Briggs & Stratton on April 27 announced financial results for its third fiscal quarter and first nine months ended April 1, 2012.
Highlights:
- Third quarter fiscal 2012 consolidated net sales were $720.1 million or comparable to third quarter fiscal 2011 consolidated net sales of $720.3 million.
- Third quarter fiscal 2012 adjusted consolidated net income of $49.5 million, or $0.99 per diluted share, excluding a $9.6 million after restructuring tax charge, or $0.19 per diluted share, related to previously announced restructuring actions. Including restructuring charges, net income of $39.9 million or $0.80 per diluted share.
- Products Group to phase out lawn and garden product offerings to national mass retailers. Engines Group to continue to support this channel with OEMs. Products Group focus will be on dealers and regional retailers for lawn and garden products.
- Auburn plant reconfigured through move of horizontal shaft engines off-shore.
- Salaried workforce intended to be reduced by 10% based on above actions and reduced infrastructure needs given market levels.
- Total annualized pre-tax savings related to all announced restructuring actions are estimated to exceed $40 million by fiscal 2014.
Consolidated Results:
Consolidated net sales for the third quarter of fiscal 2012 were $720.1 million, a decrease of $0.2 million or comparable to the same period a year ago. Fiscal 2012 third quarter consolidated net income was $39.9 million or $0.80 per diluted share. The third quarter of fiscal 2011 consolidated net income was $51.5 million or $1.02 per diluted share.
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) associated with the previously announced restructuring actions to close the Ostrava, Czech Republic and Newbern, Tennessee manufacturing facilities and reconfigure operations of the engine plant in Poplar Bluff, Missouri. After considering the impact of the restructuring charges, adjusted consolidated net income for the third quarter of fiscal 2012 was $49.5 million or $0.99 per diluted share, which was lower by $2.0 million or $0.03 per diluted share compared to third quarter fiscal 2011 consolidated net income of $51.5 million or $1.02 per diluted share.
“The early spring warm weather we experienced in the U.S. provided an early start to the lawn and garden season domestically while sales were significantly lower in Europe as consumers are cautiously spending due to concerns about the overall economy,” Todd J. Teske, chairman, president and CEO of Briggs & Stratton Corp., said in a press release. “The early spring benefited our Products Group more than our Engines Group as the favorable weather drove retail sell-through. Equipment OEMs had inventory that was adequate to cover the early season activity. The Engines Group did not see significant re-orders from OEMs in the third fiscal quarter.” Teske continued, “We are pleased with the continued progress of our Products Group in improving the operations and the financial performance as we execute our strategy of focusing on higher margin products. While we are making progress, we have more work to do as we deliver innovative new products and improve the efficiency of our operations.”
For the first nine months of fiscal 2012, consolidated net sales were $1.6 billion, an increase of $60.6 million or 4.0% when compared to the same period a year ago. Consolidated net income for the first nine months of fiscal 2012 was $37.4 million or $0.74 per diluted share. Consolidated net income for the first nine months of fiscal 2011 was $42.2 million or $0.84 per diluted share.
Included in consolidated net income for the first nine months of fiscal 2012 were the aforementioned pre-tax restructuring charges of $19.8 million ($9.6 million after tax or $0.19 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. After considering the impact of items related to the restructuring charges, organization changes, and debt redemption, adjusted consolidated net income for the first nine months of fiscal 2012 was $47.0 million or $0.93 per diluted share, which was higher by $0.3 million or less than $0.01 per diluted share compared to the first nine months of fiscal 2011 adjusted consolidated net income of $46.7 million or $0.93 per diluted share.
Engines Segment:
| Three Months Ended Fiscal March | Nine Months Ended Fiscal March | |||||||
| (In Thousands) | 2012 | 2011 | 2012 | 2011 | ||||
| Engines Net Sales | $ 498,009 | $ 503,809 | $ 987,486 | $ 1,007,250 | ||||
| Engines Gross Profit as Reported | $ 100,320 | $ 124,362 | $ 186,555 | $ 235,567 | ||||
| Restructuring Charges | 9,943 | – | 9,943 | – | ||||
| Adjusted Engines Gross Profit | $ 110,263 | $ 124,362 | $ 196,498 | $ 235,567 | ||||
| Engines Gross Profit % as Reported | 20.1% | 24.7% | 18.9% | 23.4% | ||||
| Adjusted Engines Gross Profit % | 22.1% | 24.7% | 19.9% | 23.4% | ||||
| Engines Income from Operations as Reported | $ 55,051 | $ 77,463 | $ 51,875 | $ 92,312 | ||||
| Restructuring Charges | 9,943 | – | 9,943 | – | ||||
| Organization Changes Charge | – | – | – | 559 | ||||
| Adjusted Engines Income from Operations | $ 64,994 | $ 77,463 | $ 61,818 | $ 92,871 | ||||
| Engines Income from Operations % as Reported | 11.1% | 15.4% | 5.3% | 9.2% | ||||
| Adjusted Engines Income from Operations % | 13.1% | 15.4% | 6.3% | 9.2% | ||||
Engines Segment fiscal 2012 third quarter net sales were $498.0 million, which was $5.8 million or 1.1% lower than the same period a year ago. This decrease in net sales was primarily driven by lower shipment volumes of engines due to reduced shipments to lawn and garden OEMs in the North American and European markets, and unfavorable foreign exchange of $1.6 million, partially offset by improved pricing.
The Engines Segment adjusted gross profit for the third quarter of 2012 was $110.3 million, which was $14.1 million lower compared to the third quarter of fiscal 2011 gross profit of $124.4 million. Adjusted gross profit was lower than the same period one year ago due to lower net sales, unfavorable absorption on lower production volumes, unfavorable foreign exchange of $2.4 million, and higher manufacturing spending. Higher manufacturing spending is attributed to start-up costs of $1.9 million associated with launching our Phase III emissions compliant engines. Increased pricing offset increased commodity costs.
The Engines Segment engineering, selling, general and administrative expenses were $45.3 million in the third quarter of fiscal 2012, a decrease of $1.6 million from the third quarter of fiscal 2011 due to a reduction in employee compensation costs in fiscal 2012.
Engines Segment net sales for the first nine months of fiscal 2012 were $987.5 million, which was lower by $19.8 million or 2.0% compared to the same period a year ago. This decrease in net sales was primarily driven by lower shipment volumes of engines to OEMs for lawn and garden products in the North American and European markets, and unfavorable foreign exchange of $3.4 million primarily related to the Euro, partially offset by increased pricing, a favorable mix of product shipped that reflected proportionally larger volumes of units used on riding lawn mowers, snow throwers and portable and standby generators.
The Engines Segment adjusted gross profit for the first nine months of fiscal 2012 was $196.5 million, which was $39.1 million lower compared to the third quarter of fiscal 2011 gross profit of $235.6 million. Adjusted gross profit was lower than the same period one year ago due to lower net sales, reduced absorption on lower production volumes of $5.4 million, unfavorable foreign exchange of $7.2 million, and higher manufacturing spending associated with rising commodity costs and start-up costs of $8.0 million associated with launching our Phase III emissions compliant engines, partially offset by improved engine pricing.
The Engines Segment engineering, selling, general and administrative expenses were $134.7 million in the first nine months of fiscal 2012, a decrease of $8.6 million from the first nine months of fiscal 2011 primarily due to lower employee compensation expense and the absence of $0.6 million of organization change costs in the current fiscal year.
Products Segment:
| Three Months Ended Fiscal March | Nine Months Ended Fiscal March | |||||||
| (In Thousands) | 2012 | 2011 | 2012 | 2011 | ||||
| Products Net Sales | $ 281,271 | $ 267,535 | $ 731,969 | $ 621,484 | ||||
| Products Gross Profit as Reported | $ 27,246 | $ 25,828 | $ 81,675 | $ 55,219 | ||||
| Restructuring Charges | 9,821 | – | 9,821 | – | ||||
| Adjusted Products Gross Profit | $ 37,067 | $ 25,828 | $ 91,496 | $ 55,219 | ||||
| Products Gross Profit % as Reported | 9.7% | 9.7% | 11.2% | 8.9% | ||||
| Adjusted Products Gross Profit % | 13.2% | 9.7% | 12.5% | 8.9% | ||||
| Products Income (Loss) from Operations as Reported | $ (1,153) | $ 1,730 | $ 1,717 | $ (17,538) | ||||
| Restructuring Charges | 9,821 | – | 9,821 | – | ||||
| Organization Changes Charge | – | – | – | 2,978 | ||||
| Adjusted Products Income (Loss) from Operations | $ 8,668 | $ 1,730 | $ 11,538 | $ (14,560) | ||||
| Products Income (Loss) from Operations % as Reported | -0.4% | 0.6% | 0.2% | -2.8% | ||||
| Adjusted Products Income (Loss) from Operations % | 3.1% | 0.6% | 1.6% | -2.3% | ||||
Products Segment fiscal 2012 third quarter net sales were $281.3 million, an increase of $13.7 million or 5.1% from the same period a year ago. The increase in net sales was primarily due to increased sales of standby generators, pressure washers and lawn and garden equipment. This increase was partially offset by lower shipments of snow throwers and related service parts and portable generators due to limited snowfall and a lack of ice storms in fiscal 2012.
The Products Segment adjusted gross profit for the third quarter of 2012 was $37.1 million, which was $11.2 million higher compared to the third quarter of fiscal 2011 gross profit of $25.8 million. Adjusted gross profit was higher compared to the prior year due to favorable mix of lawn and garden sales through the dealer channel, improved pricing, production operational improvements of $1.8 million, and favorable absorption benefit on higher production levels, partially offset by increased commodity costs.
The Products Segment fiscal 2012 third quarter engineering, selling, general and administrative expenses were $28.4 million, an increase of $4.3 million from the third quarter of fiscal 2011. The increase is attributable to greater selling expense to support investments in international growth, higher employee compensation expense and $0.9 million of bad debt expense recorded in fiscal 2012 attributable to distributors in the European market.
Products Segment net sales for the first nine months of fiscal 2012 were $732.0 million, an increase of $110.5 million or 17.8% from the same period a year ago. The increase in net sales was primarily due to increased sales of portable and standby generators due to widespread power outages in the U.S. as a result of a landed hurricane and 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 and favorable foreign exchange of $5.1 million. There were no landed hurricanes in fiscal 2011.
The Products Segment adjusted gross profit for the first nine months of fiscal 2012 was $91.5 million, which was $36.3 million higher compared to the third quarter of fiscal 2011 gross profit of $55.2 million. Adjusted gross profit was higher compared to the same period one year ago due to the increase in net sales, favorable mix of lawn and garden sales through the dealer channel, improved pricing, favorable foreign exchange of $1.0 million, production operational improvements of $13.7 million and manufacturing absorption benefits of $8.7 million, partially offset by increased commodity costs.
The Products Segment engineering, selling, general and administrative expenses were $80.0 million in the first nine months of fiscal 2012, an increase of $7.2 million from the first nine months of fiscal 2011 primarily due to greater selling expense to support investments in international growth, unfavorable foreign exchange of $0.8 million, higher marketing expense domestically and increased salaries, partially offset by the absence of $3.0 million of organization change costs in the current fiscal year.
Corporate Items:
