Company News: Page (1) of 1 - 04/20/17

Briggs & Stratton Corporation Reports Fiscal 2017 Third Quarter Results

 

April 20, 2017 --

MILWAUKEE, April 20, 2017 /PRNewswire/ -- Briggs & Stratton Corporation (NYSE:BGG) today announced financial results for its third fiscal quarter ended April 2, 2017.

 


  • Fiscal third quarter net sales were $597 million, a decrease of $7 million or 1.1% compared to last year. Strong sales growth in commercial engines and products was offset by a sales decline in small engines due to OEM customers producing closer to the season, as anticipated.
  • Fiscal third quarter gross profit margin of 22.6% increased from GAAP gross profit margin of 21.1% and adjusted gross profit margin of 21.2%, principally on a more favorable product mix, including a higher proportion of commercial engines and commercial products, the positive impact of innovative new engines, and improvements in manufacturing efficiencies.
  • Third quarter net income was $35.8 million, an increase from GAAP net income of $26.8 million and adjusted net income of $34.9 million last year.
  • Third quarter diluted earnings per share were $0.83, an increase from $0.61 (GAAP) and $0.80 (adjusted) last year.
  • Repurchased $2.8 million in shares under the share repurchase program during the quarter.

"Our focus on growing higher margin commercial engines and products has been an important factor in driving our improved profitability over the last few years and we continued to make progress during our fiscal third quarter," said Todd J. Teske, Chairman, President and Chief Executive Officer.  "The  hard work over the past several years to reposition our product portfolio and manufacturing footprint in order to place the proper focus on commercial growth of engines, lawn and turf care and job site products is showing results as we have achieved solid growth driven in part by new product introductions.  These markets present an attractive opportunity due to their size and anticipated growth rates. We believe that we have the brands, the products and the distribution network to grow our commercial portfolio in excess of the market."  Teske continued, "At the same time, we continue to introduce new, innovative residential products and engines that will help homeowners  get the job done.  Our engine placement on residential lawnmowers again leads the market and positions us well for improvements across the housing market.  As we have indicated throughout this fiscal year, both OEMs and retailers have been cautious in their ordering activity, choosing to produce and take inventory closer to the season.  We saw this particularly in the most recently completed quarter.  We remain optimistic that the upcoming season will reflect market growth in the U.S. of 1-4% over the course of the mowing season. Together, the base provided by our market-leading residential products combined with the higher margin, higher growth commercial products positions us well for profitable growth."

Outlook:

Our outlook for fiscal 2017 remains unchanged from previous guidance, except for higher capital expenditures.  Capital expenditures are now expected to be $80 million to $90 million compared to previous guidance of $70 million to $80 million.

Summary of fiscal 2017 guidance:

  • Net sales are expected to be in a range of $1.86 billion to $1.90 billion. We continue to expect that the U.S. residential lawn and garden market will improve by 1% to 4% over the course of the season. Customers have taken a more cautious approach to building inventory for the season as we anticipated. It is possible engine sales may shift beyond the fourth quarter of fiscal 2017 depending on the pace with which the season breaks.
  • Net income is expected to be in a range of $57 million to $64 million or $1.31 to $1.46 per diluted share (prior to the impact of any share repurchases).
  • Operating margins are expected to be approximately 5.5% to 5.8%.
  • The effective tax rate is expected to be in a range of 31% to 33%.

Conference Call Information:

The Company will host a conference call tomorrow at 10:00 AM (ET) to review this information. A live webcast of the conference call will be available on our corporate website: http://investors.basco.com.

Also available is a dial-in number to access the call real-time at (877) 233-9136. A replay will be offered beginning approximately two hours after the call ends and will be available for one week. Dial (855) 859-2056 to access the replay.

Non-GAAP Financial Measures

This release refers to non-GAAP financial measures including "adjusted gross profit", "adjusted engineering, selling, general, and administrative expenses", "adjusted segment income (loss)", "adjusted net income (loss)", and "adjusted diluted earnings per share."  Refer to the accompanying financial schedules for supplemental financial data and corresponding reconciliations of these non-GAAP financial measures to certain GAAP financial measures.

Safe Harbor Statement:

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", "forecast", "intend", "plan", "project", 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, the ability to successfully forecast demand for our products; changes in interest rates and foreign exchange 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; changes in laws and regulations; changes in customer and OEM demand; changes in prices of raw materials and parts that we purchase; changes in domestic and foreign economic conditions (including effects from the U.K.'s decision to exit the European Union); the ability to bring new productive capacity on line efficiently and with good quality; outcomes of legal proceedings and claims; the ability to realize anticipated savings from restructuring actions; and other factors disclosed from time to time in our SEC filings or otherwise, including the factors discussed in Item 1A, Risk Factors, of the Company's Annual Report on Form 10-K and in its periodic reports on Form 10-Q. We undertake no obligation to update forward-looking statements made in this release to reflect events or circumstances after the date of this release.

About Briggs & Stratton Corporation:

Briggs & Stratton Corporation (NYSE: BGG), headquartered in Milwaukee, Wisconsin, is focused on providing power to get work done and make people's lives better. Briggs & Stratton is the world's largest producer of gasoline engines for outdoor power equipment, and is a leading designer, manufacturer and marketer of power generation, pressure washers, lawn and garden, turf care and job site products through its Briggs & Stratton®, Simplicity®, Snapper®,  Ferris®, Vanguard, Allmand, Billy Goat®, Murray®, Branco® and Victa® brands. Briggs & Stratton products are designed, manufactured, marketed and serviced in over 100 countries on six continents. For additional information, please visit www.basco.com and www.briggsandstratton.com.
 

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations for the Periods Ended March

(In Thousands, except per share data)














 Three Months Ended March 


 Nine Months Ended March 




FY2017


FY2016


FY2017


FY2016


NET SALES


$596,965


$603,750


$1,311,998


$1,306,587


COST OF GOODS SOLD


462,194


476,075


1,029,299


1,032,398


RESTRUCTURING CHARGES


-


580


-


5,686


Gross Profit 


134,771


127,095


282,699


268,503












ENGINEERING, SELLING, GENERAL










AND ADMINISTRATIVE EXPENSES


78,279


75,288


223,373


219,980


RESTRUCTURING CHARGES


-


144


-


1,430


GOODWILL IMPAIRMENT


-


7,651


-


7,651


EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES (1)


1,079


1,105


7,318


1,105


Income from Operations


57,571


45,117


66,644


40,547












INTEREST EXPENSE


(5,521)


(5,593)


(15,159)


(15,142)


OTHER INCOME


844


511


1,679


4,348


Income before Income Taxes


52,894


40,035


53,164


29,753












PROVISION FOR INCOME TAXES


17,075


13,212


16,242


8,541


Net Income


$   35,819


$   26,823


$      36,922


$      21,212












EARNINGS PER SHARE










Basic  


$       0.83


$       0.62


$          0.86


$          0.48


Diluted


0.83


0.61


0.86


0.48












WEIGHTED AVERAGE SHARES OUTSTANDING










Basic  


42,076


42,621


42,217


43,158


Diluted


42,175


42,889


42,271


43,377





















1

Beginning in the third quarter of fiscal 2016, the Company classifies its equity in earnings of unconsolidated affiliates within Income from Operations. Prior to the third quarter of fiscal 2016, equity in earnings from unconsolidated affiliates is classified in Other Income. See Adjusted Segment Information tables for prior year equity in earnings of unconsolidated affiliates amounts.

 

Supplemental International Sales Information

(In Thousands)












 Three Months Ended March 


 Nine Months Ended March 



FY2017


FY2016


FY2017


FY2016

International sales based on product shipment destination


$171,565


$160,277


$440,179


$404,493

 

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets as of the End of March

(In Thousands)





CURRENT ASSETS:

FY2017


FY2016

Cash and Cash Equivalents

$      52,097


$      43,716

Accounts Receivable, Net

298,990


279,127

Inventories

413,572


419,537

Deferred Income Tax Asset

45,914


47,902

Prepaid Expenses and Other Current Assets

22,178


29,993

Total Current Assets

832,751


820,275





OTHER ASSETS:




Goodwill

161,823


160,998

Investments

49,535


56,715

Other Intangible Assets, Net

101,847


106,544

Deferred Income Tax Asset

39,093


14,393

Other Long-Term Assets, Net

19,182


15,122

Total Other Assets

371,480


353,772









PLANT AND EQUIPMENT:




At Cost

1,086,778


1,038,994

Less - Accumulated Depreciation

742,240


724,611

Plant and Equipment, Net

344,538


314,383


$ 1,548,769


$ 1,488,430









CURRENT LIABILITIES:




Accounts Payable

$    212,974


$    212,372

Short-Term Debt

62,300


32,443

Accrued Liabilities

144,023


155,965

Total Current Liabilities

419,297


400,780





OTHER LIABILITIES:




Accrued Pension Cost

297,170


194,542

Accrued Employee Benefits

22,649


22,778

Accrued Postretirement Health Care Obligation

31,126


41,165

Other Long-Term Liabilities

43,320


52,305

Long-Term Debt

221,682


221,221

Total Other Liabilities

615,947


532,011





SHAREHOLDERS' INVESTMENT:




Common Stock

579


579

Additional Paid-In Capital

73,269


73,072

Retained Earnings

1,093,323


1,074,959

Accumulated Other Comprehensive Loss

(330,293)


(280,940)

Treasury Stock, at Cost

(323,353)


(312,031)

Total Shareholders' Investment

513,525


555,639


$ 1,548,769


$ 1,488,430





 

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands)




Nine Months Ended March





CASH FLOWS FROM OPERATING ACTIVITIES:

FY2017


FY2016

Net Income

$           36,922


$           21,212

Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities:




Depreciation and Amortization

42,177


40,579

Stock Compensation Expense

4,560


4,792

Goodwill Impairment

-


7,651

Loss on Disposition of Plant and Equipment

610


454

Provision for Deferred Income Taxes

7,574


3,656

Equity in Earnings of Unconsolidated Affiliates 

(7,318)


(4,292)

Dividends Received from Unconsolidated Affiliates 

8,186


5,039

Non-Cash Restructuring Charges

-


1,725

Changes in Operating Assets and Liabilities:




Accounts Receivable

(110,978)


(64,488)

Inventories

(27,553)


(41,903)

Other Current Assets

584


1,429

Accounts Payable, Accrued Liabilities and Income Taxes

30,041


25,598

Other, Net

(13,008)


(6,808)

   Net Cash Used in Operating Activities

(28,203)


(5,356)





CASH FLOWS FROM INVESTING ACTIVITIES:




Capital Expenditures

(48,780)


(41,092)

Proceeds Received on Disposition of Plant and Equipment

1,014


997

Cash Paid for Acquisitions, Net of Cash Acquired

-


(3,074)

Cash Paid for Investment in Unconsolidated Affiliates

-


(19,100)

Proceeds on Sale of Investment in Marketable Securities

3,343


-

Other, Net

-


(750)

   Net Cash Used in Investing Activities

(44,423)


(63,019)





CASH FLOWS FROM FINANCING ACTIVITIES:




Net Borrowings on Revolver

62,300


32,443

Repayments on Long-Term Debt

-


(1,851)

Debt Issuance Costs

-


(932)

Treasury Stock Purchases

(17,924)


(33,394)

Payment of Acquisition Contingent Liability

(1,625)


-

Stock Option Exercise Proceeds and Tax Benefits

4,751


11,165

Cash Dividends Paid

(12,028)


(11,885)

   Net Cash Provided by (Used in) Financing Activities

35,474


(4,454)





EFFECT OF EXCHANGE RATE CHANGES

(590)


(1,845)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(37,742)


(74,674)

CASH AND CASH EQUIVALENTS, Beginning

89,839


118,390

CASH AND CASH EQUIVALENTS, Ending

$           52,097


$           43,716





Liquidity and Capital Resources:

Net debt at April 2, 2017 was $233.4 million (total debt, excluding debt issuance costs, of $285.4 million less $52.1 million of cash), or $21.5 million higher than net debt of $211.9 million (total debt, excluding debt issuance costs, of $255.6 million less $43.7 million of cash) at March 27, 2016.

Cash flows used in operating activities for the first nine months of fiscal 2017 were $28.2 million compared to $5.4 million for the same period in fiscal 2016. The increase in cash used in operating activities was primarily related to changes in working capital, including higher accounts receivable due to timing of sales year over year.

During the first nine months of fiscal 2017, the Company repurchased approximately 916,000 shares on the open market at an average price of $19.57 per share. As of April 2, 2017, the Company had remaining authorization to repurchase up to approximately $32 million of common stock with an expiration date of June 29, 2018.

SUPPLEMENTAL SEGMENT INFORMATION


Engines Segment:












 Three Months Ended March 


 Nine Months Ended March 



(In Thousands)


FY2017


FY2016


FY2017


FY2016



     Net Sales


$ 391,063


$ 415,680


$ 806,298


$ 827,770














     Gross Profit as Reported


$   98,814


$   99,371


$ 191,373


$ 188,783



Restructuring Charges


-


-


-


464



     Adjusted Gross Profit


$   98,814


$   99,371


$ 191,373


$ 189,247














     Gross Profit % as Reported


25.3%


23.9%


23.7%


22.8%



     Adjusted Gross Profit %


25.3%


23.9%


23.7%


22.9%














     Segment Income as Reported


$   50,946


$   52,166


$   57,216


$   52,195



Restructuring Charges


-


-


-


1,354



Litigation Charges


-


-


-


2,825



     Adjusted Segment Income


$   50,946


$   52,166


$   57,216


$   56,374














     Segment Income % as Reported


13.0%


12.5%


7.1%


6.3%



     Adjusted Segment Income %


13.0%


12.5%


7.1%


6.8%

Third Quarter Highlights

  • Starting in fiscal 2017, we implemented new sales terms for engines shipped to overseas customers, resulting in earlier revenue recognition compared to the terms we used during previous fiscal years. The change in terms caused units sold and net sales to be higher in the first half of the fiscal year compared to the second half. As a result of the change, units sold and net sales were lower in the third quarter of fiscal 2017 by approximately 100,000 units and $10 million, respectively.
  • Using comparable sales terms, engine volumes sold decreased by 5% or approximately 160,000 engines in the third quarter of fiscal 2017. The decrease is due to a more cautious approach by our U.S. customers in building inventory for the season following the delayed start to the season last year. Offsetting the decrease were higher sales of Vanguard commercial engines and higher European engine sales.
  • Gross profit percentage increased due to favorable sales mix including a higher proportion of commercial engine sales and margin lift on new products as well as manufacturing efficiency improvements.
  • Investment in our ERP system upgrade and higher pension expense were the primary drivers for the $0.7 million increase in ESG&A expenses compared to last year.

 

Products Segment:










 Three Months Ended March 


 Nine Months Ended March 


(In Thousands)


FY2017


FY2016


FY2017


FY2016


     Net Sales


$ 233,510


$ 220,845


$ 575,007


$ 555,883












     Gross Profit as Reported


$   34,946


$   27,527


$   91,075


$   81,414


Restructuring Charges


-


580


-


5,222


Acquisition Related Charges


-


-


-


250


     Adjusted Gross Profit


$   34,946


$   28,107


$   91,075


$   86,886












     Gross Profit % as Reported


15.0%


12.5%


15.8%


14.6%


     Adjusted Gross Profit %


15.0%


12.7%


15.8%


15.6%












     Segment Income (Loss) as Reported


$      5,614


$    (7,246)


$      9,177


$    (6,767)


Restructuring Charges


-


724


-


5,762


Goodwill Impairment


-


7,651


-


7,651


Acquisition Related Charges


-


-


-


276


     Adjusted Segment Income


$      5,614


$      1,129


$      9,177


$      6,922












     Segment Income (Loss) % as Reported


2.4%


-3.3%


1.6%


-1.2%


     Adjusted Segment Income %


2.4%


0.5%


1.6%


1.2%

Third Quarter Highlights

  • Net sales increased by $12.7 million, primarily due to higher sales of commercial mowers, turf care equipment and job site equipment.
  • Gross profit percentage increased by 250 basis points. Adjusted gross profit percentage increased 230 basis points, primarily due to manufacturing efficiency improvements and favorable sales mix, which includes higher sales of commercial products.
  • Higher new product promotional expenses and the investment in our ERP system upgrade were the primary drivers for the $2.3 million increase in ESG&A expenses compared to last year.

Non-GAAP Financial Measures

Briggs & Stratton Corporation prepares its financial statements using Generally Accepted Accounting Principles (GAAP). When a company discloses material information containing non-GAAP financial measures, SEC regulations require that the disclosure include a presentation of the most directly comparable GAAP measure and a reconciliation of the GAAP and non-GAAP financial measures. Management's inclusion of non-GAAP financial measures in this release is intended to supplement, not replace, the presentation of the financial results in accordance with GAAP. Briggs & Stratton Corporation management believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. Management also believes that these non-GAAP financial measures enhance the ability of investors to analyze our business trends and to understand our performance. In addition, we may utilize non-GAAP financial measures as a guide in our forecasting, budgeting and long-term planning process. Non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures presented in accordance with GAAP. The following tables are reconciliations of the non-GAAP financial measures:

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

Adjusted Segment Information for the Three Month Periods Ended March

(In Thousands, except per share data)








 Three Months Ended March 




  FY2017
 Reported


Adjustments


 FY2017 
Adjusted


  FY2016 
Reported


Adjustments1


  FY2016 
Adjusted










Gross Profit:














Engines


$         98,814


$                    -


$         98,814


$         99,371


$                    -


$         99,371


Products


34,946


-


34,946


27,527


580


28,107


Inter-Segment Eliminations


1,011


-


1,011


197


-


197


Total


$      134,771


$                    -


$      134,771


$      127,095


$              580


$      127,675
















Engineering, Selling, General and Administrative Expenses














Engines


$         48,450


$                    -


$         48,450


$         47,759


$                  -


$         47,759


Products


29,829


-


29,829


27,529


-


27,529


Total


$         78,279


$                    -


$         78,279


$         75,288


$                  -


$         75,288
















Segment Income (Loss) (2)














Engines


$         50,946


$                    -


$         50,946


$         52,166


$                    -


$         52,166


Products


5,614


-


5,614


(7,246)


8,375


1,129


Inter-Segment Eliminations


1,011


-


1,011


197


-


197


Total


$         57,571


$                    -


$         57,571


$         45,117


$           8,375


$         53,492
















Reconciliation from Segment Income (Loss) to Income before Income Taxes:














Equity in Earnings of Unconsolidated Affiliates (2)


-


-


-


-


-


-


Income from Operations


$         57,571


$                    -


$         57,571


$         45,117


$           8,375


$         53,492
















Income before Income Taxes


52,894


-


52,894


40,035


8,375


48,410


Provision for Income Taxes


17,075


-


17,075


13,212


254


13,466


Net Income


$         35,819


$                    -


$         35,819


$         26,823


$           8,121


$         34,944
















Earnings Per Share














Basic  


$             0.83


$                  -


$             0.83


$             0.62


$             0.18


$             0.80


Diluted


0.83


-


0.83


0.61


0.19


0.80















1

For the third quarter of fiscal 2016, includes pre-tax restructuring charges of $724 ($470 after tax) and goodwill impairment charge of $7,651 which is not deductible for income tax purposes. 

2

For all periods presented, equity in earnings of unconsolidated affiliates is included in segment income (loss). Beginning with the third quarter of fiscal 2016, the Company classifies its equity in earnings of unconsolidated affiliates within income from operations. Prior to the third quarter of fiscal 2016, equity in earnings of unconsolidated affiliates is classified in other income.


 

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

Adjusted Segment Information for the Nine Month Periods Ended March

(In Thousands, except per share data)








 Nine Months Ended March 




  FY2017 
Reported


Adjustments


 FY2017 
Adjusted


  FY2016 
Reported


Adjustments1


  FY2016 
Adjusted










Gross Profit:














Engines


$      191,373


$                    -


$      191,373


$      188,783


$              464


$      189,247


Products


91,075


-


91,075


81,414


5,472


86,886


Inter-Segment Eliminations


251


-


251


(1,694)


-


(1,694)


Total


$      282,699


$                    -


$      282,699


$      268,503


$           5,936


$      274,439
















Engineering, Selling, General and Administrative Expenses














Engines


$      138,610


$                    -


$      138,610


$      138,273


$           2,825


$      135,448


Products


84,763


-


84,763


81,707


26


81,681


Total


$      223,373


$                    -


$      223,373


$      219,980


$           2,851


$      217,129
















Segment Income (Loss) (2)














Engines


$         57,216


$                    -


$         57,216


$         52,195


$           4,179


$         56,374


Products


9,177


-


9,177


(6,767)


13,689


6,922


Inter-Segment Eliminations


251


-


251


(1,694)


-


(1,694)


Total


$         66,644


$                    -


$         66,644


$         43,734


$         17,868


$         61,602
















Reconciliation from Segment Income (Loss) to Income before Income Taxes:














Equity in Earnings of Unconsolidated Affiliates (2)


-


-


-


3,187


-


3,187


Income from Operations


$         66,644


$                    -


$         66,644


$         40,547


$         17,868


$         58,415
















Income before Income Taxes


53,164


-


53,164


29,753


17,868


47,621


Provision for Income Taxes


16,242


-


16,242


8,541


4,199


12,740


Net Income


$         36,922


$                    -


$         36,922


$         21,212


$         13,669


$         34,881
















Earnings Per Share














Basic  


$             0.86


$                  -


$             0.86


$             0.48


$             0.31


$             0.79


Diluted


0.86


-


0.86


0.48


0.31


0.79















1

For the first nine months of fiscal 2016, includes pre-tax restructuring charges of $7,116 ($4,671 after tax), goodwill impairment charge of $7,651 which is not deductible for income tax purposes, pre-tax acquisition-related charges of $276 ($180 after tax), pre-tax litigation charges of $2,825 ($1,836 after tax), and a tax benefit of $669 for reinstatement of a deferred tax asset related to an investment in marketable securities. 

2

For all periods presented, equity in earnings of unconsolidated affiliates is included in segment income (loss). Beginning with the third quarter of fiscal 2016, the Company classifies its equity in earnings of unconsolidated affiliates within income from operations. Prior to the third quarter of fiscal 2016, equity in earnings of unconsolidated affiliates is classified in other income.


 

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SOURCE Briggs & Stratton Corporation

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