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): January 30, 2020
 
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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock (par value $0.01 per share)
BGG
New York Stock Exchange

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 January 30, 2020, Briggs & Stratton Corporation issued a press release announcing results for the second quarter of fiscal 2020 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 “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 production 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; the ability to maintain or obtain adequate sources of liquidity and access to debt markets; 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.


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 exhibits are 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:
January 30, 2020
 
/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 2020 SECOND QUARTER RESULTS


Company Announces Completion of its Market Dynamics Project
and Timeline to Launch its Plan to Reposition the Company


MILWAUKEE, January 30, 2020/PRNewswire/ -- Briggs & Stratton Corporation (NYSE: BGG), a recognized global leader in providing power to get work done, today announced financial results for its second quarter of fiscal 2020, ended December 29, 2019.

Fiscal Second Quarter 2020 Highlights
Net sales of $438 million declined from $505 million for the prior year, predominantly driven by the expected impact of the timing of shipments of small engines to OEMs and lower storm-related sales, as well as lower than expected sales of job site products. For the quarter, Engines segment sales declined 19% and Products segment sales declined 5%.

Gross profit margin of 15.5% (GAAP) and adjusted gross profit margin of 17.3% decreased from a gross profit margin of 18.3% (GAAP) and adjusted gross profit margin of 18.6% for the second quarter last year primarily as a result of the lower sales volumes and production. Efficiency improvements in operations continue to be on track.

GAAP net loss was $15.3 million, or $0.37 per share, including pretax charges of $9.6 million primarily related to the Company’s small engine manufacturing consolidation initiative. For the second quarter last year, GAAP net loss was $2.6 million, or $0.07 per share, including pretax charges of $11.2 million primarily related to the Company’s business optimization program. Excluding these items, adjusted net loss was $8.1 million, or $0.20 per share, versus adjusted net income of $8.4 million, or $0.20 per diluted share last year.

Market Dynamics Project Highlights:
The Company recently completed its previously announced project to more fully analyze market dynamics to position the business for more sustained growth and higher returns. The project expanded to encompass a review of the Company’s current portfolio and how to best focus and simplify the business to be nimbler and compete more effectively.

Entering multi-week planning period to finalize steps in the Company’s repositioning plan, which is expected to include certain asset sales and a renewed focus on the Company’s core strength of power application.

Plan also includes a shift in the Company’s capital allocation priorities, including the suspension of the dividend, effective immediately, in an effort to strengthen the balance sheet and provide additional funds to invest for future initiatives.

Expects to host special strategic investor call following the conclusion of its planning process within the next four-to-six weeks.











Management Commentary:

“Areas of market-related softness drove sales below expectations and we are incrementally more cautious about the second half of the year,” said Todd J. Teske, Chairman, President and Chief Executive Officer. “Softer than anticipated retail activity this fall has left channel inventories of residential mowers elevated in North America and Europe and channel partners have signaled a conservative approach to ordering for the upcoming season. Despite market conditions, we have made material progress on several fronts that have positioned us to meet customer needs during the peak season and deliver efficiency improvements. We also remain on track to meet our goal for inventory reduction by fiscal year-end, as part of our focus on improving working capital and de-levering the balance sheet.”

Teske added, “During the first half of the year, we devoted significant time to our market dynamics project. These efforts have been very constructive and support our belief that a sharp focus on our core strength of power application will better position the Company for long-term sustainable growth and higher returns. We are currently finalizing the next steps forward for this plan, which will simplify our business and improve our financial flexibility. We will announce further details and begin implementing our plans in the third quarter.”


Fiscal 2020 Outlook:

The Company is revising its outlook for fiscal 2020 to reflect some increased uncertainty related to the upcoming lawn and garden selling season in North America and Europe.

 
Current Fiscal 2020 Outlook*
Prior Fiscal 2020 Outlook*
Net Sales
$1.83 - $1.97 billion
$1.91 - 1.97 billion
Adjusted Net Income
$3 - $14 million
$9 - $17 million
Adjusted Earnings per Diluted Share
$0.05 - $0.33 per share
$0.20 - $0.40 per share
Operating Margins
2.1% to 2.9%
2.5% to 3.0%
Unconsolidated Affiliate Earnings
Approximately $7.5 million
Approximately $10.0 million
Interest Expense
$35.5 million
$34.0 million

* This outlook excludes the costs of the business optimization program, the engine manufacturing consolidation project, and any potential asset sales.

Teske concluded, “Given uncertainty around elevated channel inventory and ongoing global weather related challenges, we are now forecasting slightly reduced financial results across our segments. We also expect slightly higher consolidated interest expense associated with our ABL credit facility compared to previous estimates. We remain focused on our key strategic priorities including the realization of value from our business optimization program and our small engine production consolidation, as well as reducing our inventories through the peak season and strengthening our balance sheet. We believe our strategic plan focused on power application will complement the hard work that has been done to improve our business and are excited to share the final details of that plan with our shareholders and other stakeholders in a few weeks.”






Conference Call Information:

The Company will host a conference call today, January 30, 2020, at 10:00 AM (ET) to review the second 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. To join, dial (877) 233-9136 and enter Conference ID 4383007. 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 production 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; the ability to maintain or obtain adequate sources of liquidity and access to debt markets; 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 December
(In Thousands, except per share data)

 
 
Three Months Ended December
 
Six Months Ended December
 
 
FY2020
 
FY2019
 
FY2020
 
FY2019
NET SALES
 
$
437,941

 
$
505,462

 
$
751,660

 
$
784,459

COST OF GOODS SOLD
 
369,916

 
413,005

 
640,389

 
648,248

Gross Profit
 
68,025

 
92,457

 
111,271

 
136,211

 
 
 
 
 
 
 
 
 
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
 
79,124

 
87,139

 
157,861

 
187,998

EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES
 
946

 
3,017

 
2,209

 
5,990

Income (Loss) from Operations
 
(10,153
)
 
8,335

 
(44,381
)
 
(45,797
)
 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
(8,965
)
 
(7,482
)
 
(15,869
)
 
(12,643
)
OTHER INCOME (EXPENSE)
 
(388
)
 
(946
)
 
(1,131
)
 
(603
)
Loss before Income Taxes
 
(19,506
)
 
(93
)
 
(61,381
)
 
(59,043
)
 
 
 
 
 
 
 
 
 
PROVISION (CREDIT) FOR INCOME TAXES
 
(4,162
)
 
2,511

 
(12,400
)
 
(15,452
)
Net Loss
 
$
(15,344
)
 
$
(2,604
)
 
$
(48,981
)
 
$
(43,591
)
 
 
 
 
 
 
 
 
 
EARNINGS (LOSS) PER SHARE
 
 
 
 
 
 
 
 
Basic
 
$
(0.37
)
 
$
(0.07
)
 
$
(1.18
)
 
$
(1.05
)
Diluted
 
$
(0.37
)
 
$
(0.07
)
 
$
(1.18
)
 
$
(1.05
)
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING
 
 
 
 
 
 
 
 
Basic
 
41,725

 
41,689

 
41,664

 
41,773

Diluted
 
41,725

 
41,689

 
41,664

 
41,773



Supplemental International Sales Information
(In Thousands)


 
 
Three Months Ended December
 
Six Months Ended December
 
 
FY2020
 
FY2019
 
FY2020
 
FY2019
International sales based on product shipment destination
 
$
144,019

 
$
148,125

 
$
246,635

 
$
236,651









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


 
 
 
 
 
CURRENT ASSETS:
FY2020
 
FY2019
 
Cash and Cash Equivalents
$
42,230

 
$
33,954

 
Accounts Receivable, Net
219,351

 
242,232

 
Inventories
612,119

 
567,256

 
Prepaid Expenses and Other Current Assets
34,141

 
38,481

 
Total Current Assets
907,841

 
881,923

 
 
 
 
 
OTHER ASSETS:
 
 
 
 
Goodwill
169,451

 
169,401

 
Investments
46,698

 
47,078

 
Other Intangible Assets, Net
94,915

 
98,619

 
Deferred Income Tax Asset
56,022

 
30,442

 
Other Long-Term Assets, Net
21,438

 
19,852

 
Right of Use Asset
107,605

 

 
Total Other Assets
496,129

 
365,392

 
 
 
 
 
PLANT AND EQUIPMENT:
 
 
 
 
At Cost
1,231,874

 
1,197,673

 
Less - Accumulated Depreciation
834,968

 
784,518

 
Plant and Equipment, Net
396,906

 
413,155

 
 
$
1,800,876

 
$
1,660,470

 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Accounts Payable
$
215,295

 
$
226,536

 
Short-Term Debt
195,175

 
314,073

 
Accrued Liabilities
134,463

 
132,179

 
Short-Term Lease Obligation
12,368

 

 
Total Current Liabilities
557,301

 
672,788

 
 
 
 
 
OTHER LIABILITIES:
 
 
 
 
Accrued Pension Cost
213,268

 
182,925

 
Accrued Employee Benefits
21,174

 
20,174

 
Accrued Postretirement Health Care Obligation
22,752

 
26,763

 
Other Long-Term Liabilities
65,606

 
56,388

 
Long-Term Lease Obligation
92,945

 

 
Long-Term Debt
428,300

 
196,013

 
Total Other Liabilities
844,045

 
482,263

 
 
 
 
 
SHAREHOLDERS' INVESTMENT:
 
 
 
 
Common Stock
579

 
579

 
Additional Paid-In Capital
70,901

 
77,310

 
Retained Earnings
940,616

 
1,016,205

 
Accumulated Other Comprehensive Loss
(288,983
)
 
(254,768
)
 
Treasury Stock, at Cost
(323,583
)
 
(333,907
)
 
Total Shareholders' Investment
399,530

 
505,419

 
 
$
1,800,876

 
$
1,660,470







BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
 
 
 
Six Months Ended December
CASH FLOWS FROM OPERATING ACTIVITIES:
FY2020
 
FY2019
 
Net Loss
$
(48,981
)
 
$
(43,591
)
 
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
 
 
 
 
 
Depreciation and Amortization
37,491

 
32,263

 
 
Stock Compensation Expense
2,694

 
3,177

 
 
Loss on Disposition of Plant and Equipment
1,421

 
66

 
 
Provision for Deferred Income Taxes
(15,551
)
 
(19,550
)
 
 
Equity in Earnings of Unconsolidated Affiliates
(2,730
)
 
(7,854
)
 
 
Dividends Received from Unconsolidated Affiliates
4,300

 
10,510

 
Changes in Operating Assets and Liabilities:
 
 
 
 
 
Accounts Receivable
(21,092
)
 
(59,838
)
 
 
Inventories
(111,404
)
 
(157,401
)
 
 
Other Current Assets
852

 
1,947

 
 
Accounts Payable, Accrued Liabilities and Income Taxes
(54,464
)
 
22,382

 
 
Other, Net
(397
)
 
1,862

 
 
Net Cash Used in Operating Activities
(207,861
)
 
(216,027
)
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Capital Expenditures
(34,431
)
 
(34,234
)
 
 
Proceeds Received on Disposition of Plant and Equipment
15

 
12

 
 
Cash Paid for Acquisitions, Net of Cash Acquired

 
(8,865
)
 
 
Net Cash Used in Investing Activities
(34,416
)
 
(43,087
)
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
Net Borrowings on Credit Facilities
267,757

 
266,038

 
 
Debt Issuance Costs
(4,800
)
 

 
 
Treasury Stock Purchases

 
(11,429
)
 
 
Repayment of Long Term Debt

 
(4,875
)
 
 
Stock Option Exercise Proceeds and Tax Benefits

 
1,823

 
 
Payments Related to Shares Withheld for Taxes for Stock Compensation
(55
)
 
(257
)
 
 
Cash Dividends Paid
(7,936
)
 
(5,948
)
 
 
Net Cash Provided by Financing Activities
254,966

 
245,352

 
 
 
 
 
 
EFFECT OF EXCHANGE RATE CHANGES
(74
)
 
(336
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
12,615

 
(14,098
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, Beginning (1)
30,342

 
49,218

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, Ending (2)
$
42,957

 
$
35,120

 
 
 
 
 
 
(1) Included within Beginning Cash, Cash Equivalents, and Restricted Cash is approximately $0.8 million and $4.3 of restricted cash as of June 30, 2019 and July 1, 2018, respectively.
(2) Included within Ending Cash, Cash Equivalents, and Restricted Cash is approximately $0.7 million and $1.2 million of restricted cash as of December 29, 2019 and December 30, 2018, respectively.





SUPPLEMENTAL SEGMENT INFORMATION

Engines Segment:
 
 
Three Months Ended December
 
Six Months Ended December
(In Thousands)
 
FY2020
 
FY2019
 
FY2020
 
FY2019
Net Sales
 
$
219,190

 
$
272,018

 
$
352,544

 
$
391,108

 
 
 
 
 
 
 
 
 
Gross Profit as Reported
 
$
33,192

 
$
55,614

 
$
52,334

 
$
71,551

Engine Manufacturing Consolidation Project
 
7,124

 

 
11,951

 

Business Optimization
 
63

 
665

 
224

 
1,088

 Adjusted Gross Profit
 
$
40,379

 
$
56,279

 
$
64,509

 
$
72,639

 
 
 
 
 
 
 
 
 
Gross Profit % as Reported
 
15.1
 %
 
20.4
%
 
14.8
 %
 
18.3
 %
Adjusted Gross Profit %
 
18.4
 %
 
20.7
%
 
18.3
 %
 
18.6
 %
 
 
 
 
 
 
 
 
 
Segment Income (Loss) as Reported
 
$
(14,248
)
 
$
4,658

 
$
(42,152
)
 
$
(39,593
)
Engine Manufacturing Consolidation Project
 
7,124

 

 
11,951

 

Business Optimization
 
1,595

 
7,508

 
2,486

 
21,871

Adjusted Segment Income (Loss)
 
$
(5,529
)
 
$
12,166

 
$
(27,715
)
 
$
(17,722
)
 
 
 
 
 
 
 
 
 
Segment Income (Loss) % as Reported
 
(6.5
)%
 
1.7
%
 
(12.0
)%
 
(10.1
)%
Adjusted Segment Income (Loss) %
 
(2.5
)%
 
4.5
%
 
(7.9
)%
 
(4.5
)%

Second Quarter Highlights

Engine sales unit volumes decreased versus the second quarter of fiscal 2019 by approximately 453,000 engines, or 24%, principally on the timing of OEM mower builds, which began earlier in fiscal 2019 to support brand transitions at retail. Revenue growth in service parts continued to benefit from improved throughput and order fulfillment rates.
GAAP gross profit percentage compared to the second quarter last year decreased 530 basis points and adjusted gross profit margins decreased 230 basis points, on a 19% decrease in production volumes and higher material costs, partially offset by business optimization program savings of $2 million and favorable sales mix on higher service parts sales.
GAAP engineering, selling, general and administrative expenses (ESG&A) declined by $4.6 million compared to the second quarter of fiscal 2019. Adjusted ESG&A decreased $0.2 million.
Adjusted equity in earnings of unconsolidated affiliates decreased by $1.9 million from the same period last year due to the ramp down of the Company’s Japanese joint venture that formerly produced Vanguard engines and a decrease in the Company’s service parts distributors’ profitability. This was primarily due to higher shipping costs to refill channel inventory of service parts.

















Products Segment:
 
 
Three Months Ended December
 
Six Months Ended December
(In Thousands)
 
FY2020
 
FY2019
 
FY2020
 
FY2019
Net Sales
 
$
241,984

 
$
254,627

 
$
437,625

 
$
427,670

 
 
 
 
 
 
 
 
 
Gross Profit as Reported
 
$
35,179

 
$
37,577

 
$
59,997

 
$
65,213

Business Optimization
 
441

 
834

 
1,090

 
3,713

 Adjusted Gross Profit
 
$
35,620

 
$
38,411

 
$
61,087

 
$
68,926

 
 
 
 
 
 
 
 
 
Gross Profit % as Reported
 
14.5
%
 
14.8
%
 
13.7
 %
 
15.2
 %
Adjusted Gross Profit %
 
14.7
%
 
15.1
%
 
14.0
 %
 
16.1
 %
 
 
 
 
 
 
 
 
 
Segment Income (Loss) as Reported
 
$
4,441

 
$
4,411

 
$
(1,169
)
 
$
(5,651
)
Business Optimization
 
857

 
3,235

 
1,564

 
8,802

Litigation Settlement
 

 

 
 
 
2,000

Retailer Bankruptcy Bad Debt Expense
 

 

 
 
 
4,132

Acquisition Related Charges
 

 
170

 
 
 
235

Adjusted Segment Income
 
$
5,298

 
$
7,816

 
$
395

 
$
9,518

 
 
 
 
 
 
 
 
 
Segment Income (Loss) % as Reported
 
1.8
%
 
1.7
%
 
(0.3
)%
 
(1.3
)%
Adjusted Segment Income %
 
2.2
%
 
3.1
%
 
0.1
 %
 
2.2
 %

Second Quarter Highlights

Net sales decreased by $13 million, or 5%, compared to the second quarter of fiscal 2019, primarily from lower sales of pressure washers relative to last year when brand transitions at retail accelerated product shipments. Storm-related sales of generators declined, as expected, from less storm activity compared with the same period a year ago. Sales activities were also affected by a softer market for job site products. The decrease was partially offset by higher sales of standby generators and higher pricing.
Gross profit percentage for the second quarter decreased by 30 basis points from a year ago. The adjusted gross profit percentage decreased 40 basis points. Reduced manufacturing volume was offset by higher pricing.
GAAP ESG&A declined $3.4 million from the second fiscal quarter a year ago. Adjusted ESG&A decreased by $1.3 million due to timing of spending.
Adjusted equity in earnings of unconsolidated affiliates decreased by $1.0 million versus the second quarter of fiscal 2019 due to a decrease in the Company’s service parts distributors’ profitability. This was primarily due to higher shipping costs to refill channel inventory of service parts.


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 December
(In Thousands, except per share data)


 
 
Three Months Ended December
 
 
FY2020 Reported
 
Adjustments
(1)
 
FY2020 Adjusted
 
FY2019 Reported
 
Adjustments
 
FY2019 Adjusted
Gross Profit
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
33,192

 
$
7,187

 
$
40,379

 
$
55,614

 
$
665

 
$
56,279

Products
 
35,179

 
441

 
35,620

 
37,577

 
834

 
38,411

Inter-Segment Eliminations
 
(346
)
 

 
(346
)
 
(734
)
 

 
(734
)
Total
 
$
68,025

 
$
7,628

 
$
75,653

 
$
92,457

 
$
1,499

 
$
93,956

Engineering, Selling, General and Administrative Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
48,189

 
$
1,493

 
$
46,696

 
$
52,769

 
$
5,915

 
$
46,854

Products
 
30,935

 
416

 
30,519

 
34,370

 
2,571

 
31,799

Total
 
$
79,124

 
$
1,909

 
$
77,215

 
$
87,139

 
$
8,486

 
$
78,653

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in Earnings of Unconsolidated Affiliates
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
749

 
$
39

 
$
788

 
$
1,814

 
$
927

 
$
2,741

Products
 
197

 

 
197

 
1,203

 

 
1,203

Total
 
$
946

 
$
39

 
$
985

 
$
3,017

 
$
927

 
$
3,944

 
 
 
 
 
 
 
 
 
 
 
 
 
Segment Income (Loss)
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
(14,248
)
 
$
8,719

 
$
(5,529
)
 
$
4,658

 
$
7,508

 
$
12,166

Products
 
4,441

 
857

 
5,298

 
4,411

 
3,405

 
7,816

Inter-Segment Eliminations
 
(346
)
 

 
(346
)
 
(734
)
 

 
(734
)
Total
 
$
(10,153
)
 
$
9,576

 
$
(577
)
 
$
8,335

 
$
10,913

 
$
19,248

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense
 
$
(8,965
)
 
$

 
$
(8,965
)
 
$
(7,482
)
 
$
248

 
$
(7,234
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) before Income Taxes
 
(19,506
)
 
9,576

 
(9,930
)
 
(93
)
 
11,161

 
11,068

Provision (Benefit) for Income Taxes
 
(4,162
)
 
2,358

 
(1,804
)
 
2,511

 
143

 
2,654

Net Income (Loss)
 
$
(15,344
)
 
$
7,218

 
$
(8,126
)
 
$
(2,604
)
 
$
11,018

 
$
8,414

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (Loss) Per Share
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(0.37
)
 
$
0.17

 
$
(0.20
)
 
$
(0.07
)
 
$
0.27

 
$
0.20

Diluted
 
(0.37
)
 
0.17

 
(0.20
)
 
(0.07
)
 
0.27

 
0.20


(1) For the second quarter of fiscal 2020, engine manufacturing consolidation charges include $3.5 million ($2.6 million after tax) of cash charges and $3.6 million ($2.7 million after tax) of non-cash charges related to the closure of the engine plant in Murray, Kentucky. Business optimization expenses include $1.1 million ($0.7 million after tax) of cash charges and $1.4 million ($1.1 million after tax) of non-cash charges related to the warehouse optimization program and the plan to onshore Commercial engine production.





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


 
 
Six Months Ended December
 
 
FY2020 Reported
 
Adjustments
(1)
 
FY2020 Adjusted
 
FY2019 Reported
 
Adjustments
 
FY2019 Adjusted
Gross Profit
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
52,334

 
$
12,175

 
$
64,509

 
$
71,551

 
$
1,088

 
$
72,639

Products
 
59,997

 
1,090

 
61,087

 
65,213

 
3,713

 
68,926

Inter-Segment Eliminations
 
(1,060
)
 

 
(1,060
)
 
(553
)
 

 
(553
)
Total
 
$
111,271

 
$
13,265

 
$
124,536

 
$
136,211

 
$
4,801

 
$
141,012

Engineering, Selling, General and Administrative Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
95,515

 
$
1,741

 
$
93,774

 
$
114,697

 
$
18,919

 
$
95,778

Products
 
62,346

 
474

 
61,872

 
73,302

 
11,456

 
61,846

Total
 
$
157,861

 
$
2,215

 
$
155,646

 
$
187,998

 
$
30,375

 
$
157,623

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in Earnings of Unconsolidated Affiliates
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
1,029

 
$
521

 
$
1,550

 
$
3,553

 
$
1,864

 
$
5,417

Products
 
1,180

 

 
1,180

 
2,437

 

 
2,437

Total
 
$
2,209

 
$
521

 
$
2,730

 
$
5,990

 
$
1,864

 
$
7,854

 
 
 
 
 
 
 
 
 
 
 
 
 
Segment Income (Loss)
 
 
 
 
 
 
 
 
 
 
 
 
Engines
 
$
(42,152
)
 
$
14,437

 
$
(27,715
)
 
$
(39,593
)
 
$
21,871

 
$
(17,722
)
Products
 
(1,169
)
 
1,564

 
395

 
(5,651
)
 
15,169

 
9,518

Inter-Segment Eliminations
 
(1,060
)
 

 
(1,060
)
 
(553
)
 

 
(553
)
Total
 
$
(44,381
)
 
$
16,001

 
$
(28,380
)
 
$
(45,797
)
 
$
37,040

 
$
(8,757
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense
 
$
(15,869
)
 
$

 
$
(15,869
)
 
$
(12,643
)
 
$
248

 
$
(12,395
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) before Income Taxes
 
(61,381
)
 
16,001

 
(45,380
)
 
(59,043
)
 
37,288

 
(21,755
)
Provision (Benefit) for Income Taxes
 
(12,400
)
 
2,779

 
(9,621
)
 
(15,452
)
 
6,308

 
(9,144
)
Net Income (Loss)
 
$
(48,981
)
 
$
13,222

 
$
(35,759
)
 
$
(43,591
)
 
$
30,980

 
$
(12,611
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (Loss) Per Share
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(1.18
)
 
$
0.32

 
$
(0.86
)
 
$
(1.05
)
 
$
0.74

 
$
(0.31
)
Diluted
 
(1.18
)
 
0.32

 
(0.86
)
 
(1.05
)
 
0.74

 
(0.31
)

(1) For the six months ended December, engine manufacturing consolidation charges include $5.6 million ($4.7 million after tax) of cash charges and $6.4 million ($5.3 million after tax) of non-cash charges related to the closure of the engine plant in Murray, Kentucky. Business optimization expenses include $2.2 million ($1.7 million after tax) of cash charges and $1.9 million ($1.4 million after tax) of non-cash charges related to the warehouse optimization program and the plan to onshore Commercial engine production.