MILWAUKEE -- Oct. 20 -- Briggs and Stratton Corporation today announced financial results for its first fiscal quarter ended October 2, 2011.
Highlights:
• First quarter fiscal 2012 consolidated net sales were $397.3 million, an increase of $63.2 million or 18.9% from the first quarter of fiscal 2011.
• First quarter fiscal 2012 consolidated net loss of $5.2 million improved by $2.9 million from a consolidated net loss of $8.1 million one year ago.
• Net debt outstanding as of October 2, 2011 is down $66.6 million, or 42.6%, from September 26, 2010.
"We continued to make progress against our strategic initiatives in the first quarter which enabled us to improve profitability in what remains a challenging global economy," commented Todd J. Teske, Chairman, President and Chief Executive Officer of Briggs and Stratton.
"In addition, I am very pleased how our team was able to quickly respond and provide help to the areas impacted by Hurricane Irene. Their efforts demonstrate our company's ability to respond when severe weather conditions leave people without power."
Consolidated Results:
Consolidated net sales for the first quarter of fiscal 2012 were $397.3 million, an increase of $63.2 million or 18.9% when compared to the same period a year ago. The fiscal 2012 first quarter consolidated net loss was $5.2 million or $0.10 per diluted share. The first quarter of fiscal 2011 consolidated net loss was $8.1 million or $0.16 per diluted share. Given the seasonal nature of the business, it is typical for the company to incur a loss in the first quarter of each fiscal year.
Engines Segment:
Engines Segment fiscal 2012 first quarter net sales were $203.4 million, which was $1.7 million or 0.8% lower than the same period a year ago. This decrease in net sales was driven by lower shipment volumes of engines due to reduced consumer demand for lawn and garden products in North America, offset by slightly improved engine pricing and a favorable mix of product shipped that reflected proportionally larger volumes of units used on snow throwers and riding lawn and garden equipment.
The Engines Segment gross profit was $36.9 million in the first quarter of fiscal 2012, a decrease of $5.6 million from the first quarter of fiscal 2011. Gross profit decreased primarily due to lower net sales and higher manufacturing spending associated with rising commodity costs, partially offset by slightly improved engine pricing and a favorable mix of product shipped that reflected proportionally larger volumes of units used on riding lawn and garden equipment.
The Engines Segment engineering, selling, general and administrative expenses were $42.4 million in the first quarter of fiscal 2012, a decrease of $5.6 million from the first quarter of fiscal 2011 due to lower spending on stock based compensation.
Power Products Segment:
Power Products Segment fiscal 2012 first quarter net sales were $235.3 million, an increase of $67.1 million or 39.9% from the same period a year ago. The increase in net sales was primarily due to increased sales of portable and standby generators due to widespread power outages in the U.S. as a result of a landed hurricane on the East Coast, as well as increased shipments of snow equipment after channel inventories were depleted from the prior selling season. There were no landed hurricanes in the first quarter of fiscal 2011.
The Power Products Segment gross profit was $27.6 million for the first quarter of fiscal 2012, an increase of $10.1 million from the first quarter of fiscal 2011. The increase over the prior year was primarily attributable to the increase in net sales, slightly improved pricing, production efficiencies, and favorable absorption on improved plant utilization, partially offset by increased commodity costs.
The Power Products Segment fiscal 2012 first quarter engineering, selling, general and administrative expenses of $25.3 million increased by $2.9 million from the fiscal 2011 first quarter primarily due to higher sales and marketing and professional services expenses associated with new product launches.
Corporate Items:
Interest expense was $0.8 million lower for the first quarter of fiscal 2012 compared to the same period one year ago due to the reduction in interest rate associated with the refinancing of the Senior Notes in the second quarter of fiscal 2011, partially offset by higher average borrowings outstanding.
Subsequent to the end of the first quarter of fiscal 2012, as previously announced, the company closed on a new 5-year $500 million Senior Unsecured Revolving Credit Facility. This credit facility replaced the company's $500 million credit facility that was scheduled to expire in July 2012. There were no borrowings under the existing revolving credit facility as of the end of the first quarter of fiscal 2012 and fiscal 2011.
The effective tax rate for the first quarter of fiscal 2012 was negative 25.3% or $1.1 million of tax expense compared to 33.4% or a $4.1 million tax benefit for the fiscal 2011 first quarter. Beginning with the first quarter of fiscal 2012, we excluded from our effective tax rate calculation net losses incurred by certain of our foreign subsidiaries which cannot be benefited. Excluding these foreign subsidiary net losses resulted in taxable income for purposes of calculating the company's interim income tax expense for the first quarter of fiscal 2012. The net loss of these subsidiaries is typically higher in the first quarter before they enter into the lawn and garden season.
Financial Position:
Net debt at October 3, 2011 was $89.8 million (total debt of $228.0 million less $138.2 million of cash), an improvement of $66.6 million from the $156.4 million (total debt of $204.1 million less $47.7 million of cash) at September 26, 2010. Cash flows used by operating activities for the fiscal 2012 first quarter were $56.3 million compared to $55.5 million in the fiscal 2011 first quarter. Cash used in operating activities for the first quarter of fiscal 2012 was primarily related to seasonal build of inventory levels and reduction of accounts payable in the quarter.
Outlook:
For fiscal 2012, the company has increased the projection of consolidated net income to be in the range of $58 million to $68 million or $1.15 to $1.35 per diluted share prior to the potential impact of any share repurchases under the company's previously announced share repurchase program.
Consolidated net sales for fiscal 2012 are projected to be higher than fiscal 2011 by approximately 4% to 6% depending on the level of recovery of consumer spending within the outdoor power equipment category.
Engines Segment sales are forecasted to be comparable to fiscal 2011 on lower volume and improved pricing while the Power Products Segment sales are forecasted higher primarily due to higher volumes of lawn and garden equipment, pressure washers, and portable and standby generators.
Operating income margins are now projected to be in the range of 4.5% to 5.0%, and interest expense and other income are forecasted to be in the range of $18 million to $19 million and $5 million to $6 million, respectively.
The operating earnings forecast includes additional investments of approximately $12 million for continued international growth. The effective tax rate for the full year is projected to be in a range of 32% to 34%.
Capital expenditures for the year are projected to be approximately $60 million to $65 million.
About Briggs and Stratton Corporation:
Briggs and Stratton Corporation, headquartered in Milwaukee, Wisconsin, is the world's largest producer of gasoline engines for outdoor power equipment. Its wholly owned subsidiary Briggs and Stratton Power Products Group, LLC is North America's number one manufacturer of portable generators and pressure washers, and is a leading designer, manufacturer and marketer of lawn and garden and turf care through its Simplicity®, Snapper®, Ferris®, Murray® and Victa® brands. Briggs and Stratton products are designed, manufactured, marketed and serviced in over 100 countries on six continents.
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