Briggs & Stratton Corporation Reports 2006 Results for The Fourth Quarter
MILWAUKEE, Aug. 10, 2006 -- Briggs & Stratton Corporation -- Briggs & Stratton today announced fiscal 2006 fourth quarter consolidated net sales of $656.0 million and consolidated net income of $15.8 million or $.31 per diluted share. The fourth quarter of fiscal 2005 had consolidated net sales of $871.7 million and consolidated net income of $50.4 million or $.98 per diluted share. The consolidated net sales decrease of $215.7 million or 25% was due to a $120.5 million or 24% decrease in the Engines Segment's net sales and a $138.2 million or 29% decrease in the Power Products Segment's net sales. The $34.6 million decline in fourth quarter consolidated net income was primarily the result of decreased shipment volumes experienced across both operating segments.
For fiscal 2006, the Company had consolidated net sales of $2,542.2 million and consolidated net income of $102.3 million or $1.98 per diluted share. For fiscal 2005, consolidated net sales were $2,654.9 million, and consolidated net income was $136.6 million or $2.63 per diluted share. The $112.7 million or 4% decrease in consolidated net sales was primarily due to a decrease in the volume of engine shipments. Fiscal 2006 consolidated net income decreased $34.2 million or 25% from the previous year. Pricing improvements in both operating segments were offset by decreased shipping volumes, primarily in the Engines Segment, increased legal and professional fees, stock option expensing and expenses associated with the termination of operations and liquidation of assets acquired from Murray, Inc.
Engines:
Fiscal 2006 fourth quarter net sales were $384.8 million versus $505.3 million for the same period a year ago, a decrease of $120.5 million or 24%. The reduction in net sales was primarily the result of a 30% engine unit shipment decrease over the same period a year ago. We believe the decrease in unit shipments was the result of softer retail demand for lawn and garden equipment and efforts by retailers to maintain reasonable inventory levels in the distribution channels at the end of the selling season. The impact of the volume reduction was partially offset by improvements in pricing implemented at the start of the fiscal year.
Net sales for fiscal 2006 were $1,648.2 million versus $1,739.2 million in the prior year, a decrease of $91.0 million or 5%. The principal factor contributing to the net sales decrease was the fourth quarter engine unit shipment decrease described above, which caused the fiscal 2006 shipments to be 7% less than the prior year.
Income from operations for the fourth quarter of fiscal 2006 was $16.5 million, down $30.8 million from $47.3 million during the same period in the prior year. The major factor contributing to the decline was reduced engine unit shipments. The shipment decline also resulted in lower utilization of the operating facilities as production levels were reduced to manage our engine inventories. However, more favorable pricing and a gain on the sale of a facility offset the cost of lower production.
Income from operations for fiscal 2006 was $149.8 million, up $7.1 million from $142.7 million in fiscal 2005. The increase between years was the result of gains associated with certain asset sales. Pricing improvements offset the impact of lower shipment volumes and savings from cost reduction programs offset the unfavorable impact of lower utilization of the operating facilities and a product mix that favored units with lower margins. The absence of the prior year's $38.9 million bad debt expense was offset by increases in employee benefit costs and legal and professional fees.
Power Products:
Fiscal 2006 fourth quarter net sales were $340.5 million versus $478.7 million from the same period a year ago, a decrease of $138.2 million. A majority of the decrease in net sales was the result of the anticipated reduction of $112.9 million of sales of lawn and garden equipment to major retailers who moved away from Murray branded product for the 2006 lawn and garden season. The remainder of the net sales decrease was the result of lower shipment volumes of premium lawn and garden equipment and pressure washer product. Both product lines were affected by the lower retail demand and inventory control practices described above in the Engines Segment.
Net sales for fiscal 2006 were $1,186.0 million versus $1,193.6 million in the prior year, a $7.6 million decrease. The decline was the result of lower shipment volumes of lawn and garden products and pressure washers as described in the fourth quarter. Sales of generator products increased due to the strong hurricane activity during the fiscal year.
Income from operations was $9.4 million in the fourth quarter of fiscal 2006, a decrease of $20.7 million over the same period a year ago. The decrease was the result of lower sales volumes, an unfavorable mix of lawn and garden equipment sales that favored lower margined product and expenses associated with the liquidation of assets acquired from Murray, Inc.
Income from operations for fiscal 2006 was $29.6 million, a decrease of $19.7 million from the operating income generated for the same period a year ago. The major reasons for the decrease were lower sales volumes and expenses associated with the termination of operations and liquidation of assets acquired from Murray, Inc.
General:
Other income was less than in the prior year for both the fourth quarter and fiscal 2006 due to the Company's portion of lower earnings at joint ventures. The effective tax rate is 30.6% for the fourth quarter and 32.8% for fiscal 2006 versus the prior year's fourth quarter and full year rates of 31.7% and 33.0%, respectively.
The $19.8 million extraordinary gain recorded in fiscal 2005 resulted from the acquisition of selected Murray, Inc. assets.
During the fourth quarter, the Company purchased 247,000 shares of its common stock in the open market completing a one million share repurchase program approved by the Board of Directors. For fiscal 2006, this resulted in share repurchases totaling $34.9 million.
The Company repaid $99 million of long-term debt in the fourth quarter of fiscal 2006, resulting in $101 million of net long-term debt repayments for the entire fiscal year. Of the total repayments, $90 million was used to reduce the variable rate term notes due in 2008.
Share Repurchase Program:
The Company today announced that it intends to initiate repurchases of up to $120 million of its common stock through open market transactions over the next eighteen months. The timing and amount of purchases will be dependent upon the market price of the stock and certain governing loan covenants.
Outlook:
For fiscal 2007, the Company projects that net income will be in the range of $122 to $128 million or $2.43 to $2.55 per diluted share. The estimate is based on the assumption that consolidated net sales will grow 1.5% to 2.5% between years primarily due to volume. Operating income margins are projected to be in the range of 8.2% to 8.6%, and interest expense and other income are forecasted at $42.0 million and $13.9 million, respectively. The effective tax rate for the full year is projected to be 33% to 35%. Fiscal 2007 first quarter consolidated net sales are projected to be in the range of $420 to $450 million. Lower first quarter sales and production schedules result in a projected net loss in the first quarter in the range of $10 to $12 million or $.20 to $.24 per diluted share.
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
2006 2005 2006 2005
NET SALES $655,955 $871,717 $2,542,171 $2,654,875
COST OF GOODS SOLD 543,864 709,514 2,050,487 2,149,984
Gross Profit on Sales 112,091 162,203 491,684 504,891
ENGINEERING, SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES 83,976 85,261 315,718 314,123
Income from Operations 28,115 76,942 175,966 190,768
INTEREST EXPENSE (9,865) (9,729) (42,091) (36,883)
OTHER INCOME, Net 4,496 6,486 18,491 20,430
Income before Provision for
Income Taxes 22,746 73,699 152,366 174,315
PROVISION FOR INCOME TAXES 6,953 23,328 50,020 57,548
Income before Extraordinary
Gain/(Loss) 15,793 50,371 102,346 116,767
EXTRAORDINARY GAIN/(LOSS) - - - 19,800
Net Income $15,793 $50,371 $102,346 $136,567
Average Shares Outstanding 51,353 51,194 51,479 51,472
Income before Extraordinary
Gain 0.31 0.98 1.99 2.27
Extraordinary Gain - - - 0.38
BASIC EARNINGS PER SHARE $0.31 $0.98 $1.99 $2.65
Diluted Average Shares
Outstanding 51,417 51,539 51,594 51,954
Income before Extraordinary
Gain 0.31 0.98 1.98 2.25
Extraordinary Gain - - - 0.38
DILUTED EARNINGS PER SHARE $0.31 $0.98 $1.98 $2.63
Segment Information
(In Thousands)
(Unaudited)
Fourth Quarter Twelve Months
2006 2005 2006 2005
NET SALES:
Engines $384,790 $505,332 $1,648,224 $1,739,184
Power Products 340,539 478,704 1,186,025 1,193,616
Inter-Segment Eliminations (69,374) (112,319) (292,078) (277,925)
Total* $655,955 $871,717 $2,542,171 $2,654,875
*Includes international
sales of $91,641 $131,284 $526,952 $477,352
GROSS PROFIT ON SALES:
Engines $80,132 $105,526 $381,932 $372,162
Power Products 29,715 57,100 113,166 133,888
Inter-Segment Eliminations 2,244 (423) (3,414) (1,159)
Total $112,091 $162,203 $491,684 $504,891
INCOME FROM OPERATIONS:
Engines $16,485 $47,279 $149,760 $142,653
Power Products 9,386 30,086 29,620 49,274
Inter-Segment Eliminations 2,244 (423) (3,414) (1,159)
Total $28,115 $76,942 $175,966 $190,768
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of the End of Fiscal June
(In Thousands)
(Unaudited)
CURRENT ASSETS: 2006 2005
Cash and Cash Equivalents $95,091 $161,573
Accounts Receivable, Net 273,502 360,786
Inventories 562,015 469,665
Deferred Income Tax Asset 58,024 92,251
Other 43,020 34,930
Total Current Assets 1,031,652 1,119,205
OTHER ASSETS:
Goodwill 251,885 253,663
Investments 48,917 49,783
Prepaid Pension 75,789 -
Deferred Loan Costs, Net 4,308 6,016
Other Intangible Assets, Net 94,596 96,445
Other Long-Term Assets, Net 6,765 26,601
Total Other Assets 482,260 432,508
PLANT AND EQUIPMENT:
At Cost 1,008,164 1,005,644
Less - Accumulated Depreciation 577,876 558,389
Plant and Equipment, Net 430,288 447,255
$1,944,200 $1,998,968
CURRENT LIABILITIES: 2006 2005
Accounts Payable $161,291 $155,973
Short-Term Borrowings 3,474 443
Accrued Liabilities 178,381 196,252
Total Current Liabilities 343,146 352,668
OTHER LIABILITIES:
Deferred Income Tax Liability 102,862 113,794
Accrued Pension Cost 25,587 47,944
Accrued Employee Benefits 16,267 15,125
Accrued Postretirement Health
Care Obligation 84,136 77,607
Other Long-Term Liabilities 1,672 16,323
Long-Term Debt 383,324 486,321
Total Other Liabilities 613,848 757,114
SHAREHOLDERS' INVESTMENT:
Common Stock and Additional
Paid-in Capital 67,904 56,372
Retained Earnings 1,086,397 1,029,329
Accumulated Other
Comprehensive Income (Loss) 4,960 (48,331)
Unearned Compensation on
Restricted Stock (2,199) (1,985)
Treasury Stock, at Cost (169,856) (146,199)
Total Shareholders'
Investment 987,206 889,186
$1,944,200 $1,998,968
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Twelve Months Ended Fiscal June
CASH FLOWS FROM OPERATING ACTIVITIES: 2006 2005
Net Income $102,346 $136,567
Extraordinary Gain - (19,800)
Depreciation and Amortization 77,234 72,793
(Gain) Loss on Disposition of Plant
and Equipment (11,139) 2,418
Provision for Deferred Income Taxes (10,438) (3,896)
Decrease (Increase) in Accounts Receivable 87,284 (26,892)
(Increase) Decrease in Inventories (92,350) 12,784
(Increase) Decrease in Other Current Assets (12,302) 2,650
Decrease in Accounts Payable and
Accrued Liabilities (7,695) (27,673)
Other, Net 21,668 (393)
Net Cash Provided by Operating Activities 154,608 148,558
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Plant and Equipment (69,518) (86,075)
Proceeds Received on Disposition of
Plant and Equipment 11,518 1,940
Investment in Joint Venture (900) (1,500)
Proceeds Received on Sale of Certain
B&S Canada Assets - 4,050
Cash Paid for Acquisition, Net of
Cash Received 6,347 (355,094)
Loan Receivable (2,500) -
Net Cash Used in Investing Activities (55,053) (436,679)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (Repayments) Borrowings on Loans
and Notes Payable (100,794) 122,316
Issuance Cost of Debt - (925)
Dividends (45,279) (35,065)
Stock Option Exercise Proceeds and
Tax Benefits 12,457 20,139
Treasury Stock Purchases (34,919) -
Net Cash (Used in) Provided by
Financing Activities (168,535) 106,465
EFFECT OF EXCHANGE RATE CHANGES 2,498 835
NET DECREASE IN CASH AND CASH EQUIVALENTS (66,482) (180,821)
CASH AND CASH EQUIVALENTS, Beginning 161,573 342,394
CASH AND CASH EQUIVALENTS, Ending $95,091 $161,573