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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________ 
FORM 10-Q
______________________________________________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 2019
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-1370
________________________________________________
https://cdn.kscope.io/f3aafd78119edfaeaee88810ade5a0c9-g175505g63f86a01a04.jpg
BRIGGS & STRATTON CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________________________
Wisconsin
 
39-0182330
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
12301 West Wirth Street, Wauwatosa, Wisconsin 53222
(Address of Principal Executive Offices) (Zip Code)
(414) 259-5333
(Registrant’s telephone number, including area code)
___________________________________________________________ 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes  x    No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨  
Smaller reporting company
¨
 
 
Emerging growth company
¨
 

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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ¨    No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
 
Outstanding at January 24, 2020
COMMON STOCK, par value $0.01 per share
 
42,478,165 Shares



BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INDEX
 
 
 
Page No.
 
 
PART I – FINANCIAL INFORMATION
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
PART II – OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 

2


BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)


ASSETS
 
 
 
 
 
 
 
 
December 29,
2019
 
June 30,
2019
CURRENT ASSETS:
 
 
 
 
Cash and Cash Equivalents
 
$
42,230

 
$
29,569

Accounts Receivable, Net
 
219,351

 
198,498

Inventories -
 
 
 
 
Finished Products
 
419,702

 
344,277

Work in Process
 
173,919

 
145,182

Raw Materials
 
18,498

 
12,547

Total Inventories
 
612,119

 
502,006

Prepaid Expenses and Other Current Assets
 
34,141

 
32,404

Total Current Assets
 
907,841

 
762,477

OTHER ASSETS:
 
 
 
 
Goodwill
 
169,451

 
169,682

Investments
 
46,698

 
49,641

Other Intangible Assets, Net
 
94,915

 
96,738

Long-Term Deferred Income Tax Asset
 
56,022

 
43,172

Other Long-Term Assets, Net
 
21,438

 
18,676

Right of Use Asset
 
107,605

 

Total Other Assets
 
496,129

 
377,909

PLANT AND EQUIPMENT:
 
 
 
 
Cost
 
1,231,874

 
1,220,339

Less - Accumulated Depreciation
 
834,968

 
809,294

Total Plant and Equipment, Net
 
396,906

 
411,045

TOTAL ASSETS
 
$
1,800,876

 
$
1,551,431



3



BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands, except per share data)
(Unaudited)
 

LIABILITIES & SHAREHOLDERS’ INVESTMENT
 
 
 
 
 
 
 
 
December 29,
2019
 
June 30,
2019
CURRENT LIABILITIES:
 
 
 
 
Accounts Payable
 
$
215,295

 
$
287,620

Short-Term Debt
 
195,175

 
160,540

Accrued Liabilities
 
134,463

 
129,585

Short-Term Lease Obligations
 
12,368

 

Total Current Liabilities
 
557,301

 
577,745

OTHER LIABILITIES:
 
 
 
 
Accrued Pension Cost
 
213,268

 
221,033

Accrued Employee Benefits
 
21,174

 
21,311

Accrued Postretirement Health Care Obligation
 
22,752

 
25,929

Accrued Warranty
 
19,280

 
19,572

Other Long-Term Liabilities
 
46,326

 
44,152

Long-Term Lease Obligations
 
92,945

 

Long-Term Debt
 
428,300

 
194,969

Total Other Liabilities
 
844,045

 
526,966

SHAREHOLDERS’ INVESTMENT:
 
 
 
 
Common Stock - Authorized 120,000 shares, $.01 par value, issued 57,854 shares
 
579

 
579

Additional Paid-In Capital
 
70,901

 
78,902

Retained Earnings
 
940,616

 
993,873

Accumulated Other Comprehensive Loss
 
(288,983
)
 
(292,550
)
Treasury Stock at cost, 15,374 and 15,772 shares, respectively
 
(323,583
)
 
(334,084
)
Total Shareholders’ Investment
 
399,530

 
446,720

TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT
 
$
1,800,876

 
$
1,551,431



The accompanying notes are an integral part of these statements.
4


BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 
 
Three Months Ended
 
Six Months Ended
 
 
December 29,
2019
 
December 30,
2018
 
December 29,
2019
 
December 30,
2018
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), Net
 
(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

 
 
 
 
 
 
 
 
 
DIVIDENDS PER SHARE
 
$
0.05

 
$
0.14

 
$
0.10

 
$
0.28





The accompanying notes are an integral part of these statements.
5


BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)


 
 
 
Three Months Ended
 
Six Months Ended
 
 
December 29,
2019
 
December 30,
2018
 
December 29,
2019
 
December 30,
2018
Net Loss
 
$
(15,344
)
 
$
(2,604
)
 
$
(48,981
)
 
$
(43,591
)
Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
Cumulative Translation Adjustments
 
3,331

 
264

 
(2,257
)
 
(3,426
)
Unrealized Gain (Loss) on Derivative Instruments, Net of Tax
 
1,450

 
(3,780
)
 
(1,388
)
 
(4,478
)
Unrecognized Pension & Postretirement Obligation, Net of Tax
 
3,599

 
2,682

 
7,212

 
5,408

Other Comprehensive Income (Loss)
 
8,380

 
(834
)
 
3,567

 
(2,496
)
Total Comprehensive Loss
 
$
(6,964
)
 
$
(3,438
)
 
$
(45,414
)
 
$
(46,087
)



The accompanying notes are an integral part of these statements.
6



BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(In thousands)
(Unaudited)
FOR THE THREE MONTHS ENDED DECEMBER 29, 2019
 
Common Stock
 
Additional Paid in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Total Shareholders' Investment
BALANCES, SEPTEMBER 29, 2019
 
$
579

 
$
69,873

 
$
958,222

 
$
(297,363
)
 
$
(323,486
)
 
407,825

Net Loss
 

 

 
(15,344
)
 

 

 
(15,344
)
Total Other Comprehensive Income, Net of Tax
 

 

 

 
8,380

 

 
8,380

Cash Dividends Declared ($0.05 per share)
 

 

 
(2,124
)
 

 

 
(2,124
)
Stock Option Activity, Net of Tax
 

 
346

 

 

 

 
346

Restricted Stock
 

 
29

 

 

 
(97
)
 
(68
)
Amortization of Unearned Compensation
 

 
631

 

 

 

 
631

Deferred Stock
 

 

 

 

 

 

Deferred Stock - Directors
 

 
22

 
(138
)
 

 

 
(116
)
Treasury Stock Purchases
 

 

 

 

 

 

BALANCES, DECEMBER 29, 2019
 
$
579

 
$
70,901

 
$
940,616

 
$
(288,983
)
 
$
(323,583
)
 
$
399,530


FOR THE THREE MONTHS ENDED DECEMBER 30, 2018
 
Common Stock
 
Additional Paid in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Total Shareholders' Investment
BALANCES, SEPTEMBER 30, 2018
 
$
579

 
$
75,437

 
$
1,024,875

 
$
(253,934
)
 
$
(327,619
)
 
519,338

Net Loss
 

 

 
(2,604
)
 

 

 
(2,604
)
Total Other Comprehensive Loss, Net of Tax
 

 

 

 
(834
)
 

 
(834
)
Cash Dividends Declared ($0.14 per share)
 

 

 
(5,891
)
 

 

 
(5,891
)
Stock Option Activity, Net of Tax
 

 
472

 

 

 

 
472

Restricted Stock
 

 
46

 

 

 
15

 
61

Amortization of Unearned Compensation
 

 
1,410

 

 

 

 
1,410

Deferred Stock
 

 
(69
)
 

 

 
43

 
(26
)
Deferred Stock - Directors
 

 
14

 
(175
)
 

 

 
(161
)
Treasury Stock Purchases
 

 

 

 

 
(6,346
)
 
(6,346
)
BALANCES, DECEMBER 30, 2018
 
$
579

 
$
77,310

 
$
1,016,205

 
$
(254,768
)
 
$
(333,907
)
 
$
505,419





The accompanying notes are an integral part of these statements.
7



BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(In thousands)
(Unaudited)
FOR THE SIX MONTHS ENDED DECEMBER 29, 2019
 
Common Stock
 
Additional Paid in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Total Shareholders' Investment
BALANCES, JUNE 30, 2019
 
$
579

 
$
78,902

 
$
993,873

 
$
(292,550
)
 
$
(334,084
)
 
446,720

Net Loss
 

 

 
(48,981
)
 

 

 
(48,981
)
Total Other Comprehensive Income, Net of Tax
 

 

 

 
3,567

 

 
3,567

Cash Dividends Declared ($0.10 per share)
 

 

 
(4,248
)
 

 

 
(4,248
)
Stock Option Activity, Net of Tax
 

 
758

 

 

 

 
758

Restricted Stock
 

 
(10,035
)
 

 

 
9,611

 
(424
)
Amortization of Unearned Compensation
 

 
1,281

 

 

 

 
1,281

Deferred Stock
 

 
(597
)
 

 

 
542

 
(55
)
Deferred Stock - Directors
 

 
592

 
(28
)
 

 
348

 
912

Treasury Stock Purchases
 

 

 

 

 

 

BALANCES, DECEMBER 29, 2019
 
$
579

 
$
70,901

 
$
940,616

 
$
(288,983
)
 
$
(323,583
)
 
$
399,530


FOR THE SIX MONTHS ENDED DECEMBER 30, 2018
 
Common Stock
 
Additional Paid in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Total Shareholders' Investment
BALANCES, JULY 1, 2018
 
$
579

 
$
76,408

 
$
1,071,480

 
$
(252,272
)
 
$
(325,771
)
 
570,424

Net Loss
 

 

 
(43,591
)
 

 

 
(43,591
)
Total Other Comprehensive Loss, Net of Tax
 

 

 

 
(2,496
)
 

 
(2,496
)
Cash Dividends Declared ($0.28 per share)
 

 

 
(11,840
)
 

 

 
(11,840
)
Stock Option Activity, Net of Tax
 

 
1,027

 

 

 
1,863

 
2,890

Restricted Stock
 

 
(2,667
)
 

 

 
910

 
(1,757
)
Amortization of Unearned Compensation
 

 
2,315

 

 

 

 
2,315

Deferred Stock
 

 
(776
)
 

 

 
520

 
(256
)
Deferred Stock - Directors
 

 
1,003

 
156

 

 

 
1,159

Treasury Stock Purchases
 

 

 

 

 
(11,429
)
 
(11,429
)
BALANCES, DECEMBER 30, 2018
 
$
579

 
$
77,310

 
$
1,016,205

 
$
(254,768
)
 
$
(333,907
)
 
$
505,419



The accompanying notes are an integral part of these statements.
8


BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
 
Six Months Ended
 
 
December 29,
2019
 
December 30,
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
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

Credit 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

Change 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 (3)
 
(34,431
)
 
(34,234
)
Proceeds Received on Disposition of Plant and Equipment
 
15

 
12

Cash Paid for Acquisition, 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

Repayments on Long-Term Debt
 

 
(4,875
)
Debt Issuance Costs
 
(4,800
)
 

Treasury Stock Purchases
 

 
(11,429
)
Stock Option Exercise Proceeds and Tax Benefits
 

 
1,823

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

 
245,352

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
 
(74
)
 
(336
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
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.
(3) Non-cash investing activity: The change in the balance of unpaid purchases of property, plant, and equipment included in accounts payable is $5.7 million for the six months ended December 29, 2019 and is $2.8 million for the six months ended December 30, 2018.

The accompanying notes are an integral part of these statements.
9



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business and General Information
 
Briggs & Stratton Corporation (the “Company”) is focused on providing power to get work done and make people's lives better. The Company is a U.S. based producer of gasoline engines and outdoor power equipment. The Company’s Engines segment sells engines worldwide, primarily to original equipment manufacturers ("OEMs") of lawn and garden equipment and other gasoline engine powered equipment. The Company also sells related service parts and accessories for its engines. The Company’s Products segment designs, manufactures and markets a wide range of outdoor power equipment, job site products, and related accessories.

The majority of lawn and garden equipment is sold during the spring and summer months when most lawn care and gardening activities are performed. Engine sales in the Company’s third fiscal quarter have historically been the highest, while engine sales in the first fiscal quarter have historically been the lowest. Sales of pressure washers and lawn and garden powered equipment are typically higher during the third and fourth fiscal quarters than at other times of the year. Sales of portable generators and snowthrowers are typically higher during the first and second fiscal quarters.

Inventory levels generally increase during the first and second fiscal quarters in anticipation of customer demand. Inventory levels begin to decrease as sales increase in the third fiscal quarter. This seasonal pattern results in high inventories and low cash flow for the Company in the first, second and the beginning of the third fiscal quarters. The pattern generally results in higher cash flow in the latter portion of the third fiscal quarter and in the fourth fiscal quarter as inventories are liquidated and receivables are collected.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and therefore do not include all information and footnotes necessary for a fair statement of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but also does not include all disclosures required by accounting principles generally accepted in the United States. However, in the opinion of the Company, adequate disclosures have been presented to prevent the information from being misleading, and all adjustments necessary to fairly present the Company's results of operations and financial position have been included. All of these adjustments are of a normal recurring nature, except as otherwise noted.

Interim results are not necessarily indicative of results for a full year. The information included in these condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto that were included in the Company's latest Annual Report on Form 10-K.

2. New Accounting Pronouncements

In February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-02, Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU No. 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The guidance is effective beginning fiscal year 2020. The Company has assessed this ASU and has determined that the Company will not make the permitted reclassification.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting and Hedging Activities. ASU No. 2017-12 better aligns a Company's risk management activities and financial reporting for hedging relationships, in addition to simplifying certain aspects of ASC Topic 815. The guidance is effective beginning fiscal year 2020, with early adoption permitted. The Company adopted this ASU prospectively effective July 1, 2019 and this standard did not have a material impact on the Company's Condensed Consolidated Financial Statements.



10


In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires a prospective adoption. The guidance is effective beginning fiscal year 2021. Early adoption is permitted. The Company adopted this ASU prospectively effective July 1, 2019 and this standard will not have a material impact on the Company's Condensed Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Certain qualitative and quantitative disclosures are required, as well as a modified retrospective recognition and measurement of impacted leases. The Company adopted the guidance beginning fiscal year 2020. The Company's project plan involved identifying and implementing appropriate changes to its business processes, systems and controls as well as compiling and evaluating lease arrangements to support lease accounting and disclosures under Topic 842. Upon adoption, the Company recorded $93.0 million of right of use assets and lease obligation liabilities on the consolidated balance sheet. The Company elected the practical expedient package which allows the Company to maintain historical lease classification and not reassess initial direct costs. The standard did not have a significant impact on the Company's condensed consolidated financial statements. There was no impact on existing debt covenants. See footnote 15 for additional information on lease accounting.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 enhances the existing financial instruments reporting model by modifying fair value measurement tools, simplifying impairment assessments for certain equity instruments, and modifying overall presentation and disclosure requirements. The guidance is effective beginning fiscal year 2019, with early adoption permitted. The Company adopted this standard effective July 1, 2018 and it did not have a material impact on the Company’s results of operations, financial position, and cash flows.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which requires the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The objective of ASU No. 2016-01 is to provide financial statement users with additional information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently assessing the impact of this ASU.


11



3. Accumulated Other Comprehensive Income (Loss)
The following tables set forth the changes in accumulated other comprehensive income (loss) (in thousands):
 
 
Three Months Ended December 29, 2019
 
 
Cumulative Translation Adjustments
 
Derivative Financial Instruments
 
Pension and Postretirement Benefit Plans
 
Total
Beginning Balance
 
$
(37,355
)
 
$
(9,904
)
 
$
(250,104
)
 
$
(297,363
)
Other Comprehensive Income (Loss) Before Reclassification
 
3,331

 
1,999

 
(35
)
 
5,295

Income Tax Benefit (Expense)
 

 
(480
)
 
8

 
(472
)
Net Other Comprehensive Income (Loss) Before Reclassifications
 
3,331

 
1,519

 
(27
)
 
4,823

Reclassifications:
 
 
 
 
 
 
 


Realized (Gains) Losses - Foreign Currency Contracts (1)
 

 
(291
)
 

 
(291
)
Realized (Gains) Losses - Commodity Contracts (1)
 

 
64

 

 
64

Realized (Gains) Losses - Interest Rate Swaps (1)
 

 
136

 

 
136

Amortization of Prior Service Costs (Credits) (2)
 

 

 
19

 
19

Amortization of Actuarial Losses (2)
 

 

 
4,752

 
4,752

Total Reclassifications Before Tax
 

 
(91
)
 
4,771

 
4,680

Income Tax Expense (Benefit)
 

 
22

 
(1,145
)
 
(1,123
)
Net Reclassifications
 

 
(69
)
 
3,626

 
3,557

Other Comprehensive Income
 
3,331

 
1,450

 
3,599

 
8,380

Ending Balance
 
$
(34,024
)
 
$
(8,454
)
 
$
(246,505
)
 
$
(288,983
)
(1) Amounts reclassified to net income (loss) are included in net sales or cost of goods sold. See Note 9 for information related to derivative financial instruments.
(2) Amounts reclassified to net income (loss) are included in the computation of net periodic expense, which is presented in cost of goods sold or engineering, selling, general and administrative expenses. See Note 7 for information related to pension and postretirement benefit plans.



12



 
 
Three Months Ended December 30, 2018
 
 
Cumulative Translation Adjustments
 
Derivative Financial Instruments
 
Pension and Postretirement Benefit Plans
 
Total
Beginning Balance
 
$
(32,618
)
 
$
5,788

 
$
(227,104
)
 
$
(253,934
)
Other Comprehensive Income (Loss) Before Reclassification
 
264

 
(3,050
)
 


 
(2,786
)
Income Tax Benefit (Expense)
 

 
732

 

 
732

Net Other Comprehensive Income (Loss) Before Reclassifications
 
264

 
(2,318
)
 

 
(2,054
)
Reclassifications:
 
 
 
 
 
 
 


Realized (Gains) Losses - Foreign Currency Contracts (1)
 

 
(1,757
)
 

 
(1,757
)
Realized (Gains) Losses - Commodity Contracts (1)
 

 
(6
)
 

 
(6
)
Realized (Gains) Losses - Interest Rate Swaps (1)
 

 
(160
)
 

 
(160
)
Amortization of Prior Service Costs (Credits) (2)
 

 

 
(137
)
 
(137
)
Amortization of Actuarial Losses (2)
 

 

 
3,671

 
3,671

Total Reclassifications Before Tax
 

 
(1,923
)
 
3,534

 
1,611

Income Tax Expense (Benefit)
 

 
461

 
(852
)
 
(391
)
Net Reclassifications
 

 
(1,462
)
 
2,682

 
1,220

Other Comprehensive Income (Loss)
 
264

 
(3,780
)
 
2,682

 
(834
)
Ending Balance
 
$
(32,354
)
 
$
2,008

 
$
(224,422
)
 
$
(254,768
)
(1) Amounts reclassified to net income (loss) are included in net sales or cost of goods sold. See Note 9 for information related to derivative financial instruments.
(2) Amounts reclassified to net income (loss) are included in the computation of net periodic expense, which is presented in cost of goods sold or engineering, selling, general and administrative expenses. See Note 7 for information related to pension and postretirement benefit plans.
 
 
Six Months Ended December 29, 2019
 
 
Cumulative Translation Adjustments
 
Derivative Financial Instruments
 
Pension and Postretirement Benefit Plans
 
Total
Beginning Balance
 
$
(31,767
)
 
$
(7,066
)
 
$
(253,717
)
 
$
(292,550
)
Other Comprehensive Income (Loss) Before Reclassification
 
(2,257
)
 
(1,495
)
 
(27
)
 
(3,779
)
Income Tax Benefit (Expense)
 

 
359

 
6

 
365

Net Other Comprehensive Income (Loss) Before Reclassifications
 
(2,257
)
 
(1,136
)
 
(21
)
 
(3,414
)
Reclassifications:
 
 
 
 
 
 
 
 
Realized (Gains) Losses - Foreign Currency Contracts (1)
 

 
(861
)
 
 
 
(861
)
Realized (Gains) Losses - Commodity Contracts (1)
 

 
145

 
 
 
145

Realized (Gains) Losses - Interest Rate Swaps (1)
 

 
384

 
 
 
384

Amortization of Prior Service Costs (Credits) (2)
 

 
 
 
39

 
39

Amortization of Actuarial Losses (2)
 

 
 
 
9,478

 
9,478

Total Reclassifications Before Tax
 

 
(332
)
 
9,517

 
9,185

Income Tax Expense (Benefit)
 

 
80

 
(2,284
)
 
(2,204
)
Net Reclassifications
 

 
(252
)
 
7,233

 
6,981

Other Comprehensive Income (Loss)
 
(2,257
)
 
(1,388
)
 
7,212

 
3,567

Ending Balance
 
$
(34,024
)
 
$
(8,454
)
 
$
(246,505
)
 
$
(288,983
)

(1) Amounts reclassified to net income (loss) are included in net sales or cost of goods sold. See Note 9 for information related to derivative financial instruments.
(2) Amounts reclassified to net income (loss) are included in the computation of net periodic expense, which is presented in cost of goods sold or engineering, selling, general and administrative expenses. See Note 7 for information related to pension and postretirement benefit plans.


13



 
 
Six Months Ended December 30, 2018
 
 
Cumulative Translation Adjustments
 
Derivative Financial Instruments
 
Pension and Postretirement Benefit Plans
 
Total
Beginning Balance
 
$
(28,928
)
 
$
6,486

 
$
(229,830
)
 
$
(252,272
)
Other Comprehensive Income (Loss) Before Reclassification
 
(3,426
)
 
(1,115
)
 

 
(4,541
)
Income Tax Benefit (Expense)
 

 
267

 

 
267

Net Other Comprehensive Income (Loss) Before Reclassifications
 
(3,426
)
 
(848
)
 

 
(4,274
)
Reclassifications:
 
 
 
 
 
 
 
 
Realized (Gains) Losses - Foreign Currency Contracts (1)
 

 
(2