<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 1, 1995
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
BRIGGS & STRATTON CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
A Wisconsin Corporation 39-0182330
- --------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
12301 West Wirth Street, Wauwatosa, Wisconsin 53222
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
414/259-5333
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Outstanding at
Class February 13, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK, par value $0.01 per share 28,927,000 Shares
</TABLE>
This report updates the description of the Registrant's Rights Agreement on the
Registrant's Registration Statement on Form 8-A filed on January 5, 1990 to
register the Rights under Section 12 of the Securities Exchange Act of 1934.
See Part II, Item 5 herein.
-1-
<PAGE> 2
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets -
January 1, 1995, July 3, 1994 and
December 26, 1993 3
Consolidated Condensed Statements of Income -
Three Months and Six Months Ended
January 1, 1995 and December 26, 1993 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended January 1, 1995 and
December 26, 1993 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 7
PART II - OTHER INFORMATION
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
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<PAGE> 3
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands of dollars)
<TABLE>
<CAPTION>
ASSETS
------
January 1 July 3 December 26
1995 1994 1993
--------- ------- -----------
<S> <C> <C> <C>
CURRENT ASSETS: (Unaudited) (Unaudited)
Cash and cash equivalents $ 10,956 $221,101 $ 7,765
Receivables, net 288,973 122,597 261,617
Inventories -
Finished products and parts 109,970 55,847 72,213
Work in process 35,004 27,078 25,154
Raw materials 5,469 2,745 3,988
----------------------------------
Total inventories $150,443 $ 85,670 $101,355
Future income tax benefits 32,349 32,868 28,732
Prepaid expenses 20,001 20,548 15,535
----------------------------------
Total current assets $502,722 $482,784 $415,004
----------------------------------
PREPAID PENSION COST $ 7,873 $ 8,681 $ 8,069
----------------------------------
PLANT AND EQUIPMENT, at cost: $692,563 $669,593 $663,563
Less - Accumulated depreciation and
unamortized investment tax credit 390,223 383,703 372,669
----------------------------------
Total plant and equipment, net $302,340 $285,890 $290,894
----------------------------------
$812,935 $777,355 $713,967
==================================
</TABLE>
LIABILITIES & SHAREHOLDERS' INVESTMENT
<TABLE>
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 58,798 $ 56,364 $ 54,539
Domestic notes payable 1,750 - -
Foreign loans 21,595 21,323 20,043
Accrued liabilities 109,506 119,954 103,655
Dividends payable 7,232 - 6,364
Federal and state income taxes 13,571 9,103 12,190
----------------------------------
Total current liabilities $212,452 $206,744 $196,791
----------------------------------
DEFERRED INCOME TAXES $ 9,660 $ 12,317 $ 14,834
----------------------------------
ACCRUED EMPLOYEE BENEFITS $ 15,918 $ 15,423 $ 14,625
----------------------------------
ACCRUED POSTRETIREMENT HEALTH CARE OBLIGATION $ 65,341 $ 64,079 $ 63,008
----------------------------------
LONG-TERM DEBT $ 75,000 $ 75,000 $ 75,000
----------------------------------
SHAREHOLDERS' INVESTMENT:
Common stock-
Authorized 60,000,000 shares, $.01 par value
Issued and outstanding 28,927,000 shares on
Jan. 1, 1995, and 14,463,500 shares on
July 3, 1994 and Dec. 26, 1993 $ 289 $ 145 $ 145
Additional paid-in capital 42,059 42,358 42,883
Retained earnings 393,388 362,136 308,019
Cumulative translation adjustments (1,172) (847) (1,338)
----------------------------------
Total shareholders' investment $434,564 $403,792 $349,709
----------------------------------
$812,935 $777,355 $713,967
==================================
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 4
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands of dollars except amounts per share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------
Jan. 1 Dec. 26 Jan. 1 Dec. 26
1995 1993 1995 1993
------ ------- ------ ------
<S> <C> <C> <C> <C>
NET SALES $366,717 $328,937 $594,562 $527,509
COST OF GOODS SOLD 283,193 256,556 471,239 426,932
-------- -------- -------- --------
Gross profit on sales $ 83,524 $ 72,381 $123,323 $100,577
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 26,697 23,792 48,973 43,639
-------- -------- -------- --------
Income from operations $ 56,827 $ 48,589 $ 74,350 $ 56,938
INTEREST EXPENSE (2,121) (2,161) (4,212) (4,187)
OTHER INCOME(EXPENSE), net 557 539 3,859 4,737
-------- -------- -------- --------
Income before provision
for income taxes $ 55,263 $ 46,967 $ 73,997 $ 57,488
PROVISION FOR INCOME TAXES 21,550 18,330 28,860 22,430
--------- -------- -------- --------
Net income before cumulative
effect of accounting changes $ 33,713 $ 28,637 $ 45,137 $ 35,058
-------- -------- -------- --------
CUMULATIVE EFFECT OF ACCOUNTING
CHANGES FOR:
Postretirement health care, net of
income taxes $ - $ - $ - $(40,232)
Postemployment benefits, net of
income taxes - - - (672)
Deferred income taxes - - - 8,346
-------- -------- -------- --------
$ - $ - $ - $(32,558)
-------- -------- -------- --------
Net income $ 33,713 $ 28,637 $ 45,137 $ 2,500
======== ======== ======== ========
PER SHARE DATA* -
Net income before cumulative
effect of accounting changes $ 1.17 $ .99 $ 1.56 $ 1.21
Cumulative effect of accounting changes - - - (1.12)
------ ------ ------ ------
Net income $ 1.17 $ .99 $ 1.56 $ .09
====== ====== ====== ======
Cash dividends $ .25 $ .22 $ .48 $ .44
====== ====== ====== ======
</TABLE>
* Based on 28,927,000 shares outstanding. All per share amounts have been
adjusted for the 2-for-1 stock split in November 1994.
The accompanying notes are an integral part of these statements.
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<PAGE> 5
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Increase(Decrease) in Cash and Cash Equivalents
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------
Jan. 1, 1995 Dec. 26, 1993
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 45,137 $ 2,500
Adjustments to reconcile net income to net
cash provided by operating activities -
Cumulative effect of accounting changes,
net of taxes - 32,558
Depreciation 22,662 20,132
Gain on disposition of plant and
equipment (7) (2,493)
(Increase)decrease in operating assets -
Accounts receivable (166,376) (136,636)
Inventories (64,773) (27,290)
Other current assets 1,066 (1,444)
Other assets 808 (467)
Increase(decrease) in liabilities -
Accounts payable and accrued
liabilities 3,686 29,459
Other liabilities (900) 3,147
---------- --------
Net cash used by
operating activities $(158,697) $(80,534)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of short-term investments $ - $ 70,422
Additions to plant and equipment (41,416) (20,351)
Proceeds received on sale of plant and equipment 2,032 7,075
--------- --------
Net cash provided by (used in)
investing activities $ (39,384) $ 57,146
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on domestic and
foreign loans $ 2,022 $ 4,116
Dividends (13,885) (12,728)
Purchase of common stock for treasury (295) -
Proceeds received on exercise of stock option 140 -
--------- --------
Net cash used in financing activities $ (12,018) $ (8,612)
--------- --------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS $ (46) $ 264
--------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS $(210,145) $(31,736)
CASH AND CASH EQUIVALENTS, beginning 221,101 39,501
--------- --------
CASH AND CASH EQUIVALENTS, ending $ 10,956 $ 7,765
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 4,180 $ 4,187
========= ========
Income taxes paid $ 26,748 $ 22,704
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE> 6
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited consolidated condensed 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 presentation of financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles. However, in the opinion of the Company, adequate disclosures have
been presented to make the information not misleading, and all adjustments
necessary to present fair statements of the results of operations and financial
position have been included. All of these adjustments are of a normal
recurring nature. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest annual report on Form 10-K.
On October 19, 1994, shareholders approved a doubling of the
authorized common stock shares to 60,000,000. This allowed the Company to
effect a 2-for-1 stock split previously authorized by the Board of Directors.
The distribution on November 14, 1994 increased the number of shares
outstanding from 14,463,500 to 28,927,000. The amount of $145,000 was
transferred from the additional paid-in capital account to the common stock
account to record this distribution.
On January 18, 1995, the Board of Directors approved an amendment to
the Shareholder Rights Plan to change the termination date of the rights issued
under the Plan from January 5, 2000 to July 1, 1996.
-6-
<PAGE> 7
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's results of operations and
financial condition during the periods included in the accompanying
consolidated condensed financial statements.
RESULTS OF OPERATIONS
SALES
Net sales for the second quarter of the current fiscal year increased
11% or $37,780,000 when compared to the same period last year. The major
factor effecting this improvement was a 6% increase in the number of engines
sold between years because of a strong economy. Other factors adding to the
increase were step-up sales within the same horsepower category, increases in
sales of higher horsepower engines, and modest selling price increases.
Although domestic engine sales increased, export sales increased at a
greater rate. This was due to timing differences and improving economies in
Europe. A large portion of the increased engine sales were sold for industrial
application uses, which have a tendency to use larger horsepower engines.
Service sales also showed increases in the quarter.
Lock dollar sales were up 17%, whereas lock unit sales increased 12%.
This reflects the continuing trend to higher unit price lock sets in a strong
U.S. car and truck industry.
Sales in the comparable six-month periods ending in December showed
most of the same trends as described above, except for export sales, which had
a lower first quarter in the current year.
Inventories of lawn and garden equipment in distribution channels at
the end of the 1994 summer selling season were low for the third consecutive
year. Economic forecasts continue to be favorable. Equipment manufacturers'
outlook continues to be optimistic. The Company's engine orders reflect that
optimism, and therefore, if the weather continues to cooperate, the remainder
of the year is expected to have higher sales than the preceding year.
GROSS PROFIT
Gross profit for the second fiscal quarter increased $11,143,000 or
15% when compared to the same quarter last year. This improvement compares to
the 11% increase in sales dollars and results from the spreading of fixed costs
over a larger number of engine units and improved efficiencies. It was
partially offset by a significant increase in aluminum costs, the major raw
material in engines, and other increases in manufacturing costs.
-7-
<PAGE> 8
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
These same factors caused the increase in gross profits of $22,746,000
or 23% when comparing the first six months of fiscal 1995 to the same period in
fiscal 1994.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Expenses in this category increased $2,905,000 or 12% when comparing
the two second fiscal quarters. This is a result of increases in marketing,
advertising and professional services related to increased engine emission
work.
These same factors applied to the six-month comparisons.
INTEREST EXPENSE
Interest expense did not show any significant changes, both in the
quarterly comparison and the six-month comparison. There was a modest increase
in the level of foreign borrowings. Average interest was comparable between
years.
OTHER INCOME
This category showed a 3% increase in the quarterly comparison but a
19% decrease in the six-month comparison. The first quarter of last year
contained a $2,800,000 gain on the sale of a facility in Germany, with no
comparable item in the current year. This amount was reflected in the
six-month comparison only. Partially offsetting this loss of income was an
increase in interest income in the current year of $1,700,000 due to more
investable funds.
PROVISION FOR INCOME TAXES
This category reflects a 39% tax rate in each of the comparable
periods. Management estimates this rate will be in effect for the entire
fiscal year.
CUMULATIVE EFFECT OF ACCOUNTING CHANGES
The preceding fiscal year contained an adjustment for the cumulative
effect of accounting changes made at the beginning of the first fiscal quarter.
This was the result of adopting Financial Accounting Standards Numbers 106, 112
and 109, which were fully described in the Company's 1994 fiscal year annual
report and previous year Forms 10-Q. These net charges totaled $32,558,000 for
the year and will not be repeated in the current or subsequent fiscal years.
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<PAGE> 9
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
FINANCIAL CONDITION
The following comments apply to the change in financial condition of
the Company since the preceding fiscal year end in June 1994.
Combined cash and cash equivalents decreased $210,145,000 since the
end of the previous fiscal year. $158,697,000 was used by operating activities
for the following major reasons: (1) a $166,376,000 increase in accounts
receivable due to extended payment terms and increased sales activity late in
the second quarter and (2) a $64,773,000 increase in inventories, almost all
of which is finished and partly finished inventories, and represents goods
manufactured in anticipation of shipment during the Company's busiest season in
the third fiscal quarter.
These amounts were partially offset by the $67,799,000 amount that was
generated in operations from net income and depreciation.
Another major use of cash was the purchase of plant and equipment,
which totaled $41,416,000 for the fiscal year. This was $21,065,000 greater
than the preceding year and includes initial expenditures for the previously
announced major projects which include new engine plants, plant expansions, and
a new foundry. The new engine plants will be located in Auburn, Alabama;
Statesboro, Georgia; and Rolla, Missouri. It was previously estimated that the
incremental capital expenditures for these engine plants and plant expansions
will total $112,000,000 over a three-year period. This amount has subsequently
been increased by $12,000,000, primarily to reflect more current construction
cost estimates at two of the three plants. The new foundry, located in
Ravenna, Michigan, is projected to cost $20,000,000 over a two-year period.
Company management intends to finance all of these expenditures from operating
cash flow and available lines of credit.
Late in the second fiscal quarter the Company reached an agreement
with the union representing most hourly employees in the Milwaukee area plants
on a three-year contract that will take effect when the current contract
expires July 31, 1995. Supplemental retirement benefits in the new contract
will require the company to take a charge of approximately $.30 per share in
the fourth fiscal quarter.
Late last fiscal year the Company announced its intent to spin off the
automotive lock business, STRATTEC SECURITY CORPORATION, to its shareholders.
Shares of STRATTEC will be distributed on February 27, 1995 to holders of
record on February 16, 1995.
In connection with this spin-off, subsequent to January 1, 1995, the
Company has obtained additional debt of $7,000,000. This debt carries a
floating interest rate equal to the Federal Funds Rate plus one-half percent
and matures on March 1, 1996. It will be assumed by STRATTEC SECURITY
CORPORATION as part of the spin-off.
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<PAGE> 10
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On January 18, 1995, the Board of Directors approved an amendment to
the Shareholder Rights Plan to change the termination date of the rights issued
under the Plan from January 5, 2000 to July 1, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
4.1 Amendment to Shareholder Rights Plan
27 Financial Data Schedule
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the second quarter ended January 1, 1995.
</TABLE>
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 thereunto duly authorized.
<TABLE>
<S> <C>
BRIGGS & STRATTON CORPORATION
-----------------------------
(Registrant)
Date: February 13, 1995 /s/ R. H. Eldridge
---------------------------------------
R. H. Eldridge
Secretary-Treasurer
Date: February 13, 1995 /s/ J. E. Brenn
----------------------------------------
- - J. E. Brenn
Vice President and Controller
</TABLE>
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<PAGE> 11
BRIGGS & STRATTON CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
4.1 Amendment to Shareholder Rights Plan
(Filed herewith)
27 Financial Data Schedule
(Filed herewith)
</TABLE>
-11-
<PAGE> 1
BRIGGS & STRATTON CORPORATION
Form 10-Q for Quarterly Period Ended January 1, 1995
Exhibit No. 4.1
AMENDMENT TO SHAREHOLDER RIGHTS PLAN
RESOLVED, that Section 7 of the Briggs & Stratton Rights
Agreement dated December 20, 1989 is amended to provide that the
"Final Expiration Date" under the Rights Agreement shall be July
1, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-2-1995
<PERIOD-START> JUL-4-1994
<PERIOD-END> JAN-1-1995
<EXCHANGE-RATE> 1
<CASH> 10,956,000
<SECURITIES> 0
<RECEIVABLES> 288,973,000
<ALLOWANCES> 0
<INVENTORY> 150,443,000
<CURRENT-ASSETS> 502,722,000
<PP&E> 692,563,000
<DEPRECIATION> 390,223,000
<TOTAL-ASSETS> 812,935,000
<CURRENT-LIABILITIES> 212,452,000
<BONDS> 0
<COMMON> 289,000
0
0
<OTHER-SE> 434,275,000
<TOTAL-LIABILITY-AND-EQUITY> 812,935,000
<SALES> 594,562,000
<TOTAL-REVENUES> 594,562,000
<CGS> 471,239,000
<TOTAL-COSTS> 471,239,000
<OTHER-EXPENSES> 45,114,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,212,000
<INCOME-PRETAX> 73,997,000
<INCOME-TAX> 28,860,000
<INCOME-CONTINUING> 45,137,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,137,000
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.56
</TABLE>
