Wisconsin | 1-1370 | 39-0182330 | ||
(State or other jurisdiction | (Commission | (I.R.S. Employer | ||
of incorporation) | File Number) | Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(a) | Not applicable |
(b) | Not applicable |
(c) | Not applicable |
(d) | Exhibits. The following exhibit is being furnished herewith: |
Exhibit No. | Description | |
99.1 |
BRIGGS & STRATTON CORPORATION | ||||
(Registrant) | ||||
Date: | January 24, 2018 | /s/ Mark A. Schwertfeger | ||
Mark A. Schwertfeger | ||||
Senior Vice President and Chief Financial Officer Duly Authorized Officer |
• | Fiscal second quarter net sales were $446 million, an increase of $18 million, or 4.2%, from $428 million for the prior year from continued favorable momentum in sales of engines and products designed for commercial markets. |
• | Quarterly gross profit margin of 20.8% (GAAP) and adjusted gross profit margin of 21.1% decreased from a gross profit margin of 22.3% last year primarily due to sales mix and lower production volumes as anticipated. |
• | Second quarter net loss of $16.3 million, or $0.39 per share (GAAP), included a $24.9 million one-time charge as a result of the implementation of the Tax Cuts and Jobs Act of 2017 (“Tax Reform”) as well as business optimization charges. Excluding these items, adjusted net income was $10.7 million, or $0.25 per diluted share. |
• | The company’s estimated effective tax rate for fiscal 2018 is expected to be in a range of 29% to 31%, excluding business optimization costs and the one-time charge from implementing Tax Reform. |
• | The company is increasing its fiscal 2018 earnings outlook to $1.45 to $1.62 per diluted share, before business optimization costs and the one-time charge from implementing Tax Reform, from previous guidance of $1.41 to $1.58 per diluted share due to the reduction in the planned effective tax rate. |
• | As a result of the Tax Cuts and Jobs Act of 2017, the company recognized a one-time charge of $24.9 million in the second quarter from the estimated impact of the inclusion of foreign earnings and revaluation of deferred tax assets and liabilities. Excluding this charge as well as the costs of the company’s business optimization program, the company expects the reduction in the corporate tax rate will result in an effective tax rate of approximately 29% to 31% (previously 31% to 33%) for fiscal 2018. Given the mid-year change in the corporate tax rate, the company’s fiscal 2018 effective tax rate is comprised of a blend of the pre and post-tax reform tax rates. Beginning in fiscal 2019, the company’s effective tax rate is expected to decrease to a range of approximately 26% to 28%. |
• | Net sales are expected to be in a range of $1.91 billion to $1.96 billion, up from previous guidance of $1.90 billion to $1.95 billion, due to follow-on generator sales to date through the end of the second quarter. |
• | Net income is expected to be in a range of $62 million to $70 million (previously $60 million to $68 million), or $1.45 to $1.62 per diluted share (previously $1.41 to $1.58 per diluted share), due to the reduction in the planned effective tax rate. This outlook is prior to the benefit of share repurchases and excludes the costs of the business optimization program and the one-time implementation charge related to Tax Reform. |
• | Operating margins are expected to remain unchanged from previous guidance of approximately 5.8% to 6.0%, prior to the impact of costs related to the company’s business optimization program. Management expects the modest contribution from follow-on generator sales in the second quarter to be offset by incremental promotional investment in the upcoming quarter to further promote the company’s innovative products to new and existing homeowners. |
Three Months Ended December | Six Months Ended December | |||||||||||||||
FY2018 | FY2017 | FY2018 | FY2017 | |||||||||||||
NET SALES | $ | 446,436 | $ | 428,236 | $ | 775,531 | $ | 715,034 | ||||||||
COST OF GOODS SOLD | 353,570 | 332,830 | 616,400 | 567,106 | ||||||||||||
Gross Profit | 92,866 | 95,406 | 159,131 | 147,928 | ||||||||||||
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 77,891 | 73,032 | 164,605 | 145,095 | ||||||||||||
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES | 2,113 | 3,011 | 5,726 | 6,239 | ||||||||||||
Income from Operations | 17,088 | 25,385 | 252 | 9,072 | ||||||||||||
INTEREST EXPENSE | (5,593 | ) | (5,133 | ) | (10,550 | ) | (9,638 | ) | ||||||||
OTHER INCOME | 685 | 381 | 1,403 | 836 | ||||||||||||
Income (Loss) before Income Taxes | 12,180 | 20,633 | (8,895 | ) | 270 | |||||||||||
PROVISION (CREDIT) FOR INCOME TAXES | 28,524 | 5,382 | 22,488 | (833 | ) | |||||||||||
Net Income (Loss) | $ | (16,344 | ) | $ | 15,251 | $ | (31,383 | ) | $ | 1,103 | ||||||
EARNINGS (LOSS) PER SHARE | ||||||||||||||||
Basic | $ | (0.39 | ) | $ | 0.35 | $ | (0.75 | ) | $ | 0.02 | ||||||
Diluted | (0.39 | ) | 0.35 | (0.75 | ) | 0.02 | ||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||||||||||
Basic | 42,154 | 42,081 | 42,130 | 42,287 | ||||||||||||
Diluted | 42,154 | 42,142 | 42,130 | 42,337 |
Three Months Ended December | Six Months Ended December | |||||||||||||||
FY2018 | FY2017 | FY2018 | FY2017 | |||||||||||||
International sales based on product shipment destination | $ | 157,248 | $ | 158,727 | $ | 271,885 | $ | 268,614 |
CURRENT ASSETS: | FY2018 | FY2017 | ||||||
Cash and Cash Equivalents | $ | 66,366 | $ | 47,327 | ||||
Accounts Receivable, Net | 201,253 | 222,768 | ||||||
Inventories | 501,531 | 485,851 | ||||||
Prepaid Expenses and Other Current Assets | 37,901 | 36,010 | ||||||
Total Current Assets | 807,051 | 791,956 | ||||||
OTHER ASSETS: | ||||||||
Goodwill | 164,312 | 161,287 | ||||||
Investments | 47,626 | 48,298 | ||||||
Other Intangible Assets, Net | 98,895 | 102,324 | ||||||
Deferred Income Tax Asset | 43,882 | 88,111 | ||||||
Other Long-Term Assets, Net | 19,870 | 20,171 | ||||||
Total Other Assets | 374,585 | 420,191 | ||||||
PLANT AND EQUIPMENT: | ||||||||
At Cost | 1,140,232 | 1,077,452 | ||||||
Less - Accumulated Depreciation | 754,654 | 746,289 | ||||||
Plant and Equipment, Net | 385,578 | 331,163 | ||||||
$ | 1,567,214 | $ | 1,543,310 | |||||
CURRENT LIABILITIES: | ||||||||
Accounts Payable | $ | 208,307 | $ | 186,291 | ||||
Short-Term Debt | 128,647 | 132,100 | ||||||
Accrued Liabilities | 142,785 | 127,411 | ||||||
Total Current Liabilities | 479,739 | 445,802 | ||||||
OTHER LIABILITIES: | ||||||||
Accrued Pension Cost | 232,769 | 301,551 | ||||||
Accrued Employee Benefits | 21,664 | 22,819 | ||||||
Accrued Postretirement Health Care Obligation | 31,361 | 33,658 | ||||||
Other Long-Term Liabilities | 51,464 | 43,797 | ||||||
Long-Term Debt | 222,008 | 221,570 | ||||||
Total Other Liabilities | 559,266 | 623,395 | ||||||
SHAREHOLDERS' INVESTMENT: | ||||||||
Common Stock | 579 | 579 | ||||||
Additional Paid-In Capital | 73,635 | 68,144 | ||||||
Retained Earnings | 1,063,501 | 1,063,500 | ||||||
Accumulated Other Comprehensive Loss | (290,254 | ) | (336,952 | ) | ||||
Treasury Stock, at Cost | (319,252 | ) | (321,158 | ) | ||||
Total Shareholders' Investment | 528,209 | 474,113 | ||||||
$ | 1,567,214 | $ | 1,543,310 | |||||
Six Months Ended December | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | FY2018 | FY2017 | |||||||
Net Income (Loss) | $ | (31,383 | ) | $ | 1,103 | ||||
Adjustments to Reconcile Net Income (Loss) to Net Cash Used in Operating Activities: | |||||||||
Depreciation and Amortization | 28,524 | 28,156 | |||||||
Stock Compensation Expense | 3,869 | 2,826 | |||||||
Loss on Disposition of Plant and Equipment | 1,553 | 331 | |||||||
Provision for Deferred Income Taxes | 18,427 | 4,315 | |||||||
Equity in Earnings of Unconsolidated Affiliates | (6,948 | ) | (6,239 | ) | |||||
Dividends Received from Unconsolidated Affiliates | 9,810 | 8,186 | |||||||
Changes in Operating Assets and Liabilities: | |||||||||
Accounts Receivable | 29,900 | (36,077 | ) | ||||||
Inventories | (126,075 | ) | (99,787 | ) | |||||
Other Current Assets | (3,402 | ) | 1,203 | ||||||
Accounts Payable, Accrued Liabilities and Income Taxes | 16,808 | (23,350 | ) | ||||||
Other, Net | (5,944 | ) | (7,240 | ) | |||||
Net Cash Used in Operating Activities | (64,861 | ) | (126,573 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Capital Expenditures | (45,597 | ) | (31,163 | ) | |||||
Proceeds Received on Disposition of Plant and Equipment | 686 | 1,009 | |||||||
Cash Paid for Acquisitions, Net of Cash Acquired | (1,800 | ) | — | ||||||
Proceeds on Sale of Investment in Marketable Securities | — | 3,343 | |||||||
Increase to Restricted Cash | (12,704 | ) | — | ||||||
Net Cash Used in Investing Activities | (59,415 | ) | (26,811 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Net Borrowings on Revolver | 128,648 | 132,100 | |||||||
Long Term Note Payable | 7,685 | — | |||||||
Debt Issuance Costs | (1,154 | ) | — | ||||||
Treasury Stock Purchases | (3,128 | ) | (15,153 | ) | |||||
Payment of Acquisition Contingent Liability | — | (813 | ) | ||||||
Stock Option Exercise Proceeds and Tax Benefits | 2,939 | 4,243 | |||||||
Payments Related to Shares Withheld for Taxes for Stock Compensation | (1,147 | ) | (1,739 | ) | |||||
Cash Dividends Paid | (5,998 | ) | (6,039 | ) | |||||
Net Cash Provided by Financing Activities | 127,845 | 112,599 | |||||||
EFFECT OF EXCHANGE RATE CHANGES | 1,090 | (1,727 | ) | ||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | 4,659 | (42,512 | ) | ||||||
CASH AND CASH EQUIVALENTS, Beginning | 61,707 | 89,839 | |||||||
CASH AND CASH EQUIVALENTS, Ending | $ | 66,366 | $ | 47,327 | |||||
Three Months Ended December | Six Months Ended December | |||||||||||||||
(In Thousands) | FY2018 | FY2017 | FY2018 | FY2017 | ||||||||||||
Net Sales | $ | 243,505 | $ | 260,797 | $ | 406,252 | $ | 415,235 | ||||||||
Gross Profit as Reported | $ | 55,429 | $ | 61,573 | $ | 86,648 | $ | 92,559 | ||||||||
Business Optimization | 703 | — | 1,128 | — | ||||||||||||
Adjusted Gross Profit | $ | 56,132 | $ | 61,573 | $ | 87,776 | $ | 92,559 | ||||||||
Gross Profit % as Reported | 22.8 | % | 23.6 | % | 21.3 | % | 22.3 | % | ||||||||
Adjusted Gross Profit % | 23.1 | % | 23.6 | % | 21.6 | % | 22.3 | % | ||||||||
Segment Income (Loss) as Reported | $ | 8,421 | $ | 17,922 | $ | (11,437 | ) | $ | 6,269 | |||||||
Business Optimization | 2,016 | — | 4,347 | — | ||||||||||||
Adjusted Segment Income (Loss) | $ | 10,437 | $ | 17,922 | $ | (7,090 | ) | $ | 6,269 | |||||||
Segment Income (Loss) % as Reported | 3.5 | % | 6.9 | % | (2.8 | )% | 1.5 | % | ||||||||
Adjusted Segment Income (Loss) % | 4.3 | % | 6.9 | % | (1.7 | )% | 1.5 | % |
• | Engine sales unit volumes decreased by 10%, or approximately 180,000 engines, in the second quarter of fiscal 2018 compared to the same period last year. The decrease was primarily due to an acceleration of international sales into the first quarter of fiscal 2018, as well as management’s anticipation that domestic customers will produce closer to the lawn and garden season this year. Sales of service parts to the company’s service distribution venture were also lower this year due to a planned seasonal inventory reduction initiative. Partially offsetting the sales decline were increased sales of commercial engines. |
• | Gross profit percentage decreased due to approximately 5% lower manufacturing volume and unfavorable sales mix, which includes lower service parts sales. Higher material costs were offset by modest pricing increases. |
• | ESG&A increased by $2.5 million (GAAP) and $2.4 million (adjusted) from last year due to higher employee compensation costs and the investment in the upgrade to the company’s ERP system. |
Three Months Ended December | Six Months Ended December | |||||||||||||||
(In Thousands) | FY2018 | FY2017 | FY2018 | FY2017 | ||||||||||||
Net Sales | $ | 222,080 | $ | 190,701 | $ | 408,676 | $ | 341,497 | ||||||||
Gross Profit as Reported | $ | 37,090 | $ | 33,178 | $ | 72,797 | $ | 56,129 | ||||||||
Business Optimization | 754 | — | 1,522 | — | ||||||||||||
Adjusted Gross Profit | $ | 37,844 | $ | 33,178 | $ | 74,319 | $ | 56,129 | ||||||||
Gross Profit % as Reported | 16.7 | % | 17.4 | % | 17.8 | % | 16.4 | % | ||||||||
Adjusted Gross Profit % | 17.0 | % | 17.4 | % | 18.2 | % | 16.4 | % | ||||||||
Segment Income as Reported | $ | 8,320 | $ | 6,808 | $ | 12,003 | $ | 3,563 | ||||||||
Business Optimization | 1,044 | — | 3,950 | — | ||||||||||||
Adjusted Segment Income | $ | 9,364 | $ | 6,808 | $ | 15,953 | $ | 3,563 | ||||||||
Segment Income % as Reported | 3.7 | % | 3.6 | % | 2.9 | % | 1.0 | % | ||||||||
Adjusted Segment Income % | 4.2 | % | 3.6 | % | 3.9 | % | 1.0 | % |
• | Net sales increased by $31.4 million, or 16.5%, from the same period last year. The increase was primarily due to higher sales of commercial job site products, commercial lawn and garden equipment and snow throwers. Generator sales were slightly lower in the second quarter of fiscal 2018 given the prior year’s second quarter net sales included the impact of Hurricane Matthew. |
• | Gross profit percentage and adjusted gross profit percentage decreased by 70 basis points and 40 basis points, respectively, primarily due to a 4% reduction in manufacturing throughput. Production of pressure washers and residential riding mowers was lower in the quarter in order to right size inventory levels, which were elevated coming out of last season. |
• | ESG&A increased by $2.4 million (GAAP) and $2.1 million (adjusted) compared to last year due to higher compensation costs, higher commissions expense on increased sales volume and higher costs associated with investments to upgrade the company’s ERP system and growing commercial offerings. |
Three Months Ended December | ||||||||||||||||||||||||
FY2018 Reported | Adjustments(1) | FY2018 Adjusted | FY2017 Reported | Adjustments | FY2017 Adjusted | |||||||||||||||||||
Gross Profit | ||||||||||||||||||||||||
Engines | $ | 55,429 | $ | 703 | $ | 56,132 | $ | 61,573 | $ | — | $ | 61,573 | ||||||||||||
Products | 37,090 | 754 | 37,844 | 33,178 | — | 33,178 | ||||||||||||||||||
Inter-Segment Eliminations | 347 | — | 347 | 655 | — | 655 | ||||||||||||||||||
Total | $ | 92,866 | $ | 1,457 | $ | 94,323 | $ | 95,406 | $ | — | $ | 95,406 | ||||||||||||
Engineering, Selling, General and Administrative Expenses | ||||||||||||||||||||||||
Engines | $ | 48,167 | $ | 90 | $ | 48,077 | $ | 45,706 | $ | — | $ | 45,706 | ||||||||||||
Products | 29,724 | 290 | 29,434 | 27,326 | — | 27,326 | ||||||||||||||||||
Total | $ | 77,891 | $ | 380 | $ | 77,511 | $ | 73,032 | $ | — | $ | 73,032 | ||||||||||||
Equity in Earnings of Unconsolidated Affiliates | ||||||||||||||||||||||||
Engines | $ | 1,159 | $ | 1,223 | $ | 2,382 | $ | 2,055 | $ | — | $ | 2,055 | ||||||||||||
Products | 954 | — | 954 | 956 | — | 956 | ||||||||||||||||||
Total | $ | 2,113 | $ | 1,223 | $ | 3,336 | $ | 3,011 | $ | — | $ | 3,011 | ||||||||||||
Segment Income (Loss) | ||||||||||||||||||||||||
Engines | $ | 8,421 | $ | 2,016 | $ | 10,437 | $ | 17,922 | $ | — | $ | 17,922 | ||||||||||||
Products | 8,320 | 1,044 | 9,364 | 6,808 | — | 6,808 | ||||||||||||||||||
Inter-Segment Eliminations | 347 | — | 347 | 655 | — | 655 | ||||||||||||||||||
Total | $ | 17,088 | $ | 3,060 | $ | 20,148 | $ | 25,385 | $ | — | $ | 25,385 | ||||||||||||
Income before Income Taxes | 12,180 | 3,060 | 15,240 | 20,633 | — | 20,633 | ||||||||||||||||||
Provision for Income Taxes | 28,524 | (24,010 | ) | 4,514 | 5,382 | — | 5,382 | |||||||||||||||||
Net Income (Loss) | $ | (16,344 | ) | $ | 27,070 | $ | 10,726 | $ | 15,251 | $ | — | $ | 15,251 | |||||||||||
Earnings (Loss) Per Share | ||||||||||||||||||||||||
Basic | $ | (0.39 | ) | $ | 0.64 | $ | 0.25 | $ | 0.35 | $ | — | $ | 0.35 | |||||||||||
Diluted | (0.39 | ) | 0.64 | 0.25 | 0.35 | — | 0.35 |
Six Months Ended December | ||||||||||||||||||||||||
FY2018 Reported | Adjustments(1) | FY2018 Adjusted | FY2017 Reported | Adjustments | FY2017 Adjusted | |||||||||||||||||||
Gross Profit | ||||||||||||||||||||||||
Engines | $ | 86,648 | $ | 1,128 | $ | 87,776 | $ | 92,559 | $ | — | $ | 92,559 | ||||||||||||
Products | 72,797 | 1,522 | 74,319 | 56,129 | — | 56,129 | ||||||||||||||||||
Inter-Segment Eliminations | (314 | ) | — | (314 | ) | (760 | ) | — | (760 | ) | ||||||||||||||
Total | $ | 159,131 | $ | 2,650 | $ | 161,781 | $ | 147,928 | $ | — | $ | 147,928 | ||||||||||||
Engineering, Selling, General and Administrative Expenses | ||||||||||||||||||||||||
Engines | $ | 101,526 | $ | 1,996 | $ | 99,530 | $ | 90,161 | $ | — | $ | 90,161 | ||||||||||||
Products | 63,079 | 2,428 | 60,651 | 54,934 | — | 54,934 | ||||||||||||||||||
Total | $ | 164,605 | $ | 4,424 | $ | 160,181 | $ | 145,095 | $ | — | $ | 145,095 | ||||||||||||
Equity in Earnings of Unconsolidated Affiliates | ||||||||||||||||||||||||
Engines | $ | 3,441 | $ | 1,223 | $ | 4,664 | $ | 3,871 | $ | — | $ | 3,871 | ||||||||||||
Products | 2,285 | — | 2,285 | 2,368 | — | 2,368 | ||||||||||||||||||
Total | $ | 5,726 | $ | 1,223 | $ | 6,949 | $ | 6,239 | $ | — | $ | 6,239 | ||||||||||||
Segment Income (Loss) | ||||||||||||||||||||||||
Engines | $ | (11,437 | ) | $ | 4,347 | $ | (7,090 | ) | $ | 6,269 | $ | — | $ | 6,269 | ||||||||||
Products | 12,003 | 3,950 | 15,953 | 3,563 | — | 3,563 | ||||||||||||||||||
Inter-Segment Eliminations | (314 | ) | — | (314 | ) | (760 | ) | — | (760 | ) | ||||||||||||||
Total | $ | 252 | $ | 8,297 | $ | 8,549 | $ | 9,072 | $ | — | $ | 9,072 | ||||||||||||
Income (Loss) before Income Taxes | (8,895 | ) | 8,297 | (598 | ) | 270 | — | 270 | ||||||||||||||||
Provision (Credit) for Income Taxes | 22,488 | (22,501 | ) | (13 | ) | (833 | ) | — | (833 | ) | ||||||||||||||
Net Income (Loss) | $ | (31,383 | ) | $ | 30,798 | $ | (585 | ) | $ | 1,103 | $ | — | $ | 1,103 | ||||||||||
Earnings (Loss) Per Share | ||||||||||||||||||||||||
Basic | $ | (0.75 | ) | $ | 0.73 | $ | (0.02 | ) | $ | 0.02 | $ | — | $ | 0.02 | ||||||||||
Diluted | (0.75 | ) | 0.73 | (0.02 | ) | 0.02 | — | 0.02 |