Briggs And Stratton Corporation Reports Results For The Fourth Quarter And Fiscal 2012

Highlights:

• Fiscal 2012 consolidated net sales were $2.1 billion, a decrease of 2.1% from fiscal 2011. Fourth quarter fiscal 2012 consolidated net sales were $501.2 million, or 17.2% lower than the fourth quarter of fiscal 2011.
• Fiscal 2012 consolidated net income was $29.0 million, an increase of 19.1% from fiscal 2011. Fiscal 2012 fourth quarter consolidated net loss was $8.4 million, an improvement of 52.8% from the fourth quarter of fiscal 2011.
• The Company recorded pre-tax restructuring charges of $30.1 million ($19.3 million after tax or $0.40 per diluted share) and $49.9 million ($28.8 million or $0.58 per diluted share) during the three and twelve months ended July 1, 2012, respectively.
• Adjusted net income for fiscal 2012 was $57.8 million, which was $5.4 million lower than fiscal 2011 adjusted net income.
• Adjusted net income for the fourth quarter of fiscal 2012 was $10.8 million, which was $5.7 million lower than the fourth quarter of fiscal 2011 adjusted net income.
• Quarterly dividend increased by 9% to $0.12 per share.
• Board of Directors authorizes $50 million increase of share repurchase program.

"This lawn and garden season presented significant headwinds for our two largest markets, North America and Western Europe," commented Todd J. Teske, Chairman, President and Chief Executive Officer of Briggs and Stratton Corporation. "The exceptionally severe drought negatively impacted sales to much of North America and more than offset the favorable growing conditions present in the early spring. In addition, consumer sentiment in North America and Europe remains very cautious." Teske continued, "Despite these market challenges, we are pleased that our Products Segment substantially increased profitability in fiscal 2012 through operational efficiency improvements and higher sales and production volumes."   

Consolidated Results:

Consolidated net sales for the fourth quarter of fiscal 2012 were $501.2 million, a decrease of $104.0 million or 17.2% from the fourth quarter of fiscal 2011. Fiscal 2012 fourth quarter consolidated net loss was $8.4 million, or $0.18 per diluted share. The fourth quarter of fiscal 2011 consolidated net loss was $17.8 million or $0.36 per diluted share.

Included in the consolidated net loss for the fourth quarter of fiscal 2012 were pre-tax charges of $30.1 million ($19.3 million after tax or $0.40 per diluted share) related to previously announced restructuring actions. Included in the consolidated net loss for the fourth quarter of fiscal 2011 was a $49.5 million non-cash pre-tax charge ($34.3 million after tax or $0.68 per diluted share) associated with the impairment of Products Segment goodwill. After considering the impact of the restructuring charges and goodwill impairment, adjusted consolidated net income for the fourth quarter of fiscal 2012 was $10.8 million or $0.22 per diluted share, which was $5.7 million or $0.10 per diluted share lower compared to the fourth quarter fiscal 2011 adjusted consolidated net income of $16.5 million or $0.32 per diluted share.

Consolidated net sales for fiscal 2012 were $2.1 billion, a decrease of $43.5 million, or 2.1% when compared to fiscal 2011. Fiscal 2012 consolidated net income was $29.0 million, or $0.57 per diluted share. Fiscal 2011 consolidated net income was $24.4 million, or $0.48 per diluted share.

Included in consolidated net income for fiscal 2012 were pre-tax charges of $49.9 million ($28.8 million after tax or $0.58 per diluted share) related to the aforementioned restructuring actions. Included in consolidated net income for fiscal 2011 was the aforementioned $49.5 million non-cash pre-tax goodwill impairment charge ($34.3 million after tax or $0.68 per diluted share), a $3.5 million pre-tax charge ($2.2 million after tax or $0.04 per diluted share) related to restructuring actions announced in fiscal 2011 and $3.9 million of additional pre-tax costs ($2.4 million after tax or $0.05 per diluted share) associated with the refinancing of our Senior Notes.

After considering the impact of items related to the restructuring charges, goodwill impairment and debt refinancing, adjusted consolidated net income for fiscal 2012 was $57.8 million or $1.15 per diluted share, which was $5.4 million or $0.10 per diluted share lower compared to fiscal 2011 adjusted consolidated net income of $63.2 million or $1.25 per diluted share.

Engines Segment

Engines Segment fiscal 2012 fourth quarter net sales were $322.5 million, which was $69.8 million or 17.8% lower than the fourth quarter of fiscal 2011. This decrease in net sales was primarily driven by a 19% reduction in shipment volumes to lawn and garden OEMs in the North American and European markets resulting from drought conditions in North America and economic uncertainty in Europe leading to reduced consumer purchases of lawn and garden equipment, an unfavorable mix of engines sold that reflected proportionately lower sales of units used on riding lawn mowers and unfavorable foreign exchange of $1.2 million, partially offset by improved engine pricing.

The Engines Segment adjusted gross profit percentage for the fourth quarter of 2012 was 21.1%, which was 0.3% lower compared to the fourth quarter of fiscal 2011. The adjusted gross profit percentage was unfavorably impacted by 1.6% resulting from increased commodity costs and 1.8% from unfavorable absorption on 26% lower production volumes. This reduction was partially offset by a 1.1% benefit due to reduced manufacturing costs and 2.0% from improved engine pricing and a favorable mix of engines sold.

The Engines Segment engineering, selling, general and administrative expenses were $45.0 million in the fourth quarter of fiscal 2012, a decrease of $10.9 million from the fourth quarter of fiscal 2011 due to a reduction in employee compensation costs in fiscal 2012 and a planned reduction of spend in advertising costs and other professional services in response to the softness in the global markets. 

Engines Segment net sales for fiscal 2012 were $1.3 billion, which was lower by $89.6 million or 6.4% compared to fiscal 2011. This decrease in net sales was primarily driven by an 11% reduction in shipment volumes of engines to OEMs for lawn and garden products in the North American and European markets due to drought conditions in North America and economic uncertainty in Europe leading to reduced consumer purchases of lawn and garden equipment and unfavorable foreign exchange of $8.7 million primarily related to the Euro. This was partially offset by increased engine pricing, a favorable mix of product shipped that reflected proportionally larger volumes of units used on snow throwers and portable and standby generators.

The Engines Segment adjusted gross profit percentage for fiscal 2012 was 20.2%, which was 2.6% lower compared to fiscal 2011. The adjusted gross profit percentage was unfavorably impacted by 0.8% due to reduced absorption on a 13% reduction in production volumes, 0.5% from unfavorable foreign exchange, and 3.0% resulted from higher manufacturing spending associated with rising commodity costs and start-up costs of $8.6 million associated with launching our Phase III emissions compliant engines. This reduction was partially offset by a 1.7% benefit due to improved engine pricing and a favorable mix of products sold.

The Engines Segment engineering, selling, general and administrative expenses were $179.7 million in fiscal 2012, a decrease of $18.9 million from fiscal 2011 primarily due to lower employee compensation expense and a planned reduction of spend in advertising costs and professional services in response to the softness in the global markets. 

Products Segment:

Products Segment fiscal 2012 fourth quarter net sales were $220.1 million, a decrease of $37.4 million or 14.5% from the fourth quarter of fiscal 2011. The decrease in net sales was primarily due to lower sales volumes of portable generators due to fewer spring storms in fiscal 2012, reduced sales of riding lawn and garden equipment due to drought conditions and reduced sales volume in the international markets. This decrease is partially offset by higher shipments of pressure washers in fiscal 2012 and improved pricing.

The Products Segment adjusted gross profit percentage for the fourth quarter of 2012 was 11.4%, which was 2.8% higher compared to the fourth quarter of fiscal 2011. The adjusted gross profit percentage was improved by 3.2% due to increased pricing and a favorable mix of lawn and garden sales through the dealer channel and by 2.8% from reduced manufacturing spending. This was partially offset by benefits of 2.8% from higher commodity costs and 0.4% from unfavorable foreign exchange.

The Products Segment fiscal 2012 fourth quarter engineering, selling, general and administrative expenses were $30.7 million, an increase of $2.0 million from the fourth quarter of fiscal 2011. The increase was attributable to greater selling expense to support investments in international growth, and higher employee compensation expense.

Products Segment net sales for fiscal 2012 were $952.1 million, an increase of $73.1 million or 8.3% from fiscal 2011. The increase in net sales was primarily due to increased shipments of portable and standby generators due to widespread power outages in the U.S. as a result of landed hurricane Irene and a subsequent snow storm on the United States East Coast earlier in the fiscal year, increased shipments of snow equipment after channel inventories were depleted from the prior selling season, improved pricing, a favorable mix of lawn and garden sales through the dealer channel and favorable foreign exchange of $2.3 million. This increase was partially offset by reduced shipment volumes of riding lawn and garden equipment domestically and reduced volume in the international markets. There were no landed hurricanes in fiscal 2011.

The Products Segment adjusted gross profit percentage for fiscal 2012 was 12.3%, which was 3.5% higher compared to the fourth quarter of fiscal 2011. The adjusted gross profit percentage improved by 3.1% from increased pricing and a favorable mix of lawn and garden sales through the dealer channel, 1.5% due to production operational improvements of $13.9 million and 1.7% resulted from improved absorption on higher production volumes. This was partially offset by a decrease of 2.8% due to increased commodity costs.

The Products Segment engineering, selling, general and administrative expenses were $110.7 million in fiscal 2012, an increase of $12.2 million from fiscal 2011. The increase was attributable to greater selling expense to support investments in international growth, higher employee compensation expense, and $0.7 million higher bad debt expense recorded in fiscal 2012 primarily attributable to distributors in the European market.

Corporate Items:

Interest expense for the fourth quarter of fiscal 2012 was flat compared to the same period a year ago as slightly lower average borrowings in fiscal 2012 were offset by slightly higher weighted average interest rates compared to a year ago. For fiscal 2012, interest expense was $4.8 million lower compared to fiscal 2011 due to $3.9 million of pre-tax charges associated with the refinancing of Senior Notes in fiscal 2011, which did not recur in fiscal 2012, as well as lower average outstanding borrowings at slightly higher weighted average interest rates in fiscal 2012.

The effective tax rate for the fourth quarter of fiscal 2012 was 37.0%, or comparable to the fourth quarter of fiscal 2011 effective tax rate of 37.3%. The effective tax rate for fiscal 2012 was 2.9% compared to 24.0% reported the same period one year ago. The decrease in the effective tax rate for fiscal 2012 compared to fiscal 2011 was primarily due to a net benefit of $5.6 million associated with restructuring charges incurred in connection with closing our Ostrava plant facility and a net benefit of $5.1 million due to the expiration of a non-U.S. statute of limitation period during fiscal 2012 and the settlement of U.S. audits.

Financial Position:

Net debt at July 1, 2012 was $71.9 million (total debt of $228.0 million less $156.1 million of cash), an increase of $53.6 million from the $18.4 million (total debt of $228.0 million less $209.6 million of cash) at July 3, 2011. Cash flows provided by operating activities for fiscal 2012 were $66.0 million compared to $156.9 million in fiscal 2011. The decrease in cash provided by operating activities was primarily related to a $31.6 million reduction in the decrease in accounts receivable compared to last year and cash contributions to the pension plan of $28.7 million in fiscal 2012. Approximately $19 million of the July 1, 2012 balance of accounts receivable is due to delayed funding under the Company's dealer inventory financing facility executed during fiscal 2012 with GE Capital, Commercial Distribution Finance. The delayed funding to the Company reduces the overall cost of funds.

Restructuring:

In January 2012, the Company announced plans to reduce manufacturing capacity through closure of its Newbern, Tennessee and Ostrava, Czech Republic plants as well as the reconfiguration of its plant in Poplar Bluff, Missouri. In April 2012, the Company announced plans to further reduce manufacturing costs through consolidation of its Auburn, Alabama manufacturing facility as well as the reduction of approximately 10% of the Company's salaried employees. During fiscal 2012, the Company completed manufacturing operations at its Newbern, Tennessee and Ostrava, Czech Republic plants, carried out the reconfiguration of the Poplar Bluff, Missouri plant and implemented the salaried employee reductions.

As noted previously, pre-tax costs of all restructuring actions totaled $30.1 million and $49.9 million in the fourth fiscal quarter and fiscal 2012, respectively. The total pre-tax costs associated with these restructuring actions are expected to be $60 million to $70 million.  In addition, the Company continues to anticipate annualized pre-tax savings associated with these restructuring actions of $30 million to $35 million in fiscal 2013 and $40 million to $45 million in fiscal 2014.  

Share Repurchase Program Increased:

As previously announced during the first quarter of fiscal 2012, 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. As of the end of the fourth quarter of fiscal 2012, the Company repurchased approximately 2.4 million shares on the open market at a total cost of $39.3 million. There were no shares repurchased in fiscal 2011.

In August 2012, the Board of Directors authorized an additional $50 million in funds associated with the common share repurchase program and an extension of the expiration date to June 30, 2014. Share repurchases, among other things, allow the Company to offset any potentially dilutive impacts of share-based compensation. 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. 

Dividend Increase:

The Company also announced that its Board of Directors declared an increase in the quarterly dividend to $0.12 per share from $0.11 per share on its Common Stock, payable on or after October 1, 2012 to Common Stock shareholders of record at the close of business on August 20, 2012. This represents a 9% increase compared to the prior quarterly dividend.

Outlook:

For fiscal 2013, the Company projects 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. In addition, sales in fiscal 2012 were favorably impacted by sales of portable and standby generators in response to power outages during hurricane Irene and significant east coast snow storms; however, we do not include in our annual projections revenues and profitability for significant weather events.

Additionally, drought conditions in a significant portion of the U.S. have impacted the 2012 lawn and garden season considerably in the U.S. during May through July and certain projections are that dry conditions may persist at least into the fall in the U.S. The potential impact of storm activity and the dry conditions in the U.S. could cause wide variability in our sales results for fiscal 2013.

Accordingly, 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.   

Briggs and Stratton Reports Improved Sales and Net Income for 3rd Quarter Fiscal 2011

MILWAUKEE -- April 28 -- Briggs and Stratton Corporation today announced financial results for its third fiscal quarter and first nine months ended March 27, 2011.

Highlights:

Third quarter fiscal 2011 consolidated net sales of $720.3 million increased $25.8 million or 3.7% from the third quarter of fiscal 2010. For the first nine months of fiscal 2011, consolidated sales were $1.5 billion, an increase of $92.5 million or 6.6% from the same period of fiscal 2010.

Third quarter fiscal 2011 consolidated net income of $51.5 million improved by $8.8 million from the same period of fiscal 2010 after adjusting for a litigation settlement included in the prior year period of $18.7 million after tax.

Net debt as of the end of the third fiscal quarter 2011 was $240.2 million or $80.4 million less than at the end of the third quarter of fiscal 2010. 

"Results for the third quarter of fiscal 2011 were driven by sales and operating improvements within both of our Engines and Power Products Segments," commented Todd J. Teske, Chairman, President and Chief Executive Officer of Briggs and Stratton. "We are very pleased with the strong sales growth we have achieved in our international markets this year. It is one of many outcomes demonstrating our team's focus on delivering results against the core pillars of our strategy. We remain cautiously optimistic regarding the upcoming lawn and garden season here in the U.S. despite the on-going economic challenges and the impact of higher gasoline prices on consumer spending." 

Consolidated Results:

Consolidated net sales for the third quarter of fiscal 2011 were $720.3 million, an increase of $25.8 million or 3.7% when compared to the same period a year ago. Fiscal 2011 third quarter consolidated net income was $51.5 million or $1.02 per diluted share. The third quarter of fiscal 2010 consolidated net income was $24.1 million or $0.48 per diluted share. 

Included in consolidated net income for the fiscal 2010 third quarter was a litigation settlement of $30.6 million ($18.7 million after-tax or $0.37 per diluted share). After considering the impact of the litigation settlement, third quarter fiscal 2011 consolidated net income improved by $8.8 million or $0.17 per diluted share over the adjusted consolidated net income of $42.7 million or $0.85 per diluted share in the third quarter of fiscal 2010. 

Consolidated net sales for the first nine months of fiscal 2011 were $1.5 billion, an increase of $92.5 million or 6.6% when compared to the same period a year ago. For the first nine months of fiscal 2011, consolidated net income was $42.2 million or $0.84 per diluted share. The first nine months of fiscal 2010 consolidated net income was $18.4 million or $0.36 per diluted share. 

Included in consolidated net income for the first nine months of fiscal 2011 was a $3.5 million pre-tax charge ($2.2 million after tax or $0.04 per diluted share) related to previously announced organization changes and $3.9 million of additional pre-tax costs ($2.4 million after tax or $0.05 per diluted share) associated with the redemption premium of the 8.875% Senior Notes and the write-off of the related deferred financing costs. Included in consolidated net income for the first nine months of fiscal 2010 was a litigation settlement of $30.6 million ($18.7 million after-tax or $0.37 per diluted share). After considering the impact of items related to the organization changes, debt redemption and litigation settlement, adjusted consolidated net income for the first nine months of fiscal 2011 was $46.7 million or $0.93 per diluted share, which was higher by $9.6 million or $0.20 per diluted share compared to the first nine months of fiscal 2010 adjusted consolidated net income of $37.1 million or $0.73 per diluted share. 

Engines Segment:

Engines Segment fiscal 2011 third quarter net sales were $503.8 million, which was $20.8 million or 4.3% higher than the prior year period. This increase from the same quarter last year is primarily due to higher shipment volumes and slightly increased engine pricing, partially offset by an unfavorable mix of product shipped that reflected lower volumes of units used on riding lawn and garden equipment. 

The Engines Segment gross profit percentage was 24.7% in the third quarter of fiscal 2011, or slightly lower from 24.8% in the third quarter of fiscal 2010. The change was attributable to higher commodity costs and increased salaries and benefits including a $2.3 million increase in pension benefits expense, offset by slightly increased engine pricing. 

The Engines Segment fiscal 2011 third quarter income from operations was $77.5 million, an increase of $3.5 million from fiscal 2010 third quarter adjusted income from operations. The increase is due to the improvement in net sales partially offset by an increase in non-manufacturing salaries and benefits including a $1.9 million increase in pension benefits expense. 

Engines Segment net sales for the first nine months of fiscal 2011 were approximately $1.0 billion, which was $58.2 million or 6.1% higher than the prior year period. This increase from the same period last year is primarily due to higher international engine unit shipments to European and Asian OEMs as well as slightly increased engine pricing. 

The Engines Segment gross profit percentage increased to 23.4% for the first nine months of fiscal 2011 from 22.4% in the first nine months of fiscal 2010. This improvement was primarily due to increased production volumes and slightly increased engine pricing partially offset by higher commodity costs and increased salaries and benefits. The increase in salaries and benefits includes a $7.2 million increase in pension benefits expense and $2.2 million of higher salaries and benefits due to temporary reductions in salaries and the 401(k) match implemented in the first half of fiscal 2010. 

The Engines Segment adjusted income from operations for the first nine months of fiscal 2011 was $92.9 million, an increase of $6.8 million from the first nine months of fiscal 2010 adjusted income from operations. The increase is due to the improvement in net sales and the gross profit percentage offset by an increase in non-manufacturing salaries and benefits including a $5.4 million increase in pension benefits expense and $1.5 million higher expenses due to temporary reductions in salaries and the 401(k) match implemented in the first half of fiscal 2010. 

Power Products Segment:

Power Products Segment fiscal 2011 third quarter net sales were $267.5 million, which was $12.1 million or 4.8% greater than the prior year period. This improvement was due primarily to increased unit shipment volumes of snow throwers and ZTRs, partially offset by reduced shipment volumes of portable generators as a result of fewer wide spread power outages caused by ice storms. 

The Power Products Segment gross profit percentage increased to 9.7% for the third quarter of fiscal 2011 from 7.2% in the third quarter of fiscal 2010. The improvement over the prior year was attributable to increased sales of higher margin products to dealers, decreased manufacturing spending and increased absorption on higher production volumes, partially offset by higher commodity costs and warranty expense. The decrease in manufacturing spending includes the absence of $3.0 million of transition costs from the closure of our Jefferson manufacturing facility, which were incurred in the third quarter of fiscal 2010. 

The Power Products Segment fiscal 2011 third quarter income from operations was $1.7 million, an increase of $8.9 million compared to the third quarter of fiscal 2010. 

Power Products Segment net sales for the first nine months of fiscal 2011 were $621.5 million, which was $35.4 million or 6.0% greater than the prior year period. This improvement was due primarily to increased unit shipment volumes of snow throwers and ZTRs, partially offset by reduced shipment volumes of pressure washers and portable generators as a result of lower consumer demand and retailers and dealers closely managing inventories in these categories. 

The Power Products Segment gross profit percentage decreased to 8.9% for the first nine months of fiscal 2011 from 9.8% in the first nine months of fiscal 2010. This decline between years resulted from higher manufacturing spending, lower absorption primarily related to the decreased production of portable generators, as well as increased expenses related to salaries and benefits. The increase in manufacturing spending relates to higher commodity costs, manufacturing inefficiencies in launching new products, increased warranty expense, and increased freight expense. The increase in salaries and benefits includes $0.8 million higher expenses attributable to temporary reductions in salaries and the 401(k) match implemented in the first half of fiscal 2010. 

The Power Products Segment adjusted loss from operations for the first nine months of fiscal 2011 was $14.6 million, or $5.9 million higher than the loss from operations of $8.6 million for the same period one year ago. The increased loss from operations was primarily caused by the previously discussed manufacturing cost increases as well as an increase in non-manufacturing salaries and benefits including $0.6 million higher expenses attributable to temporary reductions in salaries and the 401(k) match implemented in the first half of fiscal 2010. 

Corporate Items:

As previously announced, in December 2010 the company issued $225 million aggregate principal amount of 6.875% Senior Notes due December 2020. Net proceeds were primarily used to redeem the remaining outstanding principal of the 8.875% Senior Notes due March 2011. 

Interest expense was lower for the third quarter of fiscal 2011 due to lower average outstanding borrowings as well as the reduced interest rate associated with the refinanced Senior Notes. Interest expense was lower for the first nine months of fiscal 2011 due to lower average outstanding borrowings, partially offset by $3.9 million of pre-tax charges related to the redemption premium on the 8.875% Senior Notes and the write-off of related deferred financing costs. 

The third quarter and first nine months effective tax rate for fiscal 2011 was32.4% and 30.3%, respectively, versus 27.1% and 22.3% effective tax rate in the same respective periods last year. The variation reflected between years was due to the required recognition of the tax effect of certain events as discrete items in the quarter in which they occurred rather than in the overall expected annual tax rate. 

Financial Position:

Net debt at March 27, 2011 was $240.2 million (total debt of $283.0 million less $42.8 million of cash), an improvement of $80.4 million from the $320.6 million (total debt of $348.5 million less $27.9 million of cash) at March 28, 2010. Cash used by operating activities for the first nine months of fiscal 2011 was $100.3 million, or $83.8 million higher compared to $16.5 million in the first nine months of fiscal 2010. The increase in cash used for operating activities is primarily due to working capital requirements to replenish inventory from lower levels at the end of fiscal 2010 and due to timing of payments associated with accounts receivable, accounts payable and accrued liabilities, offset by higher net income.

Outlook:

The company maintains its guidance that fiscal 2011 net income on a GAAP basis will be in the range of $57 to $68 million or $1.13 to $1.35 per diluted share. Consolidated net sales are projected to be approximately 2% to 5% higher than in fiscal 2010. 

Engines Segment sales are forecasted higher on modest volume and pricing improvements while the Power Products Segment sales are forecasted higher primarily due to higher expected volumes of lawn and garden equipment. 

Demand for portable generators and the related engines due to landed hurricane activity have not been included in our fiscal 2011 sales forecast. 

Operating income margins for fiscal 2011 are projected to be in the range of 4.7% to 5.2%, and interest expense and other income are forecasted to be in the range of $23 million to $24 million and $6 million to $7 million, respectively. The effective tax rate for the full year is projected to be in a range of 30% to 33%.

Briggs and Stratton Reports Results for the Third Quarter of Fiscal 2010

MILWAUKEE, April 22, 2010 --  Briggs & Stratton today announced third quarter fiscal 2010 consolidated net income of $24.1 million or $0.48 per diluted share, that when adjusted for a litigation settlement of $30.6 million ($18.7 million after-tax) would result in an adjusted consolidated net income of $42.7 million or $0.85 per diluted share on consolidated net sales of $694.6 million. The litigation settlement relates to a class action lawsuit regarding horsepower labeling that was previously disclosed in a Current Report on Form 8-K filed on March 2, 2010.

The third quarter of fiscal 2009 had consolidated net income of $25.4 million or $0.51 per diluted share on consolidated net sales of $673.8 million. Consolidated net sales increased $20.8 million or 3% from the third quarter of the prior year. The increase is primarily attributable to higher sales volumes in the Engines Segment. Third quarter adjusted consolidated net income increased $17.3 million from net income in the same period a year ago. Engines Segment operating results were the primary driver of the improved adjusted net income.

For the first nine months of fiscal 2010, consolidated net income was $18.4 million or $0.36 per diluted share, that when adjusted for the litigation settlement of $30.6 million ($18.7 million after-tax), would result in an adjusted consolidated net income of $37.1 million or $0.73 per diluted share on consolidated net sales of $1.412 billion.

For the same period a year ago, consolidated net sales were $1.609 billion, and consolidated net income was $26.6 million or $0.53 per diluted share. The majority of the $197.0 million or 12% decrease in consolidated net sales was the result of lower sales volume in the Power Products Segment. The remainder of the net sales decrease reflects lower engine volume and lower prices. The nine-month adjusted consolidated net income increased by $10.5 million from net income in the same period a year ago. Engines Segment operating results were the primary driver of the improved adjusted net income.

Engines:

Third quarter net sales for fiscal 2010 were $498.9 million versus $480.2 million for the same period a year ago, an increase of $18.7 million or 4%. The increase in net sales was primarily the result of an engine unit shipment increase of 6% from the same period a year ago. Offsetting the volume improvement were lower average prices in effect for fiscal 2010. Shipments of engines increased in the third quarter for lawn and garden applications due to the shift of OEM production to the last half of the fiscal year from the fiscal second quarter reflecting the desire of the channel participants to control their working capital commitments at the end of the calendar year.

Net sales for the first nine months of fiscal 2010 were $983.6 million versus $1.078 billion in the prior year, a decrease of $94.5 million or 9%. Unit volume decreases of 7% through nine months were the result of lower engine demand for portable generators, soft engine shipments to European lawn and garden equipment manufacturers and minor market share losses in various engine categories. The majority of the remainder of the net sales decrease was due to lower pricing implemented for fiscal 2010.

Income from operations for the third quarter of fiscal 2010 was $43.8 million. Income from operations, after adjusting for the $30.6 million litigation settlement, was $74.4 million, a $27.8 million improvement from the $46.6 million reported for the same period in the prior year.

The $27.8 million improvement was primarily the result of lower manufacturing costs for materials, labor and fixed overhead. Improvement in the adjusted income from operations from sales and manufacturing volume increases was offset by the previously discussed lower prices.

Income from operations for the first nine months of fiscal 2010 was $56.0 million. Income from operations after adjusting for the litigation settlement was $86.6 million, a $23.5 million improvement from the $63.1 million reported for the same period a year ago. The $23.5 million improvement for the first nine months was the result of similar lower manufacturing costs as mentioned for the third fiscal quarter, offset by lower sales volume, production volume and pricing.

Power Products:

Fiscal 2010 third quarter net sales were $245.3 million versus $250.2 million for the same period a year ago, a decrease of $4.9 million. The net sales decrease was primarily the result of lower portable generator sales in the quarter, as the current year's quarter did not have hurricane replenishment shipments that were experienced in last year's third quarter. The portable generator sales decrease was partially offset by stronger pressure washer volume and a small improvement in shipments of lawn and garden equipment.

Net sales for the first nine months of fiscal 2010 were $565.5 million versus $697.7 million in the prior year, a $132.2 million decrease. Lower portable generator sales for this nine-month period accounted for almost all of the net sales decrease primarily due to the absence of any hurricane activity in fiscal 2010.

There was a loss from operations of $7.1 million in the third quarter of fiscal 2010, a $4.2 million greater loss than experienced in the prior year. The increase in the loss from operations resulted from lower plant utilization, primarily production of portable generators that decreased over 90% in the current third quarter compared to the same period a year ago.

The loss from operations for the first nine months of fiscal 2010 was $8.0 million, a small improvement from the $8.9 million operating loss generated for the same period a year ago. The improvement in the loss from operations for the quarter was the result of lower manufacturing costs, primarily related to lower commodity costs and planned cost saving initiatives. The improvements were offset by lower sales and production volumes primarily related to the significantly lower portable generator shipments and production in fiscal 2010.

General:

Other income for the third quarter and first nine months of fiscal 2010 was greater than the same periods last year primarily because of improved earnings in our joint ventures. Interest expense for the third quarter of fiscal 2010 was less than the prior year because of lower borrowings offset by a premium expense of $1.4 million to repurchase a portion of outstanding senior notes during the quarter. Interest expense for the first nine months of fiscal 2010 was also lower due to lower borrowings offset by a premium expense of $2.4 million to repurchase a portion of outstanding senior notes during fiscal 2010.

The effective tax rate was 27.1% for the third quarter and 22.3% for the first nine months of fiscal 2010 versus 31.4% and 23.4% for the same periods last year, respectively. The variation reflected between years was due to the required recognition of the tax effect of certain events as discrete items in the quarter in which they occurred rather than in the overall expected annual tax rate.

The 8.875% Senior Notes that are due in March 2011 have been classified as a Current Maturity on Long-term Debt in the consolidated balance sheet as of the end of fiscal March 2010. The company believes it will be able to replace these borrowings with new financing.

Outlook:

The company, after recognizing the litigation settlement in the third quarter, now projects that fiscal 2010 net income will be in the range of $24 to $31 million or $0.48 to $0.62 per diluted share. This current forecast range is the same as the forecast provided in January 2010, except it now incorporates the litigation settlement and the bottom end of the forecast has been increased.

Consolidated net sales are projected to be approximately 6% lower between years primarily due to the absence of hurricane related sales of portable generators and their related engines, the continued impact of year over year pricing changes and lower engine shipments to Europe for lawn and garden applications.

While the lawn and garden season has started, there remains uncertainty that the market growth built in to our projections should be changed at this time. Production levels for substantially all products are planned to be lower in fiscal 2010 to decrease our investment in working capital.

Operating income margins are projected to be in the range of 2.8% to 3.1% after recognition of the litigation expense but still in the previously disclosed 4% to 5% range if the litigation expense is removed. Interest expense and other income are forecasted for the full year at $26 million and $5 million, respectively. The effective tax rate for the full year is projected to be in a range of 27% to 30%.