MILWAUKEE, Oct 21, 2010 -- Briggs and Stratton Corporation today announced financial results for its first quarter ended September 26, 2010.
Highlights:
- First quarter fiscal 2011 consolidated net sales of $334.1 million, representing an increase of $9.5 million or 2.9% from the first quarter of fiscal 2010.
- First quarter fiscal 2011 consolidated net loss of $8.1 million, or $0.16 per diluted share, improved from a consolidated net loss of $8.7 million, or $0.18 per diluted share, one year ago.
- Net debt outstanding as of September 26, 2010 is down $106.5 million, or 40.5%, from September 27, 2009.
"We are pleased with our fiscal 2011 first quarter results as we move forward executing our strategy despite continued economic uncertainty," commented Todd J. Teske, Chairman, President and Chief Executive Officer of Briggs and Stratton. "We improved sales and operating results through a period of continued slow growth in consumer spending. Along with these improved operating results, our balance sheet remains strong as we continue to focus on efficiently managing our capital."
Consolidated Results:
Fiscal 2011 first quarter consolidated net sales were $334.1 million and the consolidated net loss was $8.1 million or $0.16 per diluted share. The first quarter of fiscal 2010 had consolidated net sales of $324.6 million and a consolidated net loss of $8.7 million or $0.18 per diluted share.
The $9.5 million consolidated net sales increase was due primarily to increased international engine shipments as well as improved lawn and garden and snow thrower product sales volumes within our Power Products segment, offset by lower sales of pressure washers and portable generator products. The reduced net loss of $0.6 million compared to the prior year fiscal first quarter was primarily the result of increased engine sales to third party customers and improved engine plant productivity on higher production volumes, offset by Jefferson plant transition costs and lower production volumes in the Power Products segment and increased costs stemming from higher salaries and benefits expenses.
The higher salaries and benefits expenses include a $3.0 million net increase in pension and other post-retirement benefits as well as an increase in salaries and 401(k) company match benefits of $5.0 million, which have been fully restored since being temporarily reduced early in the first quarter of fiscal 2010.
Engines Segment:
Fiscal 2011 first quarter net sales were $205.0 million, which was $0.9 million or 0.4% less than the prior year. This decrease from the same quarter last year is primarily due to a reduction in intercompany sales of engines to our Power Products segment due to lower sales and production of pressure washers and portable generators, offset by an increase in international engine unit volumes to European and Asian OEMs.
The fiscal 2011 first quarter loss from operations was $5.5 million, which is $0.7 million more than the $4.9 million loss from operations experienced in the first quarter of fiscal 2010. This increase in the loss from operations over the prior year was the result of higher salaries and benefits expenses of $6.8 million, offset by improved absorption as engines produced increased 9% over the prior year first quarter.
The increase in salaries and benefits is primarily attributed to temporary reductions in salaries and 401(k) match implemented in the first quarter last year; such salaries and benefits have since been restored resulting in the increase between years.
Power Products Segment:
Fiscal 2011 first quarter net sales were $168.2 million, which was $2.3 million or 1.4% greater than the prior year. The improvement in sales compared to the same quarter last year primarily resulted from increased unit shipment volumes of lawn and garden products, offset by reduced shipment volumes of pressure washers and portable generators as retailers reduce their inventories in these categories.
The fiscal 2011 first quarter loss from operations was $5.0 million, or $7.5 million lower than the income from operations of $2.5 million in the first quarter of fiscal 2010. This decline in income from operations between years resulted from higher manufacturing spending including transition costs from the closure of our Jefferson manufacturing facility, lower absorption primarily related to the decreased production of portable generators and pressure washers, as well as increased expenses of $1.5 million related to salaries and benefits.
The increase in salaries and benefits is primarily attributed to temporary reductions in salaries and 401(k) match implemented in the first quarter last year; such salaries and benefits have since been restored resulting in the increase between years. Higher manufacturing spending is attributed to higher material costs and increased freight expense.
Corporate Items:
Interest expense was lower between years because of lower outstanding borrowings. The effective tax rate for the fiscal 2011 first quarter was a benefit of 33.4%, or $4.1 million, versus a benefit of 36.1%, or $4.9 million, in the first quarter last year. The effective tax rate benefit for the first quarter of fiscal 2011 was lower than the 2010 period because 2010included the favorable tax impact of the settlement of audits.
Financial Position:
The 8.875% Senior Notes that are due in March 2011 are classified as Short-Term Debt in the consolidated balance sheet as of the end of the fiscal 2011 first quarter. The company believes it will be able to replace these borrowings with new financing at or prior to the maturity date of the Senior Notes. In the unlikely event the company is unable to replace these borrowings with new financing upon the maturity of the Senior Notes, we believe that the availability within our existing revolving credit facility will be sufficient to pay off the outstanding Senior Notes.
Net debt at September 26, 2010 was $156.4 million (total debt of $204.1 million less $47.7 million of cash), an improvement of $106.5 million from September 27, 2009. Cash flows used by operating activities for the fiscal 2011 first quarter were $55.5 million compared to cash provided by operating activities of $11.9 million in the fiscal 2010 first quarter. The increase in cash used for operating activities is primarily due to working capital requirements to replenish inventory from lower levels at the end of fiscal 2010.
Outlook:
The company continues to project that fiscal 2011 net income will be in the range of $60 to $70 million or $1.20 to $1.40 per diluted share. Consolidated net sales are projected to be approximately 2% to 4% higher than in fiscal 2010. Engines Segment sales are forecasted higher on modest volume and pricing improvements while the Power Products Segment sales are forecasted higher primarily due to higher expected volumes of lawn and garden equipment. Demand for portable generators and the related engines due to landed hurricane activity have not been included in our fiscal 2011 sales forecast.
Operating income margins for fiscal 2011 are projected to be in the range of 5.0% to 6.0%, and interest expense and other income are forecasted to be in the range of $23 million to $25 million and $4 million to $5 million, respectively. The effective tax rate for the full year is projected to be in a range of 32% to 35%.
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