MILWAUKEE,
Jan. 24, 2013 -- Briggs and Stratton Corporation today announced financial
results for its second fiscal quarter ended December 30, 2012.
Highlights:
• Second quarter fiscal 2013
consolidated net sales were $439.1 million, or 2.0% lower than the second
quarter of fiscal 2012.
• Fiscal 2013 second quarter consolidated
net income excluding restructuring charges was $3.7 million, or $1.0 million
higher than the net income of $2.7 million in the second quarter of fiscal
2012.
• The Company's restructuring program
started in fiscal 2012 achieved pre-tax savings of $19.1 million during the
first six months of fiscal 2013.
• The Company recorded pre-tax
restructuring charges of $6.6 million ($4.3 million after tax or $0.09 per
diluted share) during the three months ended December 30, 2012.
• Completed the acquisition of
Companhia Caetano Branco, of Brazil ("Branco"), further expanding the
Company's geographic footprint in the developing region of Brazil.
"Sales
of portable and standby generators in response to Hurricane Sandy were offset
by lower sales of snow throwers and engines for snow throwers in the U.S. and a
significantly weaker market for lawnmowers in Australia, our third largest
market," said Todd Teske, Chairman, President and Chief Executive Officer
of Briggs and Stratton Corporation. "Sales of lawnmower engines to our
U.S. OEM customers continue to show growth over last year as dealers and
retailers prepare for an anticipated improvement in this year's lawn and garden
season after last year's drought in the U.S." continued Teske. "We
continue to be pleased with the execution and the financial impact of the cost
reduction activities that we began last year which are positively impacting the
results of both our engines and products businesses."
Consolidated
Results:
Consolidated
net sales for the second quarter of fiscal 2013 were $439.1 million, a decrease
of $8.9 million or 2.0% from the second quarter of fiscal 2012. Fiscal 2013
second quarter consolidated net loss including restructuring charges was $0.6
million, or $0.02 per diluted share. The second quarter of fiscal 2012
consolidated net income was $2.7 million, or $0.05 per diluted share.
Included
in the consolidated net loss for the second quarter of fiscal 2013 were pre-tax
charges of $6.6 million ($4.3 million after tax or $0.09 per diluted share)
related to previously announced restructuring actions. After considering the
impact of the restructuring charges, the adjusted consolidated net income for
the second quarter of fiscal 2013 was $3.7 million or $0.07 per diluted share,
which was $1.0 million or $0.02 per diluted share higher compared to the second
quarter fiscal 2012 consolidated net income of $2.7 million or $0.05 per
diluted share. There were no restructuring costs incurred in the second quarter
of fiscal 2012; however, the Company did record a net tax benefit of $5.5
million in fiscal 2012 related to a reduction in tax reserves that did not
recur in fiscal 2013.
For
the first six months of fiscal 2013, consolidated net sales were $748.1
million, a decrease of $97.2 million or 11.5% when compared to the same period
a year ago. The consolidated net loss for the first six months of fiscal 2013
was $17.2 million or $0.37 per diluted share. The consolidated net loss for the
first six months of fiscal 2012 was $2.5 million or $0.05 per diluted share.
Included
in the consolidated net loss for the first six months of fiscal 2013 were
pre-tax charges of $11.8 million ($7.6 million after tax or $0.16 per diluted
share) related to the aforementioned restructuring actions. After considering
the impact of the restructuring charges, the adjusted consolidated net loss for
the first six months of fiscal 2013 was $9.5 million or $0.21 per diluted
share, which was a decrease of $7.0 million or $0.16 per diluted share compared
to the first six months of fiscal 2012 consolidated net loss of $2.5 million or
$0.05 per diluted share. There were no restructuring costs incurred in the
first six months of fiscal 2012.
Engines
Segment fiscal 2013 second quarter net sales were $274.2 million, which was
$11.9 million or 4.2% lower than the second quarter of fiscal 2012. This
decrease in net sales was driven by reduced shipments of engines used on snow
thrower equipment in the North American market and walk mowers in the
Australian market. Sales were also impacted by an unfavorable mix of engines
sold that reflected proportionately lower sales of large engines and reduced
pricing as a result of lower year-over-year material costs.
The
Engines Segment adjusted gross profit percentage for the second quarter of 2013
was 20.8%, which was 3.6% higher compared to the second quarter of fiscal 2012.
The adjusted gross profit percentage was favorably impacted by 4.2% due to
lower manufacturing costs, partially offset by the planned price decrease. The
lower manufacturing costs resulted from start-up costs incurred in fiscal 2012
associated with launching our phase III emissions compliant engines, lower
material costs and $2.5 million of cost savings as a result of restructuring
actions initiated in fiscal 2012.
The
Engines Segment engineering, selling, general and administrative expenses were
$43.9 million in the second quarter of fiscal 2013, a decrease of $3.2 million
from the second quarter of fiscal 2012 primarily due to lower compensation
costs of $2.3 million as a result of the previously announced global salaried
employee reduction and reduced selling expenses, partially offset by $0.7
million of increased pension expense compared to the same period last
year.
Engines
Segment net sales for the first six months of fiscal 2013 were $438.7 million,
which was $50.8 million or 10.4% lower than the same period a year ago. This
decrease in net sales was primarily driven by reduced shipments of engines used
on snow thrower equipment in the North American market as well as lower sales
to OEM customers in the Australian and Asian markets, an unfavorable mix of
engines sold that reflected proportionately lower sales of large engines and
unfavorable foreign exchange of $1.6 million.
The
Engines Segment adjusted gross profit percentage for the first six months of
2013 was 18.9%, which was 1.3% higher compared to the first six months of
fiscal 2012 due to lower manufacturing costs. The lower manufacturing costs
improved gross margin by 1.1% due to $4.7 million of cost savings as a result
of fiscal 2012 restructuring actions, 1.8% attributable to manufacturing cost
improvements because of start-up costs incurred in fiscal 2012 associated with
launching our phase III emissions compliant engines, partially offset by 1.6%
due to the unfavorable absorption of fixed manufacturing costs as a result of a
6% reduction in engines built.
The
Engines Segment engineering, selling, general and administrative expenses were
$86.1 million in the first six months of fiscal 2013, or $3.3 million lower compared
to the first six months of fiscal 2012 primarily due to lower compensation
costs of $4.6 million as a result of the previously announced global salaried
employee reduction and reduced selling costs in response to the softness in the
global markets, partially offset by $2.1 million of increased pension expense
compared to the same period last year.
Products
Segment fiscal 2013 second quarter net sales were $197.5 million, a decrease of
$17.9 million or 8.3% from the second quarter of fiscal 2012. The decrease in
net sales was primarily due to reduced sales of snow thrower equipment and
related service parts due to the lack of meaningful snowfall in the U.S. and
reduced sales of lawn and garden equipment as a result of unusually dry
conditions in the North American and Australian markets. This decrease was
partially offset by higher shipments of portable and standby generators due to
Hurricane Sandy and slightly improved pricing on lawn and garden equipment sold
in the North American market.
The
Products Segment adjusted gross profit percentage for the second quarter of
2013 was 10.6%, which was 1.8% lower compared to the second quarter of fiscal
2012. The adjusted gross profit percentage decreased 4.0% due to unfavorable
absorption and reduced efficiencies associated with a 49% decrease in
production. The McDonough, Georgia manufacturing facility was temporarily idled
for four weeks in the second quarter of fiscal 2013 to reduce inventory levels
in response to a decline in market demand for snow and lawn and garden products
and to re-tool the plant for new products to be launched for the upcoming
spring season. This decrease was partially offset by a benefit of 2.2% due to
cost savings of $4.4 million as a result of restructuring actions. The benefit
of implementing price increases on domestic lawn and garden equipment sales was
offset by an unfavorable mix of products sold that reflected fewer sales of
higher margin service parts as well as lower sales of lawn and garden products
in Australia.
The
Products Segment fiscal 2013 second quarter engineering, selling, general and
administrative expenses were $25.4 million, a decrease of $0.9 million from the
second quarter of fiscal 2012. The decrease was attributable to lower
compensation costs of $0.7 million as a result of the previously announced
global salaried employee reduction and reduced selling costs in response to the
softness in the global markets.
Products
Segment net sales for the first six months of fiscal 2013 were $370.8 million,
a decrease of $79.9 million or 17.7% from the same period a year ago. The
decrease in net sales was primarily due to lower sales volumes of snow
equipment due to a lack of meaningful snowfall in the U.S and reduced sales of
lawn and garden equipment resulting from prolonged drought conditions in North
America and as a result of our decision to exit the sale of lawn and garden
equipment through national mass retailers. This decrease was partially offset
by improved pricing.
The
Products Segment adjusted gross profit percentage for the first six months of
2013 was 11.8%, which was 0.3% lower compared to the first six months of fiscal
2012. The adjusted gross profit percentage benefited from cost savings of $8.4
million as a result of restructuring actions initiated in fiscal 2012 as well
as increased pricing. Offsetting this was the unfavorable impact of reduced
absorption and inefficiencies associated with a 43% decrease in production
throughput. As previously indicated, we reduced production volumes in the first
six months of fiscal 2013 in order to manage inventory levels in response to a
decline in near-term market demand.
The
Products Segment engineering, selling, general and administrative expenses were
$48.8 million in the first six months of fiscal 2013, a decrease of $2.7
million from the first six months of fiscal 2012. The decrease was attributable
to lower compensation costs of $1.4 million as a result of the previously
announced global salaried employee reduction and reduced selling expenses in
response to the softness in the global markets.
Corporate
Items:
Interest
expense was lower compared to the prior year periods by $0.2 million and $0.1
million for the second quarter and first six months of fiscal 2013,
respectively.
The
effective tax rate for the second quarter and first six months of fiscal 2013
was 156.2% and 27.8%, respectively, compared to 195.6% and 63.9% in the same
respective periods last year. The second quarter and first six months of fiscal
2013 include a tax expense of $1.0 million primarily driven by non-deductible
acquisition costs and un-benefitted losses for certain foreign subsidiaries.
The second quarter of fiscal 2012 reflected a tax benefit of $5.5 million in
spite of a loss before taxes of $2.8 million due to the settlement of U.S. audits
and the expiration of a non-U.S. statute of limitation period in the second
quarter of fiscal 2012.
Financial
Position:
Net
debt at December 30, 2012 was $228.7 million (total debt of $246.9 million less
$18.2 million of cash), slightly lower from the $229.1 million (total debt of
$243.0 million less $13.9 million of cash) at January 1, 2012. Cash flows used
in operating activities for the first six months of fiscal 2013 were $75.4
million compared to $165.0 million in the first six months of fiscal 2012. The
improvement in operating cash flows was primarily related to lower working
capital needs in the most recent period associated with decreased receivables,
lower production levels and planned inventory reductions, partially offset by
contributions to the pension plan of $16.2 million in fiscal 2013.
Restructuring:
The
Company's execution of its previously announced restructuring actions remains
largely on schedule. In the second quarter of fiscal 2013, the Company
announced changes to its defined benefit pension plan that included freezing
accruals for all non-bargaining employees effective January 1, 2014. This plan
change resulted in the Company recognizing a pre-tax curtailment charge of $1.9
million in the second quarter of fiscal 2013. In addition to the benefit plan
changes, the Company has made progress towards finalizing its exit from the
Newbern, Tennessee and Ostrava, Czech Republic manufacturing facilities and the
consolidation of its Auburn, Alabama plant. Given the incremental demand for
engines and portable generators resulting from storms that occurred in the
first six months of fiscal 2013, the Auburn plant consolidation will extend
into fiscal 2014. As noted previously, pre-tax restructuring costs for the
second quarter and first six months of fiscal 2013 were $6.6 million and $11.7
million, respectively. The total estimated pre-tax expense related to
restructuring actions in fiscal 2013 is expected to be $12 million to $22
million. In addition, the Company continues to anticipate pre-tax savings
associated with restructuring actions of $30 million to $35 million in fiscal
2013 and $40 million to $45 million in fiscal 2014.
Share
Repurchase Program:
On
August 10, 2011, the Board of Directors of the Company authorized up to $50
million in funds for use in a common share repurchase program with an
expiration of June 30, 2013. On August 8, 2012 the Board of Directors of the
Company authorized up to an additional $50 million in funds associated with the
common share repurchase program and an extension of the expiration date to June
30, 2014. The common share repurchase
program authorizes the purchase of shares of the Company's common stock on the
open market or in private transactions from time to time, depending on market
conditions and certain governing loan covenants. During the first six months of
fiscal 2013, the Company repurchased 1,053,125 shares on the open market at an
average price of $18.26 per share.
Branco
Acquisition:
The
Company also announced on December 7, 2012, that it had completed the
acquisition Branco for approximately $57 million in cash, adjusted for certain
liabilities. Branco is a leading brand in the Brazilian light power equipment
market with a broad range of outdoor power equipment used primarily in light commercial
applications in Brazil. Todd Teske commented on the acquisition stating,
"The acquisition of Branco is another step forward in executing our
strategic initiatives to grow in higher margin products in emerging regions of
the world. The Branco brand is the most
recognized brand in light power equipment in Brazil. We welcome all of Branco's
valued employees and dealers to Briggs and Stratton." Due to the timing of
completing the acquisition, the sales and profitability were not significant to
the Company's fiscal second quarter results.
Outlook:
For
fiscal 2013, the Company continues to project net income to be in a range of
$60 million to $75 million or $1.25 to $1.55 per diluted share prior to the
impact of any additional share repurchases and costs related to our announced
restructuring programs. The Company previously indicated that it would exit
sales of lawn and garden products to national mass retailers. The estimated
impact of exiting this business in fiscal 2013 is approximately $100 million of
reduced sales.
Although
sales in the first six months of fiscal 2013 were favorably impacted by sales
of generators in response to power outages during Hurricanes Isaac and Sandy,
drought conditions and a lack of meaningful snowfall in a significant portion
of the U.S. and a reduction in sales demand from many of our international
markets have continued to negatively impact shipment volumes, offsetting the
storm benefit. Our fiscal 2013 consolidated net sales are projected to be in a
range of $1.95 billion to $2.15 billion.
Operating
income margins are expected to improve over fiscal 2012 and be in a range of
5.1% to 5.6% and reflect the positive impacts of the restructuring programs
announced during fiscal 2012. Interest expense and other income are estimated
to be approximately $18 million and $7 million, respectively. The effective tax
rate is projected to be in a range of 31% to 34%, and capital expenditures are
projected to be approximately $50 million to $60 million.
No comments:
Post a Comment