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 October 1, 1995
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
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
A Wisconsin Corporation 39-0182330
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12301 West Wirth Street, Wauwatosa, Wisconsin 53222
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
414/259-5333
- ------------------------------------------------------------------------------
(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 November 3, 1995
- ------------------------------------------------------------------------------
COMMON STOCK, par value $0.01 per share 28,927,000 Shares
-1-
2
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets -
October 1, 1995, July 2, 1995 and
October 2, 1994 3
Consolidated Condensed Statements of Income -
Three Months Ended October 1, 1995 and
October 2, 1994 4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended October 1, 1995 and
October 2, 1994 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 7
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 9
-2-
3
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands of dollars)
ASSETS
------
Oct. 1 July 2 Oct. 2
1995 1995 1994
--------- ------- --------
CURRENT ASSETS: (Unaudited) (Unaudited)
Cash and cash equivalents $ 37,019 $170,648 $133,680
Receivables, net 118,098 94,116 143,847
Inventories -
Finished products and parts 157,873 96,540 102,958
Work in process 42,035 40,107 29,823
Raw materials 5,257 4,027 4,791
----------------------------------
Total inventories $205,165 $140,674 $137,572
Future income tax benefits 30,599 31,376 32,497
Prepaid expenses 15,182 16,516 18,692
----------------------------------
Total current assets $406,063 $453,330 $466,288
----------------------------------
PREPAID PENSION COST $ - $ - $ 8,123
----------------------------------
DEFERRED INCOME TAX ASSET $ 4,076 $ 1,866 -
----------------------------------
PLANT AND EQUIPMENT, at cost: $751,496 $726,331 $679,786
Less - Accumulated depreciation and
unamortized investment tax credit 384,976 383,034 387,099
----------------------------------
Total plant and equipment, net $366,520 $343,297 $292,687
----------------------------------
$776,659 $798,493 $767,098
==================================
LIABILITIES & SHAREHOLDERS' INVESTMENT
----------- ------------ ----------
CURRENT LIABILITIES:
Accounts payable $ 60,672 $ 63,913 $ 60,799
Domestic notes payable 10,000 6,750 1,750
Foreign loans 17,513 19,653 21,364
Accrued liabilities 90,729 108,817 94,145
Dividends payable 7,521 -- 6,653
Federal and state income taxes (2,108) (1,878) 7,687
----------------------------------
Total current liabilities $184,327 $197,255 $192,398
----------------------------------
DEFERRED INCOME TAX LIABILITY $ -- $ -- $ 11,038
----------------------------------
ACCRUED EMPLOYEE BENEFITS $ 16,851 $ 16,447 $ 15,644
----------------------------------
ACCRUED PENSION COST $ 2,021 $ 1,606 --
----------------------------------
ACCRUED POSTRETIREMENT HEALTH CARE OBLIGATION $ 69,615 $ 68,707 $ 64,467
----------------------------------
LONG-TERM DEBT $ 75,000 $ 75,000 $ 75,000
----------------------------------
SHAREHOLDERS' INVESTMENT:
Common stock-
Authorized 60,000,000 shares, $.01 par value
Issued and outstanding 28,927,000 shares on
October 1, 1995 and July 2, 1995, and
14,463,500 shares on October 2, 1994 $ 289 $ 289 $ 145
Additional paid-in capital 41,672 41,698 42,334
Retained earnings 386,806 397,627 366,907
Cumulative translation adjustments 78 (136) (835)
----------------------------------
Total shareholders' investment $428,845 $439,478 $408,551
----------------------------------
$776,659 $798,493 $767,098
==================================
The accompanying notes are an integral part of these statements.
-3-
4
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands of dollars except amounts per share)
(Unaudited)
First Quarter Ended
---------------------
Oct. 1 Oct. 2
1995 1994
-------- ------
NET SALES $189,477 $227,845
COST OF GOODS SOLD 170,336 188,046
-------- --------
Gross profit on sales $ 19,141 $ 39,799
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 24,483 22,276
-------- --------
Income(Loss) from operations $ (5,342) $ 17,523
INTEREST EXPENSE (2,057) (2,091)
OTHER INCOME, net 2,079 3,302
-------- --------
Income(Loss) before provision
for income taxes $ (5,320) $ 18,734
PROVISION(CREDIT) FOR INCOME TAXES (2,020) 7,310
-------- --------
Net income(loss) $ (3,300) $ 11,424
======== ========
PER SHARE DATA* -
Net income(loss) $ (.11) $ .39
====== ======
Cash dividends $ .26 $ .23
====== ======
* Based on 28,927,000 shares outstanding. All per share amounts have been
adjusted for the 2-for-1 stock split in November 1994.
The accompanying notes are an integral part of these statements.
-4-
5
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Increase(Decrease) in Cash and Cash Equivalents
(In thousands of dollars)
(Unaudited)
Three Months Ended
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: Oct. 1, 1995 Oct. 2, 1994
------------ ------------
Net income(loss) $ (3,300) $ 11,424
Adjustments to reconcile net income(loss) to
net cash provided by operating activities -
Depreciation 9,882 11,397
(Gain)Loss on disposition of plant and
equipment 353 (697)
(Increase)decrease in operating assets -
Accounts receivable (23,982) (21,250)
Inventories (64,491) (51,902)
Other current assets 2,111 2,227
Other assets (2,210) 558
Increase(decrease) in liabilities -
Accounts payable and accrued
liabilities (14,038) (16,137)
Other liabilities 1,727 (670)
--------- -------
Net cash used by
operating activities $ (93,948) $(65,050)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment $ (33,684) $(19,282)
Proceeds received on sale of plant and equipment 188 1,847
--------- --------
Net cash used by investing activities $ (33,496) $(17,435)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on domestic and
foreign loans $ 1,110 $ 1,791
Dividends (7,521) (6,653)
Purchase of common stock for treasury (40) (38)
Proceeds from exercise of stock options 14 14
---------- --------
Net cash used by financing activities $ (6,437) $ (4,886)
--------- --------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS $ 252 $ (50)
--------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS $(133,629) $(87,421)
CASH AND CASH EQUIVALENTS, beginning 170,648 221,101
--------- --------
CASH AND CASH EQUIVALENTS, ending $ 37,019 $133,680
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 2,128 $ 2,082
========= ========
Income taxes paid $ 797 $ 9,834
========= ========
The accompanying notes are an integral part of these statements.
-5-
6
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.
-6-
7
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 certain
significant factors which have affected the Company's results of operations and
financial condition during the periods included in the accompanying
consolidated condensed financial statements.
RESULTS OF OPERATIONS
SALES
Sales for the first quarter of fiscal 1996 decreased $38,368,000 or 17%.
Approximately 50% of this decrease reflects the lack of lock sales since that
business was spun off at the end of February 1995. Engine unit shipments
decreased 24% between years. This occurred because domestic manufacturers of
lawn and garden equipment reduced their production rates during the summer to
lower their inventories. The decrease in unit sales was higher than the
decrease in sales dollars as the reduction was primarily in the Company's lower
selling price small engine line. These domestic reductions were partially
offset by an increase in export sales due to continuing improvements in the
European economy. Service sales remained steady between years.
GROSS PROFIT
Gross profit dropped $20,658,000, reflecting a decrease in rate from 17%
last year to 10% in the current year. The primary reasons for this decrease
are reduced profit due to the spreading of fixed costs over a smaller number of
engine units, the expected start-up costs of the four new plants which totaled
$9,800,000 during the quarter, and the absence of gross profit of the spun-off
lock business.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
This category increased 10%, or $2,207,000, between comparable quarters.
This was primarily due to larger advertising and marketing expenses. This has
been offset, in part, by reductions due to the lack of engineering and selling
expenses associated with the spun-off lock business.
INTEREST EXPENSE
This category had a minor change between years.
-7-
8
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
OTHER INCOME
This category had a $1,223,000 reduction between years primarily because
of losses on the disposition of plant and equipment in fiscal 1996 compared to
gains in fiscal 1995.
PROVISION (CREDIT) FOR INCOME TAXES
The effective tax rate used for the first quarter's income tax credit was
38%. This rate reflects management's estimate of what the rate will be when
the Company returns to profitable operations in subsequent quarters.
OUTLOOK
The Company continues to believe that the fiscal year, as a whole, will
be a good one. The econometric forecasts the Company uses predict retail sales
next spring will be modestly higher than last spring. Because most retailers
have made their sourcing decisions, the Company believes its market position
will be at least as good as it was last year. Equipment manufacturers are
optimistic. While these manufacturers will not reach peak production until
mid-winter, the Company expects the peak will be higher than last year. Thus
it is anticipated that there will be strength in the second half of fiscal 1996
to offset weakness in the first two quarters. However, because there will be
some liquidation of inventory and because there will not be eight months of
sales and earnings from the spun-off lock business, it is unlikely that fiscal
1996 sales and earnings will be greater than fiscal 1995.
FINANCIAL CONDITION
Cash and cash equivalents decreased $133,629,000 since the end of the
previous fiscal year. This was due to four major reasons: (1) the $61,333,000
increase in finished goods inventories discussed below; (2) a $23,982,000
seasonal increase in accounts receivable; (3) capital expenditures totaling
$33,684,000 for the quarter; and (4) a reduction of $14,038,000 in accounts
payable and accrued liabilities due to the payment of the accrued profit
sharing liability on the fiscal year-end balance sheet.
Inventories increased $64,491,000 since the end of the preceding fiscal
year, most of which was in finished goods. This increase reflects the
Company's continued maintenance of a stable rate of production in anticipation
of strong demand which is expected to occur in the second half of the fiscal
year.
Additions to plant and equipment include $29,900,000 spent on the
construction of three new engine plants, plant expansions and a new foundry.
The total spent on these projects to date is $131,400,000 and approximately
$12,600,000 remains to be spent.
-8-
9
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders on October 18, 1995, the items of
business included a shareholder proposal and 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
--------------- --- --------
Clarence B. Rogers* 24,532,461 119,797
Frederick P. Stratton, Jr.* 24,531,885 120,373
Elwin J. Zarwell* 24,318,997 333,261
*Nominees who were elected to a three-year term expiring in 1998.
Directors whose term of office continues past the Annual Meeting of
Shareholders include: Michael E. Batten, Robert H. Eldridge, Peter A.
Georgescu, John L. Murray, John S. Shiely and Charles I. Story.
(b) Shareholder proposal urging declassification of Board of Directors
Out of a total of 22,609,296 votes represented on the proposal,
votes were cast as follows: 8,800,915 - For; 13,624,879 - Against; and
183,502 - Abstain. There were 2,042,962 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
27 Financial Data Schedule
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the first quarter ended October 1,
1995.
-9 -
10
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: November 3, 1995 /s/ R. H. Eldridge
--------------------------------------------------
R. H. Eldridge
Executive Vice President & Chief Financial Officer,
Secretary-Treasurer
Date: November 3, 1995 /s/ J. E. Brenn
--------------------------------------------------
J. E. Brenn
Vice President and Controller
-10-
11
BRIGGS & STRATTON CORPORATION
EXHIBIT INDEX
Exhibit
Number Description
27 Financial Data Schedule
(Filed herewith)
-11-