Generating Power from Waste Gas

Milwaukee -- February 28 -- When satellite photos showed bursts of light coming from the black night sky of rural North Dakota, it raised awareness about the practice of "flaring" wasted natural gas from the Bakken oil fields.

Huge flames light up the sky as the gas, a byproduct of oil production, is burned off day and night where there's no economical way to capture and use it.

In some places, "You can't see the stars. The sky is kind of a dark orange," said Sean Arithson, spokesman for Dakota Resource Council, an environmental group based in Bismarck, N.D.

Generac Power Systems of Waukesha and Kohler Power Systems, a division of Kohler Co., have equipment that captures some of the gas and turns it into usable electricity.

The portable generators, some roughly the size of a large pickup truck, burn the gas as fuel and provide electric power to the oil pumping operations.

The equipment captures "a fair amount of fuel" that otherwise would be burned off into the atmosphere, said Terry Dolan, a Generac executive vice president.

Generac and Kohler make generators for commercial and industrial uses as well as backup power for homes. Some of the largest units can provide enough emergency power to run an oil refinery or hospital.

The Bakken oil field units, which run 24 hours a day in remote areas of the Dakotas, are a growth area for Generac, Dolan said.

"A lot of these places are really far from where the utility lines go, but they need the electric power. With the flared gas, they have a constant flow of fuel coming out of the ground," he said.

Generac and Kohler sell the gas-driven generators to companies in the oil fields, which set them up to provide electric power that otherwise would come from diesel-powered generators.

A diesel-powered unit would burn 9 gallons of fuel an hour, 24 hours a day, to provide the electricity that comes from a generator burning the waste gas, said Mark Wald, president of Blaise Energy Inc., a Bismarck firm that provides the equipment and uses Generac products.

"It's crazy. There's a great big flare and fuel going up in smoke, while right next to it you have a diesel generator using fuel that has to be trucked in," Wald said.

Oil companies say they've spent more than $13 billion to capture the waste gas, mostly through pipelines, rather than burn it into the sky. But sometimes they have difficulty obtaining permission from landowners to place pipelines on their property, and it's cost prohibitive in remote areas.

North Dakota is considering state legislation that would drastically cut the time oil companies can burn off natural gas. It would require companies to begin paying royalties and taxes on wasted natural gas within 14 days after an oil well begins production. Companies are given a year now, but often they receive extensions because of the high cost of moving the gas to market.

The burned-off gas is valued at more than $1 million a month in lost state revenue, according to an Associated Press article.

"We want to get this gas, no question about it," Ron Ness, president of the North Dakota Petroleum Council, said in a recent hearing on the issue.

The Generac and Kohler generators use only a small amount of the waste gas from an oil well, but the units provide valuable power in areas where it would cost millions of dollars to run a utility line. They run year-round even in the harshest weather.

Reliability is important. It can cost a petroleum company $10,000 an hour in lost revenue if an oil well is not pumping because the generator shut down or something else went wrong.

Kohler has dozens of the gas-powered generators in the Bakken oil fields, said Nolan Landes, a senior products manager for the company's generator product line.

The units also are used in oil fields in Texas, Oklahoma, Canada and overseas.

Once a well is established, the waste gas is essentially a free source of fuel, Landes said.

But it's difficult to maintain machinery in remote locations, where the temperature can drop to 30 below zero. Also, the gas coming out of the ground from an oil well contains impurities that have to be removed before it's suitable for powering a generator.

"It's not like the gas that comes out of a pipe into your home," Dolan said.

Sensors in the generators are constantly checking the fuel quality and adjusting the units to run on it. Backup systems, such as propane tanks, can be used if a problem arises with the gas coming out of the ground.

The gas is valued at only a fraction of the value of the oil being produced. But there's still incentive to capture it as an energy source, Blaise Energy's Wald said.

With lower oil prices, "Everybody's looking at trimming costs," he said. If an oil field operator can save money by replacing diesel generators with gas-driven units, they're moving in that direction.

"We are not slowing down with the drop in oil prices," Wald said.

"We have seen significant growth in the call for generators to use the waste gas that's been flared for years," Dolan said.

http://www.jsonline.com/                        Rick Barrett

Briggs and Stratton Corporation Reports Results For The 2nd Quarter And First Six Months Of Fiscal 2014

MILWAUKEE -- Jan. 23 -- Briggs and Stratton Corporation today announced financial results for its second fiscal quarter ended December 29, 2013.

Highlights:

• Second quarter fiscal 2014 consolidated net sales were $416.6 million, a decrease of $22.5 million or 5.1% from the prior year.
• Increased sales of lawn and garden equipment were offset by lower sales of standby and portable generators compared to last year when Hurricane Sandy occurred.
• The reduced storm activity reduced net sales and diluted earnings per share by an estimated $55 million and $0.12 in the fiscal quarter compared with last year.
• Second quarter 2014 consolidated net income excluding restructuring charges was $2.3 million, or $1.4 million lower than the adjusted net income of $3.7 million in the second quarter of fiscal 2013.
• The Company recorded pre-tax restructuring charges of $2.3 million ($1.6 million after tax or $0.04 per diluted share) during the three months ended December 29, 2013.

"During the quarter we continued to see year over year sales of lawn and garden equipment and related parts sales improving both in North America and in Australia," commented Todd J. Teske, Chairman, President and Chief Executive Officer of Briggs and Stratton Corporation.

 "While these positive trends were not enough to offset the sales we saw last year related to storms Isaac and Sandy, we remain optimistic for an improved lawn and garden market this spring," continued Teske. "Adjusted margins expanded in the quarter in both the engines and products businesses as we continue to focus on reducing costs, streamlining our operations and delivering margin expanding innovations to consumers.

This spring we are excited to launch several new engine and product solutions including Quiet Power Technology™ that reduces the sound of a walk mower as much as 80%, Ready Start® push button starting for riding mowers, and the new Powerflow + Technology™ pressure washer that has both variable flow and pressure capabilities, to name just a few."

Consolidated Results:

Consolidated net sales for the second quarter of fiscal 2014 were $416.6 million, a decrease of $22.5 million or 5.1% from the second quarter of fiscal 2013, due to lower sales of standby and portable generators, partially offset by higher sales of engines and lawn and garden products.

The quarterly impact of fewer weather related events creating demand for generators and the related engines was an estimated sales decrease of $55 million. The fiscal 2014 second quarter consolidated net income, which includes restructuring charges, was $0.7 million or $0.01 per diluted share.

The second quarter of fiscal 2013 consolidated net loss, which includes restructuring charges, was $0.6 million or $0.02 per diluted share. The impact of the reduced engines and generator sales in the quarter was an estimated $0.12 per diluted share compared with last year's second fiscal quarter.

Included in the consolidated net income for the second quarter of fiscal 2014 were pre-tax charges of $2.3 million related to restructuring actions. Included in consolidated net loss for the second quarter of fiscal 2013 were pre-tax charges of $6.6 million related to restructuring actions. After removing the impact of these items, the adjusted consolidated net income for the second quarter of fiscal 2014 was $2.3 million or $0.05 per diluted share, which was $1.4 million lower compared to the second quarter fiscal 2013 adjusted consolidated net income of $3.7 million or $0.07 per diluted share.

For the first six months of fiscal 2014, consolidated net sales were $733.9 million, a decrease of $14.2 million or 1.9% when compared to the same period a year ago. The consolidated net loss for the first six months of fiscal 2014 was $18.6 million or $0.41 per diluted share. The consolidated net loss for the first six months of fiscal 2013 was $17.2 million or $0.37 per diluted share.

Included in the consolidated net loss for the first six months of fiscal 2014 were pre-tax charges of $5.9 million ($4.4 million after tax or $0.10 per diluted share) related to the restructuring actions. 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 restructuring actions. After considering the impact of the restructuring charges, the adjusted consolidated net loss for the first six months of fiscal 2014 was $14.2 million or $0.31 per diluted share, which was an increase of $4.7 million or $0.10 per diluted share compared to the first six months of fiscal 2013 consolidated net loss of $9.5 million or $0.21 per diluted share.

Engines Segment

Engines Segment fiscal 2014 second quarter net sales were $265.7 million, which was $8.5 million or 3.1% lower than the second quarter of fiscal 2013. This decrease in net sales was due to lower sales of engines used in generators due to the lack of storm activity during the quarter. Fiscal 2013 second quarter net sales benefited from the impact of Hurricane Sandy. The decrease was partially offset by higher North American sales of engines used on lawn and garden equipment and related service parts due to OEM's building lawn and garden inventory for the upcoming lawn and garden season. 

The Engines Segment adjusted gross profit percentage for the second quarter of 2014 was 21.0%, which was slightly higher compared to the second quarter of fiscal 2013. The increase was related to a favorable impact of 0.6% from sales mix of higher margin service parts and margin contributed from the Branco acquisition which closed late in the second quarter of fiscal 2013. Partially offsetting the increase was a 0.5% unfavorable impact from foreign exchange primarily related to the Australian Dollar. Manufacturing throughput decreased in the second quarter of 2014 by 9%; however, production mix was favorable as proportionately more large engines were built.

The Engines Segment engineering, selling, general and administrative expenses were $45.6 million in the second quarter of fiscal 2014, an increase of $1.7 million from the second quarter of fiscal 2013. The increase was primarily due to increased compensation costs and the added expenses related to Branco, partially offset by lower retirement plan expenses of $0.8 million.  

Engines Segment net sales for the first six months of fiscal 2014 were $449.5 million, which was $10.8 million or 2.5% higher than the same period a year ago. The increase was primarily driven by higher North American sales of engines used on lawn and garden equipment and related service parts due to strong demand stemming from late season growing conditions as well as the anticipated increased retail demand for the upcoming lawn and garden season. The increase was partially offset by lower sales of engines used in generators due to the lack of storm activity during the first six months of fiscal 2014. Hurricanes Isaac and Sandy occurred during the first six months of fiscal 2013.

The Engines Segment adjusted gross profit percentage for the first six months of 2014 was 18.4%, which was 0.5% lower compared to the first six months of fiscal 2013. The decrease was due to the unfavorable impact of 1.1% due to a 12% reduction in manufacturing throughput and 0.4% attributable to unfavorable foreign exchange. The decrease was partially offset by 1.0% from favorable sales mix of higher margin service parts and the margin contributed by Branco.

The Engines Segment engineering, selling, general and administrative expenses were $88.9 million in the first six months of fiscal 2014, an increase of $2.8 million. The increase is primarily due to increased compensation costs and the added expenses related to Branco partially offset by lower retirement plan expenses of $2.4 million. 

Products Segment

Products Segment fiscal 2014 second quarter net sales were $171.5 million, a decrease of $26.0 million or 13.2% from the second quarter of fiscal 2013. The decrease in net sales was driven by lower net sales of standby and portable generators due to no landed hurricanes in the second quarter of fiscal 2014 and unfavorable foreign exchange predominantly related to the Australian Dollar and the Brazilian Real. Hurricane Sandy occurred in the second quarter of fiscal 2013 and no significant storms occurred in fiscal 2014. This decrease was partially offset by favorable late season growing conditions during the second quarter of fiscal 2014 that led to higher net sales of lawn and garden equipment through our North American dealer channel as well as higher sales of pressure washers and service parts. Net sales also benefited from the Branco acquisition.

The Products Segment adjusted gross profit percentage for the second quarter of 2014 was 13.0%, which was 2.4% higher than the adjusted gross profit percentage for the second quarter of fiscal 2013. The increase was primarily related to a favorable mix of products sold in the second quarter of fiscal 2014 with the additional margin from Branco and an increase in net sales of lawn and garden equipment through the North America dealer channel.  The adjusted gross profit percentage also benefited by 0.7% due to improved manufacturing efficiencies and incremental footprint restructuring savings of $0.3 million. Partially offsetting the increase was a 1.0% unfavorable impact from foreign exchange. 

The Products Segment fiscal 2014 second quarter engineering, selling, general and administrative expenses were $26.2 million, an increase of $0.8 million from the second quarter of fiscal 2013. The increase was mainly attributable to the additional expenses from Branco and higher compensation costs partially offset by lower marketing spend and favorable foreign exchange.

Products Segment net sales for the first six months of fiscal 2014 were $324.6 million, a decrease of $46.2 million or 12.5% from the same period a year ago. The decrease in net sales was driven by lower sales of standby and portable generators due to no landed hurricanes during the first six months of fiscal 2014 and unfavorable foreign exchange predominantly due to the Australian Dollar and the Brazilian Real.  Hurricanes Isaac and Sandy occurred during the first six months of fiscal 2013. This decrease was partially offset by favorable late season growing conditions during the first six months of fiscal 2014 that led to higher sales of lawn and garden equipment through our North American dealer channel as well as higher sales of pressure washers and service parts. Net sales also benefited from the Branco acquisition.

The Products Segment adjusted gross profit percentage for the first six months of 2014 was 12.9%, which was 1.1% higher compared to the first six months of fiscal 2013. The increase was primarily related to a 0.8% benefit from improved manufacturing efficiencies and incremental footprint restructuring savings of $0.8 million. The adjusted gross profit percentage also benefited from a favorable mix of products sold in the first six months of fiscal 2014 with the additional margin from Branco and an increase in net sales through the North America dealer channel. Partially offsetting the increase was a 0.4% unfavorable impact from foreign exchange. 

The Products Segment engineering, selling, general and administrative expenses were $51.7 million in the first six months of fiscal 2014, an increase of $2.9 million from the first six months of fiscal 2013. The increase was mainly attributable to the additional expenses from Branco and higher compensation costs, partially offset by lower marketing spend and favorable foreign exchange.

Corporate Items:

Interest expense for the second quarter and first six months of fiscal 2014 was comparable to the same periods a year ago.

The effective tax rate for the second quarter and first six months of fiscal 2014 were 69.8% and 25.5%, respectively, compared to 156.5% and 27.8% for the same respective periods of fiscal 2013. The tax rate for the second quarter and first six months of fiscal 2014 was primarily driven by net operating losses of certain foreign subsidiaries without a realizable tax benefit. The second quarter and first six months of fiscal 2013 included a tax expense of $1.0 million primarily driven by nondeductible acquisition costs and net operating losses of certain foreign subsidiaries without a realizable tax benefit.

Financial Position:

Net debt at December 29, 2013 was $126.8 million (total debt of $225.0 million less $98.2 million of cash), or $101.8 million lower from the $228.7 million (total debt of $246.9 million less $18.2 million of cash) at December 30, 2012. Cash flows used in operating activities for the first six months of fiscal 2014 were $45.2 million compared to $75.4 million in fiscal 2013. The improvement in operating cash flows was primarily related to changes in working capital needs in fiscal 2014 associated with lower seasonal growth in accounts receivable and inventory due to lower production levels and planned inventory reductions. In addition, no contributions to the pension plan were made in fiscal 2014 compared to $16.2 million in the first half of fiscal 2013.

Restructuring:

The previously announced restructuring actions remain on schedule. Production of horizontal shaft engines was concluded at the Auburn, Alabama plant during the second quarter of 2014. As noted previously, pre-tax restructuring costs for the second quarter and first six months of fiscal 2014 were $2.3 million and $5.9 million, respectively. 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 $2 million to $4 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. On January 22, 2014, the Board of Directors of the Company authorized up to an additional $50 million in funds for use in the Company's common share repurchase program with an extension of the expiration date to June 30, 2016. 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 2014, the Company repurchased 1,066,447 shares on the open market at an average price of $19.77 per share.

Outlook:

For fiscal 2014, the Company has revised its full year guidance to exclude the potential positive benefit of landed hurricanes from the upper end of the revenue and earnings guidance. In addition, the lower end of the guidance has been reduced to give effect to approximately $3.0 million of negative foreign currency fluctuations and the lack of European snow sales that are not likely to be recovered in the second half of the fiscal year.

The Company now expects net income to be in a range of $48 million to $57 million or $1.00 to $1.18 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 $2.0 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. Operating income margins are expected to improve over fiscal 2013 and be in a range of 4.5% to 4.8% 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.    

Kohler Company To Start Making Portable Generators

November 20 -- Kohler Co. will start making portable generators next year, joining competitors like Generac Holdings Inc. and Briggs & Stratton Corp. that already make both standby and portable generators.

The privately held Kohler-based company has made standby generators, but not portable ones. That will change in January when it formally unveils a line of portable generators that range from a 2-kilowatt inverter to a 12.3-kilowatt gasoline generator, the company said Wednesday.

The line will also include trash pumps and water pumps.

“Today Kohler offers a complete range of generators up to 3.2 megawatts that are relied upon in myriad applications: construction, telecom, residential/light commercial, industrial, mobile and marine,” said Manny Rumao, senior product manager, in a prepared statement. “Adding portable generators helps us further meet our customers’ needs for clean, efficient and dependable power.”

Generator demand has increased nationwide in recent years in the wake of devastating storms like Superstorm Sandy.

Generator manufacturers say that demand for portable generators spikes immediately after such storms, then demand for home standby generators jumps for several months afterward. The move by Kohler allows it to play in both spaces.

Jeff Engel          www.bizjournals.com   

Generators Sell Briskly, Then They Often Come Right Back

August 31 -- Retailers are reporting brisk sales of portable generators as millions of Americans remain without electricity after Hurricane Irene, but the stores are likely to face a rush of returns once the lights come back on.

Generators powered by gasoline, propane or natural gas have become a niche industry in recent years as more U.S. homeowners seek to ensure they can keep lights, refrigerators and air-conditioning systems running during extended blackouts.

That is proving to be the case this month as consumers flocked to chain stores such as Wal-Mart Stores Inc., Home Depot Inc. and Lowe's Cos. to buy generating units costing hundreds, or in some cases, thousands, of dollars, before and after Irene struck the eastern seaboard.

"Demand has been extremely heavy," said Todd J. Teske, chief executive of Briggs and Stratton Corp., one of the top portable-generator manufacturers. "It's not unusual to see 100,000 generators go out—we saw that certainly during Katrina—and I fully expect this storm to be similar."

But consumers who come to regret the pricey purchases often try to return portable generators after their personal emergency passes, a phenomenon one manufacturer executive sardonically called a "weekend rental."

Retailers typically say they allow returns of generators if they haven't been used, while some take back used items—for a fee. Home Depot accepts returns of gasoline-powered items like generators within 30 days of purchase, but it reserves the right to charge a maintenance fee if a used item has to be cleaned or restored to resell.

Either way, the stores usually bear the financial brunt of returns, especially in areas such as the Northeast, where residents are less likely to need them again soon than in more hurricane-prone areas.

A spokeswoman for Lowe's said Tuesday that the retailer had yet to see an unusually high rate of returns.

Nick Mohabir, 38 years old, a supervisor at Bruno's Home Center in Brooklyn, N.Y., said his store sold out of generators before the storm. One man from Long Island indicated he wanted to return his, Mr. Mohabir said.

"I said, 'Are you for real, buddy?' " Mr. Mohabir said. "I said, 'Listen, it ain't going to happen. If you use it, you can't bring it back.' "

Retailers all refuse to disclose exact sales, but they say generators are among the emergency items most in demand at stores in heavily affected states such as North Carolina and Virginia.

"It's definitely one of the key items people want," said Dianna Gee, a Wal-Mart spokeswoman.

Managers at a Lowe's store in eastern North Carolina and a Home Depot near the southern New Jersey coast reported that generators were among the items selling almost immediately upon arrival.

"We've seen a fivefold increase in orders this month," said Duane Nelson, vice president of marketing for Generac Holdings Inc., a leading generator maker whose units are sold at Home Depot and Lowe's. "The problem most people in the country are unaware of is that when you have an event of this magnitude, there are just not enough generators in the marketplace to meet the demand."

A rush to buy generators has become such a predictable rite during hurricane season that retailers and manufacturers stockpile units heading into the summer months. Many residents in the Southern U.S. avoid the rush by spending thousands of dollars to have standby generators installed in their homes beforehand. In Florida, Generac says about 2% of single family homes now have backup systems, one of the highest rates in the U.S.

Mr. Teske of Briggs and Stratton said storm events typically lead mentally scarred consumers to purchase generators for months after the fact.

www.wsjonline.com

Generac Reports Fourth Quarter and Full-Year 2010 Results

WAUKESHA, WISCONSIN, (February 18, 2011) - Generac Holdings Inc., a leading designer and manufacturer of backup power generation products, today reported financial results for its fourth quarter and full year ended December 31, 2010.

Fourth Quarter 2010 Highlights

• Net sales increased year-over-year by 4.6% to $161.0 million as compared to $154.0 million in the fourth quarter of 2009.
• Cash flow remained strong as net cash provided by operating activities increased 6.4% to $31.4 million as compared to $29.5 million for the fourth quarter 2009.
• Net income increased year-over-year by 55.8% to $18.6 million as compared to $11.9 million for the fourth quarter of 2009; Adjusted net income increased 27.2% to $33.0 million from $25.9 million in the fourth quarter of 2009.
• Diluted net income per common share was $0.28 per share; Adjusted diluted net income per common share was $0.49 per share.
• Debt pre-payment of $74.2 million during the fourth quarter 2010.

Full-Year 2010 Highlights

• Net sales increased year-over-year by 0.8% to $592.9 million as compared to $588.2 million in fiscal 2009.
• Net cash provided by operating activities totaled $114.5 million for the full year 2010 compared to $74.6 million in the prior year, a 53.4% increase.
• Net income increased year-over-year by 32.2% to $56.9 million as compared to $43.1 million for the year ending 2009; Adjusted net income increased 38.6% to $115.9 million from $83.6 million for the year ending 2009.
• Total debt reduction of $434.3 million for the full year 2010, representing a 39.8% reduction from December 31, 2009.

"I am very proud of our accomplishments in 2010 which enabled us to deliver net sales growth for the third consecutive year, generate strong cash flows, and position the Company for growth moving forward," said Aaron Jagdfeld, President and Chief Executive Officer of Generac. "Despite certain headwinds, sales of our residential generators proved resilient throughout the year and we built a strong foundation for the future through the introduction of new products and the addition of new distribution outlets. Sales of our commercial and industrial products rebounded nicely this year and delivered solid double-digit year-over-year growth in the second half of 2010. Throughout the year, we continued to invest in our business by making strong commitments to research and development and through the addition of several key hires in our sales, marketing and service functions. These investments will allow us to maintain our position as the innovation leader in the standby generator market and support our strategic growth initiatives. Our attractive cash flows and stronger balance sheet will provide us the flexibility to drive our business in 2011 and beyond."

Residential product sales of $99.9 million for the fourth quarter of 2010 were down 1.7% on a year-over-year basis due to certain retail customers approaching their inventory levels more conservatively compared to the fourth quarter of 2009. This trend was partially offset by an increase in seasonal stocking by certain other distribution partners. For the full fiscal year 2010, residential product sales of $372.8 million increased 0.6% from $370.7 million in the prior year, driven by the continued expansion of the Company's residential products distribution network, successful new product launches, and a continued increase in the awareness of the product category, all of which were offset by continued weakness in U.S. residential investment.

Commercial and industrial product sales for the fourth quarter of 2010 increased 16.9% to $52.4 million from $44.8 million for the comparable period in 2009, driven by our expanded distribution network for these products and renewed growth in several key end markets, with health care, telecom, and data center applications showing the greatest improvement. For the full year 2010, commercial and industrial product sales were down 2.0%, but displayed strong momentum in the second half as end markets began to recover.

Fourth quarter 2010 gross profit margin decreased to 39.6% from 41.3% in the same period last year, which was primarily attributable to increased commodity and material costs. Gross margin for the full year was 40.0%, which was consistent with 2009 gross margin.

Operating expenses for the fourth quarter of 2010 were $37.6 million compared to $34.3 million in the same period last year. For the full year 2010, operating expenses were $147.1 million compared to $137.3 million in 2009. Of this increase, $6.4 million was related to non-cash stock compensation expense to account for the time based vesting of equity awards issued in conjunction with our initial public offering. The remaining quarterly and full year operating expense increases were primarily driven by incremental engineering and product development investments and increased administrative costs associated with operating as a public company.

Adjusted EBITDA of $42.7 million in the fourth quarter 2010 decreased from $44.1 million in the same period last year. For the full year 2010, Adjusted EBITDA decreased to $156.2 million, compared to $159.1 million in 2009, as modest sales growth and consistent gross margins were more than offset by increased investment in the business. Adjusted EBITDA margins remained strong in fiscal 2010 at 26.4%.

Interest expense decreased in the fourth quarter of 2010 to $6.6 million, compared to $17.2 million in the same period last year, contributing to our strong net income growth. For the full year 2010, interest expense was $27.4 million compared to $70.9 million in 2009, due to debt repayments, lower LIBOR rates, and the termination of certain interest rate swap agreements.

Free cash flow, defined as net cash provided by operating activities less capital expenditures, was $26.1 million in the fourth quarter of 2010, a 6.5% decrease over the same period last year as we increased working capital and capital expenditure investment during the current year quarter. For the full year 2010, free cash flow increased by 49.6% to $104.9 million compared to $70.1 million in 2009. In the fourth quarter of 2010, the Company used $74.2 million of its cash flow to make a voluntary debt pre-payment on its first lien credit facility. Following this debt pre-payment, at December 31, 2010, the Company had $657.2 million of debt outstanding with $78.6 million of cash on hand.

OUTLOOK

Mr. Jagdfeld concluded, "Our long-term growth strategy, which we refer to as "Powering Ahead", includes four key objectives of growing the residential standby generator market, gaining industrial market share, expanding our product offering to diversify our end markets, and expanding into new geographies. We have identified and started to implement initiatives to support each of these strategic objectives, and over the next several years, we believe we will make substantial progress towards achieving our long-term growth goals."

"In 2011, while we do not expect a near-term recovery in U.S. residential investment and we are not forecasting any major outage events, we do expect growth from our residential products through additional new product introductions and increased domestic and international distribution. For our commercial and industrial products, we anticipate continued strength in 2011 led by increasing demand across certain end markets, improving market share and expanding distribution into new geographies. We are anticipating higher input costs in 2011 as a result of rising commodity prices and continued weakness in the US dollar.  We intend to offset these higher costs with selective price increases and continued focus on cost reduction. As a result, we remain optimistic that we can deliver moderate sales growth overall in 2011 while maintaining attractive gross margins and continuing to invest prudently in our operating infrastructure to support our long-term strategic growth plans."

Briggs and Stratton Announces Fiscal 1st Quarter Financial Results

MILWAUKEE, Oct 21, 2010 -- Briggs and Stratton Corporation today announced financial results for its first quarter ended September 26, 2010.

Highlights:

• First quarter fiscal 2011 consolidated net sales of $334.1 million, representing an increase of $9.5 million or 2.9% from the first quarter of fiscal 2010.
• First quarter fiscal 2011 consolidated net loss of $8.1 million, or $0.16 per diluted share, improved from a consolidated net loss of $8.7 million, or $0.18 per diluted share, one year ago.
• Net debt outstanding as of September 26, 2010 is down $106.5 million, or 40.5%, from September 27, 2009.

"We are pleased with our fiscal 2011 first quarter results as we move forward executing our strategy despite continued economic uncertainty," commented Todd J. Teske, Chairman, President and Chief Executive Officer of Briggs and Stratton. "We improved sales and operating results through a period of continued slow growth in consumer spending. Along with these improved operating results, our balance sheet remains strong as we continue to focus on efficiently managing our capital."

Consolidated Results:

Fiscal 2011 first quarter consolidated net sales were $334.1 million and the consolidated net loss was $8.1 million or $0.16 per diluted share. The first quarter of fiscal 2010 had consolidated net sales of $324.6 million and a consolidated net loss of $8.7 million or $0.18 per diluted share.  

The $9.5 million consolidated net sales increase was due primarily to increased international engine shipments as well as improved lawn and garden and snow thrower product sales volumes within our Power Products segment, offset by lower sales of pressure washers and portable generator products. The reduced net loss of $0.6 million compared to the prior year fiscal first quarter was primarily the result of increased engine sales to third party customers and improved engine plant productivity on higher production volumes, offset by Jefferson plant transition costs and lower production volumes in the Power Products segment and increased costs stemming from higher salaries and benefits expenses.

The higher salaries and benefits expenses include a $3.0 million net increase in pension and other post-retirement benefits as well as an increase in salaries and 401(k) company match benefits of $5.0 million, which have been fully restored since being temporarily reduced early in the first quarter of fiscal 2010.

Engines Segment:

Fiscal 2011 first quarter net sales were $205.0 million, which was $0.9 million or 0.4% less than the prior year. This decrease from the same quarter last year is primarily due to a reduction in intercompany sales of engines to our Power Products segment due to lower sales and production of pressure washers and portable generators, offset by an increase in international engine unit volumes to European and Asian OEMs.

The fiscal 2011 first quarter loss from operations was $5.5 million, which is $0.7 million more than the $4.9 million loss from operations experienced in the first quarter of fiscal 2010. This increase in the loss from operations over the prior year was the result of higher salaries and benefits expenses of $6.8 million, offset by improved absorption as engines produced increased 9% over the prior year first quarter.

The increase in salaries and benefits is primarily attributed to temporary reductions in salaries and 401(k) match implemented in the first quarter last year; such salaries and benefits have since been restored resulting in the increase between years.

Power Products Segment:

Fiscal 2011 first quarter net sales were $168.2 million, which was $2.3 million or 1.4% greater than the prior year. The improvement in sales compared to the same quarter last year primarily resulted from increased unit shipment volumes of lawn and garden products, offset by reduced shipment volumes of pressure washers and portable generators as retailers reduce their inventories in these categories.

The fiscal 2011 first quarter loss from operations was $5.0 million, or $7.5 million lower than the income from operations of $2.5 million in the first quarter of fiscal 2010. This decline in income from operations between years resulted from higher manufacturing spending including transition costs from the closure of our Jefferson manufacturing facility, lower absorption primarily related to the decreased production of portable generators and pressure washers, as well as increased expenses of $1.5 million related to salaries and benefits.

The increase in salaries and benefits is primarily attributed to temporary reductions in salaries and 401(k) match implemented in the first quarter last year; such salaries and benefits have since been restored resulting in the increase between years. Higher manufacturing spending is attributed to higher material costs and increased freight expense.

Corporate Items:

Interest expense was lower between years because of lower outstanding borrowings. The effective tax rate for the fiscal 2011 first quarter was a benefit of 33.4%, or $4.1 million, versus a benefit of 36.1%, or $4.9 million, in the first quarter last year. The effective tax rate benefit for the first quarter of fiscal 2011 was lower than the 2010 period because 2010included the favorable tax impact of the settlement of audits.

Financial Position:

The 8.875% Senior Notes that are due in March 2011 are classified as Short-Term Debt in the consolidated balance sheet as of the end of the fiscal 2011 first quarter. The company believes it will be able to replace these borrowings with new financing at or prior to the maturity date of the Senior Notes. In the unlikely event the company is unable to replace these borrowings with new financing upon the maturity of the Senior Notes, we believe that the availability within our existing revolving credit facility will be sufficient to pay off the outstanding Senior Notes.

Net debt at September 26, 2010 was $156.4 million (total debt of $204.1 million less $47.7 million of cash), an improvement of $106.5 million from September 27, 2009. Cash flows used by operating activities for the fiscal 2011 first quarter were $55.5 million compared to cash provided by operating activities of $11.9 million in the fiscal 2010 first quarter. 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.

Outlook:

The company continues to project that fiscal 2011 net income will be in the range of $60 to $70 million or $1.20 to $1.40 per diluted share. Consolidated net sales are projected to be approximately 2% to 4% 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 5.0% to 6.0%, and interest expense and other income are forecasted to be in the range of $23 million to $25 million and $4 million to $5 million, respectively. The effective tax rate for the full year is projected to be in a range of 32% to 35%.