<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 September 29, 1996
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)
A Wisconsin Corporation 39-0182330
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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)
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.
Outstanding at
Class November 7, 1996
- --------------------------------------------------------------------------------
COMMON STOCK, par value $0.01 per share 28,927,000 Shares
-1-
<PAGE> 2
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets -
September 29, 1996, June 30, 1996 and
October 1, 1995 3
Consolidated Condensed Statements of Earnings -
Three Months Ended September 29, 1996
and October 1, 1995 4
Consolidated Condensed Statements of Cash Flow -
Three Months Ended September 29, 1996 and
October 1, 1995 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 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 10
-2-
<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
Sept. 29 June 30 Oct. 1
1996 1996 1995
--------- -------- ---------
CURRENT ASSETS: (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 59,520 $150,639 $ 37,019
Short-term investments 15,183 - -
Receivables, net 105,179 119,346 118,098
Inventories -
Finished products and parts 164,563 96,078 157,873
Work in process 47,127 36,932 42,035
Raw materials 5,240 4,393 5,257
-------- -------- --------
Total inventories 216,930 137,403 205,165
Future income tax benefits 29,339 29,589 30,599
Prepaid expenses 17,938 19,410 15,182
-------- -------- --------
Total current assets 444,089 456,387 406,063
PREPAID PENSION COST 4,612 4,682 -
DEFERRED INCOME TAX ASSET 3,595 2,883 4,076
PLANT AND EQUIPMENT -
Cost 788,552 776,638 751,496
Less - Accumulated depreciation 411,498 402,426 384,976
-------- -------- --------
Total plant and equipment, net 377,054 374,212 366,520
-------- -------- --------
$829,350 $838,164 $776,659
======== ======== ========
<CAPTION>
LIABILITIES & SHAREHOLDERS' INVESTMENT
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 57,220 $ 65,642 $ 60,672
Domestic notes payable 5,000 5,000 10,000
Foreign loans 14,294 14,922 17,513
Current maturities on long-term debt 15,000 15,000 -
Accrued liabilities 90,887 82,932 90,729
Dividends payable 7,810 - 7,521
Federal and state income taxes 3,619 6,683 (2,108)
-------- -------- --------
Total current liabilities 193,830 190,179 184,327
ACCRUED EMPLOYEE BENEFITS 18,944 18,431 16,851
ACCRUED PENSION COST - - 2,021
ACCRUED POSTRETIREMENT HEALTH CARE OBLIGATION 69,185 69,049 69,615
LONG-TERM DEBT 60,000 60,000 75,000
SHAREHOLDERS' INVESTMENT:
Common stock-
Authorized 60,000,000 shares, $.01 par value
Issued and outstanding 28,927,000 shares 289 289 289
Additional paid-in capital 40,818 40,898 41,672
Retained earnings 446,594 459,666 386,806
Cumulative translation adjustments (310) (348) 78
-------- -------- --------
Total shareholders' investment 487,391 500,505 428,845
-------- -------- --------
$829,350 $838,164 $776,659
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE> 4
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In thousands of dollars except amounts per share)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
-----------------------
Sept. 29 Oct. 1
1996 1995
-------- --------
<S> <C> <C>
NET SALES $161,731 $189,477
COST OF GOODS SOLD 143,762 170,336
-------- --------
Gross profit on sales $ 17,969 $ 19,141
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 26,061 24,483
-------- --------
Loss from operations $ (8,092) $ (5,342)
INTEREST EXPENSE (1,952) (2,057)
OTHER INCOME, net 1,562 2,079
-------- --------
Loss before credit
for income taxes $ (8,482) $ (5,320)
CREDIT FOR INCOME TAXES (3,220) (2,020)
-------- --------
Net loss $ (5,262) $ (3,300)
======== ========
PER SHARE DATA* -
Net loss $ (.18) $ (.11)
====== ======
Cash dividends $ .27 $ .26
====== ======
</TABLE>
* Based on 28,927,000 shares outstanding.
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 5
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
Increase(Decrease) in Cash and Cash Equivalents
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: Sept. 29, 1996 Oct. 1, 1995
-------------- ------------
<S> <C> <C>
Net loss $ (5,262) $ (3,300)
Adjustments to reconcile net loss to
net cash provided by operating activities -
Depreciation 10,698 9,882
Loss on disposition of plant and equipment 515 353
(Increase)decrease in operating assets -
Accounts receivable 14,167 (23,982)
Inventories (79,527) (64,491)
Other current assets 1,722 2,111
Other assets (642) (2,210)
Increase(decrease) in liabilities -
Accounts payable and accrued
liabilities 4,279 (14,038)
Other liabilities 649 1,727
--------- ---------
Net cash used in
operating activities $ (53,401) $ (93,948)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment $ (14,171) $ (33,684)
Proceeds received on sale of plant and equipment 129 188
Purchase of short-term investments (15,183) -
--------- ---------
Net cash used in investing activities $ (29,225) $ (33,496)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings(repayments) from domestic and
foreign loans $ (628) $ 1,110
Dividends (7,810) (7,521)
Purchase of common stock for treasury (120) (40)
Proceeds from exercise of stock options 40 14
--------- ---------
Net cash used in financing activities $ (8,518) $ (6,437)
--------- ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS $ 25 $ 252
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (91,119) $(133,629)
CASH AND CASH EQUIVALENTS, beginning 150,639 170,648
--------- ---------
CASH AND CASH EQUIVALENTS, ending $ 59,520 $ 37,019
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 1,952 $ 2,128
========= =========
Income taxes paid $ 422 $ 797
========= =========
</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.
The short-term investments caption represents money market mutual fund
investments that can be readily purchased or sold using established markets.
These investments are stated at cost plus accrued income which equals market
value.
The sale of the Company's Menomonee Falls, Wisconsin facility for $16.3
million was completed just after the first fiscal quarter ended. The
provisions of the contract state that the Company will continue to own and
occupy the warehouse portion of the facility for a period of up to ten years
(the "Reservation Period"). The contract also contains a buyout clause, at the
buyer's option, of the remaining Reservation Period under certain
circumstances. Given the provisions of the contract, the Company will be
required to account for this as a financing transaction and, therefore, any
cash received will be reflected as a liability and the net book value of the
facility will continue to be shown as an asset with depreciation expense
recorded each period. Imputed interest expense will be recorded and added to
the deferred liability. Offsetting this will be fair value imputed lease
income on the manufacturing portion of the facility. The pre-tax gain, which
will be recognized at the earlier of the exercise of the buyout option or the
expiration of the Reservation Period, is estimated to be $10 million to $12
million.
-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
Sales for the first fiscal quarter ending in September 1996 were 15% or
$27,746,000 lower than in the same period of the preceding year. The primary
reason for this decline in dollars was a 20% decrease in engine units shipped.
This was caused by customers planning to schedule their production of lawn and
garden equipment later this year than last year. Partially offsetting this
decrease was a small improvement in the price and mix ratio of the engines
sold.
GROSS PROFIT
The gross profit rate increased to 11% in the current fiscal year from 10%
last year principally due to lower new plant start-up costs this year. The
amount of gross profit decreased 6% or $1,172,000 between years because of
reduced sales.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
This category increased 6% or $1,578,000 between years. This was due to
increases in salaries and planned increases in manpower and other costs
relating to new venture activities. Partially offsetting this was a reduction
in marketing costs due to timing during the year.
INTEREST EXPENSE
Interest expense decreased $105,000 between years due to lower borrowings
offset, in part, by higher average interest rates.
-7-
<PAGE> 8
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
OTHER INCOME
This category decreased $517,000 or 25% because of increases in losses on
the disposition of plant and equipment and reduced equity income on joint
ventures.
PROVISION FOR INCOME TAXES
The effective tax rate used in both years was 38.0%. This rate is
management's estimate of what the rate will be for the entire fiscal year.
OUTLOOK
The sale of the Company's Menomonee Falls, Wisconsin plant was completed
just after the quarter ended. Because the Company retains an interest in the
warehouse portion of the facility, the gain on the sale will be postponed until
this interest ends. The majority of the expense of moving the Menomonee Falls
manufacturing operations to available space in the Company's Wauwatosa plant
will be recognized in the second quarter and should not significantly affect
the results of operations.
The outlook is little changed from that previously reported. Many
retailers have made their sourcing decisions for the coming season; management
knows of no changes that will have a significant effect on the business.
Management is concerned that, despite good late season retail sales,
inventories are somewhat higher than they were a year ago. Nevertheless, they
continue to believe that, if the weather cooperates, the Company should have a
good year.
The Company will offer a final early retirement window in late fiscal
1997, in accordance with the union contract with its Milwaukee hourly
employees. It is unknown how many employees will accept this offer. All
elections under this window must be completed in June 1997. If all eligible
employees elect to take this window, the charge to earnings could total a
maximum of $53 million before taxes.
FINANCIAL CONDITION
Cash, cash equivalents and short-term investments decreased $75,936,000
since the end of the previous fiscal year. This normal seasonal use of
available funds and the amounts generated from depreciation and the decrease in
accounts receivable financed the $79,527,000 increase in inventories and
$14,171,000 in capital expenditures.
-8-
<PAGE> 9
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
The increase in inventories is a result of the Company's maintenance of a
stable rate of production in anticipation of a strong demand which is expected
to occur in the second half of the fiscal year. Company management believes
that the fiscal year-end inventory levels will be similar to the preceding
year. Accounts receivable decreased because of lower sales.
Additions to plant and equipment are $19,513,000 less than last fiscal
year at this time. This reduction is because the preceding year included the
completion of construction of three new engine plants, plant expansions and a
new foundry. Management expects capital expenditures for reinvestment in
equipment and new products to total approximately $65,000,000 in the current
fiscal year--all to be financed from internal resources and the Company's lines
of credit.
The Company will make the first of five annual installments on its
long-term debt in June 1997. These payments will total $15,000,000 and are
shown as Current Maturities on Long-Term Debt in the accompanying balance
sheet.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements in the Outlook section of Management's Discussion and
Analysis and the Notes to Consolidated Condensed Financial Statements may
contain forward-looking information (as defined in the Private Securities
Litigation Reform Act of 1995) that involves risk and uncertainty. The words
"anticipate", "believe", "estimate", "expect", "objective", and "think" or
similar expressions are intended to identify forward-looking statements.
Company results may differ materially from those projected in the
forward-looking statements. Any forward-looking statements are based on
management's current views and assumptions and involve risks and uncertainties
that could significantly affect final results. These uncertainties could
include, among other things, the effects of weather; actions of competitors;
changes in laws and regulations, including accounting standards; customer
demand; prices of purchased raw materials and parts; domestic economic
conditions, including housing starts and changes in consumer disposable income;
and foreign economic conditions, including currency rate fluctuations. Some or
all of the factors are beyond the Company's control.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders on October 16, 1996, the only item
of business was the election of directors.
(a) Election of three directors:
The following schedule indicates the votes cast for and withheld with
respect to each nominee for director.
<TABLE>
<CAPTION>
Name of Nominee* For Withheld
---------------- --- --------
<S> <C> <C>
Michael E. Batten 25,199,586 438,987
Robert H. Eldridge 25,226,151 412,422
Peter A. Georgescu 25,225,842 412,731
</TABLE>
*Nominees were elected to a three-year term expiring in 1999.
-9-
<PAGE> 10
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION (Continued)
Directors whose terms of office continue past the Annual Meeting of
Shareholders include: John L. Murray, Clarence B. Rogers, Jr., John S.
Shiely, Charles I. Story, Frederick P. Stratton, Jr. and Elwin J. Zarwell.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
------- -----------
11 Computation of Earnings Per Share of Common Stock
(Filed herewith)
27 Financial Data Schedule
(Filed herewith)
(b) Reports on Form 8-K.
On August 7, 1996, the Company filed a report on Form 8-K regarding (as
disclosed in Item 5. thereof) the declaration of a dividend of one common share
purchased right for each outstanding share of common stock and the entering into
of a Rights Agreement on August 7, 1996 with the Firstar Trust Company.
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.
BRIGGS & STRATTON CORPORATION
-----------------------------
(Registrant)
Date: November 7, 1996 /s/ R. H. Eldridge
------------------------------------------
R. H. Eldridge
Executive Vice President & Chief Financial
Officer, Secretary-Treasurer
Date: November 7, 1996 /s/ J. E. Brenn
------------------------------------------
J. E. Brenn
Vice President and Controller
-10-
<PAGE> 1
EXHIBIT 11
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------
September 29, 1996 October 1, 1995
------------------ ---------------
<S> <C> <C>
COMPUTATIONS FOR STATEMENTS OF INCOME
Primary earnings per share of common stock:
Net loss $ (5,262,000) $ (3,300,000)
================= ===============
Average shares of common stock outstanding 28,927,000 28,927,000
Incremental common shares applicable to common stock options based
on the average market price during the period 131,601 140,487
----------------- ---------------
Average common shares, as adjusted 29,058,601 29,067,487
================= ===============
Earnings per share of common stock: $ (0.18) $ (0.11)
================= ===============
Fully diluted earnings per share of common stock:
Average shares of common stock outstanding 28,927,000 28,927,000
Incremental common shares applicable to common stock options based
on the more dilutive of the common stock ending or average market
price during the period 137,662 151,699
----------------- ---------------
Average common shares assuming full dilution 29,064,662 29,078,699
================= ===============
Fully diluted earnings per average share of common stock, assuming
conversion of all applicable securities $ (0.18) $ (0.11)
================= ===============
</TABLE>
Note: The dilutive effect of stock options is less than 3% and, accordingly,
presentation is not required under Accounting Principles Board Opinion No. 15.
The above is presented to comply with Securities and Exchange Commission
regulations.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF BRIGGS & STRATTON CORPORATION FOR THE QUARTER ENDED SEPTEMBER 29,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-29-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 59,520,000
<SECURITIES> 15,183,000
<RECEIVABLES> 105,179,000
<ALLOWANCES> 0
<INVENTORY> 216,930,000
<CURRENT-ASSETS> 444,089,000
<PP&E> 788,552,000
<DEPRECIATION> 411,498,000
<TOTAL-ASSETS> 829,350,000
<CURRENT-LIABILITIES> 193,830,000
<BONDS> 0
0
0
<COMMON> 289,000
<OTHER-SE> 487,102,000
<TOTAL-LIABILITY-AND-EQUITY> 829,350,000
<SALES> 161,731,000
<TOTAL-REVENUES> 161,731,000
<CGS> 143,762,000
<TOTAL-COSTS> 143,762,000
<OTHER-EXPENSES> 24,499,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,952,000
<INCOME-PRETAX> (8,482,000)
<INCOME-TAX> (3,220,000)
<INCOME-CONTINUING> (5,262,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,262,000)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
