Some Good News - Briggs & Stratton Reports Second Quarter Net Income Of $2.3 Million Some Bad News Last Year It Was $20 Million
MILWAUKEE, Jan. 17 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