MILWAUKEE, Oct.
17 -- Briggs and Stratton Corporation today announced financial results
for its first fiscal quarter ended September 29, 2013.
Highlights:
- First quarter
fiscal 2014 consolidated net sales were $317.3 million, an increase
of $8.3 million or 3% from the prior year.
- Higher North
American consumer engine shipments and sales of equipment to dealers
increased as consumer demand rebounds from last year's drought.
- Lack of storms
in quarter caused lower portable generator sales compared to last year
when Hurricane Isaac hit in August.
- Planned engine
and products production cuts lowers inventories and reduces margins in
the quarter.
- First quarter
2014 adjusted net loss was $16.5 million, $3.3 million higher
than the adjusted net loss of $13.2 million in the first
quarter of fiscal 2013.
"Our
first quarter results were slightly better than we anticipated as we
experienced increased consumer demand for lawn and garden equipment leading to
higher shipments of engines that power these products and higher shipments of
lawn and garden products to our dealers," commented Todd J. Teske,
Chairman, President and Chief Executive Officer of Briggs and Stratton
Corporation.
"We
have also seen continued strength in standby generator sales; however, portable
generator sales decreased with Hurricane Isaac landing last year and no
significant storm activity this year," continued Teske.
"Higher
retail sales of lawn and garden equipment have helped to reduce channel
inventories. We also lowered our inventory by reducing production in the
quarter compared to last year.
While
this reduced productivity and margins in the near term, our inventory levels
are better aligned for manufacturing to retail demand in the upcoming lawn and
garden season."
Consolidated Results:
Consolidated
net sales for the first quarter of fiscal 2014 were $317.3 million, an
increase of $8.3 million or approximately 3% from the first quarter
of fiscal 2013 with sales increases in engines and lawn and garden products,
partially offset by lower sales of portable generators.
The
fiscal 2014 first quarter consolidated net loss, which includes restructuring
charges, was $19.3 million, or $0.41 per diluted share. The
first quarter of fiscal 2013 consolidated net loss including restructuring
charges was $16.5 million, or $0.35 per diluted share.
Included
in the consolidated net loss for the first quarter of fiscal 2014 were pre-tax
charges of $3.6 million related to restructuring actions. Included in
consolidated net loss for the first quarter of fiscal 2013 were pre-tax charges
of $5.1 million also related to restructuring actions.
After
removing the impact of these items, the adjusted consolidated net loss for the
first quarter of fiscal 2014 was $16.5 million or $0.35 per
diluted share, which was $3.3 million higher compared to the first
quarter fiscal 2013 adjusted consolidated net loss of $13.2 million or $0.28 per
diluted share.
Engines Segment:
Engines
Segment fiscal 2014 first quarter net sales were $183.8 million, which was $19.3
million or 11.7% higher than the first quarter of fiscal 2013. This
increase in net sales was driven by higher sales of engines used on lawn and
garden equipment and related service parts to customers in the North American
and European markets due to more favorable late season growing conditions this
year. The increase was partially offset by unfavorable sales mix due to fewer
sales of larger engines used in snow throwers and in portable generators
resulting from a lack of storm activity in the first quarter of fiscal 2014 and
unfavorable foreign exchange predominantly related to the Australian dollar.
The
Engines Segment adjusted gross profit percentage for the first quarter of 2014
was 14.7%, which was 1.0% lower compared to the first quarter of fiscal 2013.
The adjusted gross profit percentage was unfavorably impacted by 2.4% from a
15% reduction in manufacturing volume to reduce inventory.
Unfavorable
foreign exchange related to the Australian dollar and Japanese yen also
impacted the adjusted gross profit percentage by 0.5%. The decrease was
partially offset by an increase to adjusted gross profit of 1.3% related to
favorable sales mix of higher margin service parts as well as the contribution
of margin generated by the Branco acquisition which closed in the second
quarter of fiscal 2013. Margins also benefitted slightly from reduced
manufacturing costs and materials costs.
The
Engines Segment engineering, selling, general and administrative expenses were $43.3
million in the first quarter of fiscal 2014, an increase of $1.1
million from the first quarter of fiscal 2013 primarily due to higher
compensation expense and the addition of expenses from Branco. The increase was
partially offset by $1.5 million of lower pension expense in fiscal
2014.
Products Segment:
Products
Segment fiscal 2014 first quarter net sales were $153.0 million, a
decrease of $20.3 million or 11.7% from the first quarter of fiscal
2013. The decrease in net sales was primarily related to lower sales of
portable generators due to no landed hurricanes in the first quarter of fiscal
2014.
Hurricane
Isaac occurred in the first quarter of fiscal 2013. In addition, international
net sales were lower in the first quarter of fiscal 2014 due to reduced
shipments of snow throwers to customers in Europe and unfavorable
foreign exchange primarily related to the Australian dollar.
This
decrease was partially offset by favorable late season growing conditions
during the first quarter of fiscal 2014 that led to higher sales of lawn and
garden equipment through our North American dealer channel, pressure washers
and service parts as well as net sales from the Branco acquisition.
The
Products Segment adjusted gross profit percentage for the first quarter of 2014
was 12.8%, which was 0.3% lower than the adjusted gross profit percentage for
the first quarter of fiscal 2013. The adjusted gross profit percentage was
lower by 0.8% due to a 21% reduction of manufacturing throughput that was
planned in order to control inventory in response to lower sales at the outset
of the 2013 lawn and garden season. This decrease was partially offset by the
margin contributed by the Branco acquisition.
The
Products Segment fiscal 2014 fourth quarter engineering, selling, general and
administrative expenses were $25.4 million, an increase of $2.0
million from the first quarter of fiscal 2013. The increase was mainly
attributable to the additional expenses from Branco.
Corporate Items:
Interest
expense for the first quarter of fiscal 2014 was comparable to the same period
a year ago.
The
effective tax rate for the first quarter of fiscal 2014 was 29.3% compared to
33.6% for the same period in the prior year. The decrease in the effective tax
rate for the first quarter of fiscal 2014 compared to the first quarter of
fiscal 2013 was primarily driven by non-deductible losses of certain foreign
subsidiaries and foreign tax rates that vary from the U.S. statutory rate.
Financial Position:
Net
debt at September 29, 2013 was $109.8 million (total debt
of $225.0 million less $115.2 million of cash), or $16.6
million lower from the $126.4 million (total debt of $228.0
million less $101.6 million of cash) at September 30, 2012.
Cash
flows used in operating activities for fiscal 2014 were $52.9 million compared
to $41.4 million in fiscal 2013. The change in operating cash flows
was primarily related to changes in working capital needs in fiscal 2014
associated with a lower reduction in accounts receivable partially offset by
the benefit of reduced inventory production levels.
Restructuring:
The
previously announced restructuring actions remain on schedule. The Company
achieved incremental pre-tax savings for the first quarter of $0.7
million. The Company continues to make progress towards moving horizontal
engine manufacturing from its Auburn, Alabama plant to China.
As
noted previously, pre-tax restructuring costs for the first quarter of fiscal
2014 were $3.6 million. Pre-tax restructuring cost estimates for fiscal
2014 remain unchanged at $6 million to $8 million. Incremental
restructuring savings for fiscal 2014 are expected to be $3 million to $5
million.
Share Repurchase Program:
On August
8, 2012, the Board of Directors of the Company authorized up to $50
million in funds associated with the common share repurchase program with
an expiration date of 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 quarter of
fiscal 2014, the Company repurchased 482,926 shares on the open market at an
average price of $20.08 per share.
Outlook:
For
fiscal 2014, the Company reaffirms its guidance of net income to be in a range
of $50 million to $62 million or $1.04 to $1.28 per diluted
share prior to the impact of any additional share repurchases and costs related
to our announced restructuring actions.
Our
fiscal 2014 consolidated net sales are projected to be in a range of $1.88
billion to $2.03 billion. We continue to estimate that the retail market for
lawn and garden products will increase 4-6% in the U.S. next season. The
estimated incremental impact of exiting the sale of lawn and garden equipment
through national mass retailers is approximately $10 million to $15
million of reduced sales in fiscal 2014.
In
addition, sales in fiscal 2013 were favorably impacted by sales of portable and
standby generators in response to power outages during Hurricanes Isaac and
Sandy. The upper end of our earnings projections contemplates a higher market
recovery in excess of 10% for the U.S. lawn and garden market, normal snowfall
and a landed hurricane.
Operating
income margins are expected to improve over fiscal 2013 and be in a range of
4.5% to 5.0% and reflect the positive impacts of the restructuring actions.
Interest expense and other income are estimated to be approximately $18
million and $5 million, respectively. The effective tax rate is
projected to be in a range of 30% to 33% and capital expenditures are projected
to be approximately $50 million to $55 million.
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