENT: |
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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 |
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| 2005 |
| 2004 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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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 | ) | ||
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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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 | ) | ||
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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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 |
| ||
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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 |
|