<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 29, 1998
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
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(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 7, 1998
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COMMON STOCK, par value $0.01 per share 24,113,545 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 29, 1998 and June 29, 1997 3
Consolidated Condensed Statements of Income -
Three Months and Nine Months ended
March 29, 1998 and March 30, 1997 5
Consolidated Condensed Statements of Cash Flow -
Nine Months ended March 29, 1998 and
March 30, 1997 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 6. Exhibits and Reports on Form 8-K 11
Signatures 11
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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)
<TABLE>
<CAPTION>
ASSETS
------
March 29 June 29
1998 1997
----------- ---------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 22,616 $ 112,859
Receivables, net 302,033 129,877
Inventories -
Finished products and parts 94,093 83,361
Work in process 36,934 37,922
Raw materials 3,564 4,674
---------- ---------
Total inventories 134,591 125,957
Future income tax benefits 34,087 31,602
Prepaid expenses 16,892 18,121
---------- ---------
Total current assets 510,219 418,416
---------- ---------
OTHER ASSETS:
Deferred income tax assets 14,017 16,975
Capitalized software 10,604 10,532
---------- ---------
Total other assets 24,621 27,507
---------- ---------
PLANT AND EQUIPMENT -
Cost 816,610 796,714
Less - Accumulated depreciation 423,189 400,448
---------- ---------
Total plant and equipment, net 393,421 396,266
---------- ---------
$ 928,261 $ 842,189
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 4
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Continued)
(In thousands)
LIABILITIES & SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
March 29 June 29
1998 1997
-------- -------
(Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 78,999 $ 82,166
Domestic notes payable 82,942 5,000
Foreign loans 18,637 13,359
Current maturities of long-term debt 15,000 15,000
Accrued liabilities 108,290 87,553
Dividends payable 6,839 -
Federal and state income taxes 27,211 10,916
-------- --------
Total current liabilities 337,918 213,994
-------- --------
OTHER LIABILITIES:
Deferred revenue on sale of plant and equipment 15,913 15,966
Accrued pension cost 27,642 31,891
Accrued employee benefits 12,862 12,324
Accrued postretirement health care obligation 75,225 74,020
Long-term debt 143,051 142,897
-------- --------
Total other liabilities 274,693 277,098
-------- --------
SHAREHOLDERS' INVESTMENT:
Common stock-
Authorized 60,000 shares, $.01 par value,
Issued 28,927 shares 289 289
Additional paid-in capital 38,010 40,533
Retained earnings 513,320 490,682
Cumulative translation adjustments (1,712) (1,033)
Treasury stock at cost, 4,661 and 3,513 shares,
respectively (234,257) (179,374)
-------- --------
Total shareholders' investment 315,650 351,097
-------- --------
$928,261 $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>
Three Months Ended Nine Months Ended
------------------ -----------------
March 29 March 30 March 29 March 30
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $469,055 $475,955 $948,093 $937,350
COST OF GOODS SOLD 374,282 368,836 776,012 755,405
-------- -------- -------- --------
Gross profit on sales 94,773 107,119 172,081 181,945
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 33,103 30,847 92,342 84,979
-------- -------- -------- --------
Income from operations 61,670 76,272 79,739 96,966
INTEREST EXPENSE (5,870) (2,691) (14,912) (7,051)
OTHER INCOME, net 1,908 1,453 5,243 3,551
-------- -------- -------- --------
Income before provision
for income taxes 57,708 75,034 70,070 93,466
PROVISION FOR INCOME TAXES 21,930 28,520 26,630 35,520
-------- -------- -------- --------
Net income $ 35,778 $ 46,514 $ 43,440 $ 57,946
======== ======== ======== ========
EARNINGS PER SHARE DATA -
Average shares outstanding 24,514 28,927 24,861 28,927
======== ======== ======== ========
Basic earnings per share $ 1.46 $ 1.60 $ 1.75 $ 2.00
======== ======== ======== ========
Diluted average shares outstanding 24,600 29,055 25,008 29,050
======== ======== ======== ========
Diluted earnings per share $ 1.45 $ 1.60 $ 1.74 $ 1.99
======== ======== ======== ========
CASH DIVIDENDS PER SHARE $ .28 $ .27 $ .84 $ .81
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE> 6
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: March 29, 1998 March 30, 1997
-------------- --------------
<S> <C> <C>
Net income $ 43,440 $ 57,946
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation 35,523 32,278
Amortization of discount on long-term debt 154 -
Loss on disposition of plant and equipment 984 2,201
(Increase)decrease in operating assets -
Accounts receivable (172,156) (158,268)
Inventories (8,634) (19,992)
Other current assets (1,256) (1,864)
Other assets 2,886 (12,841)
Increase(decrease) in liabilities -
Accounts payable and accrued
liabilities 40,704 68,208
Other liabilities (2,506) 2,355
---------- ---------
Net cash used in operating activities (60,861) (29,977)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (34,192) (52,423)
Proceeds received on sale of plant and equipment 360 163
Proceeds received on sale of
Menomonee Falls, Wisconsin facility - 15,981
---------- ---------
Net cash used in investing activities (33,832) (36,279)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on domestic and foreign loans 83,220 2,611
Dividends (20,802) (23,431)
Purchase of common stock for treasury (66,433) (550)
Proceeds from exercise of stock options 9,027 185
---------- ---------
Net cash provided(used) in financing
activities 5,012 (21,185)
---------- ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS (562) (327)
---------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (90,243) (87,768)
CASH AND CASH EQUIVALENTS, beginning 112,859 150,639
---------- ---------
CASH AND CASH EQUIVALENTS, ending $ 22,616 $ 62,871
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 14,809 $ 7,051
========== =========
Income taxes paid $ 9,144 $ 17,766
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<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. These condensed financial statements should be read in
conjunction with the financial statements and the notes thereto which were
included in the Company's latest annual report on Form 10-K.
The Company adopted Financial Accounting Standard No. 128, effective for
periods ending after December 15, 1997, during the second quarter of the
current fiscal year. The Company's earnings per share were computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share, for each period
presented, were computed on the assumption that stock options were exercised at
the beginning of the periods reported.
-7-
<PAGE> 8
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
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 third fiscal quarter decreased $7 million or 1% compared
to the same period of the previous year. This decrease resulted primarily from
two factors: an $8 million reduction in sales dollars was due to a 1% decrease
in engine unit shipments and a $4 million reduction in revenue from European
customers with whom we share currency risk. These decreases were partially
offset by a $5 million increase in sales dollars due to a mix change to higher
horsepower, higher priced engines.
Net sales for the nine months ended March 1998 increased 1% or $11 million
when compared to the first nine months of the prior year. This increase
resulted primarily from a $24 million increase in sales dollars due to a 3%
increase in engine unit shipments and a $12 million increase in service parts
sales due to increased demand. These increases were partially offset by a $17
million decrease in sales dollars due to a mix change to lower horsepower,
lower priced engines and an $8 million decrease in revenue from European
customers with whom we share currency risk.
GROSS PROFIT
The gross profit percentage declined from 23% in the preceding year's
third quarter to 20% in the current year's quarter. The strong U.S. dollar
compared to European currencies caused $6 million of this decline. Reduced
volume in service sales was the primary cause of the remaining decline.
The gross profit margins for the nine-month period declined from 19% in
the preceding year to 18% in the current year. This resulted primarily from
the strong U.S. dollar compared to European currencies, which had a $12 million
negative impact. A change in mix of engines sold also had a $9 million
negative impact. Partially offsetting these was the $11 million favorable gross
profit impact resulting from the unit volume increases.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
This category increased 7% or $2 million between the third fiscal quarters
of 1998 and 1997, primarily due to increased costs related to the
implementation of a new company-wide information system.
The 9% or $7 million increase for the comparative nine-month period was
due primarily to the new company-wide information system.
-8-
<PAGE> 9
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INTEREST EXPENSE
Interest expense increased $3 million in the three-month comparison and $8
million in the nine-month comparison. These increases were the result of the
Company's higher level of short-term and long-term borrowings.
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 used in operating activities for the nine-month period was $61
million in 1998 and $30 million in 1997. These funds were used in 1998 and
1997 for seasonal increases in accounts receivable of $172 million and $158
million, respectively. The use of funds from the increases in accounts
receivable, inventories and other current assets was partially offset by funds
provided by earnings before depreciation and an increase in accounts payable
and accrued liabilities.
Cash used in investing activities totaled $34 million in the nine-month
period and $36 million in the same period of the preceding year. Additions to
plant and equipment totaled $34 million and $52 million in the respective
years. Partially offsetting additions to plant and equipment in the prior year
was $16 million received in the sale of the Company's Menomonee Falls,
Wisconsin facility.
Financing activities provided $5 million of cash in 1998 and used $21
million of cash in 1997, resulting in a change of $26 million. Net borrowings
increased $80 million dollars between years. This was caused by the Company
having less available cash due to its share repurchase program, which commenced
in May 1997. The nine-month comparisons also show increases of $66 million for
the Company's repurchase program, a $3 million decrease for dividends caused by
fewer shares outstanding and a $9 million increase in proceeds from the
exercise of stock options.
FUTURE LIQUIDITY AND CAPITAL RESOURCES
In the previous fiscal year, the Board of Directors authorized the
purchase of up to $300 million of common stock of the Company. As of March
29, 1998, the Company has made purchases totaling $245 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, cash generated from operations
and additional borrowings.
Management expects capital expenditures for reinvestment in equipment and
new products to total $44 million in fiscal 1998. The Company is also
implementing a new company-wide information system. The project expenditures
to date have been $14 million. The future expenditures are expected to total
$20 million through fiscal 2002. This system, along with related projects,
will address the issues related to the year 2000. These projects include
working with the Company's customers and suppliers regarding year 2000 issues
to ensure continuity of business. Management does not expect any additional
material expenses for the related projects.
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<PAGE> 10
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Management believes that available cash, credit facilities, cash generated
from operations, and access to public debt markets will be adequate to fund the
Company's capital requirements for the foreseeable future.
OUTLOOK
The Company's business is very strong and it is unable to meet the demand
for some popular models. Weather conditions in the United States and in Europe
are favorable, and outdoor power equipment is selling well. Unless there is a
change in the weather pattern, management believes the Company will have a
fourth quarter in line with prior years.
The 1998 fiscal year will not contain the $37 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 increases in debt and less available cash.
OTHER MATTERS
The California Air Resources Board (CARB) staff completed a review of the
existing Tier II standards and proposed that alternative standards and
implementation dates be adopted by CARB. The alternative Tier II standards
adopted by CARB at its March 26, 1998 meeting are not harmonized with EPA Phase
II, but rather require the accelerated introduction of overhead value engine
technology into California. In addition, individual companies which sell more
than a threshold number of Class I engines into California must submit a
supplemental compliance plan to CARB to achieve additional reductions in
extreme non-attainment areas. While CARB's aggressive program may result in a
reduced product offering by the Company in California, it is not anticipated
that the California program will have a material effect on the financial
position or results of operations of the Company.
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.
-10-
<PAGE> 11
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
------- -----------
10 Form of Officer Employment Agreements*
11 Computation of Earnings Per Share of Common Stock*
12 Computation of Ratio of Earnings to Fixed Charges*
27(a) Financial Data Schedule, 3/29/98*
27(b) Restated Financial Data Schedule, 3/30/97*
27(c) Restated Financial Data Schedule, 12/29/96*
*Filed herewith
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the third quarter ended March 29,
1998.
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 7, 1998 /s/ R. H. Eldridge
---------------------------------------------------
R. H. Eldridge
Executive Vice President & Chief Financial Officer,
Secretary-Treasurer
Date: May 7, 1998 /s/ J. E. Brenn
---------------------------------------------------
J. E. Brenn
Vice President & Controller
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<PAGE> 12
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
10 Form of Officer Employment Agreements*
11 Computation of Earnings Per Share of Common Stock*
12 Computation of Ratio of Earnings to Fixed Charges*
27(a) Financial Data Schedule, 3/29/98*
27(b) Restated Financial Data Schedule, 3/30/97*
27(c) Restated Financial Data Schedule, 12/29/96*
*Filed herewith
-12-
<PAGE> 1
BRIGGS & STRATTON CORPORATION
Form 10-Q for Quarterly Period Ended March 29, 1998
Exhibit No. 10
FORM OF OFFICER EMPLOYMENT AGREEMENT
(Agreement provided to all Executive Officers,
except James A. Wier, whose Agreement
was previously filed.)
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of the _______day
of ___________, 19__, by and between _______________________ (the "Employee")
and BRIGGS & STRATTON CORPORATION, a Wisconsin corporation with its corporate
office in Wauwatosa, Wisconsin (the "Company").
WHEREAS, the Company desires to employ Employee in the business of
manufacturing, selling and servicing gasoline powered engines or in such other
businesses as the Company may from time to time engage (the "Business"), and
Employee desires to be employed by the Company for such purpose; and
WHEREAS, Employee shall have access to confidential financial information,
trade secrets and other confidential and proprietary information of the
Company;
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT
1.1 Duties. The Company shall employ Employee upon the terms and
conditions set forth in this Agreement. Employee shall have such duties at
such work locations as may be assigned to Employee from time to time by the
Company.
1.2 Best Efforts. Employee agrees to devote his best efforts and his full
time and attention to the performance of his duties under this Agreement, and
to perform such duties in an efficient, trustworthy and businesslike manner.
1.3 Duty to Act in the Best Interest of the Company. Employee shall not
act in any manner, directly or indirectly, which may damage the business of the
Company or which would adversely affect the goodwill, reputation or business
relations of the Company with its customers, the public generally or with any
of its other employees.
2. TERM OF EMPLOYMENT
2.1 Term. The term of Employee's employment with the Company under this
Agreement shall commence as of January 1, 1998 (the "Effective Date"), and
shall expire two years from the Effective Date ("Expiration Date"). In the
event that neither the Company nor the Employee shall give written notice to
the other party at least 30 days prior to any anniversary of the Effective Date
that this Agreement shall not be further extended, the Expiration Date shall be
automatically extended by one additional year. If such notice is given, this
Agreement shall expire on the last determined Expiration Date. Notwithstanding
the foregoing, this Agreement and Employee's employment may be terminated at
any time as provided for in Sections 2.2, 2.3 or 2.4 of this Agreement.
<PAGE> 3
2.2 Termination for Cause. The Company shall have the right to terminate
this Agreement and Employee's employment for the following causes (each a
"Termination for Cause"):
(a) Conviction of Employee for, or entry of a plea of
guilty or nolo contendere by Employee with respect to, any
felony or any crime involving an act of moral turpitude;
(b) Engaging in any act involving fraud or theft;
(c) Conduct which is detrimental to the reputation,
goodwill or business operations of the Company;
(d) Neglect by Employee of his duties or breach by
Employee of his duties or intentional misconduct by Employee in
discharging such duties;
(e) Employee's continued absence from his duties without
the consent of the Employee's supervisor after receipt of
notification from the Company, other than absence due to bona
fide illness or disability as defined herein;
(f) Employee's failure or refusal to comply with the
directions of his supervisor or with the policies, standards and
regulations of the Company, provided that such directions,
policies, standards or regulations do not require Employee (i)
to take any action which is illegal, immoral or unethical or
(ii) to fail to take any action required by applicable law,
regulations or licensing standards; or
(g) Employee's breach of the restrictive covenants set
forth in Section 5 of this Agreement;
provided, however, that termination of Employee for an act or omission
described in subparagraphs (c) through (g) above shall not constitute a valid
Termination for Cause unless Employee shall have received written notice on
behalf of the Board of Directors of the Company by its Chairman or designee
stating the nature of the conduct forming the basis for termination and
affording Employee 10 days to correct the act or omission described. Unless
Employee cures such act or omission to the satisfaction of the Company, such
Termination for Cause shall be effective immediately upon the expiration of the
10 day period. Upon the effectiveness of any Termination for Cause by the
Company, payment of all compensation to Employee under this Agreement shall
cease immediately (except for any payment of compensation accrued but unpaid
through the date of such Termination for Cause).
2.3 Termination by the Company Without Cause. The Company shall have the
right to terminate this Agreement and Employee's employment without cause upon
10 days' written notice to Employee. If the Company terminates this Agreement
and Employee's employment without cause pursuant to this Section 2.3, Employee
shall receive his Base Compensation, as that term is defined in Section 3.1 of
this Agreement, for the remainder of the then current term of this Agreement,
and shall be entitled to continue pre-existing coverage for himself and any
dependents under any applicable
2
<PAGE> 4
medical plans described in Section 3.4 of this Agreement for the remainder of
the then current term of this Agreement as long as the Employee continues to
make the same monthly payments and copayments which would have been applicable
if the Employee's employment had not been terminated. Upon such termination,
Employee shall not receive any further compensation pursuant to Sections 3.2,
3.3 or the non-medical benefits described in Section 3.4 of this Agreement
except as required by the terms of such benefit plans. In the event of
termination without cause, Employee acknowledges that the Company shall have no
liability to him whatsoever other than its obligation to pay him his Base
Compensation and to provide continuation of coverage under any applicable
medical plans for the remainder of the then current term of this Agreement, and
subsequently to provide the Employee with medical benefits under the
Consolidated Omnibus Budget Reconciliation Act of 1985 as amended ("COBRA") and
other benefits to which the Employee may be entitled notwithstanding
termination of his employment.
2.4 Termination Due to Disability or Death. If Employee is unable to
perform his duties under this Agreement by reason of physical or mental
disability, this Agreement shall terminate, and, upon such termination,
Employee shall continue to receive the compensation described in Section 3 of
this Agreement, reduced by any disability payment to which Employee may be
entitled in lieu of such compensation, for a period of 6 months following
termination. At the expiration of the 6 month period, payment of all
compensation to Employee under this Agreement shall cease immediately (except
for any payment of compensation accrued but unpaid through that date, COBRA
benefits and other benefits to which the Employee may be entitled
notwithstanding termination of his employment). The term "disability" as used
herein shall mean a condition which prohibits Employee from performing his
duties substantially in the manner he is capable of performing them on the date
of this Agreement, which cannot be removed by reasonable accommodations on the
part of the Company, for 60 days or more during any one year period.
If Employee should die during the term of this Agreement, this Agreement
shall terminate and all payments to Employee under this Agreement shall cease
immediately (except for any such payments accrued but unpaid through the date
of death).
2.5 COBRA Coverage. Any period of continued post-employment medical plan
coverage provided in accordance with this Agreement shall count against the
minimum period of coverage required by the medical continuation provisions of
COBRA and any other applicable legislation.
3. COMPENSATION
3.1 Base Compensation. Subject to Sections 2 and 5.5 of this Agreement,
during the term of this Agreement the Company shall pay to Employee an annual
salary ("Base Compensation"), which salary shall be reviewed annually by the
Nominating and Salaried Personnel Committee of the Board of Directors. Such
Base Compensation shall in no event be lower than the salary of the previous
year. Employee acknowledges that $2,000
3
<PAGE> 5
of each year's Base Compensation is consideration for the covenant made by
Employee in Section 5.3 of this Agreement against post-employment competition,
and that the amount of such consideration is reasonable and adequate.
3.2 Incentive Compensation. Subject to Sections 2 and 5.5 of this
Agreement, in addition to the Base Compensation referred to in Section 3.1 of
this Agreement, Employee shall be eligible to participate in any incentive pay
plan adopted by the Board of Directors for a group of employees that includes
executive officers.
3.3 Reimbursement of Business Expenses. During the term of this
Agreement, the Company shall reimburse Employee for all ordinary and necessary
business expenses incurred by him in connection with the Business, upon
submission by Employee to the Company of vouchers itemizing such expenses in a
form satisfactory to the Company, properly identifying the nature and business
purpose of any such expenditure.
3.4 Benefits. During the term of this Agreement, Employee shall be
entitled to participate in such insurance, medical and retirement plans and to
be provided such other fringe benefits as have been accorded other
similarly-situated employees of the Company, as determined from time to time by
the Company.
4. PROPERTY OF THE COMPANY/ASSIGNMENT
Employee agrees that the Business and all businesses developed by him
relating to the Business, including without limitation software, contracts,
fees, commissions, customer lists and any other incident of any business
developed or sought by the Company, or earned or carried on by Employee for the
Company, are and shall be the exclusive property of the Company for its sole
use.
Employee hereby grants and assigns to the Company (without additional
compensation) his entire right, title and interest under applicable laws in and
to all software products and modifications thereto, inventions, improvements,
drawings, designs, prototypes, patents, patent applications, trade secrets,
confidential information, cost information, marketing plans, new product plans,
proposed product improvements, research information, customer lists and
customer contacts, all other technical and research data, and copyrightable
material (including derivative works) made, conceived, developed or acquired by
him solely or jointly with others during the period of his employment by the
Company, but only to the extent the foregoing pertains to the Business. During
the term of his employment with the Company and for two years after the
termination of his employment with the Company for any reason, Employee shall
execute all documents as requested by Company to accomplish such assignment of
rights, and shall otherwise cooperate with the Company and its attorneys in the
protection and enforcement of the Company's intellectual property rights, at
the expense of Company.
4
<PAGE> 6
5. COVENANTS OF NON-DISCLOSURE, NON-SOLICITATION AND NON-COMPETITION
5.1 Non-Disclosure. During the term of his employment with the Company
and for two years after the termination of his employment with the Company for
any reason, Employee shall not, and Employee shall use his best efforts (which
best efforts shall include, without limitation, notifying the Board of
Directors of the Company of any suspected breach of this Section 5.1) to ensure
that any persons or entities over which Employee has control do not, directly
or indirectly, use any Company proprietary or other confidential information
for any purpose not associated with Company activities, or disseminate or
disclose any such information to any person or entity not affiliated with the
Company. Such Company proprietary or other confidential information includes
without limitation sales methods, prospecting methods, customer lists and
customer contacts, computer technology, programs and data, whether on-line or
off-loaded on disk format, inventions, improvements, trade secrets, drawings,
designs, cost information, prototypes, new product plans, proposed product
improvements, methods of presentation and any other plans, programs and
materials used in managing, marketing or furthering Company business. Upon
termination of Employee's employment relationship with the Company, Employee
shall return to the Company all documents, records, notebooks, manuals,
computer disks and similar repositories of or containing Company proprietary or
other confidential information, including all copies thereof, then in
Employee's possession or control, whether prepared by Employee or otherwise.
Employee shall undertake all reasonably necessary and appropriate steps to
ensure that the confidentiality of Company proprietary or other confidential
information shall be maintained.
5.2 Non-Solicitation. For a period of two years after the termination of
Employee's employment with the Company for any reason, Employee shall not (i)
solicit, service or in any way or to any degree handle any business similar to
that performed by Employee for the Company, for any person, firm or entity
which is a customer or actively marketed prospect of the Company or which
becomes a customer or actively marketed prospect of the Company during the term
of Employee's employment, whether or not said customer or prospect shall have
been handled, serviced or produced by Employee, (ii) divert or attempt to
divert any such customer or prospect, or (iii) publicly announce or advertise
his former employment by or connections with the Company.
For a period of two years after the termination of Employee's employment
with the Company for any reason, Employee shall not solicit, take away, hire,
employ or endeavor to employ any of the employees of the Company.
5.3 Non-Competition. Employee acknowledges that the Business is unique
and is conducted throughout the United States and abroad, and, therefore,
agrees that, during the term of his employment with the Company and for two
years after the earlier of the date of termination of his employment with the
Company for any reason or the date when the Employee or the Company provides
written notice to the other party under Section 2.1
5
<PAGE> 7
that this Agreement will not be extended, he shall not, without the prior
written consent of the Company, directly or indirectly, own, develop, manage,
operate, join, control or participate in the ownership, management, operation
or control of, or become an employee or independent contractor of, or
consultant to, any business which competes with the Business as conducted by
the Company, or any of its subsidiary companies, or any of their respective
successors, by selling such products, or providing such services as the
Company, or any of its subsidiary companies, or any of their respective
successors, sells or provides during the term of such employment or at the time
of such termination. This restriction will apply worldwide. The foregoing
notwithstanding, nothing herein shall be construed so as to prohibit or
restrict Employee from owning less than five percent (5%) of the outstanding
common stock of any corporation, the stock of which is publicly traded on a
national securities exchange or in the over-the-counter market, that competes
with the Company. Employee further agrees that, during his employment with the
Company, he shall use his best efforts to preserve the Business and the
organization of the Company, to keep available to the Company the services of
its employees, and to preserve for the Company its and his favorable business
relationships with suppliers, customers and others.
5.4 Applicability. Subject to Sections 2.2 and 2.4 of this Agreement, the
provisions of Sections 5.1, 5.2 and 5.3 of this Agreement shall apply to all
terminations of Employee's employment with the Company, regardless of the cause
or circumstances thereof and whether such termination was voluntary or
involuntary, for cause or without cause. Further, Employee's covenants of
non-disclosure, non-competition, and non-solicitation, along with the Company's
remedies for the breach or threatened breach of those covenants, shall remain
in effect following the termination of this Agreement and Employee's
employment, regardless of the cause or circumstances thereof and whether such
termination was voluntary or involuntary, for cause or without cause.
5.5 Remedies. In view of the services which Employee will perform for the
Company, which are special, unique, extraordinary and intellectual in
character, which place him in a position of confidence and trust with the
customers and employees of the Company, and which provide him with access to
confidential financial information, trade secrets, "know-how" and other
confidential and proprietary information of the Company, in view of the
geographic scope and nature of the business in which the Company is engaged,
and recognizing the value of this Agreement to him, Employee expressly
acknowledges that the restrictive covenants set forth in this Agreement,
including without limitation the geographic scope of such covenants, are
necessary in order to protect and maintain the proprietary interests and other
legitimate business interests of the Company, and that the enforcement of such
restrictive covenants shall not prevent him from earning a livelihood.
Employee also acknowledges that the scope of the operations of the Company are
such that it is reasonable that the restrictions set forth in this Agreement
are not more limited as to geographic area than is set forth herein. Employee
further acknowledges that the remedy at law for any breach or threatened breach
of this Agreement will be inadequate and, accordingly, that the Company, in
addition to all other
6
<PAGE> 8
available remedies (including, without limitation, seeking such damages as it
has sustained by reason of such breach), shall be entitled to injunctive or any
other appropriate form of equitable relief. Notwithstanding anything in this
Agreement to the contrary, in the event Employee breaches any of the covenants
of non-disclosure, non-solicitation or non-competition set forth in Sections
5.1, 5.2 and 5.3 of this Agreement, he shall not receive any further payments
from the Company pursuant to this Agreement.
6. INDEMNIFICATION
The Company shall indemnify and hold harmless Employee from and against
any claim of liability or loss (including costs and reasonable attorneys' fees)
arising as a result of Employee's proper performance of his obligations under
this Agreement in accordance with the provisions for indemnification of
officers of the Company set forth in the Bylaws of the Company.
7. MISCELLANEOUS PROVISIONS
7.1 Assignment and Successors. The Company may assign its rights and
obligations under this Agreement to any corporation or other entity which
controls, is controlled by, or is under common control with, the Company,
without Employee's consent. Further, if the Company sells all or substantially
all of the assets of the Business, the rights and obligations of the Company
under this Agreement may be assigned without Employee's consent. In all other
circumstances, the rights and obligations of the Company under this Agreement
may be assigned with Employee's consent (which shall not be unreasonably
withheld) and shall inure to the benefit of and be binding upon the successors
and assigns of the Company. Employee's obligation to provide services
hereunder may not be assigned to or be assumed by any other person or entity.
7.2 Notices. All notices, requests, demands, or other communications
under this Agreement shall be in writing and shall only be deemed to be duly
given if to the Company c/o Corporate Secretary, and to Employee at his address
as shown in the Company's records.
7.3 Severability. If any provision or portion of this Agreement shall be
or become illegal, invalid or unenforceable in whole or in part for any reason,
such provision shall be ineffective only to the extent of such illegality,
invalidity or unenforceability, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. If any court of
competent jurisdiction should deem any covenant herein to be invalid, illegal
or unenforceable because its scope is considered excessive, such covenant shall
be modified so that the scope of the covenant is reduced only to the minimum
extent necessary to render the modified covenant valid, legal and enforceable.
7.4 Integration, Amendment and Waiver. This Agreement constitutes the
entire agreement between the Company and the Employee, superseding all prior
similar
7
<PAGE> 9
arrangements and agreements, and may be modified, amended or waived only by a
written instrument signed by both of them. This Agreement does not supersede
the separate employment agreement between the Employee and the Company relating
to a change in control of the Company.
7.5 Governing Law. This Agreement shall be construed in accordance with
and governed for all purposes by the laws of the State of Wisconsin applicable
to contracts executed and wholly performed within such state.
7.6 Interpretation. The headings contained in this Agreement are for
reference purposes only, and shall not affect in any way the meaning or
interpretation of this Agreement. The language in all parts of this Agreement
shall in all cases be construed according to its fair meaning, and not strictly
for or against any party. In this Agreement, unless the context otherwise
requires, the masculine, feminine and neuter genders and the singular and the
plural include one another.
7.7 Non-Wavier of Rights and Breaches. No failure or delay of any party
in the exercise of any right given to such party hereunder shall constitute a
waiver unless the time specified for the exercise of such right has expired,
nor shall any single or partial exercise of any right preclude other or further
exercise thereof or of any other right. The waiver by a party of any default
of any other party shall not be deemed to be a waiver of any subsequent default
or other default by such party.
7.8 Attorneys' Fees. In the event that the Employee or the Company is
required to bring an arbitration proceeding or any legal action to enforce the
terms of this Agreement, the prevailing party shall, in addition to any other
remedies available to it, be entitled to recover its reasonable attorneys' fees
and costs from the losing party.
7.9 Dispute Resolution.
(a) (i) Any dispute, controversy or claim arising out of or relating to
this Agreement or any term or provision of this Agreement, including without
limitation any claims of breach, termination or invalidity thereof, (ii) any
matter subject to arbitration under any provision of this Agreement, and (iii)
any other matter which the parties agree to submit to arbitration shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Such
arbitration proceedings shall be held in Milwaukee, Wisconsin.
(b) Notwithstanding the foregoing, the Company at all times shall have the
right to bring an action to enforce the covenants and seek the remedies set
forth in Section 5 of this Agreement through the courts as it deems necessary
or desirable in order to protect its proprietary and other confidential
information or to prevent the occurrence of any event which the Company
believes will cause it to suffer immediate and irreparable harm or damage. The
parties agree that any such action may be brought in a state or federal
8
<PAGE> 10
court located within Milwaukee, Wisconsin. The parties waive any and all
objections to jurisdiction or venue. The parties further agree that service of
process may be made by registered mail to the addresses referred to in Section
7.2 of this Agreement, and that such service shall be deemed effective service
of process.
7.10 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Employee have caused this Employment
Agreement to be duly executed as of the date first written above.
EMPLOYEE BRIGGS & STRATTON CORPORATION
- --------------------------- -------------------------------
F. P. Stratton, Jr., Chairman
9
<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 Nine Months Ended
------------------------------------ ------------------------------------
March 29, 1998 March 30, 1997 March 29, 1998 March 30, 1997
----------------- ------------------ ----------------- ------------------
Computations for Statements of Income
<S> <C> <C> <C> <C>
Net income $ 35,778 $ 46,514 $ 43,440 $ 57,946
=========== =========== =========== ===========
Basic earnings per share of common stock:
Average shares of common stock outstanding 24,514 28,927 24,861 28,927
=========== =========== =========== ===========
Basic earnings per share of common stock: $ 1.46 $ 1.60 $ 1.75 $ 2.00
=========== =========== =========== ===========
Diluted earnings per share of common stock:
Average shares of common stock outstanding 24,514 28,927 24,861 28,927
Incremental common shares applicable to common
stock options 86 128 147 123
----------- ----------- ----------- -----------
Average common shares assuming dilution 24,600 29,055 25,008 29,050
=========== =========== =========== ===========
Diluted earnings per average share of common
stock $ 1.45 $ 1.60 $ 1.74 $ 1.99
=========== =========== =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 12
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS TO FIXED CHARGES
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------
March 29, 1998 March 30, 1997
---------------- ----------------
<S> <C> <C>
Net income $ 43,440 $ 57,946
Add:
Interest 14,912 7,051
Income tax expense and other taxes on income 26,630 35,520
Fixed charges of unconsolidated subsidiaries 392 470
------------- -------------
Income as defined $ 85,374 $ 100,987
============= =============
Interest $ 14,912 $ 7,051
Fixed charges of unconsolidated subsidiaries 392 470
------------- -------------
Fixed charges as defined $ 15,304 $ 7,521
============= =============
Ratio of earnings to fixed charges 5.58 x 13.43 x
============= =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF BRIGGS & STRATTON CORPORATION FOR THE NINE MONTHS ENDED MARCH 29,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1998
<PERIOD-START> JUN-30-1997
<PERIOD-END> MAR-29-1998
<CASH> 22,616
<SECURITIES> 0
<RECEIVABLES> 302,033
<ALLOWANCES> 0
<INVENTORY> 134,591
<CURRENT-ASSETS> 510,219
<PP&E> 816,610
<DEPRECIATION> 423,189
<TOTAL-ASSETS> 928,261
<CURRENT-LIABILITIES> 337,918
<BONDS> 0
0
0
<COMMON> 289
<OTHER-SE> 315,361
<TOTAL-LIABILITY-AND-EQUITY> 928,261
<SALES> 948,093
<TOTAL-REVENUES> 948,093
<CGS> 776,012
<TOTAL-COSTS> 776,012
<OTHER-EXPENSES> 87,099
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,912
<INCOME-PRETAX> 70,070
<INCOME-TAX> 26,630
<INCOME-CONTINUING> 43,440
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,440
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 1.74
</TABLE>
<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 MARCH 30,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS. EARNINGS PER SHARE INFORMATION HAS BEEN RESTATED TO CONFORM WITH THE
REQUIREMENTS OF FAS NO. 128, EARNINGS PER SHARE.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-30-1997
<CASH> 62,871
<SECURITIES> 0
<RECEIVABLES> 276,405
<ALLOWANCES> 0
<INVENTORY> 157,395
<CURRENT-ASSETS> 543,849
<PP&E> 802,764
<DEPRECIATION> 410,871
<TOTAL-ASSETS> 959,833
<CURRENT-LIABILITIES> 259,789
<BONDS> 0
0
0
<COMMON> 289
<OTHER-SE> 533,939
<TOTAL-LIABILITY-AND-EQUITY> 959,833
<SALES> 937,350
<TOTAL-REVENUES> 937,350
<CGS> 755,405
<TOTAL-COSTS> 755,405
<OTHER-EXPENSES> 81,428
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,051
<INCOME-PRETAX> 93,466
<INCOME-TAX> 35,520
<INCOME-CONTINUING> 57,946
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,946
<EPS-PRIMARY> 2.00<F1>
<EPS-DILUTED> 1.99<F2>
<FN>
<F1>REPRESENTS BASIC EARNINGS PER SHARE IN ACCORDANCE WITH FAS NO.128, EARNINGS PER
SHARE.
<F2>REPRESENTS DILUTED EARNINGS PER SHARE IN ACCORDANCE WITH FAS NO. 128, EARNINGS
PER SHARE.
</FN>
</TABLE>
<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 DECEMBER 29,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS. EARNINGS PER SHARE INFORMATION HAS BEEN RESTATED TO CONFORM WITH
THE REQUIREMENTS OF FAS NO. 128, EARNINGS PER SHARE.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-29-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 3,254
<SECURITIES> 0
<RECEIVABLES> 234,525
<ALLOWANCES> 0
<INVENTORY> 230,424
<CURRENT-ASSETS> 515,855
<PP&E> 788,453
<DEPRECIATION> 403,777
<TOTAL-ASSETS> 922,397
<CURRENT-LIABILITIES> 261,709
<BONDS> 0
0
0
<COMMON> 289
<OTHER-SE> 495,904
<TOTAL-LIABILITY-AND-EQUITY> 922,397
<SALES> 461,395
<TOTAL-REVENUES> 461,395
<CGS> 386,569
<TOTAL-COSTS> 386,569
<OTHER-EXPENSES> 52,034
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,360
<INCOME-PRETAX> 18,432
<INCOME-TAX> 7,000
<INCOME-CONTINUING> 11,432
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,432
<EPS-PRIMARY> .40<F1>
<EPS-DILUTED> .39<F2>
<FN>
<F1>REPRESENTS BASIC EARNINGS PER SHARE IN ACCORDANCE WITH FAS NO. 128, EARNINGS
PER SHARE.
<F2>REPRESENTS DILUTED EARNINGS PER SHARE IN ACCORDANCE WITH FAS NO. 128, EARNINGS
PER SHARE.
</FN>
</TABLE>
