Briggs and Stratton Provides Market Update and Revises Fiscal 2013 Guidance

MILWAUKEE, July 26, 2013 -- Briggs and Stratton Corporation today announced that it expects to report net sales and earnings below the guidance provided for fiscal 2013.

•          Consolidated net sales for the fourth quarter and fiscal year 2013 are expected to be approximately    $475 million and $1.86 billion, respectively
•  ·      Production levels lowered in response to OEM production schedules to control inventories
•  ·      U.S. sales in line with industry estimates for engines and products; Europe market softness continues
•          Engine market share in line with original guidance

·         Excluding charges related to restructuring actions, legal settlements, and other non-cash charges, revised fourth fiscal quarter and fiscal 2013 adjusted diluted earnings per share is estimated to be approximately $0.17 to $0.21 per share and $0.88 to $0.92 per share, respectively

·         Outlook for an improved fiscal 2014 on a strengthening U.S. lawn and garden market, lower channel inventories, and continued expansion and growth in certain international markets; European outlook remains cautious

"An extremely slow start to the spring lawn and garden season and a cautious approach to managing inventories after last year's drought has impacted the U.S. and European markets through the end of June," commented Todd J. Teske, Chairman, President and CEO of Briggs and Stratton Corporation.  "In response to the lower retail sales, almost all channel participants including mass retailers, dealers, and equipment OEMs have been cautiously managing inventories and therefore have been slow to re-order for the current season.  Equipment OEMs have reduced production levels compared to last year and thus we reduced our engine production in the quarter negatively impacting absorption of plant operating costs in the near term," continued Teske.  "On a positive note, we have seen the retail market strengthening in May and June and continuing into July as we compare to last year's drought-impacted summer season and we believe inventory levels at our dealers are in great shape heading into our next fiscal year."

Engines Segment:

•          Fourth fiscal quarter 2013 Engines segment net sales are expected to be approximately $300 million
•         Total engines shipped in the quarter were approximately 1.9 million units compared to approximately   2.1 million units in the prior year
•       Production totaled approximately 1.6 million units in the quarter compared to approximately 2.0 million in the prior year
•           Ending engine unit inventories were approximately 1.4 million compared to approximately 1.3 million units last year

Through the end of June 2013, the Company estimates that the retail market for walk and riding mowing equipment has decreased by approximately 3-5% compared to the last season.   The lower retail sales due to a late spring in the U.S. and Europe have not yet recovered in the current season.  Estimates of U.S. industry shipments to retailers of walk mowers are consistent with last year through June while shipments of riding mowers has increased by approximately 3%.   The Company expects that by the end of the current season, retail sales of mowing equipment will be flat to slightly up for the season.   Certain equipment OEMs have reduced inventories compared to the prior year in response to lower than anticipated retail sales.

Products Segment:

•         Fourth fiscal quarter 2013 Products segment net sales are expected to be approximately $203 million
•          Manufacturing throughput reduced 15% in the quarter compared to the prior year in order to control inventories
•          Domestic product inventories decreased by approximately $50 million compared to the prior year 
•         Dealer inventories are below average of last several years
• 
  

The  majority of the decrease in net sales compared to the prior year is due to our previously announced decision to exit the sale of lawn and garden equipment to U.S. mass market retailers.  This was partially offset by higher sales of lawn and garden equipment to our dealers in the U.S. and increased sales in Brazil due to our acquisition of Branco in December of 2012.  Production levels in the products plants were also reduced to lower inventories resulting in lower absorption of fixed manufacturing costs in the near term. 

Financial Position:

Net debt at June 30, 2013 is anticipated to be approximately $37 million.   Expected cash flows from operations for fiscal 2013 is approximately $160 million.   

Generac to Acquire Tower Light Business Based in Italy

Acquisition of leading light tower manufacturer positions Generac as a global leader in mobile power equipment and accelerates international expansion efforts

WAUKESHA, Wis. — July 25 -- Generac Holdings Inc., a leading designer and manufacturer of generators and other engine powered products, announced today the signing of a purchase agreement to acquire the equity of Tower Light Srl and its wholly-owned subsidiaries from European private equity fund Ambienta I, advised by Ambienta SGR, and a group of minority-share investors.

Founded in 1996 and headquartered outside Milan, Italy, Tower Light is a leading developer and supplier of mobile light towers throughout Europe, the Middle East and Africa. Tower Light has experienced growth and built a leading market position in the equipment rental markets by leveraging their broad product offering and strong global distribution network in over 50 countries. With approximately 100 employees, Tower Light’s net sales for year ended December 31, 2012 were approximately €37 million.

“Tower Light is a great strategic fit for Generac’s business, providing an expanded product offering of light tower generators to support additional geographic markets beyond those we serve today,” said Aaron Jagdfeld, President and Chief Executive Officer of Generac. “Acquiring Tower Light positions us as a global leader in light towers, allowing us to participate in the growing rental market for these products outside the U.S.”

“This is a very exciting development for Tower Light which opens up many new opportunities and allows us to continue to innovate and further develop the Tower Light product range. We are pleased to join the Generac family, and we look forward to our continued success as we work together to execute on potential synergies and drive global growth for mobile power products,” said Andrea Fontanella, Founder and Managing Director of Tower Light Srl.

Following the close of the transaction, Tower Light’s management team will continue to lead the company and the Tower Light brand name will join Generac’s brands, including Magnum and Ottomotores, in serving global power generation and associated markets. It is expected that the transaction will close in the third quarter of 2013, pending standard closing conditions. The purchase price of the acquisition was not announced.

About Generac

Since 1959, Generac has been a leading designer and manufacturer of a wide range of generators and other engine powered products. As a leader in power equipment serving residential, light commercial, industrial and construction markets, Generac's power products are available internationally through a broad network of independent dealers, retailers, wholesalers and equipment rental companies.

About Tower Light Srl

Tower Light Srl, founded in 1996 and based at Villanova d’Ardenghi (PV), is the European leader in the production of lighting towers for construction and other applications. Through continuous product development and a broad distribution network, Tower Light Srl has become a leading supplier to construction and equipment rental companies, providing mobile power equipment that meets the specific needs of geographic markets across the world.

Presentation to House Energy and Commerce Committee by Todd Teske, Briggs CEO

A PRESENTATION BY MR. TODD J. TESKE, PRESIDENT, CHAIRMAN and CEO, BRIGGS and STRATTON CORP. TO THE HOUSE ENERGY AND COMMERCE SUBCOMMITTEE ON ENERGY AND POWER

July 19, 2013

One Page Summary: 

Five reasons why EPA should revisit its conditional certification of E-15:

1. Research has shown, and EPA has agreed, that use of E15 in small non-road engines can have harmful and costly consequences on small engines and outdoor power equipment.

2. Research on warning label effectiveness suggests that an E-15 warning label will do very little to mitigate misfueling.

3. Behavioral studies of customers at the gas pump conclude that consumers overwhelmingly favor the lowest priced option, regardless of the consequences.

4. Misfueling due to lack of education to consumers regarding the proper use of E-15 will be significant.

5. The use of Biofuels or “drop-in fuels” has been tested and could prevent misfueling.

If public policy requires that the federal government drive the market for alternative fuels, Briggs and Stratton urges that the policy be amended to more fully support the development and use of biofuels, from any feedstock, which are intended for use as “drop-in fuels” which provide a safe fuel for both legacy and newly manufactured small engines and outdoor power equipment.

At a minimum we recommend that the reform legislation rescind the partial waiver for E15, and establish gasoline blended with up to 10% ethanol as the general purpose domestic fuel. The legislation should also require that all considerations to increase domestic biofuel levels in the future be subject to a formal EPA rulemaking whereby the market’s ability to safely distribute, retail and consume such fuel is provided for.

July 19, 2013

Written Testimony of Mr. Todd J. Teske, President, Chairman and CEO, Briggs and Stratton Corporation

Chairman Whitfield, Ranking Member Rush, Congressman Barrow and distinguished Members of the Committee, thank you for soliciting Briggs and Stratton’s perspective on the issues raised by the EPA’s implementation of the Renewable Fuels Standard. I have been extremely impressed by the Committee’s workmanlike approach to educate itself, and the public, on the challenge which the RFS presents to manufacturers, consumers and the environment. The Outdoor Power Equipment Institute, on which I currently serve as Chairman, has submitted formal comments in response to the Committee’s white papers. My statement, which is submitted strictly in my capacity as Chairman and CEO of Briggs and Stratton, will attempt to define that challenge as it pertains to small engine manufacturers and offer suggestions on how to protect consumers from significant economic and environmental damage.

Briggs and Stratton Corporation, which is headquartered in Milwaukee, Wisconsin, is the world’s largest producer of gasoline engines for outdoor power equipment. We are a leading designer, manufacturer and marketer of pressure washers, generators, lawn and garden, turf care and other power equipment through its Briggs and Stratton, Simplicity®, Snapper®, Ferris®, Murray®, Branco® and Victa® brands. Briggs and Stratton products are designed, manufactured, marketed and serviced in over 100 countries by 6,200 employees. Approximately 5,300 of those employees work here in the United States. As a U.S. based manufacturer, our company is proud to be celebrating its 105th anniversary this year and continues to manufacture over 85% of its products here in America.

Briggs and Stratton’s long standing commitment to the environment remains a key focus for our business. We continue to manufacture our products with recycled materials that are highly efficient and with reduced emissions. Since 1995, we have reduced our emissions by 75% and, after completing the phase in of our new product offering, will achieve an additional 35% reduction in those emissions by January, 2014. In 2007, we signed a pledge with the Department of Energy to reduce our energy consumption by 25% over 10 years. Just 6 years later, we have already cut our consumption by 20%. These are just a few of the many examples that demonstrate our commitment to the environment.

Below are five factors justifying rescission of EPA’s conditional certification of E-15 :

1. Research has shown, and EPA has agreed, that use of E15 in small non-road engines can have harmful and costly consequences on small engines and outdoor power equipment. 

Briggs and Stratton has conducted extensive testing on levels of ethanol above 10%. Increasing levels of ethanol in gasoline result in increased levels of alcohol. Alcohol has inherent properties that cause issues with our engines and they become more acute with increasing alcohol content.

Increasing the alcohol in fuel changes the air-fuel ratio (enleanment) in our carbureted engines. E-15 fuel, by definition would have an alcohol content ranging from 0 to 15%. Our engines would have great difficulty in meeting both emissions and performance expectations with this type of alcohol range. Enleanment will also result in higher operating temperatures that will lower engine life due to issues such as valve sealing, piston scoring, and head gasket leakage, just to name a few. Ethanol is also hydroscopic (absorbs water). Increased levels of water will cause the engine to run poorly, and will also cause corrosion by means of acidic attack, galvanic activity, and chemical interaction. Ethanol will also cause other problems such as reduced fuel storage life, starting issues and reduced fuel economy.

The Department of Energy (DOE) also conducted testing. After testing E-15 on a representative sample of small non-road engines, including Briggs and Stratton powered generators and power washers, the DOE found that small engines experienced a variety of difficulties with intermediate blends of ethanol. Most engines performed worse in several metrics when running on higher ethanol blends – engines often had higher operating temperatures, higher exhaust temperatures, and NOx emission rates. Higher operating temperatures, lead to increased wear and tear and more frequent maintenance. Moreover, 7 out of the 11 engines behaved “poorly” or “erratically”, according to DOE’s report, with incidents of unstable speeds, stalling, and clutch engagement at idle. As a result of this testing, small engines were specifically excluded by EPA from the E-15 Waiver.

2. Research on warning label effectiveness suggests that an E-15 warning label will do very little to mitigate misfueling.

In response to our concerns and the concerns of other interested parties, EPA has issued a mandatory warning label for pumps that distribute E-15. Given the body of research on the effectiveness of warning labels, we believe that this warning will not prevent consumers from misfueling their engines with the E-15 blend, and, with no one else liable, will leave the equipment owner liable for the damage to their products. Warning labels have been the subject of many research studies, with results often showing little change in consumer behavior. To address this concern, there are standards and testing protocol that have been completed. The Association for Consumer Research further reports that warning labels are considerably less likely to be successful when applied to products that consumers use frequently and feel comfortable with, e.g. gas pumps. If consumers visit their local gas station and do not realize that the ethanol blend has been increased, this research would indicate that they are unlikely to heed the warning label on the pump. There has been no testing done by EPA to validate the effectiveness of the warning label, which is not consistent with recognized safety standards such as ANSI.

When the U.S. transitioned from leaded gasoline to unleaded gasoline in the 70s and 80’s, new cars running on unleaded gasoline were designed with different fuel tanks to be incompatible with older leaded gasoline in an effort to prevent misfueling. There is no such “transition” plan or tangible differentiation in place for E-15 and it is solely up to the consumer to know what fuel is appropriate for their automobile, lawn mower, generator, pressure washer, etc.

3. Behavioral studies of customers at the gas pump conclude that consumers overwhelmingly favor the lowest priced option, regardless of the consequences.

Historical evidence suggests that when faced with a range of prices at the pump, consumers are far more likely to choose the lowest-priced option despite potential damages to their engines. As previously mentioned, when the United States transitioned from leaded gasoline to unleaded gasoline in the 70’s and 80’s, new cars running on unleaded gasoline were designed with different fuel tanks, to be incompatible with older leaded gasoline pumps. Additionally, car buyers were educated at the point of purchase about the new fuel. Even with those prevention and education measures, the EPA reported that in 1983 – ten years after the introduction of unleaded gasoline – misfueling rates remained as high as 15.5%. The New York Times reported that “customers would go out of their way to pump leaded gas if it was just a few cents cheaper. What they gain at the pump they lose at the repair shop in higher maintenance costs.” If high rates of misfueling still occurred when physical obstacles were in place, we believe that a simple warning label next to the pump will not yield better results. Similarly, the National Bureau of Economic Research reports very strong price elasticity of demand in its own study on the use of premium vs. regular gasoline during times of high gasoline prices. When gasoline prices increased, consumers switched to less expensive, regular gasoline even though premium gasoline was recommended for their vehicles. NBER concludes that households are nearly 20 times more sensitive to the income effect for gasoline than to equivalent effects from other sources.

4. Misfueling due to lack of education to consumers regarding the proper use of E-15 will be significant.

EPA has instructed stakeholders to “develop a broad public education and outreach campaign that provides both consumers and retailers with the information they need to avoid misfueling.” Briggs and Stratton is already taking steps to educate its customers about proper fueling for its products and has introduced additives and E-0 gasoline products to assist consumers with selecting the proper fuel. Briggs and Stratton does not feel it, nor the outdoor power equipment industry, should be held solely responsible for educating tens of millions of Americans of the dangers of misfueling, especially when many already own products which are incompatible with E-15. In a recent study, AAA found that 95% of Americans had not heard of the new E-15 waiver. In a separate study by the National Association of Convenience Stores, it was clear that consumers were confused by E-15; many believed that E-15 had higher fuel economy than E-10. And the study also found that of participants who said they would consider fueling their cars with E-15, 60% of them owned cars for which E-15 is incompatible and prohibited. Despite our best efforts at education and prevention, we believe the risk of misfueling will be substantial, and damage to our products will be irreversible. We risk losing decades of trust and our brand reputation as a manufacturer of quality, reliable products while owners will not get the value they expected when

they purchased the product.

5. The use of Biofuels or “drop-in fuels” has been tested and could prevent misfueling.

Small engines and outdoor power equipment are not designed, warranted, or EPA-approved to operate on gasoline containing more than 10% ethanol. Briggs and Stratton fully supports the development and use of biofuels, from any feedstock, which are “drop-in fuels”. Drop in fuels, by definition, meet existing gasoline specifications and are ready to “drop-in” to infrastructure, minimizing compatibility issues. These fuels are capable of satisfying the additional growth in

biofuel use, while also providing a safe and highly performing general fuel for both legacy and newly manufactured small engines and outdoor power equipment. We have conducted extensive testing with a drop-in isobutanol blended gasoline which demonstrated evidence that such fuels can provide the performance and operational criteria necessary, without demonstrating any negative effects. Drop in fuels had not yet materialized when the RFS was developed in previous market conditions and the EPA was compelled to grant the partial waiver to meet the statutory targets using ethanol. E-15 will not provide compliance with current RFS targets and will require EPA to continue to revise fuel standards creating uncertainty in the marketplace and for manufacturers and increasing misfueling risks to consumers. Misfueling will result in economic harm to all parties and void product warranties. Ever changing targets will result in less efficient

investment of manufacturing resources and more costly products.

Briggs and Stratton Corporation’s Request To The Committee

For the past three years we have worked closely with our Congressman, Jim Sensenbrenner, in an effort to rescind the certification of E-15 until such time as the National Academy of Science can convene a peer review panel to evaluate EPA’s action and recommend alternative approaches which protect consumers and the environment. Briggs and Stratton urges this Committee to work in a bi-partisan, bi-cameral manner to pass reform legislation through revisions to the RFS which will align domestic goals for biofuel use with the market’s ability to produce, distribute and consume such fuels. At a minimum we recommend that the reform legislation rescind the partial waiver for E-15, and establish gasoline blended with up to 10% ethanol as the general purpose domestic fuel. The legislation should also require that all considerations to increase domestic biofuel levels in the future be subject to a formal EPA rulemaking whereby the market’s ability to safely distribute, retail and consume such fuel is provided for.

Generac Is the One to Watch Out For

July 15 -- Power outages are getting more common in US and Canada.

The energy crisis has taken over the whole world and its adverse effects are encompassing the residential and commercial sectors alike. According to the estimates of U.S. Department of Energy, power cuts cost businesses an average $80 billion loss per year. This has opened the gates for standby energy source providers in the market to take advantage of this opportunity. The use of standby power generators are growing more popular each day. Companies providing such machinery are expected to experience exponential growth on the basis of growing demand. The companies are expanding their operations outside the U.S. so that they can cater a larger market. One company working on this principle is Generac Holdings.  Let’s see if investors can trust the company’s growth expectations or not.

Generac’s business outlook

Generac is a manufacturer and marketer of generators and other engine-powered machinery for residential, commercial and industrial markets. The company has a huge market share in the residential sector holding a 70% share of the domestic home standby market in the US. It has a huge distribution network of over 4800 dealers which acts as a competitive advantage and a barrier to entry for the new players in the market. The company’s sales rocketed up to the $1 billion mark for the first time in 2012, which was a 48% growth in sales from 2011. Along with this, the company’s 3 year average income growth stands at a huge 29.4% compared to the industry average of just 3.5%. The cash flows of the company increased from $105 in 2010 to $213 million in 2012.

Though it is performing better than the industry, the company has a lower return on equity and return on assets compared to rival Cummins.  But it may not be too worrisome for Generac, as Cummins has gone down with its revenues last year and its performance might deteriorate more in coming future due to the strict regulations recently introduced by the government on diesel engines. Briggs and Stratton on the other hand is a large cap stable company with little or no growth expected in near future. Thus it is unable to excite you with its margins or returns.

The company’s main focus these days is the optional standby power supply for markets, restaurants, healthcare institutions and telecom companies. This is because of the huge losses these places incur when power is cut and there is no secondary power source.  Hospitals cannot risk the life of patients by not keeping power generators. They are bound to keep power generators for emergency purposes. Moreover, the company is also considering working on a line of generators that use natural gas as the power source. This decision might be fruitful as natural gas prices have declined and demand for such products would be high.

Competitive situation

As mentioned above some of its peers are Briggs and Stratton and Cummins. Cummins gives Generac a tough time in the residential market whereas Briggs is present as a dominant force in the commercial sector. Moreover Cummins is not just confined to power generation; it has a number of other operations. Currently its diesel engine business is in a funk as the government has conducted some serious changes in the regulations for diesel engine vehicles. Cummins is currently working on Natural gas engines to take advantage from the low natural gas prices in the country.

Briggs on the other hand also has two segments i.e. engines and products. Most of its sales and profits are attributed to the engines segment whereas its product line of generators and power washers have reported losses since the past 3 years. Both these other companies have their primary focus on engines, but Generac is focused on the production of power generators only. This gives the company an advantage over its peers to increase its market share of the power generators market. Furthermore, both Cummins and Briggs provide a decent yield to their investors which Generac does not, but Generac does give out hefty special dividends to its investors. In June 2012 the company paid a $6 per share dividend which is huge compared to what you have to pay for the company’s stock.

Recent acquisition

In the last quarter of 2012 the company made a strong move to enter international markets by acquiring Ottomotores. Through this acquisition, the company would take over the operations of Ottomotores Mexico and Ottomotores Brazil in Curitiba. This would enable Generac to combine both companies which are involved in the manufacturing and selling of diesel generators from 15 kW to 2.5 MW. Ottomotores is a leading company in Latin American standby power industry. This would help the company to strengthen its grasp on the Latin American market where its competitor Briggs & Stratton is already present.

Conclusion

Power generators are an essential component for both residential and commercial users alike. With the energy shortage in different countries increasing, the market for these power generators is growing. Growing companies like Generac can make full use of this opportunity due to its exceptional presence in the market over more than 50 years and its strong profitability and cash flows indicating that the company can take a few leaps of faith. Furthermore, its acquisition of Ottomotores will help it to focus on its sales outside the US market and take advantage of synergies.

www.fool.com  

Husqvarna Interim Report January - June 2013

Stockholm July 19, 2013

Kai Wärn, President and CEO:

“Group sales improved over the course of the quarter, albeit from a slow start of the season due to unusually cold weather in both Europe and North America. Sales for Europe & Asia/Pacific increased 2%, Construction 7% while Americas’ sales decreased -3%, mainly as a result of the Group’s continued sales channel management to prioritize margin.

Group operating income for the quarter declined, impacted mainly by negative currency effects within Europe & Asia/Pacific. The operating income was also affected by under-absorption due to inventory reductions. The stable earnings improvement for Americas continued, benefiting from dealer channel growth and improved cost efficiency. The positive earnings trend for Construction was supported by higher sales volumes and improved mix. As a result of the inventory reductions, Group operating cash flow for the second quarter was strong.

We have a continued cautious demand outlook for Europe, while the outlook for North America remains more positive for lawn and garden as well as for construction products.

During the second half of the year we will review how we can further accelerate key improvement

programs in order to realize our financial goals.”

Second quarter

•        Net sales amounted to SEK 10,227m (10,706). Adjusted for exchange rate effects, net sales were unchanged.

•        Operating income amounted to SEK 1,022m (1,152). Adjusted for changes in exchange rates, operating income improved slightly.

•          Changes in exchange rates negatively impacted operating income by SEK -156m year over year.

•          Strong operating cash flow amounting to SEK 1,915m (2,535).

•          Earnings per share decreased to SEK 1.15 (1.36).

•          Kai Wärn new President and CEO as of July 1, 2013.

SECOND QUARTER

NET SALES

Net sales for the second quarter decreased by -4% to SEK 10,227m (10,706). Adjusted for exchange rate effects, net sales for the Group were unchanged, increased by 2% for Europe & Asia/Pacific and by 7% for Construction, while Americas adjusted net sales decreased by -3%.

OPERATING INCOME

Operating income for the second quarter amounted to SEK 1,022m (1,152) and the corresponding operating margin amounted to 10.0% (10.8). Operating income increased for Americas and Construction, while it decreased for Europe & Asia/Pacific.

In addition to changes in exchange rates, operating income was negatively impacted mainly by unfavorable product mix and lower factory utilization levels due to inventory reductions.

Changes in exchange rates had a total negative impact on operating income of SEK -156m compared to the second quarter 2012.

JANUARY – JUNE

NET SALES

Net sales for January – June decreased by -6% to SEK 19,251m (20,517). Adjusted for exchange rate effects, net sales for the Group declined by -2%, for Europe & Asia/Pacific by -2%, for Americas by -2%, while sales for Construction increased by 4%.

OPERATING INCOME

Operating income for January – June amounted to SEK 1,710m (2,082) and the corresponding operating margin amounted to 8.9% (10.1). Operating income increased for Americas and Construction, while it decreased for Europe & Asia/Pacific.

Operating income, excluding changes in exchange rates, was negatively impacted mainly by lower factory utilization levels, the lower sales volume and product mix.

Changes in exchange rates had a total negative impact on operating income of SEK -291m compared to January - June 2012.

FINANCIAL ITEMS NET

Net financial items for the second quarter amounted to SEK -106m (-121). The lower financial cost is explained mainly by lower average interest rates. The average interest rate on borrowings at June 30, 2013, was 3.9% (3.9). For January – June, net financial items amounted to SEK -192m (-255).

INCOME AFTER FINANCIAL ITEMS

Income after financial items for the second quarter decreased to SEK 916m (1,031) corresponding to a margin of 9.0% (9.6). Income after financial items for January - June decreased to SEK 1,518m (1,827) corresponding to a margin of 7.9% (8.9).

TAXES

Taxes for January - June amounted to SEK -390m (-408), corresponding to a tax rate of 26% (22) of income after financial items.

EARNINGS PER SHARE

Income for the second quarter amounted to SEK 661m (786), corresponding to SEK 1.15 (1.36) per share. Income for January – June amounted to SEK 1,128m (1,419), corresponding to SEK 1.96 (2.46) per share.

OPERATING CASH FLOW

Operating cash flow for the second quarter amounted to SEK 1,915 (2,535). Inventory reductions contributed positively to cash flow. The lower operating cash flow was mainly due to stronger sales during the latter part of the quarter, resulting in lower cash flow from change in trade receivables during the second quarter compared with the previous year.

Operating cash flow for January – June amounted to SEK 129m (92).

FINANCIAL POSITION

Group equity as of June 30, 2013, excluding non-controlling interests, amounted to SEK 11,591m (12,149), corresponding to SEK 20.2 (21.2) per share.

Net debt amounted to SEK 8,733m (9,319) as of June 30, 2013, of which liquid funds amounted to

SEK 1,940m (1,658) and interest bearing debt amounted to SEK 10,673m (10,977), including pensions. The major currencies used for debt financing are SEK and USD. Net debt decreased by SEK -320m as a result of changes in exchange rates.

The net debt/equity ratio amounted to 0.75 (0.76) and the equity/assets ratio to 38% (39).

In addition to the amendment of IAS 19 “Employee benefits,” Husqvarna Group has reclassified the net defined pension liability to interest-bearing financial liability and included the liabilities in the calculation of net debt.

On June 30, 2013, long-term loans including financial leases amounted to SEK 7,515m (5,211) and short-term loans including financial leases to SEK 1,487m (3,850). Long-term loans consist of SEK 4,939m (2,526) in issued bonds, and bank loans and financial leases of SEK 2,576m (2,685). The bonds and bank loans mature in 2014 and onwards. The Group also has an unutilized SEK 6 bn syndicated revolving credit facility, with maturity in 2016.

PERFORMANCE BY BUSINESS AREA

Europe & Asia/Pacific

Net sales for Europe & Asia/Pacific decreased by -3% in the second quarter 2013. Adjusted for exchange rate effects, net sales increased by 2%.

Demand for lawn and garden products was negatively impacted by a late start of spring due to unusually cold weather, which lasted well into the quarter in many European markets. Consumer demand remained weaker than in the previous year and retailers continued to manage inventory conservatively as the macroeconomic uncertainty remained.

The Group’s sales were off to a slow start, but picked up in May and had a strong finish in June. In terms of products categories, electric products such as robotic mowers had the best development, while handheld products and riders declined. Watering products were in line with prior year.

Operating income amounted to SEK 806m (1,018) and the operating margin amounted to 15.5% (19.0).

In addition to impact from changes in exchange rates, the lower operating income was mainly related to lower utilization levels in factories as a result of inventory reductions, and less favorable product mix.

Changes in exchange rates had a negative year-on-year effect of SEK -153m on operating income.

Americas

           

Net sales for Americas decreased by -8% in the second quarter 2013. Adjusted for exchange rate effects, net sales decreased by -3%.

Although supported by an improving U.S. economy, demand for lawn and garden equipment in North America was off to a slow start due to unfavorable weather.

The Group’s sales recovered in the second half of the quarter, but not enough to exceed prior year’s level. Sales were lower in the U.S. and in Latin America, while sales in Canada were higher. Sales to the dealer channel rose.

Operating income increased to SEK 150m (87) and the corresponding margin improved to 3.6% (1.9). The effects of channel management and manufacturing efficiencies continued to contribute to the positive development.

Changes in exchange rates had a positive year-on-year effect of SEK 11m on operating income.

Construction

Net sales for Construction increased by 1% in the second quarter 2013. Adjusted for exchange rate effects, the increase in sales was 7%.

The positive development in North America continued. Market demand was on a higher level than in the previous year, and the Group achieved additional growth as a result of market share gains. Despite continued weak demand in Europe, the Group’s sales were slightly higher. In the rest of the world, sales also increased, with a particularly good development in Brazil.

Operating income increased to SEK 100m (85) and the operating margin improved to 12.3% (10.5). Operating income was positively impacted mainly by the higher sales volume and mix.

Changes in exchange rates had a negative year-on-year effect of SEK -13m on operating income.

PARENT COMPANY

Net sales for January – June 2013 for the Parent Company, Husqvarna AB, amounted to SEK 6,430m (6,886), of which SEK 4,981m (5,365) referred to sales to Group companies and SEK 1,449m (1,521) to external customers.

Income after financial items amounted to SEK 1,012m (743). Income for the period was SEK 907m (461). Investments in tangible and intangible assets amounted to SEK 227m (164). Cash and cash equivalents amounted to SEK 432m (25) at the end of the quarter. Undistributed earnings in the Parent Company amounted to SEK 17,466m (16,991).

KAI WÄRN NEW PRESIDENT AND CEO AS OF JULY 1

Kai Wärn took office as new President and CEO of Husqvarna as of July 1, 2013. He replaced Hans Linnarson, who will continue to work for the Group until he retires early 2014.

Kai Wärn was born in 1959 and is a graduate from the Royal Institute of Technology in Stockholm, Sweden. Previous positions include President and CEO at Seco Tools AB, a leading global metal cutting tools company, at that time listed at NASDAQ OMX Nordic stock exchange and President of the Business Unit ABB Robotics Products within ABB Group. Most recently Kai has held the position as Operations Partner at the private equity firm IK Investment Partners.

ALAN SHAW APPOINTED NEW HEAD OF AMERICAS

Effective August 15, 2013, Alan Shaw has been appointed Executive Vice President, Head of business area Americas and will become member of Husqvarna Group Management. Alan Shaw has more than 25 years of global experience from consumer durables including barbeque grills and accessories, lawn and garden equipment and major home appliances. Most recently, Alan was President and CEO of Char-Broil LLC.

OPEI Announces 2013-2014 Officers and Board of Directors

The Outdoor Power Equipment Institute (OPEI) recently announced its 2013-2014 Officers and Board of Directors during the OPEI Annual Meeting in Williamsburg, VA, June 18-20, 2013.

Officers for the 2013-2014 year include:

OPEI chairman - Todd Teske, chairman, president & CEO, Briggs & Stratton

OPEI vice chair - Paul Mullet, president, Excel Industries

OPEI secretary/treasurer - Lee Sowell, president of outdoor products, Techtronic Industries, N.A., Inc.

“OPEI is entering this new fiscal year stronger than ever, both organizationally and financially,” said Kris Kiser, president and CEO of OPEI. “The OPEI Board reflects the impressive scope and breadth of our membership. Our membership is at a record high, representing small engine manufacturers with a range of power sources, utility vehicle manufacturers, and a myriad of small engine equipment manufacturers and suppliers serving a broad range of industries and uses.”

"OPEI’s long history and strong membership put us in a unique position to make sure we are bringing good quality high value products to the marketplace,” said OPEI chair, Todd Teske. “Our collective strength to influence legislation in order to protect our employees and consumers and to communicate accurate information about our industry will continue to be our focus into the future. For the over hundred million consumers who use our products, we want them to know we are working hard for them.”

Continuing their service on the OPEI Board are:

Immediate past chairman - Daniel Ariens, president & CEO, Ariens Company

Marc Dufour, president, Club Car

Peter Hampton, president, Active Exhaust Corporation

Jean Hlay, president and chief operating officer, MTD Products Inc.

Steven Bly, executive vice president, Echo Inc.

Ed Cohen, vice president of Government & Industry Relations, Honda North America

Michael Hoffman, chairman, chief executive officer, The Toro Company

Tim Merrett, vice president, AT&T Global Platform Turf & Utility, Deere & Company

Fred Whyte, president, Stihl Incorporated

New to the board this year are:

Tom Cromwell, president, Kohler Engines, Kohler Company

John Cunningham, president, Consumer Products Group, Stanley Black & Decker, Inc.

Briggs and Stratton to Sell Snapper, Simplicity Parts Online to Consumers

July 9 -- Briggs and Stratton's Snapper and Simplicity brands will begin selling certain lawnmower parts online to consumers. Briggs is citing increased demand from some consumers to shop for parts online, as opposed to the more traditional visit to an independently owned servicing dealership.

“Briggs and Stratton wants to assure that its consumers who prefer to shop online have access to original branded equipment parts for their Simplicity and Snapper products,” says Troy Blewett, director of dealer channel marketing for Briggs and Stratton.

Select parts will be available on both the Snapper and Simplicity websites starting July 17, 2013.

According to a memo to dealers from a Briggs representative, each website will provide the opportunity for consumers to find their nearest dealer, along with an online option to purchase OEM parts. The dealer locator search function will assure that consumers understand that they have a local dealer for all of their parts and service needs, the memo states.

“Briggs and Stratton continues to make every effort to drive consumers into its dealers’ brick and mortar stores,” says Blewett. “On each page of the online shopping module, a dealer locator is prominently displayed. In fact, it is our plan to use this selling tool to increase brand awareness thereby driving more footsteps into our dealerships.”

Generally speaking, dealers are not happy as they will likely lose some parts business; consumers already expressing a desire to buy parts online will forego the locate-a-dealer option.

Many dealers already have robust online parts selling capability, but many do not. Briggs assures there is faith in dealers to meet demand and tools made available to support their individual online sales efforts.

“We have great faith in our dealers’ abilities to sell our end products and our OEM parts in their local markets. Not all dealers, however, engage in online selling,” explains Blewett. “Additionally, for our dealers who are selling parts online (or who would like to start), Briggs and Stratton offers a variety of online tools they can use to increase their local search capabilities and drive more consumers to their own websites. In fact, our branded websites link directly to those of our dealers.”

Some suppliers, such as Toro and Rotary (aftermarket parts), do sell parts to consumers online, but filter sales through the appropriate dealers.

The Briggs memo also stated that it's important for the company to provide customers with the original branded equipment parts for trusted brands such as Snapper and Simplicity. Thus, an option to buy online is necessary. The company says dealers will maintain the most competitive pricing on parts.

“Prices are full list plus freight charges and tax where required,” says Blewett. “Dealers will always be more competitive in terms of price. Again, our goal is to provide an avenue for original equipment parts sales for online consumers.” 

The Briggs memo also stated that it's important for the company to provide customers with the original branded equipment parts for trusted brands such as Snapper and Simplicity. Thus, an option to buy online is necessary. The company says dealers will maintain the most competitive pricing on parts.

“Prices are full list plus freight charges and tax where required,” says Blewett. “Dealers will always be more competitive in terms of price. Again, our goal is to provide an avenue for original equipment parts sales for online consumers.”  

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