Briggs & Stratton Corporation Reports Results for the Fourth Quarter and Twelve Months of Fiscal 2005
MILWAUKEE, Wis., Aug. 11, 2005 -- Briggs & Stratton Corporation -- Briggs & Stratton today announced fiscal 2005 fourth quarter consolidated net sales of $871.7 million and consolidated net income of $50.4 million or $.98 per diluted share. The fourth quarter of fiscal 2004 had consolidated net sales of $545.3 million and consolidated net income of $40.2 million or $.81 per diluted share. The consolidated net sales increase of $326.4 million or 60% was basically due to the inclusion of $129.1 million of net sales from the July 2004 Simplicity Manufacturing, Inc. ("Simplicity") acquisition, the inclusion of $141.6 million of net sales of lawn and garden equipment as a result of the February 2005 acquisition of selected assets of the bankrupt Murray, Inc. ("Murray") and increased sales for the other components in the Power Products segment, primarily as a result of strong generator demand. Consolidated net income increased $10.2 million between years. The increase in fourth quarter consolidated net income was primarily the result of the earnings contributed by the Simplicity operations.
For fiscal 2005, the Company had consolidated net sales of $2,654.9 million and consolidated net income of $136.6 million or $2.63 per diluted share. For fiscal 2004, consolidated net sales were $1,947.4 million, and consolidated net income was $136.1 million or $2.77 per diluted share. The $707.5 million or 36% increase in consolidated net sales was due to the inclusion of $389.1 million of net sales from Simplicity, the inclusion of $213.5 million of net sales of Murray product and improved Power Products segment net sales of $101.8 million, primarily the result of increased generator volume experienced during the year. Twelve month consolidated net income was basically the same between years. Pricing improvements and the benefit of increased sales volume in both segments were in large part offset by the significant cost increases experienced on certain raw materials and selected manufacturing overhead categories. In addition, the after tax difference between the write-off of the trade receivable from Murray and the extraordinary gain from the acquisition of Murray assets decreased net income by $6.2 million in fiscal 2005.
Engines:
Fiscal 2005 fourth quarter net sales were $505.3 million versus $443.3 million for the same period a year ago, an increase of $62.0 million or 14%. The improvement in net sales was primarily the result of a 26% engine unit shipment increase over the same period a year ago offset by a mix that favored lower priced product.
Net sales for fiscal 2005 were $1,739.2 million versus $1,617.4 million in the prior year, an improvement of $121.8 million or 8%. The main drivers for the net sales increase were an engine unit shipment increase of 10% and a favorable price and Euro impact. Offsetting the engine unit and price increases was a mix that favored lower priced product and lower service parts and component sales.
Income from operations for the fourth quarter of fiscal 2005 was $47.3 million, down $8.4 million from $55.7 million during the same period in the prior year. The major contributors to the decrease were increased selling expenses, an unfavorable mix of shipments to lower margined engines and increased raw material and purchased component costs. The decreases were partially offset by the increase in sales volume.
Income from operations for fiscal 2005 was $142.7 million, down $61.8 million from $204.5 million in fiscal 2004. The most significant reason for the decrease was the write-off of the trade receivable from Murray ($38.9 million). The write-off was recorded against income from operations; however, the gain recognized on the acquisition of Murray assets ($19.8 million after tax) was recorded as an extraordinary gain that is not included in income from operations. The other major contributors to the decrease in income from operations were higher raw material and purchased component costs and increased selling expenses. The major items that partially offset the decreases in income from operations were the favorable Euro impact, pricing improvements and an increase in engine sales volume.
Power Products:
Fiscal 2005 fourth quarter net sales were $478.7 million versus $140.5 million from the same period a year ago, an increase of $338.2 million. A majority of the increase in net sales was the result of the inclusion of $129.1 million of net sales from our Simplicity acquisition and $141.6 million of net sales from our Murray asset acquisition. The remaining improvement was the result of portable generator and pressure washer unit volume increases. Portable generator net sales increased 105% on a unit volume increase of 90%. While generator demand was strong due to continued replenishment of retailers' inventory, exceptional demand was driven by consumers in Florida who responded to state legislation that provided for a tax holiday on purchases of hurricane related supplies. Pressure washer net sales increased 16% on a unit volume increase of 20%. Volume grew because of market growth and successful product lineups at retail.
Sales for fiscal 2005 were $1,193.6 million versus $489.3 million in the prior year, a $704.3 million increase. As in the fourth quarter, the majority of the increase in net sales was the result of the inclusion of net sales from our Simplicity and Murray acquisitions of $389.1 million and $213.5 million, respectively. The remaining improvement is primarily the result of a portable generator net sales increase of 39% supported by a unit volume increase of 35%. The generator volume increase resulted from the strong hurricane activity in the first quarter and the exceptional fourth quarter demand discussed above.
Income from operations was $30.1 million in the fourth quarter of fiscal 2005, an improvement of $21.5 million over the same period a year ago. The Simplicity acquisition accounted for $14.1 million of this increase, while the Murray acquisition was breakeven for the period. The remainder of the improvement was experienced on the generator and pressure washer products. Pricing improvement, primarily on generators, and increased unit sales were the major factors contributing to improved income from operations for the other products in this segment.
Income from operations for fiscal 2005 was $49.3 million, an increase of $18.8 million from the operating income generated for the same period a year ago. The Simplicity acquisition is responsible for $12.8 million of the increase. For fiscal 2005, Simplicity's operating income reflects $9.0 million of expenses associated with purchase accounting on inventory, which will not reoccur in fiscal 2006. The remainder of the increase came from the pricing improvement and unit volume increases on the other products in the Power Products segment.
General:
Other income was greater in both the fourth quarter and fiscal 2005 due to the recognition of dividends on preferred stock that we own. The effective tax rate is 31.7% for the fourth quarter and 33.0% for fiscal 2005 versus the prior year's fourth quarter and full year rates of 34.5% and 33.6%, respectively.
Other Matters:
During fiscal 2005, $3.9 million of costs related to preparing a portion of a manufacturing property to be saleable were recorded in cost of goods sold. It was anticipated that the property would be sold in the fourth quarter of fiscal 2005, under an agreement, for a gain of approximately $6.8 million. Because of unresolved contingencies in the agreement at the fiscal year end, the transaction could not close as planned, and it is now projected to be completed in the first quarter of fiscal 2006.
Outlook:
For fiscal 2006, we estimate that diluted earnings per share should be in the range of $3.17 to $3.27. The estimate is based on the assumption that consolidated net sales will grow 3.0% to 3.5% between years with overall volumes being relatively flat. Operating income margins are projected to be in the range of 9.0% to 10.0%, and interest expense and other income are forecasted at $38.5 million and $19.0 million, respectively. The effective tax rate for the full year is projected to be 33.0%.
The forecast for fiscal 2006 does not contain significant sales of Murray branded product. In fiscal 2005, the bankrupt estate of Murray, Inc. produced Murray branded product that we sold to retailers under pre-bankruptcy arrangements. At this time, we know operations at Murray, Inc. will end in September 2005. We are pursuing arrangements with other original equipment manufacturers to produce Murray branded product. In addition, retailers are still reviewing their 2006 lines, so it is too early to determine which retailers, if any, will commit to buy product from us for the upcoming lawn and garden season. Consequently, we have included in our projections only sales of Murray branded powered product that we believe will be produced through September 2005.
< BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings for the Fiscal Periods Ended June
(In Thousands, except per share data)
(Unaudited)
Fourth Quarter Twelve Months
2005 2004 2005 2004
NET SALES $871,717 $545,304 $2,654,875 $1,947,364
COST OF GOODS SOLD 709,514 424,240 2,149,984 1,507,492
Gross Profit on Sales 162,203 121,064 504,891 439,872
ENGINEERING, SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES 85,261 54,330 314,123 205,663
Income from Operations 76,942 66,734 190,768 234,209
INTEREST EXPENSE (9,943) (8,634) (37,097) (37,665)
OTHER INCOME, Net 6,700 3,285 20,644 8,460
Income before Provision
for Income Taxes 73,699 61,385 174,315 205,004
PROVISION FOR INCOME TAXES 23,328 21,190 57,548 68,890
Income before Extraordinary
Gain 50,371 40,195 116,767 136,114
Extraordinary Gain - - 19,800 -
Net Income $50,371 $40,195 $136,567 $136,114
Average Shares Outstanding 51,194 47,268 51,472 45,286
Income before Extraordinary
Gain $0.98 $0.85 $2.27 $3.01
Extraordinary Gain - - 0.38 -
BASIC EARNINGS PER SHARE $0.98 $0.85 $2.65 $3.01
Diluted Average Shares
Outstanding 51,539 50,623 51,954 50,680
Income before Extraordinary
Gain $0.98 $0.81 $2.25 $2.77
Extraordinary Gain - - 0.38 -
DILUTED EARNINGS PER SHARE $0.98 $0.81 $2.63 $2.77
Segment Information
(In Thousands)
(Unaudited)
Fourth Quarter Twelve Months
2005 2004 2005 2004
NET SALES:
Engines $505,332 $443,298 $1,739,184 $1,617,409
Power Products 478,704 140,450 1,193,616 489,250
Inter-Segment Eliminations (112,319) (38,444) (277,925) (159,295)
Total* $871,717 $545,304 $2,654,875 $1,947,364
*Includes international
sales of $131,284 $79,292 $477,352 $362,274
GROSS PROFIT ON SALES:
Engines $105,526 $102,890 $372,162 $382,713
Power Products 57,100 15,739 133,888 57,846
Inter-Segment Eliminations (423) 2,435 (1,159) (687)
Total $162,203 $121,064 $504,891 $439,872
INCOME FROM OPERATIONS:
Engines $47,279 $55,737 $142,653 $204,468
Power Products 30,086 8,562 49,274 30,428
Inter-Segment Eliminations (423) 2,435 (1,159) (687)
Total $76,942 $66,734 $190,768 $234,209
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of the End of Fiscal June
(In Thousands)
(Unaudited)
CURRENT ASSETS: 2005 2004
Cash and Cash
Equivalents $161,573 $342,394
Accounts Receivable, Net 360,786 230,510
Inventories 469,665 337,731
Deferred Income Tax Asset 92,251 47,623
Other 34,930 23,735
Total Current Assets 1,119,205 981,993
OTHER ASSETS:
Goodwill 253,066 151,991
Investments 49,783 49,259
Prepaid Pension 84,475 81,730
Deferred Loan Costs, Net 6,016 6,325
Other Long-Term Assets,
Net 136,068 9,313
Total Other Assets 529,408 298,618
PLANT AND EQUIPMENT:
At Cost 981,943 867,987
Less - Accumulated
Depreciation 547,113 511,445
Plant and Equipment,
Net 434,830 356,542
$2,083,443 $1,637,153
CURRENT LIABILITIES: 2005 2004
Accounts Payable $155,973 $120,409
Short-Term Borrowings 443 3,127
Accrued Liabilities 196,252 177,025
Total Current
Liabilities 352,668 300,561
OTHER LIABILITIES:
Deferred Income Tax
Liability 113,794 70,454
Accrued Pension Cost 132,419 20,603
Accrued Employee Benefits 15,125 14,201
Accrued Postretirement
Health Care Obligation 77,607 38,248
Other Long-Term
Liabilities 16,323 14,929
Long-Term Debt 486,321 360,562
Total Other Liabilities 841,589 518,997
SHAREHOLDERS' INVESTMENT:
Common Stock and Additional
Paid-in Capital 56,372 48,946
Retained Earnings 1,029,329 927,766
Accumulated Other
Comprehensive Income (48,331) 4,028
Unearned Compensation on
Restricted Stock (1,985) (1,490)
Treasury Stock, at Cost (146,199) (161,655)
Total Shareholders'
Investment 889,186 817,595
$2,083,443 $1,637,153
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Twelve Months Ended Fiscal June
CASH FLOWS FROM OPERATING ACTIVITIES: 2005 2004
Net Income $136,567 $136,114
Extraordinary Gain (19,800) -
Depreciation and Amortization 73,543 66,898
Loss on Disposition of Plant and Equipment 2,418 7,390
Provision for Deferred Income Taxes (3,901) 12,800
Increase in Accounts Receivable (26,892) (28,588)
Decrease (Increase) in Inventories 12,784 (128,594)
Decrease in Other Current Assets 2,650 2,017
(Decrease) Increase in Accounts
Payable and Accrued Liabilities (27,668) 4,696
Other, Net (19,897) (26,969)
Net Cash Provided by Operating Activities 129,804 45,764
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Plant and Equipment (86,075) (52,962)
Proceeds Received on Disposition of
Plant and Equipment 1,940 720
Proceeds Received on Sale of Certain
B&S Canada Assets 4,050 -
Cash Paid for Acquisitions, Net of
Cash Received (355,094) -
Dividends Received 18,754 4,392
Investment in Joint Venture (1,500) -
Refund of Cash Paid for Acquisition - 5,686
Net Cash Used in Investing Activities (417,925) (42,164)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings on Loans and Notes Payable 122,316 165
Dividends (35,065) (30,408)
Issuance Cost on Loans (925) (1,789)
Proceeds from Exercise of Stock Options 20,139 45,314
Net Cash Provided by Financing Activities 106,465 13,282
EFFECT OF EXCHANGE RATE CHANGES 835 697
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (180,821) 17,579
CASH AND CASH EQUIVALENTS, Beginning 342,394 324,815
CASH AND CASH EQUIVALENTS, Ending $161,573 $342,394