BRIGGS & STRATTON CORPORATION
FORM 8-K DATED JANUARY 31, 2002
EXHIBIT 99.1
BRIGGS & STRATTON CORPORATION REPORTS SECOND QUARTER RESULTS
MILWAUKEE, January 17, 2002/PR Newswire/-Briggs & Stratton Corporation
(NYSE:BGG)
Briggs & Stratton Corporation today announced fiscal 2002 second quarter net
income of $2.4 million or $.11 per diluted share. These results included
expenses of $5.2 million on an after tax basis or $.24 per diluted share
representing the cost of the early retirement incentive program announced in
November. The net income for the fiscal 2001 second quarter was $19.9 million or
$.92 per diluted share. Lower engine sales, lower engine production levels and
higher interest expense were the other major factors causing lower quarterly
earnings between the years.
For the first six months of fiscal 2002, the Company incurred a $15.0 million
loss; for the same period in fiscal 2001, $13.6 million of net income was
reported. Lower earnings for the first six months were primarily the result of
the same factors that affected the second quarter. The dollar magnitude of the
impact of each of these factors on the first six month's results was similar.
Interest expense for both the second quarter and first six months of fiscal 2002
has increased over the comparable periods from a year ago as a result of the
long-term debt issued to make the Generac Portable Products acquisition.
ENGINES:
Second quarter sales were $307.5 million versus $368.2 million in the prior
year. This 16% decrease is primarily the result of a 12% decrease in unit sales
and a sales mix weighted to small horsepower engines. Six-month sales for fiscal
2002 were $487.0 million versus $549.5 million in the prior year. Causes of the
decline in the sales between years were the same as for the second quarter. Year
to date unit shipments are off 7% from the prior year and reflect original
equipment manufacturers' efforts to move the assembly of lawn and garden
equipment closer to the spring retail selling season.
Income from operations for the second quarter was $16.7 million compared to
$36.9 million in the second quarter of fiscal 2001. For the first six months of
fiscal 2002 we have experienced a $0.9 million loss from operations compared to
$29.0 million of income from operations for the same period in fiscal 2001. The
previously mentioned early retirement incentive program was responsible for $7.7
million of the $20.1 million decline between quarters and the $29.9 million
decline in the six month comparison. The remainder of the decreases essentially
reflect declines in sales and production volumes between the respective periods.
GENERAC PORTABLE PRODUCTS:
Net sales in the second quarter of fiscal 2002 were $39.6 million and they were
$94.8 million for the first six months of fiscal 2002. Sales for the comparable
periods a year ago when Briggs & Stratton did not own Generac were $41.0 million
and $86.1 million, respectively.
The second quarter sales dollars are similar between years; however, they are
the net result of an increase in generator unit volumes and a decrease in
pressure washer unit volumes. Generator volume, while greater than last year,
did not experience any incremental demand from storm related activity. Pressure
washer volume decreased because last year's second quarter contained shipments
to initially stock a new national account. This year only normal restocking has
occurred.
Increased generator volume in the first six months of fiscal 2002 accounts for
the increased sales between years.
Losses from operations in the second quarter of fiscal 2002 were $1.9 million
and $0.3 million for the first six months of the current year. Amounts for the
comparable periods last year when Briggs & Stratton did not own Generac were a
loss of $0.1 million and income of $0.5 million, respectively. Sales of
generators with lower margins created an unfavorable product mix, which
negatively affected operating income in the second quarter and first six months
of fiscal 2002.
OUTLOOK:
The first half of fiscal 2002 is now completed, with results slightly better
than what we anticipated they would be when we announced the early retirement
incentive program. We continue to believe that the second half of the fiscal
year will outperform revenue and earnings levels of the comparable period from a
year ago because the results of the May 2001 Generac acquisition will be in the
numbers and Engine sales and production levels are expected to exceed those of
the comparable period a year ago.
We still expect that the Engine business will be up from last year based upon
projections for the overall lawn and garden market and our current understanding
of our customers' forecasted requirements. However, we feel Generac's business
has continued to soften for both the generator and pressure washer product
lines. Annual sales for Generac are currently projected for $220 million, down
from the $260 million we had forecast. Consequently, our current estimate for
consolidated net income for fiscal 2002 is now in a range between $56 and $60
million.
For the third quarter, sales are projected to be approximately $510 million;
$460 million for Engines and $50 million for Generac. Gross margins are
estimated to be close to 21%. Engineering, selling and administrative expenses
are anticipated to be $38 million and interest expense is projected at $12
million.
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 its
corporate website: http://www.briggsandstratton.com/shareholders. Also available
is a dial-in number to access the call real-time at (877) 679-9055. A replay
will be offered beginning approximately two hours after the call ends and will
be available for one week. Dial (800) 615-3210 to access the replay. The pass
code will be 5717584.
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", "intend", "may", "objective", "plan", "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, our 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
and accounting standards; work stoppages or other consequences of any
deterioration in our employee relations; changes in customer and OEM demand;
changes in prices of purchased 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; 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)
SECOND QUARTER SIX MONTHS
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- --------- ---------
NET SALES $ 335,315 $ 368,207 $ 556,644 $ 549,458
COST OF GOODS SOLD 278,695 298,601 478,502 454,054
--------- --------- --------- ---------
Gross Profit on Sales 56,620 69,606 78,142 95,404
ENGINEERING, SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES 42,286 32,756 80,510 66,368
--------- --------- --------- ---------
Income (Loss) from Operations 14,334 36,850 (2,368) 29,036
INTEREST EXPENSE (11,101) (8,317) (21,523) (12,885)
OTHER INCOME (EXPENSE), Net 427 3,100 742 5,473
--------- --------- --------- ---------
Income (Loss) Before Provision (Credit)
for Income Taxes 3,660 31,633 (23,149) 21,624
PROVISION (CREDIT) FOR INCOME TAXES 1,281 11,705 (8,104) 8,000
--------- --------- --------- ---------
Net Income (Loss) $ 2,379 $ 19,928 $ (15,045) $ 13,624
========= ========= ========= =========
Average Shares Outstanding 21,603 21,597 21,602 21,602
========= ========= ========= =========
BASIC EARNINGS PER SHARE $ 0.11 $ 0.92 $ (0.70) $ 0.63
========= ========= ========= =========
Diluted Average Shares Outstanding 21,616 21,608 21,615 21,617
========= ========= ========= =========
DILUTED EARNINGS PER SHARE $ 0.11 $ 0.92 $ (0.70) $ 0.63
========= ========= ========= =========
SEGMENT INFORMATION
(IN THOUSANDS)
SECOND QUARTER SIX MONTHS
---------------------- ----------------------
NET SALES: 2001 2000 2001 2000
--------- --------- --------- ---------
Engines $ 307,521 $ 368,207 $ 487,008 $ 549,458
Generac Portable Products 39,622 -- 94,750 --
Eliminations (11,828) -- (25,114) --
--------- --------- --------- ---------
Total* $ 335,315 $ 368,207 $ 556,644 $ 549,458
--------- --------- --------- ---------
*Includes sales to international customers $ 87,570 $ 88,561 $ 142,277 $ 136,331
--------- --------- --------- ---------
GROSS PROFIT ON SALES:
Engines $ 53,884 $ 69,606 $ 68,471 $ 95,404
Generac Portable Products 3,201 -- 10,861 --
Eliminations (465) -- (1,190) --
--------- --------- --------- ---------
Total $ 56,620 $ 69,606 $ 78,142 $ 95,404
========= ========= ========= =========
INCOME (LOSS) FROM OPERATIONS:
Engines $ 16,723 $ 36,850 $ (897) $ 29,036
Generac Portable Products (1,924) -- (281) --
Eliminations (465) -- (1,190) --
--------- --------- --------- ---------
Total $ 14,334 $ 36,850 $ (2,368) $ 29,036
========= ========= ========= =========
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF THE END OF FISCAL DECEMBER 2001 AND 2000
--------------------------------------------------------------------------
(IN THOUSANDS)
CURRENT ASSETS: 2001 2000
---------- ----------
Cash and Cash Equivalents $ 16,618 $ 20,839
Accounts Receivable 327,510 380,240
Inventories 344,444 341,348
Other 60,676 51,937
---------- ----------
Total Current Assets 749,248 794,364
========== ==========
OTHER ASSETS:
Investments 44,742 49,413
Prepaid Pension 47,011 19,391
Deferred Loan Costs 10,159 655
Capitalized Software 6,292 6,986
Intangible Assets 152,449 --
---------- ----------
Total Other Assets 260,653 76,445
========== ==========
PLANT AND EQUIPMENT,
at Cost 889,478 849,910
Less - Accumulated
Depreciation 476,665 452,069
---------- ----------
Net Plant and Equipment 412,813 397,841
---------- ----------
$1,422,714 $1,268,650
========== ==========
CURRENT LIABILITIES: 2001 2000
----------- -----------
Accounts Payable $ 94,733 $ 125,945
Domestic Notes Payable 149,560 372,580
Foreign Loans 18,157 17,035
Accrued Liabilities 141,406 140,814
----------- -----------
Total Current Liabilities 403,856 656,374
=========== ===========
OTHER LIABILITIES:
Deferred Revenue on Sale of
Plant & Equipment 15,454 15,611
Deferred Income Tax Liability 9,591 8,451
Accrued Pension Cost 15,533 12,079
Accrued Employee Benefits 13,216 12,947
Postretirement Health Care
Obligation 63,137 64,203
Long-Term Debt 508,426 98,615
----------- -----------
Total Other Liabilities 625,357 211,906
=========== ===========
SHAREHOLDERS' INVESTMENT:
Common Stock and Additional
Paid-in Capital 36,231 36,342
Retained Earnings 714,802 722,224
Accumulated Other Comprehensive
Loss (7,205) (7,477)
Unearned Compensation on
Restricted Stock (252) (358)
Treasury Stock, at Cost (350,075) (350,361)
----------- -----------
Total Shareholders' Investment 393,501 400,370
----------- -----------
$ 1,422,714 $ 1,268,650
=========== ===========
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED FISCAL DECEMBER
CASH FLOWS FROM OPERATING ACTIVITIES: 2001 2000
--------- ---------
Net Income (Loss) $ (15,045) $ 13,624
Depreciation and Amortization 30,245 27,368
Loss on Disposition of Plant and Equipment 1,141 279
Pension Income, Net (9,542) (12,834)
Provision for Deferred Income Taxes 1,529 3,092
Increase in Accounts Receivable (182,211) (236,511)
Increase in Inventories (22,745) (83,574)
(Increase) Decrease in Other Current Assets (583) 119
Increase in Accounts Payable and Accrued Liabilities 14,079 17,118
Other, Net (388) (5,058)
--------- ---------
Net Cash Used in Operating Activities (183,520) (276,377)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Plant and Equipment (26,657) (32,364)
Proceeds Received on Disposition of Plant and Equipment 547 2,349
Other, Net 2,426 2,933
--------- ---------
Net Cash Used in Investing Activities (23,684) (27,082)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings on Loans and Notes Payable 148,126 327,450
Issuance Costs of Long-Term Debt (327) --
Dividends (13,384) (13,380)
Purchase of Common Stock for Treasury -- (6,118)
Proceeds from Exercise of Stock Options 95 275
--------- ---------
Net Cash Provided by Financing Activities 134,510 308,227
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES 569 (918)
--------- ---------
NET DECREASE (INCREASE) IN CASH AND CASH EQUIVALENTS (72,125) 3,850
CASH AND CASH EQUIVALENTS, Beginning 88,743 16,989
--------- ---------
CASH AND CASH EQUIVALENTS, Ending $ 16,618 $ 20,839
========= =========