Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
 
Date of Report (Date of earliest event reported): April 25, 2019
 
BRIGGS & STRATTON CORPORATION
(Exact name of registrant as specified in its charter)
 

Wisconsin
 
1-1370
 
39-0182330
(State or other jurisdiction
 
(Commission
 
(I.R.S. Employer
 of incorporation)
 
File Number)
 
   Identification No.)

12301 West Wirth Street, Wauwatosa, Wisconsin 53222
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code (414) 259-5333


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o



BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

ITEM 2.02.    RESULTS OF OPERATIONS AND FINANCIAL CONDITION
 
On April 25, 2019, Briggs & Stratton Corporation issued a press release announcing results for the third quarter of fiscal 2019 in the press release furnished as Exhibit 99.1.

Cautionary Statement on Forward-Looking Statements
This Current Report on Form 8-K contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. The words "anticipate", “believe”, “estimate”, “expect”, “forecast”, “intend”, “plan”, “project”, and similar expressions are intended to identify forward-looking statements. The forward-looking statements are based on the Company's current views and assumptions and involve risks and uncertainties that include, among other things, the ability to successfully forecast demand for our products; changes in interest rates and foreign exchange rates; the effects of weather on the purchasing patterns of consumers and original equipment manufacturers (OEMs); actions of engine manufacturers and OEMs with whom we compete; changes in laws and regulations, including U.S. tax reform, changes in tax rates, laws and regulations as well as related guidance; imposition of new, or changes in existing, duties, tariffs and trade agreements; changes in customer and OEM demand; changes in prices of raw materials and parts that we purchase; changes in domestic and foreign economic conditions (including effects from the U.K.’s decision to exit the European Union); the ability to bring new productive capacity on line efficiently and with good quality; outcomes of legal proceedings and claims; the ability to realize anticipated savings from restructuring actions; and other factors disclosed from time to time in our SEC filings or otherwise, including the factors discussed in Item 1A, Risk Factors, of the company's Annual Report on Form 10-K and in its periodic reports on Form 10-Q. We undertake no obligation to update forward-looking statements made in this release to reflect events or circumstances after the date of this release.


2

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

ITEM 9.01.    FINANCIAL STATEMENTS AND EXHIBITS

(a)
Not applicable
(b)
Not applicable
(c)
Not applicable
(d)
Exhibits. The following exhibit is being furnished herewith:

Exhibit No.
 
Description
99.1
 


3

BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
    
 
 
 
BRIGGS & STRATTON CORPORATION
 
 
 
 
(Registrant)
 
 
 
 
 
 
Date:
April 25, 2019
 
/s/ Mark A. Schwertfeger
 
 
 
 
Mark A. Schwertfeger
 
 
 
 
Senior Vice President and Chief Financial Officer
Duly Authorized Officer
 



4
Exhibit


Investor Relations Contact:
Mark A. Schwertfeger, Senior VP and Chief Financial Officer
(800) 365-2759

BRIGGS & STRATTON CORPORATION REPORTS
FISCAL 2019 THIRD QUARTER RESULTS

MILWAUKEE, April 25, 2019/PRNewswire/ -- Briggs & Stratton Corporation (NYSE: BGG) today announced financial results for its third fiscal quarter ended March 31, 2019.

Third fiscal quarter net sales decreased 4% to $580 million from $604 million in the prior year. The decrease is largely driven by continued weather-related market softness in Australia and Europe as well as the impact to U.S. sales from the Sears bankruptcy.

Ongoing favorable sales momentum led to 18% growth of engines and products designed for commercial markets, on a trailing twelve-month basis, and accounted for 30% of trailing twelve-month sales.

Quarterly GAAP gross profit margin of 16.7% and adjusted gross profit margin of 17.4% decreased from last year’s GAAP gross profit margin of 21.6% and adjusted gross profit margin of 21.9%, primarily due to sales mix, lower production volumes as planned, and start-up inefficiencies associated with our business optimization initiatives.

Third quarter GAAP net income of $8.0 million, or $0.19 per diluted share, included business optimization charges and acquisition integration charges compared to GAAP net income of $31.9 million, or $0.74 per diluted share in the prior year. Excluding these items, adjusted net income for the fiscal 2019 third quarter was $14.6 million, or $0.34 per diluted share, compared with $36.2 million, or $0.84 per diluted share, for the prior year.

The company is revising its fiscal 2019 earnings outlook to $0.45 to $0.55 per diluted share, before business optimization costs and other charges, from previous guidance of $1.10 to $1.30 per diluted share. The revision reflects continued weather-related market softness and the impact of temporary inefficiencies associated with the start-up of business optimization initiatives.

The company’s preliminary estimates for fiscal 2020 include meaningful sales and earnings improvement from the fiscal 2019 outlook. Net sales for fiscal 2020 are expected to be in a range of $1.98 billion to $2.03 billion and diluted earnings per share are expected to be in a range of $1.20 to $1.40, excluding business optimization program costs. Further context will be provided in tomorrow’s earnings conference call.

Todd J. Teske, Chairman, President and Chief Executive Officer, commented, “We were disappointed in the quarterly results. Lower shipments due to the Sears bankruptcy, weather-related softness particularly in Australia and Europe, and inefficiencies from start-up activities related to our business optimization initiatives tempered overall sales performance and reduced quarterly profitability more than previously expected.  While incurring these elevated start-up costs were difficult from a financial performance perspective, they helped enable us to meet important customer delivery commitments on robust sales across commercial lines and position us well for long-term growth.”  Teske continued, “Actions are already underway to improve operating performance.  Fulfillment levels in our service parts business have meaningfully improved, and we are now positioned to support demand during the peak season.  Similarly, production of commercial Vanguard engines is increasing, following the on-shoring from our joint venture. Quality and performance for this line remain high, as closer proximity to our primary customer base is helping us win new business. Production is also increasing at our new facility for Ferris mowers and other commercial products. Growing conditions are favorable throughout much of North America and Europe, which set the stage for a more normal grass-cutting season. The much-needed additional capacity is also giving us the resources to meet the higher demand for our innovative commercial products.  Taken together, we are well-positioned to regain momentum on delivering the business optimization program pre-tax savings of up to $40 million by fiscal 2021 and are confident that our strategic actions position us for improving trends in revenue growth, profitability and capital returns as





we enter fiscal 2020 and beyond.” 







Fiscal 2019 Outlook:

Net sales are now expected to be in a range of $1.86 billion to $1.91 billion (previously $1.90 billion to $1.96 billion), a $40 million reduction. The decrease contemplates $30 million in lower sales in Australia and Europe due to unfavorable weather conditions and a cautious retail sentiment. North America service parts sales are anticipated to be $10 million lower than previously estimated due to lower sales to date through the third quarter.
Operating margin is expected to be 2.6% to 2.8% (previously 4.5% to 4.8%), before the impact of charges from the business optimization program, bad debt charge, litigation settlement charge or acquisition integration costs. The reduction is due to the company’s expectation of lower sales as well as unfavorable sales mix, lower manufacturing volumes and temporarily elevated inefficiencies.
Equity in earnings of unconsolidated affiliates is expected to be $11.5 million, and interest expense is expected to be $28.5 million, adjusted for business optimization charges and premiums paid to retire senior notes. Due to lower expected earnings, the consolidated tax rate is expected to be in a range of 10% to 12%.
Net income is now expected to be in a range of $19 million to $23 million (previously $47 million to $55 million), or $0.45 to $0.55 per diluted share (previously $1.10 to $1.30 per diluted share), before the impact of charges.
The company continues to anticipate capital expenditures of approximately $65 million.
The company’s business optimization program is expected to generate pre-tax savings of $35 million to $40 million by fiscal 2021 and related total program pre-tax charges are expected to be up to $70 million, including fiscal 2019 program costs of $42 million to $46 million.
 
Conference Call Information:

The company will host a conference call tomorrow at 10:00 AM (ET) to review the third quarter financial results. A live webcast of the conference call will be available on the company’s corporate website: http://investors.basco.com.

Also available is a dial-in number to access the call real-time at (877) 233-9136 and enter Conference ID 9389953. A replay will be offered beginning approximately two hours after the call ends and will be available for one week. Dial (855) 859-2056 and enter the Conference ID to access the replay.

Non-GAAP Financial Measures:

This release refers to non-GAAP financial measures including “adjusted gross profit”, “adjusted engineering, selling, general, and administrative expenses”, “adjusted segment income (loss)”, “adjusted net income (loss)”, and “adjusted diluted earnings (loss) per share.” Refer to the accompanying financial schedules for supplemental financial data and corresponding reconciliations of these non-GAAP financial measures to certain GAAP financial measures.








Safe Harbor Statement:

This release contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. The words “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “intend”, “plan”, “project”, and similar expressions are intended to identify forward-looking statements. The forward-looking statements are based on the company’s current views and assumptions and involve risks and uncertainties that include, among other things, the ability to successfully forecast demand for its products; changes in interest rates and foreign exchange rates; the effects of weather on the purchasing patterns of consumers and original equipment manufacturers (OEMs); actions of engine manufacturers and OEMs with whom the company competes; changes in laws and regulations, including U.S. tax reform, changes in tax rates, laws and regulations as well as related guidance; imposition of new, or changes in existing, duties, tariffs and trade agreements; changes in customer and OEM demand; changes in prices of raw materials and parts that the company purchases; changes in domestic and foreign economic conditions (including effects from the U.K.’s decision to exit the European Union); the ability to bring new productive capacity on line efficiently and with good quality; outcomes of legal proceedings and claims; the ability to realize anticipated savings from the business optimization program and restructuring actions; and other factors disclosed from time to time in the company’s SEC filings or otherwise, including the factors discussed in Item 1A, Risk Factors, of the company’s Annual Report on Form 10-K and in its periodic reports on Form 10-Q. The company undertakes no obligation to update forward-looking statements made in this release to reflect events or circumstances after the date of this release.

About Briggs & Stratton Corporation:

Briggs & Stratton Corporation (NYSE: BGG), headquartered in Milwaukee, Wisconsin, is focused on providing power to get work done and make people's lives better. Briggs & Stratton is the world’s largest producer of gasoline engines for outdoor power equipment, and is a leading designer, manufacturer and marketer of power generation, pressure washer, lawn and garden, turf care and job site products through its Briggs & Stratton®, Simplicity®, Snapper®, Ferris®, Vanguard®, Allmand®, Billy Goat®, Murray®, Branco®, and Victa® brands. Briggs & Stratton products are designed, manufactured, marketed and serviced in over 100 countries on six continents. For additional information, please visit www.basco.com and www.briggsandstratton.com.














BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations for the Periods Ended March
(In Thousands, except per share data)

 
 
Three Months Ended March
 
Nine Months Ended March
 
 
FY2019
 
FY2018
 
FY2019
 
FY2018
NET SALES
 
$
580,196

 
$
604,069

 
$
1,364,655

 
$
1,379,599

COST OF GOODS SOLD
 
483,209

 
473,796

 
1,131,422

 
1,090,196

Gross Profit
 
96,987

 
130,273

 
233,233

 
289,403

 
 
 
 
 
 
 
 
 
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
 
79,521

 
80,156

 
267,553

 
245,304

EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES
 
(205
)
 
713

 
5,786

 
6,438

Income (Loss) from Operations
 
17,261

 
50,830

 
(28,534
)
 
50,537

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
(9,088
)
 
(8,617
)
 
(21,731
)
 
(19,167
)
OTHER INCOME
 
953

 
1,350

 
391

 
3,297

Income (Loss) before Income Taxes
 
9,126

 
43,563

 
(49,874
)
 
34,667

 
 
 
 
 
 
 
 
 
PROVISION (CREDIT) FOR INCOME TAXES
 
1,121

 
11,675

 
(14,331
)
 
34,163

Net Income (Loss)
 
$
8,005

 
$
31,888

 
$
(35,543
)
 
$
504

 
 
 
 
 
 
 
 
 
EARNINGS (LOSS) PER SHARE
 
 
 
 
 
 
 
 
Basic
 
$
0.19

 
$
0.74

 
$
(0.86
)
 
$
0.00

Diluted
 
$
0.19

 
$
0.74

 
$
(0.86
)
 
$
0.00

 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING
 
 
 
 
 
 
 
 
Basic
 
41,527

 
42,064

 
41,691

 
42,108

Diluted
 
41,527

 
42,307

 
41,691

 
42,362



Supplemental International Sales Information
(In Thousands)


 
 
Three Months Ended March
 
Nine Months Ended March
 
 
FY2019
 
FY2018
 
FY2019
 
FY2018
International sales based on product shipment destination
 
$
142,817

 
$
160,653

 
$
379,468

 
$
432,538









BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of the End of March
(In Thousands)


 
 
 
 
 
CURRENT ASSETS:
FY2019
 
FY2018
 
Cash and Cash Equivalents
$
23,863

 
$
56,165

 
Accounts Receivable, Net
253,536

 
259,472

 
Inventories
525,210

 
438,492

 
Prepaid Expenses and Other Current Assets
34,682

 
35,953

 
Total Current Assets
837,291

 
790,082

 
 
 
 
 
OTHER ASSETS:
 
 
 
 
Goodwill
169,693

 
164,213

 
Investments
46,937

 
50,224

 
Other Intangible Assets, Net
97,465

 
98,021

 
Deferred Income Tax Asset
31,031

 
34,886

 
Other Long-Term Assets, Net
20,365

 
20,932

 
Total Other Assets
365,491

 
368,276

 
 
 
 
 
PLANT AND EQUIPMENT:
 
 
 
 
At Cost
1,208,747

 
1,161,535

 
Less - Accumulated Depreciation
795,467

 
762,186

 
Plant and Equipment, Net
413,280

 
399,349

 
 
$
1,616,062

 
$
1,557,707

 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Accounts Payable
$
272,125

 
$
202,822

 
Short-Term Debt
211,545

 
131,556

 
Accrued Liabilities
143,432

 
157,895

 
Total Current Liabilities
627,102

 
492,273

 
 
 
 
 
OTHER LIABILITIES:
 
 
 
 
Accrued Pension Cost
179,487

 
197,749

 
Accrued Employee Benefits
20,122

 
21,787

 
Accrued Postretirement Health Care Obligation
25,294

 
29,547

 
Other Long-Term Liabilities
61,050

 
53,737

 
Long-Term Debt
195,464

 
202,332

 
Total Other Liabilities
481,417

 
505,152

 
 
 
 
 
SHAREHOLDERS' INVESTMENT:
 
 
 
 
Common Stock
579

 
579

 
Additional Paid-In Capital
77,523

 
75,001

 
Retained Earnings
1,018,265

 
1,089,364

 
Accumulated Other Comprehensive Loss
(255,021
)
 
(280,546
)
 
Treasury Stock, at Cost
(333,803
)
 
(324,116
)
 
Total Shareholders' Investment
507,543

 
560,282

 
 
$
1,616,062

 
$
1,557,707







BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
 
 
 
Nine Months Ended March
CASH FLOWS FROM OPERATING ACTIVITIES:
FY2019
 
FY2018
 
Net Income (Loss)
$
(35,543
)
 
$
504

 
Adjustments to Reconcile Net Income (Loss) to Net Cash Used in Operating Activities:
 
 
 
 
 
Depreciation and Amortization
47,385

 
43,756

 
 
Stock Compensation Expense
5,496

 
5,312

 
 
Loss on Disposition of Plant and Equipment
66

 
1,595

 
 
Provision (Credit) for Deferred Income Taxes
(19,247
)
 
24,744

 
 
Equity in Earnings of Unconsolidated Affiliates
(8,403
)
 
(9,068
)
 
 
Dividends Received from Unconsolidated Affiliates
10,510

 
9,810

 
 
Pension Cash Contributions

 
(30,000
)
 
Changes in Operating Assets and Liabilities:
 
 
 
 
 
Accounts Receivable
(70,876
)
 
(25,948
)
 
 
Inventories
(113,407
)
 
(62,780
)
 
 
Other Current Assets
(856
)
 
(3,430
)
 
 
Accounts Payable, Accrued Liabilities and Income Taxes
77,905

 
11,287

 
 
Other, Net
2,079

 
15,198

 
 
Net Cash Used in Operating Activities
(104,891
)
 
(19,020
)
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Capital Expenditures
(46,379
)
 
(77,483
)
 
 
Proceeds Received on Disposition of Plant and Equipment
31

 
339

 
 
Cash Paid for Acquisitions, Net of Cash Acquired
(8,865
)
 
(1,800
)
 
 
Net Cash Used in Investing Activities
(55,213
)
 
(78,944
)
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
Net Borrowings on Revolver
163,509

 
131,556

 
 
Long Term Note Payable

 
7,685

 
 
Debt Issuance Costs

 
(1,154
)
 
 
Treasury Stock Purchases
(11,937
)
 
(8,710
)
 
 
Repayment of Long Term Debt
(5,424
)
 
(19,781
)
 
 
Stock Option Exercise Proceeds and Tax Benefits
1,823

 
3,943

 
 
Payments Related to Shares Withheld for Taxes for Stock Compensation
(257
)
 
(1,147
)
 
 
Cash Dividends Paid
(11,891
)
 
(12,007
)
 
 
Net Cash Provided by Financing Activities
135,823

 
100,385

 
 
 
 
 
 
EFFECT OF EXCHANGE RATE CHANGES
(239
)
 
1,090

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
(24,520
)
 
3,511

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, Beginning (1)
49,218

 
61,707

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, Ending (2)
$
24,698

 
$
65,218

 
 
 
 
 
 
(1) Included within Beginning Cash, Cash Equivalents, and Restricted Cash is approximately $4.3 million and $0 of restricted cash as of July 1, 2018 and July 2, 2017, respectively.
(2) Included within Ending Cash, Cash Equivalents, and Restricted Cash is approximately $0.8 million and $9.1 million of restricted cash as of March 31, 2019 and April 1, 2018, respectively.





SUPPLEMENTAL SEGMENT INFORMATION

Engines Segment:
 
 
Three Months Ended March
 
Nine Months Ended
March
(In Thousands)
 
FY2019
 
FY2018
 
FY2019
 
FY2018
Net Sales
 
$
336,243

 
$
384,292

 
$
727,351

 
$
790,543

 
 
 
 
 
 
 
 
 
Gross Profit as Reported
 
$
72,529

 
$
96,780

 
$
144,272

 
$
183,428

Business Optimization
 
623

 
903

 
1,712

 
2,031

 Adjusted Gross Profit
 
$
73,151

 
$
97,683

 
$
145,984

 
$
185,459

 
 
 
 
 
 
 
 
 
Gross Profit % as Reported
 
21.6
%
 
25.2
%
 
19.8
 %
 
23.2
%
Adjusted Gross Profit %
 
21.8
%
 
25.4
%
 
20.1
 %
 
23.5
%
 
 
 
 
 
 
 
 
 
Segment Income (Loss) as Reported
 
$
22,833

 
$
47,718

 
$
(16,579
)
 
$
35,776

Business Optimization
 
5,211

 
2,896

 
27,083

 
7,243

Adjusted Segment Income
 
$
28,044

 
$
50,614

 
$
10,504

 
$
43,019

 
 
 
 
 
 
 
 
 
Segment Income (Loss) % as Reported
 
6.8
%
 
12.4
%
 
(2.3
)%
 
4.5
%
Adjusted Segment Income %
 
8.3
%
 
13.2
%
 
1.4
 %
 
5.4
%

Third Quarter Highlights

Engine unit volumes decreased by 18%, or approximately 456,000 engines, in the third quarter of fiscal 2019 compared to the same period last year. Domestically, as anticipated, consumer engine sales decreased due to the Sears bankruptcy and the pull forward of shipments to the second quarter to enable channel partners to restock inventory and facilitate brand transitions this year. Sales into Australia and Europe declined by over 25% in the third quarter due to prolonged historic drought conditions in Australia and elevated channel inventories in Europe following last summer’s drought. Domestic service parts sales declined slightly year over year. The decrease in sales was mitigated by a nearly 10% increase in commercial Vanguard engine sales and higher pricing to offset cost inflation and tariffs.
The gross profit percentage decreased by 360 basis points from last year due to unfavorable sales mix (160 bps), a 14% reduction in manufacturing volume as planned (130 bps) and inefficiencies (100 bps). Unfavorable sales mix was caused by proportionately less sales outside the U.S. and slightly lower service parts sales. Inefficiencies from start-up activities related to the company’s ERP upgrade and the on-shoring of Vanguard engines led to temporarily elevated supply chain and labor costs to ensure timely delivery on the robust growth of Vanguard engines and improve the throughput of service parts sales. Higher prices offset higher commodity costs and tariffs. Foreign exchange was slightly favorable to margins in the quarter.
GAAP ESG&A expenses were consistent year over year and adjusted ESG&A expenses decreased $3.0 million from last year due to lower employee compensation costs.













Products Segment:
 
 
Three Months Ended March
 
Nine Months Ended March
(In Thousands)
 
FY2019
 
FY2018
 
FY2019
 
FY2018
Net Sales
 
$
271,209

 
$
245,169

 
$
698,879

 
$
653,845

 
 
 
 
 
 
 
 
 
Gross Profit as Reported
 
$
24,348

 
$
32,773

 
$
89,402

 
$
105,570

Business Optimization
 
3,267

 
971

 
6,978

 
2,493

 Adjusted Gross Profit
 
$
27,615

 
$
33,744

 
$
96,380

 
$
108,063

 
 
 
 
 
 
 
 
 
Gross Profit % as Reported
 
9.0
 %
 
13.4
%
 
12.8
 %
 
16.1
%
Adjusted Gross Profit %
 
10.2
 %
 
13.8
%
 
13.8
 %
 
16.5
%
 
 
 
 
 
 
 
 
 
Segment Income (Loss) as Reported
 
$
(5,682
)
 
$
2,392

 
$
(11,514
)
 
$
14,356

Business Optimization
 
4,407

 
1,309

 
13,207

 
5,259

Litigation Settlement
 

 

 
2,000

 

Retailer Bankruptcy Bad Debt Expense
 

 

 
4,132

 

Acquisition Related Charges
 
287

 

 
523

 

Adjusted Segment Income (Loss)
 
$
(988
)
 
$
3,701

 
$
8,348

 
$
19,615

 
 
 
 
 
 
 
 
 
Segment Income (Loss) % as Reported
 
(2.1
)%
 
1.0
%
 
(1.6
)%
 
2.2
%
Adjusted Segment Income (Loss) %
 
(0.4
)%
 
1.5
%
 
1.2
 %
 
3.0
%

Third Quarter Highlights

Net sales increased by $26.0 million, or 10.6%, from the same period last year. The increase was primarily due to 16% growth in commercial products on higher sales of Ferris mowers and growth of commercial stand-on blowers from the Hurricane acquisition in early fiscal 2019. Residential sales grew slightly on higher volumes of standby generators and pressure washers, partially offset by lower sales of portable generators and riding mowers following cool spring temperatures in the U.S. Sales also benefited from higher prices to offset cost inflation.
The gross profit percentage decreased 440 basis points and adjusted gross profit percentage decreased by 360 basis points compared to the third quarter last year. The decrease in the adjusted gross profit percentage is largely attributed to inefficiencies (180 bps) and unfavorable sales mix (170 bps). Inefficiencies from start-up activities related to the ERP upgrade, elevated international container shipping rates and higher supply chain and labor costs to ensure our ability to meet delivery commitments on the robust growth of Ferris mowers. We also incurred higher labor costs to improve the throughput of service parts to support increased shipments during the peak season. Unfavorable sales mix was driven by lower sales of portable generators due to less spring storms, as well as lower sales of riding mowers through the dealer channel. Strong sales of pressure washers were driven by elevated pollen levels this spring and brand transitions at retail. Partially offsetting the unfavorable sales mix was the favorable impact of higher commercial sales. Increases in pricing largely offset higher material and tariff costs.
GAAP ESG&A expenses decreased by $0.8 million and adjusted ESG&A expenses decreased by $1.9 million compared with the previous year from lower employee compensation costs.

 











Non-GAAP Financial Measures
Briggs & Stratton Corporation prepares its financial statements using Generally Accepted Accounting Principles (GAAP). When a company discloses material information containing non-GAAP financial measures, SEC regulations require that the disclosure include a presentation of the most directly comparable GAAP measure and a reconciliation of the GAAP and non-GAAP financial measures. Management’s inclusion of non-GAAP financial measures in this release is intended to supplement, not replace, the presentation of the financial results in accordance with GAAP. Briggs & Stratton Corporation management believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. Management also believes that these non-GAAP financial measures enhance the ability of investors to analyze the company’s business trends and to understand the company’s performance. In addition, management may utilize non-GAAP financial measures as a guide in the company’s forecasting, budgeting and long-term planning process. Non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures presented in accordance with GAAP. The following tables are reconciliations of the non-GAAP financial measures:











BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Adjusted Segment Information for the Three Month Periods Ended March
(In Thousands, except per share data)


 
 
Three Months Ended March
 
 
FY2019 Reported
 
Adjustments
(1)
 
FY2019 Adjusted
 
FY2018 Reported
 
Adjustments
 
FY2018 Adjusted
Gross Profit
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
72,529

 
$
623

 
$
73,151

 
$
96,780

 
$
903

 
$
97,683

Products
 
24,348

 
3,267

 
27,615

 
32,773

 
971

 
33,744

Inter-Segment Eliminations
 
110

 

 
110

 
720

 

 
720

Total
 
$
96,987

 
$
3,889

 
$
100,876

 
$
130,273

 
$
1,874

 
$
132,147

Engineering, Selling, General and Administrative Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
49,287

 
$
3,835

 
$
45,452

 
$
49,124

 
$
587

 
$
48,537

Products
 
30,234

 
1,428

 
28,806

 
31,032

 
338

 
30,694

Total
 
$
79,521

 
$
5,263

 
$
74,258

 
$
80,156

 
$
925

 
$
79,231

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in Earnings of Unconsolidated Affiliates
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
(408
)
 
$
753

 
$
345

 
$
62

 
$
1,406

 
$
1,468

Products
 
203

 

 
203

 
651

 

 
651

Total
 
$
(205
)
 
$
753

 
$
548

 
$
713

 
$
1,406

 
$
2,119

 
 
 
 
 
 
 
 
 
 
 
 
 
Segment Income (Loss)
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
22,833

 
$
5,211

 
$
28,044

 
$
47,718

 
$
2,896

 
$
50,614

Products
 
(5,682
)
 
4,694

 
(988
)
 
2,392

 
1,309

 
3,701

Inter-Segment Eliminations
 
110

 

 
110

 
720

 

 
720

Total
 
$
17,261

 
$
9,905

 
$
27,166

 
$
50,830

 
$
4,205

 
$
55,035

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense
 
$
(9,088
)
 
$
15

 
$
(9,073
)
 
$
(8,617
)
 
$
2,017

 
$
(6,600
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before Income Taxes
 
9,126

 
9,920

 
19,046

 
43,563

 
6,222

 
49,785

Provision for Income Taxes
 
1,121

 
3,288

 
4,409

 
11,675

 
1,876

 
13,551

Net Income
 
$
8,005

 
$
6,632

 
$
14,637

 
$
31,888

 
$
4,346

 
$
36,234

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings Per Share
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.19

 
$
0.15

 
$
0.34

 
$
0.74

 
$
0.10

 
$
0.84

Diluted
 
0.19

 
0.15

 
0.34

 
0.74

 
0.10

 
0.84


(1) For the third quarter of fiscal 2019, business optimization expenses include $1.4 million ($0.9 million after tax) of non-cash charges related to accelerated depreciation, and $8.4 million ($5.6 million after tax) of cash charges related primarily to activities associated with the upgrade to the Company's ERP system, professional services, employee termination benefits, and plant rearrangement activities. The Company recognized $0.2 million ($0.1 million after tax) related to acquisition integration activities.





BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Adjusted Segment Information for the Nine Month Periods Ended March
(In Thousands, except per share data)
 
 
Nine Months Ended March
 
 
FY2019 Reported
 
Adjustments
(1)
 
FY2019 Adjusted
 
FY2018 Reported
 
Adjustments
 
FY2018 Adjusted
Gross Profit
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
144,272

 
$
1,712

 
$
145,984

 
$
183,428

 
$
2,031

 
$
185,459

Products
 
89,402

 
6,978

 
96,380

 
105,570

 
2,493

 
108,063

Inter-Segment Eliminations
 
(441
)
 

 
(441
)
 
405

 

 
405

Total
 
$
233,233

 
$
8,690

 
$
241,923

 
$
289,403

 
$
4,524

 
$
293,927

Engineering, Selling, General and Administrative Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
163,997

 
$
22,754

 
$
141,243

 
$
151,154

 
$
2,582

 
$
148,572

Products
 
103,556

 
12,884

 
90,672

 
94,150

 
2,766

 
91,384

Total
 
$
267,553

 
$
35,638

 
$
231,915

 
$
245,304

 
$
5,348

 
$
239,956

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in Earnings of Unconsolidated Affiliates
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
3,146

 
$
2,617

 
$
5,763

 
$
3,502

 
$
2,630

 
$
6,132

Products
 
2,640

 

 
2,640

 
2,936

 

 
2,936

Total
 
$
5,786

 
$
2,617

 
$
8,403

 
$
6,438

 
$
2,630

 
$
9,068

 
 
 
 
 
 
 
 
 
 
 
 
 
Segment Income (Loss)
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
(16,579
)
 
$
27,083

 
$
10,504

 
$
35,776

 
$
7,243

 
$
43,019

Products
 
(11,514
)
 
19,862

 
8,348

 
14,356

 
5,259

 
19,615

Inter-Segment Eliminations
 
(441
)
 

 
(441
)
 
405

 

 
405

Total
 
$
(28,534
)
 
$
46,945

 
$
18,411

 
$
50,537

 
$
12,502

 
$
63,039

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense
 
$
(21,731
)
 
$
263

 
$
(21,468
)
 
$
(19,167
)
 
$
2,017

 
$
(17,150
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) before Income Taxes
 
(49,874
)
 
47,208

 
(2,666
)
 
34,667

 
14,519

 
49,186

Provision for Income Taxes
 
(14,331
)
 
9,602

 
(4,729
)
 
34,163

 
(21,104
)
 
13,059

Net Income (Loss)
 
$
(35,543
)
 
$
37,606

 
$
2,063

 
$
504

 
$
35,623

 
$
36,127

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (Loss) Per Share
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(0.86
)
 
$
0.90

 
$
0.04

 
$
0.00

 
$
0.84

 
$
0.84

Diluted
 
(0.86
)
 
0.90

 
0.04

 
0.00

 
0.83

 
0.83

(1) For the first nine months of fiscal 2019, business optimization expenses include $2.9 million ($2.3 million after tax) of non-cash charges related to accelerated depreciation, and $44.2 million ($34.5 million after tax) of cash charges related primarily to activities associated with the upgrade to the Company's ERP system, professional services, employee termination benefits, and plant rearrangement activities. The Company recognized bad debt expense of $4.1 million ($3.1 million after tax) after a major retailer announced that it had filed for bankruptcy protection. The Company recognized $2.0 million ($1.5 million after tax) for amounts accrued related to a litigation settlement and $0.5 million ($0.3 million after tax) related to acquisition integration activities. Interest expense includes $0.2 million ($0.2 million after tax) for premiums paid to repurchase senior notes. Tax expense includes a $1.1 million charge associated with the Tax Cuts and Jobs Act of 2017 to record the impact of the inclusion of foreign earnings.