Briggs and Stratton Joins SmartEquip Network

October 10 -- Briggs and Stratton, the world’s largest producer of gas engines for lawn mowers, snow blowers, portable generators, pressure washers and other outdoor equipment, announced that it is joining the SmartEquip Network to provide electronic parts and service support and procurement. Also coming on board the network is Class C Solutions Group, formerly known as Barnes Distribution North America, a supplier of vendor-managed inventory programs to the construction equipment industry, which will provide integrated parts support and procurement.

“Briggs and Stratton continues to demonstrate its commitment to improving process and transactional efficiencies for its customers,” said Doug Dougherty, vice president of North America service sales for Briggs and Stratton. “By joining the SmartEquip Network, we are extending our electronic product support capabilities, and our parts-ordering efficiencies, directly into the operating platforms of our customers, delivering real savings and improving equipment uptime.”

“Briggs and Stratton’s fleet presence across the market shows the potential for tremendous savings for the industry,” said Mike Kendall, SmartEquip director of OEM business development. “We very much welcome the partnership opportunity to support this significant new equipment footprint.”

CCSG executives were equally pleased to be part of SmartEquip. “CCSG is committed to providing vendor managed inventory supply chain solutions that lower total costs for MRO consumables,” said Ray Rutledge, managing director of CCSG. “By joining the SmartEquip Network, we can extend those solutions directly into the operating platforms of our customers, delivering significant savings and improving equipment uptime. We think this is an excellent combination that will create value for all SmartEquip Network members.”

“Class C Solutions Group’s use of lean principles for vendor managed inventory offers the potential for tremendous savings across the industry,” added Kendall. “We very much welcome the partnership opportunity to provide additional transactional efficiency gains to our network customers.”

Rental companies and equipment fleets utilizing SmartEquip’s e-FleetPro technology can anticipate the availability of both Briggs and Stratton and Class C Solutions Group parts and service support information on the SmartEquip Network in the fourth quarter of 2014.

Briggs and Stratton Corp., headquartered in Milwaukee, includes such brands as Simplicity, Snapper, SnapperPro, Ferris, Murray, Branco and Victa. The company’s products are designed, manufactured, marketed and serviced in more than 100 countries on six continents.

Class C Solutions Group specializes in inventory management for small but essential consumables, offering more than 1 million items from about 3,000 suppliers.

www.rermag.com

Briggs and Stratton Moves 370 Jobs to Wauwatosa WI Plant

WAUWATOSA, WI - July 16 - As part of the company's plans to shut down a Georgia facility and consolidate its manufacturing operations, Briggs and Stratton Corp. announced July 10 it will be hiring 220 full-time workers and 150 seasonal workers at its Wauwatosa facility at 3300 N. 124th St.

After the transition in early 2015, the Wauwatosa facility will be producing pressure washers, tractors and snow throwers. The Journal Sentinel reported the company will not have to expand the plant's footprint.

Alderman Craig Wilson, whose district includes the facility, said the new jobs could only mean good things for Wauwatosa, even if they don't all go to local residents.

"It will get more people familiar with Wauwatosa, and maybe they'll decide to buy lunch in town," Wilson said. "Beyond that, one thing we're getting better at is helping foster that culture of a strong business community."

Wilson said city officials have in the past considered different visions for this more industrial area of Wauwatosa. Redevelopment there could bring a higher density of property value and therefore more tax revenue.

"There's a tremendous amount of industrial space and I think we all know those spaces aren't used the way they used to be," Wilson said. "It's something we need to keep an eye on."

Although the infusion of jobs does not bring a change in use or property value, Wilson said he still thought it would be a valuable move for the community.

"This is even better, in a sense," Wilson said. "Sure we have budgeting and levy issues, but at the same time, any time you have a local business trying to grow, it certainly benefits the community and reputation of Wauwatosa."

Rory Linnane      http://www.wauwatosanow.com/   

Lawn Mowers Cut Decibels For a Price

March 25 -- How much will Americans pay to avoid annoying their neighbors?

Briggs and Stratton Corp. hopes they will cough up roughly $40 to $50 extra for a quieter lawn mower. The Milwaukee-based company this spring is introducing a mower engine that it said is 64% less noisy than standard versions.

So far, this quieter engine is available only on two Craftsman mowers sold at Sears stores. Briggs, the world's largest maker of gasoline engines for outdoor power equipment, based on sales, said the new engines may be installed in other mower brands eventually.

Rival engine maker Kohler Co. said it also has made its motors quieter but declined to provide details. A Honda Motor Co. spokeswoman said she lacked the data needed to say whether that company's mowers had become less noisy in recent years.

Briggs said it has been able to reduce the racket mainly because it has found a way to slow the spinning of the blade without sacrificing cutting ability.

Mowers are noisy partly because much of the time they are running faster than necessary to cut the grass. Standard engines typically run at about 3,100 revolutions a minute when they are started, then slow as the blade hits resistance in slicing through grass, Briggs said. The rotation of the crankshaft varies from around 2,800 rpm when the blade is cutting thick or wet patches of grass to more than 3,000 rpm where the grass is less dense.

A fuel governor on the new Briggs engine increases the flow of gas to the engine when it runs into denser patches of grass, so the speed remains steadier at around 2,800 rpm, Briggs said, and the use of a flatter blade reduces noise further. The two Craftsman mowers offered by Sears with the quieter engine are priced at about $340 and $450.

Briggs's chief executive, Todd Teske, hopes to achieve further sound improvements by "tuning" mower mufflers to make the noise less harsh. Still, he conceded, "it's never going to sound like Bach."

It isn't clear that many people will pay a premium for less noise. Stihl Group, a Germany-based maker of power lawn equipment, introduced in 2008 a quieter leaf blower known as the BG 66 L. Baffles inside the blower smooth air flow to eliminate whistling noises. This model, also available in other parts of the world, typically retails in the U.S. for around $230, or roughly $60 more than a similar model that makes more noise. Sales of the lower-priced model remain much higher than those of the quieter one, Stihl said.

Malcolm Crocker, a soft-spoken acoustical engineer who directs the International Institute of Acoustics and Vibration at Auburn University, said he wears ear-protecting muffs when he mows. He likes the idea of a quieter mower but thinks some people may be wary.

"Humans tend to equate loudness with power," Dr. Crocker said, "so if you make it quieter people think it's not so powerful."

James R. Hagerty         http://online.wsj.com/  

Briggs and Stratton Corporation Reports Improved First Quarter Sales; Reaffirms Full Year Guidance

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.   

Briggs and Stratton Employees Reject Contract in Low Vote Turnout

September 7 -- Local Briggs and Stratton Corp. union employees have again rejected a contract proposal in a vote with low turnout.

Workers voted 109-22 to reject the proposal Sunday, said Briggs spokeswoman Laura Timm. That was a lower turnout than the rejected proposal in August in which just 162 voted, out of the approximately 395 employees in Wauwatosa and Menomonee Falls represented by United Steelworkers Local 2-232.

“We are extremely disappointed in (Sunday’s) vote,” Timm said in an email to The Business Journal on Monday. “We have been negotiating with the bargaining committee in good faith and have presented a very fair and equitable offer. It is very unfortunate that member turnout was even less than the last vote, and that it was held on a Sunday afternoon (during a Packer game). Many members have to drive a fair distance and that makes it challenging for them.”

USW Local 2-232 officials could not be immediately reached Monday afternoon. USW Local 2-232 president Jesse Edwards told WITI-TV (Channel 6) on Sunday that there was improvement in the contract’s language but the economics of the deal were “the same or even worse.”

Briggs offered a four-year agreement that would include a $500 ratification bonus and a $500 contribution to each employee’s health savings account in the first year, a 1 percent wage increase and $500 bonus in the second year and 2 percent wage increases in the third and fourth years, Timm said. The health benefit changes would match that of salaried employees, which equates to a 3.8 percent wage improvement over the current plan.

Pensions will be frozen for all hourly and salaried employees at the end of the calendar year, life insurance will be eliminated for future retirees and mandatory Saturday workdays would be increased by two, to 18, in the rejected proposal, Timm said.

“We will meet with the bargaining committee again at a mutually agreeable time to determine what the next steps will be,” Timm said.

Wauwatosa-based Briggs manufactures small engines and outdoor power equipment. In August it reported a wider fourth-quarter net loss on weak sales and higher costs that included expenses for restructuring actions at plants worldwide.

Jeff Engel            www.bizjournals.com     

Analyst Sees "Short-Term Opportunity in Briggs and Stratton"

Overview

Briggs and Stratton is the largest manufacturer of small gasoline-powered air-cooled engines for outdoors equipment. Eighty-four percent of the company's sales are to original equipment manufacturers (OEMs) for use in this equipment. Briggs and Stratton also manufactures generators and lawn mowers amongst a multitude of other garden equipment.

Financials

Briggs and Stratton maintains a leveraged balance sheet with $226 million in long-term debt. With $188 million of cash on had, the company can easily cover its fiscal obligations, and the leverage should work in favor of the investor.

As a mature company, Briggs and Stratton has generated exceptionally steady revenues over the past decade. Nonetheless, revenues have declined in eight of the past ten years.

A similar trend of declining cash flows is also of concern. In light of this, management has finally taken action and has begun significant restructuring activities which have clouded the results of the past two years. In 2013, revenues declined from $2.1 billion to $1.9 billion.

The company's income was impacted by $18.8 million in restructuring charges, and by over $90 million in goodwill impairment. $29 million in cash was also funneled to the company's underfunded pension, further hurting results.

Nonetheless, gross margins increased from 16.3% to 17.7%, something that the company attributes to lower costs and increase working capital efficiencies.

The company has aggressively returned capitol to shareholders with a variable cash dividend along share repurchases. In 2013, the company returned over $30 million in cash to shareholders via these share repurchases.

Positive Trends

While the market for landscaping equipment is relatively stable, there are indications of potential strength in the near-term future. With the strengthening economy, sales of consumer goods are rising, and that should definitely benefit Briggs and Stratton.

Although market data on year-over-year sales of lawn mowers is not widely available, by tracking interest by means of Google (GOOG) search popularity (limited to United States searches), we see a steady sinusoidal trend with consistent amplitude for three years from 2010-2012.

While interest reached the same nadir on the off-season, in 2013 interest in lawn mowers increased by almost 25% from the prior three seasons.

The divergence from the trends in lawn mower interest alone can be considered a statistical fluke, but a few more searches indicate similar trends across the industry.

Extrapolating sales from search terms is not possible, but overall, enormously increased interest in the term will almost definitely indicate future increases in sales.

In another chart, we can see the drastic effect which storms have on interest and sales of emergency generators. The peaks in the chart below directly correlate with significant storms. While the current hurricane season has been surprisingly quite, experts have predicted an above-average hurricane season. Thus, generators are a wildcard for the company and cannot be accurately incorporated into sales models.

On the heels of Briggs and Stratton's first loss in a decade, the shares are trading at a reasonable 0.5 times sales and 13.6 times expected 2014 earnings. Historically, share price has been steadily correlated with profitability, and for this reason they have underperformed this year.

An anticipated return to profitability, along with the heavily positive indicators for sales should drive the shares higher in the short-term. In the longer term, results will be dependent on management's ability to effectively restructure the company and compete in a mature industry, along with secular economic conditions in the market overall.

Marc Gilbert          www.seekingalpha.com  

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 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  

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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CPSC and Briggs and Stratton Recall Ariens Compact Snow Blowers

The snow blower's carburetor bowl nut can allow gas to escape

March 6 -- Briggs and Stratton Corporation of Milwaukee, WI, is recalling about 5,400 Ariens Snow-Thro 24 inch snow blowers.

The snow blower's carburetor bowl nut can allow gas to escape from the unit. There have been no reports of incidents or injuries.

The recalled snow blower is 24-inches wide and comes in orange with black. Recalled products have the model number 920014 and serial numbers ranging from 100,000 through 119,039 that can be found on an Ariens-brand label on the lower back panel of the product with the warranty code.

There is also a Briggs and Stratton engine model number 13D1370110 F1 labeled on the side of the engine with the serial number range from 12053000000 through 12071699999.

Engines with a circular black marker dot located on the right side of the engine base, below the electric starter and just above the oil drain plug, have already been inspected and are not part of this recall.

The snow blowers, manufactured in China and the United States, were sold at Ariens dealers and The Home Depot nationwide from August through September 2012 for about $800 to $1000.

Consumers should immediately stop using the product and return it to an authorized Briggs and Stratton dealer for a repair.

Briggs Reports Results for 2nd Quarter and First Six Months of Fiscal 2013

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.