<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 March 31, 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
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(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 May 8, 1996
- --------------------------------------------------------------------------------
COMMON STOCK, par value $0.01 per share 28,927,000 Shares
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<PAGE> 2
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets -
March 31, 1996, July 2, 1995 and
April 2, 1995 3
Consolidated Condensed Statements of Income -
Three Months and Nine Months Ended
March 31, 1996 and April 2, 1995 4
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended March 31, 1996 and
April 2, 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 6. Exhibits and Reports on Form 8-K 9
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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)
ASSETS
<TABLE>
<CAPTION>
March 31 July 2 April 2
1996 1995 1995
-------- ------ -------
CURRENT ASSETS: (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 59,158 $170,648 $114,247
Receivables, net 273,310 94,116 265,432
Inventories -
Finished products and parts 94,840 96,540 87,881
Work in process 31,206 40,107 34,773
Raw materials 4,229 4,027 3,863
-------- -------- --------
Total inventories 130,275 140,674 126,517
Future income tax benefits 34,964 31,376 34,479
Prepaid expenses 14,539 16,516 13,746
-------- -------- --------
Total current assets 512,246 453,330 554,421
PREPAID PENSION COST 1,898 - 12,406
DEFERRED INCOME TAX ASSET 5,907 1,866 -
PLANT AND EQUIPMENT -
Cost 769,731 726,331 670,867
Less - Accumulated depreciation and
unamortized investment tax credit 395,212 383,034 376,472
-------- -------- --------
Total plant and equipment, net 374,519 343,297 294,395
-------- -------- --------
$894,570 $798,493 $861,222
======== ======== ========
<CAPTION>
LIABILITIES & SHAREHOLDERS' INVESTMENT
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 72,996 $ 63,913 $ 80,248
Domestic notes payable 10,000 6,750 1,750
Foreign loans 23,959 19,653 24,764
Accrued liabilities 104,504 108,817 129,930
Dividends payable 7,521 - 7,232
Federal and state income taxes 31,611 (1,878) 21,487
-------- -------- --------
Total current liabilities 250,591 197,255 265,411
DEFERRED INCOME TAX LIABILITY - - 7,383
ACCRUED EMPLOYEE BENEFITS 17,676 16,447 15,966
ACCRUED PENSION COST - 1,606 -
ACCRUED POSTRETIREMENT HEALTH CARE OBLIGATION 69,577 68,707 63,566
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 289 289 289
Additional paid-in capital 41,001 41,698 41,775
Retained earnings 440,914 397,627 392,521
Cumulative translation adjustments (478) (136) (689)
-------- -------- --------
Total shareholders' investment 481,726 439,478 433,896
-------- -------- --------
$894,570 $798,493 $861,222
======== ======== ========
</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 Nine Months Ended
------------------ ------------------
March 31 April 2 March 31 April 2
1996 1995 1996 1995
-------- ------- -------- -------
<S> <C> <C> <C> <C>
NET SALES $460,201 $450,163 $979,035 $1,044,725
COST OF GOODS SOLD 356,119 344,725 790,049 815,964
-------- -------- -------- ----------
Gross profit on sales $104,082 $105,438 $188,986 $ 228,761
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 30,055 27,742 79,339 76,715
-------- -------- -------- ----------
Income from operations $ 74,027 $ 77,696 $109,647 $ 152,046
INTEREST EXPENSE (2,879) (2,195) (7,855) (6,407)
OTHER INCOME, net 1,798 2,100 4,418 5,959
-------- -------- -------- ----------
Income before provision
for income taxes $ 72,946 $ 77,601 $106,210 $ 151,598
PROVISION FOR INCOME TAXES 27,720 30,270 40,360 59,130
-------- -------- -------- ----------
Net income $ 45,226 $ 47,331 $ 65,850 $ 92,468
======== ======== ======== ==========
PER SHARE DATA* -
Net income $ 1.57 $ 1.64 $ 2.28 $ 3.20
====== ====== ====== ======
Cash dividends $ .26 $ .25 $ .78 $ .73
====== ====== ====== ======
</TABLE>
* Based on 28,927,000 shares outstanding.
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>
Nine Months Ended
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: March 31, 1996 April 2, 1995
-------------- -------------
<S> <C> <C>
Net income $ 65,850 $ 92,468
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation 31,704 33,848
Loss on disposition of plant and equipment 1,318 608
(Increase)decrease in operating assets -
Accounts receivable (179,194) (160,191)
Inventories 10,399 (48,596)
Other current assets (1,611) (5,053)
Other assets (5,939) 1,252
Increase(decrease) in liabilities -
Accounts payable and accrued
liabilities 45,780 59,825
Other liabilities 493 (2,004)
--------- ---------
Net cash used by
operating activities $ (31,200) $ (27,843)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment $ (65,341) $ (70,709)
Proceeds received on sale of plant and equipment 1,006 2,075
Decrease in cash due to spin-off of lock business - (174)
--------- ---------
Net cash used in investing activities $ (64,335) $ (68,808)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from domestic and
foreign loans $ 7,556 $ 12,191
Dividends (22,563) (21,117)
Purchase of common stock for treasury (1,032) (784)
Proceeds from exercise of stock options 335 345
--------- ---------
Net cash used by financing activities $ (15,704) $ (9,365)
--------- ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS $ (251) $ (838)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS $(111,490) $(106,854)
CASH AND CASH EQUIVALENTS, beginning 170,648 221,101
--------- ---------
CASH AND CASH EQUIVALENTS, ending $ 59,158 $ 114,247
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 7,905 $ 6,351
========= =========
Income taxes paid $ 15,795 $ 53,271
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<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.
During the second quarter of fiscal 1996, the Company recorded a change
in an accounting estimate originally made in the last quarter of fiscal 1995.
During the last quarter of fiscal 1995, a charge totaling $19,059,000 was added
to pension and postretirement health care expenses to reflect the costs of
early retirement windows that were offered and accepted at the end of fiscal
1995. In October 1995, when the retirements were to occur, a number of those
employees who had accepted the offer canceled their acceptance, and thus a
credit totaling $3,477,000 was recorded as a change in the original accounting
estimate.
The Financial Accounting Standards Board issued SFAS No. 123
"Accounting for Stock-Based Compensation" in October 1995, which establishes
financial accounting and reporting standards for stock-based employee
compensation. The Company plans to adopt only the pro forma disclosure
requirements of this statement, and will continue to apply the accounting
provisions of APB Opinion No. 25 to stock-based employee compensation
arrangements, as is allowed by the statement. This disclosure will be
effective for the financial statements ending in June 1997.
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<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 third quarter of fiscal 1996 increased 2% or
$10,038,000. This was the net result of a $26,420,000 increase in engine
sales, partially offset by the lack of lock sales in the current quarter in the
amount of $16,382,000 included in last year's third quarter before that
business was spun off to shareholders at the end of February 1995. The
increase in engine sales was due to a 9% increase in engine unit shipments
which occurred in the Company's lower selling price small engine line. Larger
engine unit sales remained steady between years. The largest portion of this
increase was in the domestic market, although the export markets had small
improvements. Service sales showed a decline in the current year.
Net sales for the nine months ended March 1996 decreased 6% to
$979,035,000. This decrease is almost entirely attributable to the absence of
lock sales in the current year. Total engine units sold, however, showed a 3%
decrease. There was not a corresponding sales dollar decrease because there
were larger decreases in sales of the Company's lower selling price engines
than higher selling price engines. Decreases in the domestic market and in
service sales were offset by increases in export markets.
GROSS PROFIT
Gross profit decreased 1% or $1,356,000 between comparable third
quarter periods. The gross profit rate decreased less than 1%. Gross profit
was generated from the net increase in sales; small reductions in the cost of
aluminum, the major raw material used in the manufacture of engines; and lower
profit sharing accruals. The favorable effect of these items was offset by the
expected costs associated with the transition to new plants and the spreading
of fixed costs over fewer engines produced.
Nine-month gross profit decreased 17%, or $39,775,000. The gross
profit rate decreased from 22% in the previous year to 19% in the current year.
The same factors described above were in effect except that lower sales had a
negative impact over the nine-month period. There was also the absence of
gross profit related to the spun-off lock business.
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<PAGE> 8
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
This category increased $2,313,000 or 8% between comparable quarters.
This was due to planned increases in manpower costs related to the Company's
service operations and increases in professional services, offset in part by
reduced profit sharing accruals and the lack of engineering and selling
expenses from the spun-off lock business.
The 3% increase in the nine-month comparison is also due to the factors
described above.
INTEREST EXPENSE
Interest expense for the third fiscal quarter increased 31% over the
comparable period in the preceding year. The nine- month amount increased 23%.
These increases were the result of the use of domestic short-term borrowing to
finance increases in accounts receivable and inventories. Substantially all of
the current year domestic borrowings were paid off by the end of the quarter.
The preceding year had a minimal amount of short-term borrowing.
OTHER INCOME
This category decreased between years in both the quarterly and
nine-month comparisons. These decreases were caused by a reduction in
investable funds during the current year for the same reasons described in
Interest Expense.
PROVISION FOR INCOME TAXES
The effective tax rate used for both the quarter and nine-month periods
was 38%. This rate is management's estimate of what the rate will be for the
entire fiscal year.
OUTLOOK
A late spring in the eastern half of the United States has clouded the
outlook for the fourth quarter. In the few places that have enjoyed warm, wet
weather, retail sales of outdoor power equipment have been good, which is
encouraging. Where winter has refused to make a timely departure, retail sales
have been poor, which is what would be expected. The question for which an
answer is awaited: Will warm weather return before consumers decide to
postpone purchases until next spring? Until this question is answered, no
prediction of fourth quarter results can be made. Company management believes
that earnings for the full year will be lower than for last year.
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<PAGE> 9
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
FINANCIAL CONDITION
Cash and cash equivalents decreased $111,490,000 since the end of the
previous fiscal year. This reduction in cash and the increase in accounts
payable and accrued liabilities were used to finance the $179,194,000 seasonal
increase in accounts receivable, capital expenditures totaling $65,341,000, and
the payment of dividends totaling $22,563,000.
Inventories decreased $10,399,000 since the end of the fiscal year.
The high level of finished goods inventories carried during most of fiscal 1996
was reduced by shipments late in the third fiscal quarter.
A major part of the $65,341,000 in capital expenditures during the
first nine months of fiscal year 1996 was for previously announced projects
involving three new engine plants, a foundry and plant expansions. These
projects were substantially completed during the December quarter and
manufacturing operations have begun at these locations. The Company plans to
spend approximately $15,000,000 on additional capital expenditures during the
final fiscal quarter.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements in this Management's Discussion and Analysis contain
forward-looking information (as defined in the Private Securities Litigation
Reform Act of 1995) that involve risk and uncertainty. Company results may
differ materially from those 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 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; housing starts; and foreign economic conditions,
including currency rate fluctuations.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
(Filed herewith)
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<PAGE> 10
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION (Continued)
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the third quarter ended March 31,
1996.
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: May 8, 1996 /s/ R. H. Eldridge
---------------------------------------
R. H. Eldridge
Executive Vice President & Chief
Financial Officer, Secretary-Treasurer
Date: May 8, 1996 /s/ J. E. Brenn
---------------------------------------
J. E. Brenn
Vice President and Controller
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-03-1995
<PERIOD-END> MAR-31-1996
<CASH> 59,158,000
<SECURITIES> 0
<RECEIVABLES> 273,310,000
<ALLOWANCES> 0
<INVENTORY> 130,275,000
<CURRENT-ASSETS> 512,246,000
<PP&E> 769,731,000
<DEPRECIATION> 395,212,000
<TOTAL-ASSETS> 894,570,000
<CURRENT-LIABILITIES> 250,591,000
<BONDS> 0
0
0
<COMMON> 289,000
<OTHER-SE> 481,437,000
<TOTAL-LIABILITY-AND-EQUITY> 894,570,000
<SALES> 979,035,000
<TOTAL-REVENUES> 979,035,000
<CGS> 790,049,000
<TOTAL-COSTS> 790,049,000
<OTHER-EXPENSES> 74,921,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,855,000
<INCOME-PRETAX> 106,210,000
<INCOME-TAX> 40,360,000
<INCOME-CONTINUING> 65,850,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,850,000
<EPS-PRIMARY> 2.28
<EPS-DILUTED> 2.28
</TABLE>
