<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 28, 1997
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)
Wisconsin 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 6, 1997
- --------------------------------------------------------------------------------
COMMON STOCK, par value $0.01 per share 24,943,289 Shares
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<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 -
September 28, 1997 and June 29, 1997 3
Consolidated Condensed Statements of Income -
Three Months ended September 28, 1997 and
September 29, 1996 5
Consolidated Condensed Statements of Cash Flow -
Three Months ended September 28, 1997 and
September 29, 1996 6
Notes to Consolidated Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
</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)
ASSETS
<TABLE>
<CAPTION>
Sept. 28 June 29
1997 1997
-------- -------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,825 $112,859
Receivables, net 121,534 129,877
Inventories -
Finished products and parts 156,305 83,361
Work in process 43,556 37,922
Raw materials 4,942 4,674
-------- --------
Total inventories 204,803 125,957
Future income tax benefits 31,523 31,602
Prepaid expenses 15,618 18,121
-------- --------
Total current assets 378,303 418,416
-------- --------
OTHER ASSETS:
Deferred income tax assets 16,673 16,975
Capitalized software 11,066 10,532
-------- --------
Total other assets 27,739 27,507
-------- --------
PLANT AND EQUIPMENT -
Cost 809,182 796,714
Less - Accumulated depreciation 411,199 400,448
-------- --------
Total plant and equipment, net 397,983 396,266
-------- --------
$804,025 $842,189
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 4
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEETS (Continued)
(In thousands)
LIABILITIES & SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
Sept. 28 June 29
1997 1997
-------- --------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 62,630 $ 82,166
Domestic notes payable 12,980 5,000
Foreign loans 11,936 13,359
Current maturities of long-term debt 15,000 15,000
Accrued liabilities 92,634 87,553
Dividends payable 7,001 -
Federal and state income taxes 8,490 10,916
-------- --------
Total current liabilities 210,671 213,994
-------- --------
OTHER LIABILITIES:
Deferred revenue on sale of plant and equipment 15,951 15,966
Accrued pension cost 31,208 31,891
Accrued employee benefits 12,496 12,324
Accrued postretirement health care obligation 74,717 74,020
Long-term debt 142,948 142,897
-------- --------
Total other liabilities 277,320 277,098
-------- --------
SHAREHOLDERS' INVESTMENT:
Common stock-
Authorized 60,000 shares, $.01 par value,
Issued 28,927 shares 289 289
Additional paid-in capital 39,389 40,533
Retained earnings 481,049 490,682
Cumulative translation adjustments (1,276) (1,033)
Treasury stock at cost, 4,000 and 3,513 shares,
respectively (203,417) (179,374)
-------- --------
Total shareholders' investment 316,034 351,097
-------- --------
$804,025 $842,189
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 5
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
-----------------------
Sept. 28 Sept. 29
1997 1996
-------- --------
<S> <C> <C>
NET SALES $170,557 $161,731
COST OF GOODS SOLD 144,146 143,762
-------- --------
Gross profit on sales $ 26,411 $ 17,969
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 29,174 26,061
-------- --------
Loss from operations $ (2,763) $ (8,092)
INTEREST EXPENSE (3,794) (1,952)
OTHER INCOME, net 2,315 1,562
-------- --------
Loss before credit
for income taxes $ (4,242) $ (8,482)
CREDIT FOR INCOME TAXES (1,610) (3,220)
-------- --------
Net loss $ (2,632) $ (5,262)
======== ========
PER SHARE DATA -
Net loss $(0.10) $ (.18)
====== ======
Cash dividends $ .28 $ .27
====== ======
Weighted average number of shares outstanding 25,165 28,927
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 6
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
-----------------------------
Sept. 28, 1997 Sept. 29, 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,632) $ (5,262)
Adjustments to reconcile net loss to net
cash provided by operating activities -
Depreciation 10,928 10,698
Amortization of discount on long-term debt 51 -
Loss on disposition of plant and equipment 1 515
(Increase)decrease in operating assets -
Accounts receivable 8,343 15,889
Inventories (78,846) (79,527)
Other current assets 2,582 1,954
Other assets (232) (874)
Increase(decrease) in liabilities -
Accounts payable and accrued
liabilities (9,880) 2,557
Other liabilities 186 649
--------- --------
Net cash used in
operating activities (69,499) (53,401)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (12,855) (14,171)
Proceeds received on sale of plant and equipment 138 129
Purchase of short-term investments - (15,183)
--------- --------
Net cash used in investing activities (12,717) (29,225)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings(repayments) from domestic
and foreign loans 6,557 (628)
Dividends (7,001) (7,810)
Purchase of common stock for treasury (26,396) (120)
Proceeds from exercise of stock options 1,209 40
--------- ---------
Net cash used in financing activities (25,631) (8,518)
--------- ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS (187) 25
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (108,034) (91,119)
CASH AND CASH EQUIVALENTS, beginning 112,859 150,639
--------- ---------
CASH AND CASH EQUIVALENTS, ending $ 4,825 $ 59,520
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 2,051 $ 1,952
========= =========
Income taxes paid $ 857 $ 422
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 7
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.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share."
This statement establishes a new standard for computing and presenting earnings
per share in financial statements. The Company will adopt the new standard in
its 1998 second quarter financial statements. The impact of adoption of this
standard will not be material to the Company's results of operations.
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<PAGE> 8
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 the Company's
results of operations and financial condition for the periods included in the
accompanying consolidated condensed financial statements.
RESULTS OF OPERATIONS
SALES
Net sales for the three months ended September 1997 were 5% or $8.8
million higher than in the same period of the preceding year. This sales
increase was the result of a 1% increase in sales to original equipment
manufacturers (OEMs) and a 4% increase in service parts sales.
Engine unit shipments to OEMs were 8% higher in the current year.
However, the sales dollar increase to OEMs was smaller than the unit increase
because the mix was more heavily weighted toward lower horsepower, lower
selling price engines.
The increase in service parts sales was the result of increased volume
that would normally occur later in the fiscal year.
GROSS PROFIT
The gross profit rate increased to 15% in the current year from 11% in
the last year. This resulted in additional gross profit totaling $8.4 million
between years. Better absorption of fixed expenses which totaled $3.2 million,
additional profits of $2.9 million from the higher margin service sales and
$2.3 million in reductions in various plant operating costs accounted for this
improvement.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
This category increased 12% or $3.1 million between years.
Approximately $2.2 million of this increase is related to the continuing costs
of design and implementation of a new company-wide information system. The
remaining increase is due primarily to planned increases in manpower costs
related to new venture activities.
INTEREST EXPENSE
Interest expense increased $1.8 million when comparing the two years.
This is due to the interest expense on the Company's 7.25% Notes Due 2007,
which were issued in the fourth quarter of fiscal 1997 in connection with the
Company's dutch auction tender offer for its common stock.
OTHER INCOME
This category increased $.8 million between years. This change was
evenly split between a reduction in the losses experienced on the disposition
of plant and equipment and an increase in the equity income from joint
ventures.
-8-
<PAGE> 9
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
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.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow used in operating activities was $69.5 million in 1997 and
$53.4 million in 1996. The primary use of these funds was the seasonal
increases in inventories of $78.8 million and $79.5 million in the respective
years. Earnings before depreciation and decreases in accounts receivable
offset these inventory increases.
Cash used in investing activities was $12.7 million in the quarter
ended in the current year and $29.2 million in the same quarter of the
preceding year. Additions to plant and equipment totaled $12.9 million and
$14.2 million in the respective years. The prior year also contained an
expenditure for the purchase of $15.2 million of short-term investments.
Cash used in financing activities totaled $25.6 million in 1997 and
$8.5 million in 1996. This increase was primarily the result of the purchase
of common stock for $26.4 million, which is described later. Dividends in the
first quarter totaled $7.0 million in 1997 and $7.8 million in 1996. The
current year's smaller amount is due to the decrease in the outstanding shares.
FUTURE LIQUIDITY AND CAPITAL RESOURCES
In the previous fiscal year, the Company's Board of Directors
authorized the purchase of up to $300 million of shares of common stock of the
Company. As of November 6, 1997, the Company has made purchases totaling
$211.1 million. Any future purchases will depend on many factors, including
the market price of the shares, the Company's business and financial position,
and general economic and market conditions. The Company intends to fund future
purchases of its common stock through a combination of available cash and
additional borrowings.
Management expects capital expenditures to total $56 million in fiscal
1998 for reinvestment in equipment and new products. The Company is also
implementing a new company-wide information system, the expenditures for which
are expected to total $25 million over the next five years. Among other things,
the implementation of this new information system addresses the issues related
to the year 2000.
Management believes that available cash, the credit facility, cash
generated from operations, existing lines of credit and access to public debt
markets will be adequate to fund the Company's capital requirements for the
foreseeable future.
OUTLOOK
The seasonal pattern of sales is expected to continue with a
concentration in the third and fourth fiscal quarters. Most retailers have
made their sourcing decisions, and the Company does not expect any significant
net change in its market share. Fiscal 1998 sales should be good if weather
conditions are normal, and retail sales in the spring of 1998 are anticipated
to be modestly higher than 1997.
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<PAGE> 10
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION (Continued)
The 1998 fiscal year will not contain the $37.1 million charge related
to the early retirement window which was contained in the final quarter of the
1997 fiscal year. Therefore, the gross profit rate is anticipated to increase
year to year. Interest expense is expected to continue to increase because of
the new long-term debt and less available cash.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements in Management's Discussion and Analysis, pages 8
through 10, may contain forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
in the forward-looking statements. The words "anticipate", "believe",
"estimate", "expect, "objective", and "think" or 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 effects of
weather on the purchasing patterns of the Company's customers and end use
purchasers of the Company's engines; the seasonal nature of the Company's
business; actions of competitors; changes in laws and regulations, including
accounting standards; employee relations; 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 may be beyond
the Company's control.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders on October 15, 1997, 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>
Robert J. O'Toole 20,838,337 93,564
John S. Shiely 20,867,117 64,784
Charles I. Story 20,854,286 77,615
</TABLE>
*Nominees were elected to a three-year term expiring in 2000.
Directors whose terms of office continue past the Annual Meeting of
Shareholders are:
Michael E. Batten, Robert H. Eldridge, Eunice M. Filter, Peter A.
Georgescu, Clarence B. Rogers, Jr., and Frederick P. Stratton, Jr.
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<PAGE> 11
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION (Continued)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
11 Computation of Earnings Per Share of Common Stock
(Filed herewith)
12 Computation of Ratio of Earnings to Fixed Charges
(Filed herewith)
27 Financial Data Schedule
(Filed herewith)
</TABLE>
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the first quarter ended
September 28, 1997.
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 6, 1997 /s/ R. H. Eldridge
--------------------------------------
R. H. Eldridge
Executive Vice President & Chief
Financial Officer, Secretary-Treasurer
Date: November 6, 1997 /s/ J. E. Brenn
--------------------------------------
J. E. Brenn
Vice President and Controller
-11-
<PAGE> 12
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
11 Computation of Earnings Per Share of Common Stock
(Filed herewith)
12 Computation of Ratio of Earnings to Fixed Charges
(Filed herewith)
27 Financial Data Schedule
(Filed herewith)
</TABLE>
-12-
<PAGE> 1
EXHIBIT 11
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(In thousands except per share data)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------
September 28, September 29,
1997 1996
---- ----
<S> <C> <C>
COMPUTATIONS FOR STATEMENTS OF INCOME
Primary earnings per share of common stock:
Net loss $ (2,632) $ (5,262)
======== ========
Average shares of common stock outstanding 25,165 28,927
Incremental common shares applicable to common stock
options based on the average market price during the period 150 131
-------- --------
Average common shares, as adjusted 25,315 29,058
======== ========
Earnings per share of common stock $ (0.10) $ (0.18)
======== ========
Fully diluted earnings per share of common stock:
Average shares of common stock outstanding 25,165 28,927
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 150 137
-------- --------
Average common shares assuming full dilution 25,315 29,064
======== ========
Fully diluted earnings per average share of common stock,
assuming conversion of all applicable securities $ (0.10) $ (0.18)
======== ========
</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.
<PAGE> 1
EXHIBIT 12
BRIGGS & STRATTON CORPORATION & SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands)
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------
September 28, September 29,
1997 1996
---- ----
<S> <C> <C>
Net loss $ (2,632) $ (5,262)
Add:
Interest 3,794 1,952
Income tax credit and other taxes on income (1,610) (3,220)
Fixed charges of unconsolidated subsidiaries 139 168
-------- --------
Loss as defined $ (309) $ (6,362)
======== ========
Interest $ 3,794 $ 1,952
Fixed charges of unconsolidated subsidiaries 139 168
-------- --------
Fixed charges as defined $ 3,933 $ 2,120
======== ========
Ratio of earnings to fixed charges* - -
======== ========
</TABLE>
* For the quarter ended September 28, 1997 and September 29, 1996, earnings
were inadequate to cover fixed charges by $4,242,000 and $8,482,000,
respectively
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BRIGGS & STRATTON CORPORATION FOR THE QUARTER ENDED
SEPTEMBER 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1998
<PERIOD-START> JUN-30-1997
<PERIOD-END> SEP-28-1997
<CASH> 4,825
<SECURITIES> 0
<RECEIVABLES> 121,534
<ALLOWANCES> 0
<INVENTORY> 204,803
<CURRENT-ASSETS> 378,303
<PP&E> 809,182
<DEPRECIATION> 411,199
<TOTAL-ASSETS> 804,025
<CURRENT-LIABILITIES> 210,671
<BONDS> 0
0
0
<COMMON> 289
<OTHER-SE> 315,745
<TOTAL-LIABILITY-AND-EQUITY> 804,025
<SALES> 170,557
<TOTAL-REVENUES> 170,557
<CGS> 144,146
<TOTAL-COSTS> 26,859
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,794
<INCOME-PRETAX> (4,242)
<INCOME-TAX> (1,610)
<INCOME-CONTINUING> (2,632)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,632)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
