CEO Aaron Jagdfeld Leads Generac Growth

May 14 -- Aaron Jagdfeld, 41, runs a fast-growing company with $1 billion in annual ­revenue. He’s president and CEO of ­Generac Holdings, a maker of automatic standby generators based in Waukesha, Wis.

Jagdfeld joined Generac in 1994 and became its chief executive in 2008. In the past two years, its workforce has grown from about 1,400 to approximately 3,000 employees, largely due to acquisitions.

EL: How did you become CEO at such a young age?

Jagdfeld: I started here in finance and later became chief financial officer [in 2002]. I think it’s my deep understanding of the business, the products, the customers, the employees, even the supply chain.

EL: If you were to pick one skill that drives your success, what would it be?

Jagdfeld: Decision-making. You’ve got to make educated decisions through data as a leader. With big decisions, you want to solicit opinions from your team, the board of directors and other stakeholders and understand the impact any one decision will have.

EL: But doesn’t gathering wide-ranging input make it harder to decide?

Jagdfeld: I’ll pick a path, and the input process becomes a validation of that path. You can’t go out to people with an open question and just go in any or all directions they take you. 

EL: What lessons have you learned to make sound decisions?

Jagdfeld: You need to act swiftly and decisively. Don’t wait for a problem to solve itself. People resolve problems. My clock speed runs faster. If I have the data, I’ll advance toward making a decision.

EL: How about personnel decisions?

Jagdfeld: If you see someone failing or flailing, give proper feedback quickly.

EL: As CEO, what metrics do you track?

Jagdfeld: We’re heavy into numbers. We use KPIs [key performance indicators] to make sure our team has the resources to execute properly. But to me, leadership is also about having energy: getting excited about our prospects and our growth.

EL: How do you ex­press that excite­­ment?

Jagdfeld: My role is to develop the team. You turn into a head coach, calling plays and executing plays. I get to be a cheerleader, coach and traffic cop. Confidence comes from the team saying, “We can do this.”

EL: How do you set goals?

Jagdfeld: There’s an art to giving teams the confidence, resources and drive to achieve goals. You want to set goals that don’t disillusion people.

EL: How would you describe Generac’s culture?

Jagdfeld: In 2008, we had a culture shaped by the company’s founder. When I became CEO, I had a blank slate to develop our culture going forward. We created a list of what we wanted to keep and what we wanted to change.

We formed a “Culture Club” of employees to go through the list. We kept elements such as our speed, flexibility and work ethic. We changed to develop more team orientation.

www.businessmanagementdaily.com     

Press Release from Schiller Grounds Care regarding April 24 Article "Schiller Grounds Care's Classen Manufacturing Norfolk Plant To Close"

CORRECTION

In the May 1, 2013, Vol. 180 issue of “OPE-In-The Know”, Item # 10 entitled “Schiller Grounds Care’s Classen Manufacturing Norfolk Plant to Close,” was a cut and paste article taken directly from the Web Site of the Norfolk Daily News located in Norfolk, NE.  www.norfolkdailynews.com

The president of Schiller Grounds Care, parent company of Classen, has informed me that the April 24, 2013, Norfolk Daily News article contained numerous inaccuracies; that the closing of the leased Classen plant is part of a manufacturing consolidation; and that the Classen brand will continue to be manufactured in two other Schiller Grounds Care plants.

We’re delighted to provide you with a press release directly from Schiller Grounds Care giving you the accurate facts about the manufacturing consolidation

Please read the brief press release from Schiller Grounds Care below.

                       

Announcement from Schiller Grounds Care

April 24, 2013

Schiller Grounds Care announced today, it is consolidating its manufacturing operations. Effective immediately, production at its Norfolk, Nebraska facility is being consolidated into two of Schiller’s existing operations, Johnson Creek, WI and Southampton, PA.  The Norfolk facility has been leased since the Classen brand was acquired in 2004.  Approximately 27 full time employees are impacted with several individuals being offered positions to relocate.  The decision to consolidate is in no way a reflection on the work of the Classen employees, nor the talent and pride with which they do it.  This consolidation will help ensure that the performance of Classen products remains best in class, and that Schiller’s costs are structured in a way that will keep it strong, efficient and competitive both in today’s economic environment and into the future.

For further inquiries regarding this announcement, please contact Nina DeRosa, at 215- 357-5110.

CPSC, MTD Products Recalls Cub Cadet Commercial Lawn Mowers Due to Fire Risk

Recall date: APRIL 29, 2013

Recall number: 13-733

Recall Summary

Name of product:

Cub Cadet 2011 Model Year Commercial Zero Turn Mowers

Hazard:

Fuel can leak from the vent valve grommet on top of the fuel tank during operation, posing a risk of fire.

Remedy:

Repair

Consumer Contact:

Cub Cadet; toll-free at (888) 848-6038, from 8 a.m. to 5 p.m. ET Monday through Friday, from 9 a.m. to 5 p.m. ET Saturday, or online at www.cubcadet.com and click on “Product Recalls” for more information.

Recall Details

Units

About 2,100

Description

This recall involves eight 2011 model Cub Cadet commercial zero turn lawn mowers. Models included in the recall are: M54-KH, M60-KH, M60-KW, M72-KW, S6031-KW, S7237-KW, TANK L48 and TANK L60.  Mowers included in the recall were manufactured between January 2011 and December 2011. A label located on the frame under the foot rest lists the model number and the month and year date of manufacture (DOM).

Incidents/Injuries

Cub Cadet has received 106 reports of fuel leaking or seeping from the top of the tank, including one report of a fire. No injuries have been reported.

Remedy

Consumers should immediately stop using the recalled mowers and contact an authorized Cub Cadet service dealer for a free repair. Cub Cadet is contacting its customers directly.

Sold at

Independent Cub Cadet dealers nationwide from January 2011 through January 2013 for between $7,700 and $18,700.

Manufacturer

MTD Products Inc, of Cleveland, Ohio

Manufactured in United States

City of Beatrice Loses a Lawn Mower Pioneer

BEATRICE – May 1 -- A pioneer in the lawn mower industry who helped turn sketches drawn in his basement into two successful businesses passed away Monday evening.

Wilfred H. “Dick” Tegtmeier, 74, of Beatrice, was a familiar face around town and instrumental in co-founding Exmark Manufacturing with three others before branching out on his own to start Encore Manufacturing.

Tegtmeier graduated from Hollenberg High School in Hollenberg, Kan. in 1956 and was the only boy in the class of four. He did not attend college.

Tegtmeier’s career in the mower business began at Kees Manufacturing, where he worked with lawn mowers.

“He started with Kees Manufacturing back in the 1970s and they asked him to develop a line of lawnmowers, said Dick’s son, Doug Tegtmeier. “Around 1983, the opportunity came up where he had a chance to spin off and start Exmark with a couple other guys.

“He was a pivotal guy in the lawn and garden business. They always call Beatrice ‘the lawn mower capital of the world,’ and he was pretty much responsible for the whole thing.”

Exmark began with sketches in the founders’ homes before a prototype was made that was displayed at trade shows.

In 1983, Exmark became one of the first businesses to locate in Beatrice's Industrial Park.

Known for making bold business decisions, Dick left Exmark in 1988 when he formed a new mower company, Encore Manufacturing, which was also located in the Industrial Park -- a move many people questioned at the time.

“When we started Exmark, people said, ‘You’re crazy,’” Dick told the Daily Sun at a company anniversary celebration in 2002. “When we started Encore, they said, ‘You have to be a complete idiot.’”

At the time Dick made that comment, Encore’s business has grown 640 percent since its first year and the building had to be expanded in 1993.

“He pretty much risked everything he had to make Encore work,” Doug said. “It was very risky at the time, but it was also a good market. It was scary.”

Encore employed 42 people at its peak, but after 23 years, a harsh economy took its toll on the business and Dick sold Encore Manufacturing to the China-based World Lawn Power Equipment, on the condition the factory still operate in its Beatrice location.

Beatrice Mayor Dennis Schuster said without the two businesses Tegtmeier helped settle in the area, Beatrice’s Industrial Park would likely be a shell of its current self.

"There would probably be one or two occupied buildings, but Exmark’s homegrown-products were really an anchor," Schuster said. “Dick was one heck of an entrepreneur and someone who will be greatly missed.”

While the public will likely remember Dick Tegtmeier as a pioneer of the lawn mower industry, for his family, memories will extend beyond a savvy businessman to a caring family man.

“He was the best man at my wedding, we loved to golf and he enjoyed playing with his grandson,” Doug said. “He just loved his community, family and friends. He taught me how to be a good man.”

Funeral services will be held at 10:30 a.m. Saturday, May 4, at St. Paul Lutheran Church in Beatrice. A family and friends prayer service will be held at 10:15 a.m. Saturday in the fellowship room of the church.

Deere's Horicon Plant Supplies Hunters and the U.S. Army

Horicon – April 24 -- In a factory that made horse-drawn farming equipment in the 1800s, John Deere Corp. has a modern assembly line that employs more than 1,000 people making riding lawn mowers and utility vehicles.

The latter, especially, have grown in popularity as outdoor enthusiasts want something that can carry more passengers and cargo than three-wheel all-terrain vehicles.

In a year when much of the lawn-and-garden industry is hurting from a slow start to spring and a sputtering global economy, John Deere is glad to build the popular utility vehicles, which have bench seats, fully enclosed cabs, a heater, and work equipment such as a snowplow.

Originally used for farm work, the John Deere Gators are used for hunting and general recreation. For thrill seekers, some of the little machines can reach speeds topping 40 mph.

About 40% of the Horicon factory's production is now for Gators, compared with none before 2009 when the factory focused on lawn-and-garden equipment.

Deere closed a plant in Canada and moved the Gator production to Wisconsin and Mexico.

The Horicon plant is Dodge County's largest manufacturer, with 1,100 hourly and 300 salaried employees, according to county officials.

"We would probably have a little higher employment level if lawn-and-garden tractor sales weren't so sluggish" this spring, said Steve Johnson, John Deere Horicon Works manager.

"The utility vehicle business is more year-round and has higher sales in the fall for hunting. It helps us level out our workforce and have employees concentrating on lawn equipment in the spring. It's a very good mix for the factory," he added.

The U.S. military ordered Gators for use in the wars in Iraq and Afghanistan, where the small vehicles were dropped out of helicopters to reach remote areas.

The six-wheeled military utility vehicles, called M-Gators, have been used to haul supplies and transport injured soldiers. The military has experimented with a robotic version that can send video, sounds and sensor readings from hostile areas without putting soldiers at risk.

"There's also a pure recreational market for utility vehicles that's starting to mature. They're faster, high-performance machines," Johnson said.

John Deere has spent millions of dollars upgrading its Horicon factory that produced the company's first lawn-and-garden tractor in 1963 and has undergone a high-tech makeover that's helped save jobs.

The credit goes to the plant's employees, Johnson said.

"They give us great suggestions on how to improve quality levels, and how to move out of their way so they can be more efficient and productive. When we do that, we ultimately reduce our costs. It allows us to stay competitive with Mexico and China," he added.

For decades, the plant manufactured farm equipment. Then it morphed into riding lawn tractors, new types of riding mowers, and utility vehicles.

The latest John Deere lawn tractor, the X700 series, has a mowing deck that can be attached and removed while the operator remains in the seat.

Product research and development and testing are done in Horicon.

"Over the years, this plant has reinvented itself multiple times in order to remain a viable business," Johnson said.

Employees commute from about a 50-mile radius, including Milwaukee County, and shop employees are represented by the International Association of Machinists and Aerospace Workers.

The plant has a beneficial effect on smaller companies that supply parts and services.

"John Deere has quite a reach in this area. I have dealt with many firms that do support work for them," said Trent Campbell, executive director of the Beaver Dam Area Development Corp.

"They are a large entity. I couldn't imagine Horicon without that plant thriving," Campbell said.

Rick Barrett     www.jsonline.com      

ARI Named One of Wisconsin's Fastest-Growing Public Companies

MILWAUKEE, April 25 -- ARI Network Services, a leader in creating, marketing, and supporting software, SaaS and DaaS solutions that connect consumers, dealers, distributors, and manufacturers in selected vertical markets, announced today that it was recognized in The Business Journal's Top 25 List as one of Wisconsin's fastest-growing public companies.

"It's an honor to be included in the Top 25 List this year," said Roy W. Olivier, CEO and President of ARI. "Despite a sluggish economy in the vertical markets we serve, we have been able to successfully execute on our strategic growth objectives. We have a lot of momentum that sets the stage for sustained, profitable growth and I'm excited about our future," added Olivier. "The progress we make every day is a direct result of our employees, customers and loyal shareholders hard work and support."  According to Olivier, ARI has been on the Top 25 List in four out of the last five years.

The Top 25 List is published annually by The Business Journal . All public companies headquartered in Wisconsin with a stock price of $1 or more between February and April 2012, and positive revenue growth from fiscal 2011 to 2012 were considered for the list.  The information on each company is gathered by The Business Journal from annual reports and financial statements.

ARI Network Services, Inc. ("ARI") creates award-winning software-as-a-service ("SaaS") and data-as-a-service ("DaaS") solutions that help equipment manufacturers, distributors and dealers in selected vertical markets Sell More Stuff!™ – online and in-store. Our innovative products are powered by a proprietary library of enriched original equipment and aftermarket content that spans more than 10.5 million active part and accessory SKUs, 469,000 models and $1.7 billion in retail product value.  We remove the complexity of selling and servicing new and used inventory, parts, garments, and accessories ("PG&A") for customers in automotive tire and wheel, powersports, outdoor power equipment, marine, RV and white goods industries. More than 22,000 equipment dealers, 195 distributors and 140 manufacturers worldwide leverage our web and eCatalog platforms to Sell More Stuff!™.

Schiller Grounds Care's Classen Manufacturing Plant to Close in Norfolk, NE

April 24 -- Classen Manufacturing, a Norfolk, NE company that began in Norfolk 40 years ago, is closing its doors.

The company at 1401 Logan St. in south Norfolk manufactured commercial turf and lawn care products sold worldwide.

Larry Classen, who was president of the Norfolk operations, said the final day of production was Tuesday.

Classen said the closure came suddenly and without warning from Schiller Grounds Care of Southhampton, Pa., which owns Classen Manufacturing. Schiller Grounds Care also has plants in Johnson Creek, Wis., and Southampton, Pa.

Classen said he isn’t exactly sure why the company decided to close the Norfolk plant, which was started in 1973 by his parents, Tom and Sylvia Classen.

“It’s not the way we wanted to celebrate 40 years,” he said Wednesday morning.

After its start as a repair facility, Classen Manufacturing went on to manufacture wrought iron products, realty sign posts, automatic can crushers and other miscellaneous items in the 1970s and 1980s.

In 2004, the company was sold to Schiller-Pfeiffer, Inc. The company now goes by the name Schiller Grounds Care.

Larry Classen said the Norfolk plant had 28 employees, including other members of the Classen family. The only employee who still has a job is Matt Classen, Larry’s son, who is working in Southampton, Pa., he said.

Classen said he still owns the building in Norfolk and will be looking for a new manufacturer to locate in it.

Travis Schwartzer, who was one of the Classen employees, said workers were told about the closure Tuesday afternoon by Jim Beck.

“He said, ‘Stop your work. Put down your tools. Gather in the assembly area. I’ve got something to say,’ ” Schwartzer said.

Schwartzer said employees learned of the closure “a little past 3:30” p.m. Tuesday.

“I’m just shocked,” he said. “I can hardly believe it.”

In the past three weeks, employees had been working six days a week. Schwartzer said most of his work in recent weeks involved building blade shafts.

Some of the products the company made in recent weeks included aerators, power rakes and industrial lawn equipment, he said.

There’s a lot of good employees who are now out of work. Many of them are in their 40s and 50s and have families, he said.

Schwartzer said he isn’t sure what he will do. He just landed the job with Classen on March 11 and was happy with it because it meant he no longer had to work three part-time jobs.

“It just kills me,” he said. “It hurts. I didn’t think that just plain news could cause physical pain, but this does.”

Schwartzer said his fiance has a job that doesn’t pay much and he has an 18-month-old boy at home. He finally was able to get a job that provided health insurance and now isn’t sure what he will do.

Jerry Guenther       www.norfolkdailynews.com

Husqvarna Group Interim Report January - March 2013

Stockholm April 24, 2013

Hans Linnarson, President and CEO:

“Husqvarna’s first quarter results were impacted by unfavorable weather conditions and continued macroeconomic slowdown in Europe. Earnings were also negatively affected by the strong Swedish Krona which accounted for more than half of the decline in operating income, and reduced manufacturing utilization to meet the lower demand. Improvements in Americas and Construction were not enough to offset the downturn in Europe.

We are pleased with the results coming from operational improvements in our business area Americas. The effects of mix, channel management, price and manufacturing efficiencies all contributed to an improved development of operating income and margin in the first quarter.

The positive development for Construction continued, although it was mixed between the different regions. Operating income and margin improved over prior year, primarily due to a positive product mix impact.

We have a continued cautious outlook for demand in Europe, while the outlook for North America remains more positive. Late last year we announced actions to reduce cost and improve flexibility. The initiatives are on track and will gradually deliver savings.”

·         Net sales amounted to SEK 9,024m (9,811). Adjusted for exchange rate effects, net sales decreased -4%.

·         Operating income decreased to SEK 688m (930), which entirely relates to Europe & Asia/Pacific.

·         Changes in exchange rates negatively impacted operating income by SEK 135m year over year.

·         Operating cash flow improved to SEK -1,786m (-2,443).

·         Earnings per share decreased to SEK 0.81 (1.10).

·         Announcement of SEK 1bn investment in manufacturing of chainsaw chains and cylinders.

·         Kai Wärn was appointed new President and CEO as of July 1, 2013.

FIRST QUARTER

Net Sales

Net sales for the first quarter decreased by -8% to SEK 9,024m (9,811). Adjusted for exchange rate effects, net sales for the Group declined by -4%, for Europe & Asia/Pacific by -7%, for Americas by -2%, while sales for Construction were unchanged.

Operating Income

Operating income for the first quarter amounted to SEK 688m (930) and the corresponding operating margin amounted to 7.6% (9.5). Operating income increased for Americas and Construction, while it decreased for  Europe & Asia/Pacific.

Operating income, excluding changes in exchange rates, was negatively affected mainly by the lower sales volume, product mix and lower factory utilization levels. Price and material impacted operating income positively.

Changes in exchange rates had a total negative impact on operating income of SEK 135m compared to the first quarter 2012.

FINANCIAL ITEMS NET

Net financial items amounted to SEK -86m (-134) for the first quarter. The lower financial cost is explained mainly by lower interest rates. The average interest rate on borrowings at the end of the quarter was 3.6%

INCOME AFTER FINANCIAL ITEMS

Income after financial items decreased to SEK 602m (796) corresponding to a margin of 6.7% (8.1).

TAXES

Taxes amounted to SEK -135m (-163), corresponding to a tax rate of 22% (20) of income after financial items.

EARNINGS PER SHARE

Income for the quarter amounted to SEK 467m (633), corresponding to SEK 0.81 (1.10) per share.

OPERATING CASH FLOW

Operating cash flow for the quarter amounted to SEK -1,786m (-2,443). The improved operating cash flow was mainly related to changes in inventories and trade receivables.

Due to the seasonality of the Group’s operations, operating cash flow is normally negative in the first quarter.

FINANCIAL POSITION

Group equity as of March 31, 2013, excluding non-controlling interests, amounted to SEK 11,093m (11,261), corresponding to SEK 19.4 (19.7) per share. Group equity was negatively affected by exchange differences on translating foreign operations to SEK amounting to SEK -389m.

Net debt amounted to SEK 10,053m (10,733) as of March 31, 2013, of which liquid funds amounted to SEK 1,412m (1,434) and interest bearing debt amounted to SEK 11,465m (12,167), including pensions. The major currencies used for debt financing are SEK and USD. Net debt decreased by SEK -25m as a result of changes in exchange rates.

The net debt/equity ratio amounted to 0.90 (0.95) and the equity/assets ratio to 35% (34).

In addition to the amendment of IAS 19 “Employee benefits” which is shown on pages 12 and 13, Husqvarna Group has reclassified the net defined pension liability to interest-bearing financial liability and included the liabilities in the calculation of net debt.

On March 31, 2013, long-term loans including financial leases amounted to SEK 6,574m (6,883) and short term loans including financial leases to SEK 3,104m (3,708). Long-term loans consist of SEK 4,061m (3,158) in issued bonds, and bank loans and financial leases of SEK 2,513m (3,725). The bonds and bank loans mature in 2014 and onwards. The Group also has an unutilized SEK 6 bn syndicated revolving credit facility, with maturity in 2016.

PERFORMANCE BY BUSINESS AREA

EUROPE & ASIA/PACIFIC

Q1

Net sales for Europe & Asia/Pacific decreased by -11% in the first quarter 2013. Adjusted for exchange rate effects, net sales decreased by -7%.

Demand for lawn and garden products were negatively impacted by a late start of spring due to unusually cold weather in most European markets. Consumer demand remained weak as the macroeconomic uncertainty continued.

Due to the weak demand, the Group’s sales declined. The down-turn was related to all product categories, by sales channel it was mainly related to the retail channel.

Operating income amounted to SEK 555m (846) and the operating margin amounted to 13.4% (18.2).

Changes in exchange rates had a negative year-on-year effect of SEK 146m on operating income. Excluding impact from changes in exchange rates, the lower operating income was mainly related to the lower sales, negative product mix and lower utilization of factories.

AMERICAS

Q1

Net sales for Americas decreased by -5% in the first quarter 2013. Adjusted for exchange rate effects, net sales decreased by -2%.

Although supported by an improving economy, demand for lawn and garden equipment in North America slightly lagged 2012 levels in the first quarter, mainly because the early spring of prior year was not repeated.

The Group’s sales in Canada and Latin America increased, while sales in the U.S. were lower. Sales to the dealer channel increased in all regions.

Operating income amounted to SEK 137m (83) and the corresponding operating margin improved to 3.3% (1.9). The effects of channel management and mix, price and manufacturing efficiencies contributed to the positive result. Changes in exchange rates had a positive year-on-year effect of SEK 8m on operating income.

CONSTRUCTION

Net sales for Construction decreased by -4% in the first quarter 2013. Adjusted for exchange rate effects, sales were unchanged.

Total construction market activity during the first quarter 2013, compared with the first quarter prior year, was unchanged in North America, lower in Europe and higher in the rest of the world. The Group’s sales of construction products had a similar development.

Operating income increased to SEK 46m (39) and the operating margin improved to 6.5% (5.3). Changes in exchange rates had a positive year-on-year effect of SEK 3m on operating income. Operating income was also positively impacted mainly  by mix, as a result of new products with higher margins representing a larger share of total sales.

PARENT COMPANY

Net sales in Q1 2013 for the Parent Company, Husqvarna AB, amounted to SEK 3,217m (3,442), of which SEK 2,660m (2,836) referred to sales to Group companies and SEK 557m (606) to external customers.

Income after financial items amounted to SEK -60m (357). Income for the period was SEK -111m (222).

Investments in tangible and intangible assets amounted to SEK 92m (83). Cash and cash equivalents amounted to SEK 90m (87) at the end of the quarter. Undistributed earnings in the Parent Company amounted to SEK 17,308m (16,738).

ANNUAL GENERAL MEETING

The Annual General Meeting of Husqvarna AB (publ) was held on April 11, 2013, in Jönköping, Sweden. A dividend of SEK 1.50 (1.50) per share was resolved.

INVESTMENT IN CORE TECHNOLOGIES

Husqvarna Group has decided to invest around SEK 1bn during 2013 - 2015 in a new production facility for manufacturing of chainsaw chains in Huskvarna, Sweden, where the Group already manufactures professional chainsaws, brush cuttersand trimmers. The Group will also invest in expanded capacity for manufacturing of cylinders for two-stroke engines for chainsaws in the Group’s facilities in Nashville, U.S. and in Huskvarna, Sweden.

KAI WÄRN APPOINTED NEW PRESIDENT AND CEO AS OF JULY 1

The Board of Directors of Husqvarna AB has appointed Kai Wärn as President and CEO of Husqvarna Group effective as of July 1, 2013. Hans Linnarson, who was appointed President and CEO in 2011, will continue to work for the Group until he retires early 2014.

Kai Wärn was born in 1959 and is a graduate from the Royal Institute of Technology in Stockholm, Sweden.

Previous positions include President and CEO at Seco Tools AB, a leading global metal cutting tools company, at that time listed at NASDAQ OMX Nordic stock exchange and President of the Business Unit ABB Robotics Products within ABB Group. Most recently Kai has held the position as Operations Partner at the private equity firm IK Investment Partners.

Briggs and Stratton Reports Results for the 3rd Quarter and 1st Nine Months of Fiscal 2013

MILWAUKEE -- April 19 -- Briggs and Stratton Corporation today announced financial results for its third fiscal quarter and first nine months ended March 31, 2013.

Highlights:

Third quarter fiscal 2013 consolidated net sales were $637.3 million, or 11.5% lower than the third quarter of fiscal 2012.

Fiscal 2013 third quarter consolidated net income excluding restructuring charges was $43.9 million, or $5.6 million lower than the adjusted net income of $49.5 million in the third quarter of fiscal 2012.

The Company's restructuring program started in fiscal 2012 achieved pre-tax savings of $28.8 million during the first nine months of fiscal 2013.

The Company recorded pre-tax restructuring charges of $6.6 million ($5.4 million after tax or $0.11 per diluted share) during the third quarter of fiscal 2013.

"We continue to see soft demand across international markets for engines and products due to macroeconomic concerns weighing on the minds of consumers and unfavorable weather conditions particularly in Australasia.  Brazil continues to be a bright spot for growing our international products business as our Branco acquisition is performing as anticipated," commented Todd Teske, Chairman, President and Chief Executive Officer of Briggs and Stratton Corporation.

"Here in the U.S., the spring lawn and garden season has been delayed by at least a few weeks due to a prolonged cold and wet spring in many parts of the country. This is significantly different from last year when we had an unusually early start to spring with very warm weather across the country.  The drought that impacted our industry so significantly last season appears to be improving east of the Mississippi River which is encouraging for the upcoming season. Despite a later start to spring compared to last year, we are optimistic that the U.S. market will be in line with our anticipated growth projections of 4 to 6%."

Consolidated Results:

Consolidated net sales for the third quarter of fiscal 2013 were $637.3 million, a decrease of $82.8 million or 11.5% from the third quarter of fiscal 2012. Fiscal 2013 third quarter consolidated net income including restructuring charges was $38.5 million, or $0.78 per diluted share. The third quarter of fiscal 2012 consolidated net income including restructuring charges was $39.9 million, or $0.80 per diluted share.

Sales of engines and products to international regions decreased by approximately $37 million compared to last years' third quarter. The majority of the remaining decrease in sales in the quarter was due to our decision to no longer sell lawn and garden products to large mass retailers in the U.S.  

Included in consolidated net income for the third quarter of fiscal 2013 were pre-tax charges of $6.6 million ($5.4 million after tax or $0.11 per diluted share) related to previously announced restructuring actions. Included in consolidated net income for the third quarter of fiscal 2012 were pre-tax charges of $19.8 million ($9.6 million after tax or $0.19 per diluted share) also related to the restructuring actions. After considering the impact of the restructuring charges, the adjusted consolidated net income for the third quarter of fiscal 2013 was $43.9 million or $0.89 per diluted share, which was $5.6 million or $0.10 per diluted share lower compared to the third quarter fiscal 2012 adjusted consolidated net income of $49.5 million or $0.99 per diluted share.

For the first nine months of fiscal 2013, consolidated net sales were $1.385 billion, a decrease of $180.0 million or 11.5% when compared to the same period a year ago. Consolidated net income for the first nine months of fiscal 2013 was $21.4 million or $0.44 per diluted share. Consolidated net income for the first nine months of fiscal 2012 was $37.4 million or $0.74 per diluted share.

Included in consolidated net income for the first nine months of fiscal 2013 were pre-tax charges of $18.4 million ($13.0 million after tax or $0.27 per diluted share) related to the aforementioned restructuring actions. Included in consolidated net income for the first nine months of fiscal 2012 were pre-tax charges of $19.8 million ($9.6 million after tax or $0.19 per diluted share) also related to the restructuring actions.

After considering the impact of the restructuring charges, adjusted consolidated net income for the first nine months of fiscal 2013 was $34.4 million or $0.71 per diluted share, which was a decrease of $12.6 million or $0.22 per diluted share compared to the first nine months of fiscal 2012 adjusted consolidated net income of $47.0 million or $0.93 per diluted share.

Engines Segment

Engines Segment fiscal 2013 third quarter net sales were $451.9 million, which was $46.1 million or 9.3% lower than the third quarter of fiscal 2012. This decrease in net sales was driven by reduced shipments of engines used primarily on walk and ride equipment in European and North American markets as OEM customers manage inventory levels due to a later start to warmer spring weather. Net sales were also lower due to unfavorable foreign exchange of $5.4 million primarily due to a decrease in the value of the Euro in fiscal 2013. These decreases in net sales were partially offset by the timing of generator engine replenishment sales in the U.S. following the recent hurricane season.

The Engines Segment adjusted gross profit percentage for the third quarter of 2013 was 23.5%, which was 1.4% higher compared to the third quarter of fiscal 2012. The adjusted gross profit percentage was favorably impacted by 3.6% due to lower manufacturing costs, partially offset by 1.2% due to unfavorable foreign exchange and by 1% due to unfavorable absorption of fixed manufacturing costs as a result of a 4% reduction in engines built. The lower manufacturing costs resulted from $3.4 million of cost savings as a result of restructuring actions initiated in fiscal 2012, lower material costs, and start-up costs incurred in fiscal 2012 associated with launching our phase III emissions compliant engines.

The Engines Segment engineering, selling, general and administrative expenses were $43.9 million in the third quarter of fiscal 2013, a decrease of $1.3 million from the third quarter of fiscal 2012 primarily due to lower compensation costs of $2.5 million as a result of the previously announced global salaried employee reduction and reduced selling expenses, partially offset by $0.6 million of increased pension expense compared to the same period last year. 

Engines Segment net sales for the first nine months of fiscal 2013 were $890.6 million, which was $96.9 million or 9.8% 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 for the European and Australasian markets. European markets were off considerably given macroeconomic issues and unfavorable weather conditions.  Australasia markets were off due to a significant lack of rainfall in highly populated areas. In addition, sales were lower in fiscal 2013 due to an unfavorable mix of engines sold that reflected proportionately lower sales of large engines, and unfavorable foreign exchange of $9.7 million primarily related to the Euro.

The Engines Segment adjusted gross profit percentage for the first nine months of 2013 was 21.3%, which was 1.4% higher compared to the first nine months of fiscal 2012. The adjusted gross profit percentage was favorably impacted by 3.4% due to lower manufacturing costs, partially offset by 1% due to unfavorable foreign exchange and by 1% due to unfavorable absorption of fixed manufacturing costs as a result of a 5% reduction in engines built. The lower manufacturing costs resulted from $8.1 million of cost savings as a result of restructuring actions initiated in fiscal 2012, lower material costs, and start-up costs incurred in fiscal 2012 associated with launching our phase III emissions compliant engines.

The Engines Segment engineering, selling, general and administrative expenses were $130.0 million in the first nine months of fiscal 2013, or $4.7 million lower compared to the first nine months of fiscal 2012 primarily due to lower compensation costs of $7.4 million as a result of the previously announced reduction of 10% of the global salaried workforce and reduced selling costs in response to the softness in the global markets, partially offset by $2.7 million of increased pension expense compared to the same period last year.

Products Segment

Products Segment fiscal 2013 third quarter net sales were $231.5 million, a decrease of $49.7 million or 17.7% from the third quarter of fiscal 2012. The decrease in net sales was primarily related to our decision to exit the sale of lawn and garden equipment through national mass retailers.  In addition, sales of lawn and garden equipment and pressure washers decreased in North America from last year as a result of a later start to the spring selling season and decreased in international markets due to continued drought conditions in parts of Australasia. The net sales decrease was partially offset by net sales from the acquisition of Branco that were in line with expectations.  

The Products Segment adjusted gross profit percentage for the third quarter of 2013 was 12.0%, which was 1.2% lower than the adjusted gross profit percentage for the third quarter of fiscal 2012. The adjusted gross profit percentage decreased 3.4% due to unfavorable absorption associated with a 35% decrease in production in order to control inventory levels. This decrease was partially offset by a benefit of 1.7% due to cost savings of $4.0 million as a result of restructuring actions initiated in fiscal 2012.                                                                                                   

The Products Segment fiscal 2013 third quarter engineering, selling, general and administrative expenses were $26.8 million, a decrease of $1.7 million from the third quarter of fiscal 2012. The decrease was attributable to lower compensation costs of $0.7 million as a result of the previously announced reduction of 10% of the global salaried workforce, $0.7 million of lower bad debt expense, and reduced selling costs in response to the softness in the global markets.

Products Segment net sales for the first nine months of fiscal 2013 were $602.3 million, a decrease of $129.6 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 significantly below average snowfall in North America and reduced sales of lawn and garden equipment resulting from prolonged drought conditions in the United States and Australasia. In addition, the decrease in net sales was impacted by our decision to exit the sale of lawn and garden equipment through national mass retailers. The decrease in net sales was partially offset by higher shipments of portable and standby generators in the North American market.

The Products Segment adjusted gross profit percentage for the first nine months of 2013 was 11.9%, which was 0.6% lower compared to the adjusted gross profit percentage of the first nine months of fiscal 2012. The adjusted gross profit percentage decreased 2.6% due to unfavorable absorption associated with a 43% decrease in production volume in order to control inventory levels.

This was partially offset by a 1.8% benefit due to cost savings of $11.1 million as a result of restructuring actions. We reduced production volumes in the first nine months of fiscal 2013 in order to manage inventory levels in response to a decline in near-term market demand. 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 spring season.

The Products Segment engineering, selling, general and administrative expenses were $75.6 million in the first nine months of fiscal 2013, a decrease of $4.4 million from the first nine months of fiscal 2012. The decrease was attributable to lower compensation costs of $2.2 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 $0.1 million for both the third quarter and first nine months of fiscal 2013.

The effective tax rate for the third quarter and the first nine months of fiscal 2013 was 27.6% and 27.5% respectively, compared to 20.4% and 13.4% for the same respective periods last year. The tax rate for the third quarter of fiscal 2013 is lower than the 35% statutory U.S. rate due to the reenactment of the U.S. federal research and development and other credits in the amount of $1.0 million and foreign tax credits in the amount of $0.5 million which were partially offset by additional taxes of $1.0 million due to non-deductible expenses related to the Ostrava, Czech Republic plant closing. 

The effective tax rate for the first nine months of fiscal 2013 was lower than the 35% statutory U.S. rate due to the aforementioned credits and non-deductible expenses and non-deductible acquisition costs increasing the tax expense by $0.5 million.  The effective rate for the third quarter of fiscal 2012 was lower as a result of recording a net benefit of $3.3 million related to Ostrava plant restructuring charges incurred during that quarter. The effective rate for the first nine months of fiscal 2012 was impacted by the aforementioned restructuring charges and a net benefit of $5.0 million related to the settlement of U.S. audits and the expiration of a non-U.S. statute of limitation period during fiscal 2012.

Financial Position:

Net debt at March 31, 2013 was $239.9 million (total debt of $262.5 million less $22.6 million of cash), or $17.7 million lower from the $257.6 million (total debt of $274.0 million less $16.4 million of cash) at April 1, 2012. Cash flows used in operating activities for the first nine months of fiscal 2013 were $73.8 million compared to $166.7 million in the first nine months of fiscal 2012. The improvement in operating cash flows was primarily related to lower working capital needs in the first nine months of fiscal 2013 associated with less of an increase in accounts receivable and inventory compared to the same period last year.

Restructuring:

The Company's execution of its previously announced restructuring actions remains largely on schedule. In the third quarter of fiscal 2013, the Company entered into an agreement to sell the Ostrava, Czech Republic manufacturing facility. The transaction closed early in the fourth fiscal quarter. The Company continues to make progress towards finalizing its exit from the Newbern, Tennessee manufacturing facility and the move of horizontal engine manufacturing from its Auburn, Alabama plant to China. As noted previously, pre-tax restructuring costs for the third quarter and first nine months of fiscal 2013 were $6.6 million and $18.4 million, respectively. The total estimated pre-tax expense related to restructuring actions in fiscal 2013 is expected to be $20 million to $22 million. In addition, the Company continues to anticipate pre-tax savings associated with restructuring actions of $32 million to $37 million in fiscal 2013 and $40 million to $45 million in fiscal 2014 as compared to 2012.

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 nine months of fiscal 2013, the Company repurchased approximately 1.2 million shares on the open market at an average price of $18.96 per share.

Revised Outlook:

Due to continued weakness in consumer spending for outdoor power equipment in our international markets and a significantly reduced market for snow thrower products in the U.S. and Europe, we are revising our fiscal 2013 net income projections to be in a range of $56 million to $65 million or $1.16 to $1.33 per diluted share. These net income projections include the results of the Branco acquisition closed on December 7, 2012 and are prior to the impact of any additional share repurchases and costs related to our announced restructuring programs.

The market growth estimates of 4% to 6% for the U.S. lawn and garden market remain unchanged; however, the lower end of the net income projections contemplate a later start to the spring lawn and garden season in the U.S. which could potentially have the impact of extending the season past fiscal 2013 at the end of June and into the first  quarter of fiscal 2014.

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 nine 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. prior to February 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 $2.0 billion.  Operating income margins are expected to improve over fiscal 2012 and be in a range of 4.8% to 5.3% 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 30% to 33%, and capital expenditures are projected to be approximately $45 million to $50 million.  

About Briggs and Stratton Corporation:

Briggs and Stratton Corporation, headquartered in Milwaukee, Wisconsin, is the world's largest producer of gasoline engines for outdoor power equipment. Its wholly owned subsidiaries include North America's number one manufacturer of portable generators and pressure washers, and it is a leading designer, manufacturer and marketer of lawn and garden and turf care through its Simplicity®, Snapper®, Ferris®, Murray®, Branco® and Victa® brands. Briggs and Stratton products are designed, manufactured, marketed and serviced in over 100 countries on six continents.