MILWAUKEE, Aug. 14 -- Briggs and
Stratton Corporation today announced financial results for its fourth fiscal
quarter and fiscal year ended June 29, 2014.
Highlights:
- Fourth quarter fiscal 2014 consolidated net sales increased 4.1% to $496.8 million compared to the prior year
- Fourth quarter fiscal 2014 engines segment sales increased 6.3% to $317.8 million compared to the prior year
- Fourth quarter 2014 consolidated adjusted net income increased 36% to $14.6 million, from adjusted net income of $10.7 million in the fourth quarter of fiscal 2013
- Fourth quarter 2014 adjusted diluted earnings per share were $0.31, or $0.09 higher than the prior year
- Fiscal 2014 full year consolidated net sales of $1.86 billion were consistent with the prior fiscal year;
- Fiscal 2014 organic sales growth of 4% after excluding approximately $100 million of storm related sales in the previous fiscal year and acquisition-related growth
- Quarterly dividend increased by 4% to $0.125 per share
- Board of Directors authorized an additional $50 million in share repurchases
"Despite a slower than normal
start to the lawn and garden season this spring, we saw improved sales results
for our engines and products due to the new innovative products launched this
year and market share gains made within the large engine category,"
commented Todd J. Teske, Chairman, President and Chief Executive Officer of
Briggs and Stratton Corporation.
Teske continued, "In addition to
higher sales, we saw margin expansion in our engines business even as we
continued to invest in our future with new product launches and building out
our international sales distribution in emerging regions. Within our Products
segment, our new pressure washer product launches and our commercial lawn and
garden business continued to perform well even as we saw reduced demand for
generators in the U.S. following an uneventful storm season and lower
pre-season snow thrower sales to our European customers due to a significantly
below normal snow season in Europe last winter."
Also commenting on the fiscal year
end results was David J. Rodgers, Senior Vice President and Chief Financial
Officer, who said "Given our continued strong cash flow from operations of
$127 million during fiscal 2014 and the ongoing strength of our balance sheet,
the Board authorized an additional $50 million for share repurchases and a 4%
increase in our quarterly cash dividend."
Teske also commented on the recent
announcement that Briggs and Stratton would acquire Allmand Bros., Inc., a Holdrege,
Nebraska based designer and manufacturer of high quality towable light towers,
industrial heaters and solar LED arrow boards. "We are pleased to announce
a combination of these two well-established and great companies. We believe the
acquisition of Allmand diversifies our higher margin commercial product
portfolio, provides an entry into the construction and energy job site
channels, and provides higher sales growth opportunities in the U.S. and
abroad," said Teske.
Consolidated Results:
Consolidated net sales for the fourth
quarter of fiscal 2014 were $496.8 million, an increase of $19.6 million or
4.1% from the fourth quarter of fiscal 2013, due to higher sales of large
engines used on riding lawnmowers, pressure washers, and service parts used on lawn
and garden equipment. The increase in sales was partially offset by lower sales
of smaller engines used in walk lawnmowers and decreased sales of generators.
The fiscal 2014 fourth quarter consolidated net income, which includes
restructuring actions and goodwill and tradename impairment charges, was $7.8
million or $0.17 per diluted share. The fourth quarter of fiscal 2013
consolidated net loss, which included restructuring charges, goodwill and
tradename impairment charges, and a litigation settlement, was $55.0 million or
$1.17 per diluted share.
Consolidated net sales for fiscal
2014 were $1.9 billion, a decrease of $3.4 million or 0.2% from fiscal 2013,
due to lower sales of generators and the engines that power them. The impact of
fewer weather related events creating demand for generators and the related
engines was an estimated sales decrease of $100 million for fiscal 2014. This
decrease was offset by higher sales of engines used on U.S. lawn and garden
equipment, increased sales of pressure washers and sales from Branco, which was
acquired mid-year in fiscal 2013.
Fiscal 2014 consolidated net income,
which included restructuring actions and goodwill and tradename impairment
charges, was $28.3 million or $0.59 per diluted share. Fiscal 2013 consolidated
net loss, which includes restructuring charges, goodwill and tradename
impairment charges, and a litigation settlement, was $33.7 million or $0.73 per
diluted share. The estimated impact of the reduced storms on generator and
related engine sales in fiscal 2014 was $0.20 per diluted share compared with
fiscal 2013 which had storms including Hurricanes Isaac and Sandy.
Engines Segment:
Engines segment net sales of $317.8
million in the fourth fiscal quarter increased $18.7 million or 6.3% from the
prior year. Total engine volumes shipped in the quarter increased 2% to
approximately 2 million units. Net sales increased partially due to increased
placement of large engines used on lawn and garden equipment in the North
America market, higher sales into the European market due to an improved season
and higher service parts sales. Partially offsetting this increase was lower
sales of small engines due to a decrease in the market for walk lawnmowers this
season. New innovations, including Quiet Power Technology™ ("QPT™"),
Mow-and-Stow™ and Ready Start® for Ride, were well received by the market this
selling season.
Engines segment adjusted income from
operations in the fourth fiscal quarter was $22.2 million, an increase of $8.1
million from the prior year. Engines segment adjusted gross profit margin
improved 50 basis points on favorable net pricing and mix, including the impact
of new product introductions.
In addition, we benefitted by 27%
higher production of engines in the quarter improving adjusted gross profit
margin by 160 basis points. Lastly, engine segment adjusted gross profit margin
benefited by 130 basis points due to reduced manufacturing costs and improved
plant efficiencies compared to the prior year. Engineering, selling, general
and administrative increased $6.2 million due to increased international sales
and marketing expenses, research and development costs, corporate development
and legal expenses, and compensation and benefits.
Products Segment:
Products segment net sales of $206.6
million in the fourth fiscal quarter increased by $3.5 million or 2% from the
prior year. This increase was due to higher sales of pressure washers,
commercial lawn and garden equipment and service parts in the North America
market. Partially offsetting the increase were lower sales of generators as a
result of fewer weather related events during fiscal 2014 and lower
replenishment of snow throwers in Europe following last year's dry winter.
Sales volume increases in both Australia and Brazil were offset by unfavorable
foreign exchange related to the devaluation of the currencies.
Products segment adjusted loss from
operations in the fourth fiscal quarter was $1.4 million, an increase of $0.5
million from the prior year adjusted loss from operations. Products adjusted
gross profit margins were consistent year over year. Products segment adjusted
gross profit margin benefited from a 12% increase in manufacturing throughput
as well as improved product sales mix in fiscal 2014. Offsetting the increase
in adjusted gross profit margin was an unfavorable foreign exchange impact of
approximately 60 basis points. Engineering, selling, general and administrative
increased $1.0 million due to increased spending to support international
growth.
Corporate Items:
Interest expense for the fourth
quarter of fiscal 2014 was $0.1 million lower compared to the same period a
year ago. For fiscal 2014, interest expense was comparable to fiscal 2013.
The effective tax rate for fourth
quarter of fiscal 2014 was 14.8% compared to 32.6% for the same period of
fiscal 2013. The tax rate for the fourth quarter of fiscal 2014 was driven by
the impact of foreign operations subject to different statutory tax rates. The
tax rate for the fourth quarter of fiscal 2013 was impacted by a non-deductible
goodwill impairment charge.
Financial Position:
Net debt at June 29, 2014 was $30.3
million (total debt of $225.0 million less $194.7 million of cash), or $6.6
million lower than the $36.9 million (total debt of $225.3 million less $188.4
million of cash) at June 30, 2013. Cash flows provided by operating activities
for fiscal 2014 were $127.1 million compared to $160.8 million in fiscal 2013.
The decrease in operating cash flows was primarily related to changes in
working capital as higher fourth quarter sales in fiscal 2014 led to a larger
accounts receivable balance year over year. The change was partially offset by
no contributions to the pension plan in fiscal 2014 compared to $29.4 million
of contributions in fiscal 2013.
Restructuring:
The restructuring actions that were
in progress at the beginning of fiscal 2014 have concluded as planned. These
restructuring actions resulted in pre-tax restructuring costs for the fourth
quarter and twelve months ended June 29, 2014 of $1.4 million and $6.5 million,
respectively. Incremental pre-tax restructuring savings for fiscal 2014 were
$2.5 million.
In the first quarter of fiscal 2015,
the Company announced further restructuring actions to narrow its assortment of
lower-priced Snapper consumer lawn and garden equipment and consolidate its
Products segment manufacturing facilities in order to reduce costs. The Company
will continue to focus on premium residential products through its Snapper and
Simplicity brands and commercial products through its Snapper Pro and Ferris
brands. The Company will close its McDonough, Georgia location and consolidate
production into existing facilities in Wisconsin and New York.
Total restructuring charges related
to these actions are anticipated to be approximately $30 to $37 million,
including non-cash write-downs of approximately $15 to $20 million, to be
recorded during fiscal 2015. Total cash costs related to these actions are
anticipated to be approximately $15 to $17 million, with the majority of the
cash costs being incurred in fiscal 2015. Total annual cost savings as a result
of these actions are anticipated to be approximately $15 to $20 million with
approximately $5 million to $7 million expected to be realized in fiscal 2015
and the remainder realized in fiscal 2016 upon completion of the transition in
the fourth quarter of fiscal 2015. Products segment sales are estimated to be
lower by approximately $20 to $25 million in fiscal 2015 and $35 to $45 million
annually beginning in fiscal 2016 as a result of these actions.
Pending Acquisition:
On August 14, 2014, the Company
announced that it signed a definitive agreement to acquire Allmand Bros., Inc.
Founded in 1938 and based in Holdrege, Nebraska, Allmand is a leading designer
and manufacturer of high quality towable light towers, industrial heaters, and
solar LED arrow boards. The transaction is expected to close in the next 30
days.
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.
On January 22, 2014, the Board of Directors of the Company authorized up to an
additional $50 million in funds for use in the Company's common share
repurchase program with an extension of the expiration date to June 30, 2016.
On August 13, 2014, the Board of Directors of the Company authorized up to an
additional $50 million in funds for use in the Company's common share
repurchase program with an expiration date of June 30, 2016.
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 fiscal 2014, the
Company repurchased 2,100,499 shares on the open market at an average price of
$20.49 per share. Since the end of the fiscal year, the Company has repurchased
an additional 658,167 shares on the open market at an average price of $19.35 per
share. As of August 12, 2014, the Company has remaining authorization to
repurchase up to approximately $75 million of common stock with an expiration
date of June 30, 2016.
Outlook:
For fiscal 2015, the Company projects
net income to be in a range of $50 million to $60 million or $1.07 to $1.27 per
diluted share prior to the impact of acquisitions, additional share
repurchases, or costs related to our announced restructuring actions. Our
fiscal 2015 consolidated net sales are projected to be in a range of $1.88
billion to $1.94 billion.
We estimate that the retail market
for lawn and garden products will increase 1-4% in the U.S. next season. Sales
estimates do not include the impact of landed hurricanes. Operating income
margins for fiscal 2015 are expected to improve over fiscal 2014 and be in a
range of 4.5% to 5.0% and reflect the positive impacts of the restructuring
actions, particularly in the last quarter of the fiscal year. Interest expense
and other income are estimated to be approximately $19 million and $7 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 $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 subsidiaries
include North America's number one marketer of portable generators and pressure
washers, and it is a leading designer, manufacturer and marketer of lawn and
garden and turf care through its Simplicity®, Snapper®, SnapperPro®, Ferris®,
Murray®, Branco® and Victa® brands. Briggs and Stratton products are designed,
manufactured, marketed and serviced in over 100 countries on six continents.
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