<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 28, 1999
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, 1999
- --------------------------------------------------------------------------------
COMMON STOCK, par value $0.01 per share 23,284,999 Shares
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets -
March 28, 1999 and June 28, 1998 3
Consolidated Condensed Statements of Income -
Three Months and Nine Months ended
March 28, 1999 and March 29, 1998 5
Consolidated Condensed Statements of Cash Flow -
Nine Months ended March 28, 1999 and
March 29, 1998 6
Notes to Consolidated Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
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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>
March 28, June 28,
1999 1998
-------- --------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 26,166 $ 84,527
Receivables, net 342,958 136,629
Inventories -
Finished products and parts 65,892 58,975
Work in process 56,662 45,217
Raw materials 5,372 3,684
-------- --------
Total inventories 127,926 107,876
Future income tax benefits 35,776 31,287
Prepaid expenses 29,660 21,727
-------- --------
Total current assets 562,486 382,046
-------- --------
OTHER ASSETS:
Marketable securities 2,100 --
Deferred income tax assets 5,221 9,555
Capitalized software 7,545 9,881
-------- --------
Total other assets 14,866 19,436
-------- --------
PLANT AND EQUIPMENT -
Cost 842,040 812,428
Less - Accumulated depreciation 444,495 420,501
-------- --------
Total plant and equipment, net 397,545 391,927
-------- --------
$974,897 $793,409
======== ========
</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 28, June 28,
1999 1998
-------- -------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $106,223 $ 76,915
Domestic notes payable 81,025 4,700
Foreign loans 18,952 14,336
Current maturities of long-term debt 15,000 15,000
Accrued liabilities 131,372 101,465
Dividends payable 6,762 --
Federal and state income taxes 29,200 10,529
-------- --------
Total current liabilities 388,534 222,945
-------- --------
OTHER LIABILITIES:
Deferred revenue on sale of plant and equipment 15,823 15,893
Accrued pension cost 19,494 26,477
Accrued employee benefits 12,984 12,571
Accrued postretirement health care obligation 70,691 70,933
Long-term debt 128,256 128,102
-------- --------
Total other liabilities 247,248 253,976
-------- --------
SHAREHOLDERS' INVESTMENT:
Common stock-
Authorized 60,000 shares, $.01 par value,
Issued 28,927 shares 289 289
Additional paid-in capital 37,044 37,776
Retained earnings 584,316 533,805
Unearned compensation on restricted stock (249) --
Unrealized gain on marketable securities 192 --
Cumulative translation adjustments (1,998) (2,110)
Treasury stock at cost, 5,743 and 5,103 shares,
respectively (280,479) (253,272)
-------- --------
Total shareholders' investment 339,115 316,488
-------- --------
$974,897 $793,409
======== ========
</TABLE>
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 INCOME
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -------------------
March 28, March 29, March 28 March 29,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET SALES $476,259 $469,055 $1,060,183 $948,093
COST OF GOODS SOLD 373,428 374,282 848,269 776,012
-------- -------- ---------- --------
Gross profit on sales 102,831 94,773 211,914 172,081
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 32,140 33,103 90,495 92,342
-------- -------- ---------- --------
Income from operations 70,691 61,670 121,419 79,739
INTEREST EXPENSE (5,025) (5,870) (13,183) (14,912)
OTHER INCOME, net 1,250 1,908 5,198 5,243
-------- -------- ---------- --------
Income before provision
for income taxes 66,916 57,708 113,434 70,070
PROVISION FOR INCOME TAXES 25,103 21,930 42,543 26,630
-------- -------- ---------- --------
Net income $ 41,813 $ 35,778 $ 70,891 $ 43,440
======== ======== ========== ========
EARNINGS PER SHARE DATA -
Average shares outstanding 23,271 24,514 23,399 24,861
====== ====== ====== ======
Basic earnings per share $ 1.80 $ 1.46 $ 3.03 $ 1.75
====== ====== ====== ======
Diluted average shares outstanding 23,357 24,600 23,480 25,008
====== ====== ====== ======
Diluted earnings per share $ 1.79 $ 1.45 $ 3.02 $ 1.74
====== ====== ====== ======
CASH DIVIDENDS PER SHARE $ .29 $ .28 $ .87 $ .84
====== ====== ====== ======
</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>
Nine Months Ended
----------------------------
March 28, March 29,
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 70,891 $ 43,440
Adjustments to reconcile net income to net
cash used in operating activities -
Depreciation 35,706 35,523
Amortization of discount on long-term debt 154 154
Amortization of compensation on
restricted stock 39 --
Loss on disposition of plant and equipment 391 984
Provision(Benefit) for deferred income taxes (278) 473
Change in operating assets and liabilities -
Increase in accounts receivable (207,600) (172,156)
Increase in inventories (20,048) (8,634)
(Increase)Decrease in prepaid expenses (8,052) 1,229
Increase in accounts payable
and accrued liabilities 87,009 40,704
Other, net (5,882) (2,578)
--------- ---------
Net cash used in operating activities (47,670) (60,861)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (43,903) (34,192)
Proceeds received on sale of plant and equipment 1,521 360
--------- ---------
Net cash used in investing activities (42,382) (33,832)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on domestic and foreign loans 81,417 83,220
Dividends (20,380) (20,802)
Purchase of common stock for treasury (58,006) (66,433)
Proceeds from exercise of stock options 28,682 9,027
--------- ---------
Net cash provided by financing activities 31,713 5,012
--------- ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS (22) (562)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (58,361) (90,243)
CASH AND CASH EQUIVALENTS, beginning 84,527 112,859
--------- ---------
CASH AND CASH EQUIVALENTS, ending $ 26,166 $ 22,616
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 14,751 $ 14,809
========= =========
Income taxes paid $ 23,678 $ 9,144
========= =========
</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 applicable to interim statements 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 caption entitled Marketable Securities represents stock received in
the sale of the Company's software business at the end of the first quarter of
fiscal 1999. These securities are being classified as available-for-sale and are
being reported at fair market value. The unrealized gain incurred on this stock
is recorded as Unrealized Gain on Marketable Securities in the Shareholders'
Investment section of the balance sheet.
The Company's Board of Directors authorized awards of a total of 8,000
shares of restricted stock to key employees in August 1998 from the Company's
treasury stock. These shares shall be forfeitable until they become vested upon
the first to occur of the following: five years from the award date; a change in
control; or termination of employment by reason of retirement, disability or
death. The market value of these shares was recorded as Unearned Compensation on
Restricted Stock at the award date and is being amortized to compensation
expense over five years.
The Company adopted Financial Accounting Standard (FAS) No. 130,
Reporting Comprehensive Income, in the quarter ended September 1998. This
statement requires the reporting of comprehensive income in addition to net
income from operations. Comprehensive income is a more inclusive financial
reporting method that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net income. The
Company has foreign currency translation adjustments accounted for under FAS
Statement No. 52 which fall within this definition. Total comprehensive income
is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ ------------------
Mar. 28 Mar. 29 Mar. 28 Mar. 29
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 41,813 $ 35,778 $ 70,891 $ 43,440
Foreign currency translation
adjustments (657) (14) 112 (679)
Unrealized gain on marketable
securities, (net of tax) 256 -- 192 --
-------- -------- -------- --------
Total comprehensive income $ 41,412 $ 35,764 $ 71,195 $ 42,761
======== ======== ======== ========
</TABLE>
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<PAGE> 8
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of the Company's
financial condition and results of operations for the periods included in the
accompanying consolidated condensed financial statements:
RESULTS OF OPERATIONS
SALES
Net sales for the third fiscal quarter increased $7 million or 2%
compared to the same period of the previous year. This increase resulted
primarily from the following factors: a $28 million increase resulting from a
mix change in engines sold to higher priced units, $7 million from increased
prices, offset by a $27 million decrease in sales dollars resulting from an 8%
decrease in engine unit shipments.
Net sales for the nine months ended March 1999 increased $112 million
or 12% when compared to the first nine months of the prior year. This increase
was due to an $81 million increase in sales dollars resulting primarily from an
8% increase in engine unit shipments, a favorable mix change in engines sold of
$17 million, and $14 million from increased prices.
GROSS PROFIT
The gross profit percentage increased to 22% in the current quarter
from 20% in the preceding year's third quarter. This increase resulted primarily
from the $7 million of price increases, absorption of $5 million of fixed
expenses over more units produced, and lower material costs of $4 million caused
by lower aluminum cost, the major raw material used in engines.
The gross profit percentage for the nine-month period increased to 20%
in the current year from 18% in the preceding year. The increase resulted
primarily from the following factors: $14 million of price increases, $7 million
attributed to the benefit of higher production during the second and third
quarters and $13 million in lower costs for purchased parts and engines and raw
materials, of which $7 million was due to lower aluminum costs. Offsetting these
improvements were a mix shift to lower margin engines of $8 million and
increased overhead spending of $5 million.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
This category decreased by 3% or $1 million between the third fiscal
quarters of 1999 and 1998. This resulted from a $3 million decrease in costs
related to the software business the Company sold earlier in the fiscal year,
offset by a $2 million increase in profit sharing expense due to improved
results.
The 2% or $2 million decrease for the comparative nine-month periods
was due primarily to the same factors discussed above for the quarter. There was
a $6 million decrease in costs related to the software business and reduced
expenses of $1 million related to the implementation of the Company's new
computer system. These decreases were offset by a $2 million increase in both
advertising and profit sharing expenses.
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<PAGE> 9
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INTEREST EXPENSE
Interest expense decreased $1 million in the three-month comparison and
$2 million in the nine-month comparison. These decreases were the result of
lower average interest rates on working capital borrowings and the repayment of
$15 million of long-term debt at the end of fiscal year 1998.
PROVISION FOR INCOME TAXES
The effective rate used in both the three-month and nine-month periods
for the current year was 37.5%. This is management's estimate of what the rate
will be for the entire 1999 fiscal year. Last year's rate was 38% in both
periods; however, the final effective rate for the entire 1998 fiscal year was
37.6%.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities for the nine-month period was $48
million in fiscal 1999 and $61 million in 1998. In the nine-month period, net
income before depreciation provided cash of $107 million for fiscal 1999 and $79
million for fiscal 1998. Accounts receivable increased $208 million in fiscal
1999 and $172 million in fiscal 1998. The increase in accounts receivable was
caused by increased sales in fiscal 1999 and the timing of payments. Inventory
increased $20 million in fiscal 1999 compared to $9 million in fiscal 1998. The
increase in inventories is attributed to increased production levels in fiscal
1999. Accounts payable and accrued liabilities increased $87 million in fiscal
1999 and $41 million in fiscal 1998. The $46 million increase was primarily due
to a $27 million increase in accounts payable and an $8 million increase in
accrued liabilities as a result of the timing of payments, and a $6 million
increase in the warranty reserve due to increased sales volume.
Cash used in investing activities totaled $42 million in the nine-month
period and $34 million the same period of the preceding year. Additions to plant
and equipment primarily made up the cash used in each year.
Financing activities provided $32 million of cash in 1999 compared to
$5 million in 1998. The Company used $58 million in the current year and $66
million in the preceding year for its stock repurchase program. The Company also
received an additional $20 million in proceeds from stock options exercised in
fiscal 1999.
FUTURE LIQUIDITY AND CAPITAL RESOURCES
The share repurchase program authorized by the Board of Directors in
fiscal 1997 for $300 million of its common stock was completed in the second
quarter of fiscal 1999. In January 1999, the Board of Directors approved a
repurchase of up to 1.3 million additional shares of the Company's common stock
in open market or private transactions. Under this authorization, stock
repurchases totaling .4 million shares were made during the third quarter in
open market transactions. The latest share repurchase authorization is intended
to minimize dilution from shares issued for employee benefit plans and will be
funded from available cash.
Management expects capital expenditures for reinvestment in equipment
and new products to total $70 million in fiscal 1999.
-9-
<PAGE> 10
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
On April 21, 1999, the Company's Board of Directors approved capital
expenditures of $95 million for fiscal 2000. These anticipated expenditures
include a significant amount for capacity increases, as well as continuing
reinvestment in equipment and new products. The Company expects to increase its
engine capacity by approximately 10%-15% by fiscal 2001.
The Company currently intends to increase future cash dividends per
share at a rate approximating the inflation rate, subject to the discretion of
its Board of Directors and requirements of applicable law.
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
At this time the Company's business continues to be very strong despite
slower retail sales of lawn and garden equipment. The slower start of the spring
selling season is a concern, but last year's early spring sales were unusually
strong. Retail sales of other products, particularly generators, are strong. The
Company expects that engine unit sales will reflect a small increase in fiscal
1999 compared to fiscal 1998. Finished engine inventories are low, and the
Company plans to continue high production rates in order to restore the engine
inventory to a normal level.
In fiscal 1998 the Company experienced adverse effects on revenue and
gross profit as a result of the strong U.S. dollar compared to European
currencies. Assuming the exchange rates of the U.S. dollar against the European
currencies remain consistent with where they were in third fiscal quarter of
1999, management believes that the adverse effect on revenue and gross profit
for fiscal 1999 will be significantly less.
OTHER MATTERS
Emissions
Environmental Protection Agency (EPA) finalized its Phase II regulation
for non hand-held small engines in March of 1999. The final regulation imposes
more stringent standards over the useful life of the engine. The standards will
be phased in from 2001 to 2005 for Class II engines and from 2003 to 2008 for
Class I engines. It is not anticipated that this will have a material effect on
the financial condition or results of operations of the Company.
Year 2000 Issues
The Company has completed implementation of its new company-wide
information system. All business transactions are being processed on the new
system, which addresses all significant information technology year 2000
computer issues. Data containing year 2000 dates such as orders and preventive
maintenance schedules have been entered and accepted by the new system. The
Company has initiated a business recovery program at an off-site location which
will be used for complete testing of the new company-wide information system.
This testing is expected to be completed by the middle of the 1999 calendar
year. The Company will also be establishing an on-site stand alone system for
additional testing of the integrated information system.
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<PAGE> 11
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Project expenditures to date total $30 million. The Company expects to
incur an additional $6 million of incremental costs, running through the 2002
fiscal year, because of related projects.
The Company completed the assessment phase of its non-information
technology systems during the first quarter of the 1999 calendar year. An
outside company was retained to audit these systems and to recommend remedial
actions for any non-compliant systems. These activities will be completed during
the second and third quarters of the 1999 calendar year. Based on the assessment
and audit, the Company does not anticipate the need to develop an extensive
contingency plan for non-information systems, so it is not expecting to incur
material incremental costs to do this.
During the second and third quarters of calendar 1999 the Company will
be following up with suppliers who have not yet responded to the Company's
survey and contact companies who did respond to the survey but received a low
readiness ranking from the Company. Audits of suppliers will also be conducted
to verify their readiness. Contingency plans will be developed for suppliers
based on the information received in the follow-up contacts.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements in Management's Discussion and Analysis of Financial
Condition and Results of Operations may contain forward-looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from those projected 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;
foreign economic conditions, including currency rate fluctuations; the ability
of the Company's customers and suppliers to meet year 2000 compliance; and
unanticipated internal year 2000 issues. Some or all of the factors may be
beyond the Company's control.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes since the September 8, 1998 filing
of the Company's Annual Report on Form 10-K.
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<PAGE> 12
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
------- -----------
10.1 Agreement with Executive Officer*
11 Computation of Earnings Per Share of Common Stock*
12 Computation of Ratio of Earnings to Fixed Charges*
27 Financial Data Schedule, March 28, 1999*
*Filed herewith
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the third quarter ended March 28,
1999.
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, 1999 /s/ J. E. Brenn
--------------------------------------------------
J. E. Brenn
Senior Vice President and Chief Financial Officer
Date: May 7, 1999 /s/ T. J. Teske
---------------------------------------------------
T. J. Teske
Controller
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<PAGE> 13
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.1 Agreement with Executive Officer*
11 Computation of Earnings Per Share of Common Stock*
12 Computation of Ratio of Earnings to Fixed Charges*
27 Financial Data Schedule, March 28, 1999*
</TABLE>
* Filed herewith.
-13-
<PAGE> 1
BRIGGS & STRATTON CORPORATION
Form 10-Q for Quarterly Period Ended March 28, 1999
Exhibit No. 10.1
AGREEMENT WITH EXECUTIVE OFFICER
<PAGE> 2
AGREEMENT
This Separation Agreement is made this 4th day of January 1999,
by and between Briggs & Stratton Corporation, a Wisconsin corporation (the
"Employer") and James A. Wier (the "Employee"). In consideration of the promises
set forth herein, the parties hereto agree as follows:
1. Employment. Employer shall employ Employee from the date
hereof until June 30, 1999 (the "Separation Date"), unless such
employment shall be terminated earlier as specified herein.
Employer may terminate Employee's employment at any time for any
of the following causes:
(a) the continuing inability of the Employee,
for a period of at least 90 days, to perform and carry out his
duties and responsibilities under this Agreement for any reason,
including mental or physical disability. The determination of
such inability shall be made in the sole discretion of the Board
of Directors of the Employer;
(b) gross negligence or repeated neglect by
Employee in the performance of duties for Employer;
(c) material breach by Employee of the terms of
this Agreement; or
(d) death.
2. Salary. During the term specified in Section 1 hereof,
Employer shall pay Employee a monthly based salary of $19,244.00,
payable in semi-monthly installments, through January 31, 1999.
Thereafter, Employer shall pay Employee a monthly salary of $1,000.00
through June 30, 1999.
3. Other Compensation and Benefits. Except as specified in this
Section 3 and Sections 4 and 5 hereof, Employee's participation in such
executive compensation structures and employee benefit plans as shall
cover senior executives of the Employer generally and his participation
and benefits (and the participation and benefits of any person claiming
through his status as a participant) shall terminate as of the
Separation Date.
Employer agrees that all of the Employee's options granted
under the Briggs & Stratton Stock Incentive Plan that are exercisable
as of the Separation
<PAGE> 3
Date shall continue to be exercisable until their normal expiration
date. The Employer further agrees that if the Employee continues his
employment through June 30, 1999, the exercise date for the
unexercisable options will be accelerated to the Separation Date.
Moreover, notwithstanding any other provisions of the Stock Incentive
Plan, Employee shall have up to three (3) years following his
Separation Date, or until the expiration of the stated term of such
option, whichever period is the shorter period, in which to exercise
such options, but in no event beyond June 30, 2002. Employer shall
grant no options to the Employee following the Separation Date.
For purposes of determining any cash bonus to which Employee
may be entitled for fiscal 1999 and the computation of which is a
function of base salary, Employee's monthly base salary during the term
covered hereby shall be deemed to be actual base salary, plus $4,166.67
for the period July 1, 1998 through January 31, 1999 plus $1,000 per
month for the period February 1 through June 30, 1999.
4. Supplemental Pension Benefits. If Employee's employment
shall continue until June 30, 1999, he shall be entitled to a monthly
pension benefit commencing July 1, 1999 equal to $20,000.00, which
shall be payable in the form of a joint and 50% survivor annuity --
i.e., the monthly pension shall be $20,000.00 during Employee's
lifetime, and should the spouse to whom he was legally married on July
1, 1999 survive him, she will be paid a monthly annuity for her life of
$10,000.00. Such amounts shall include any amounts to which the
Employee and such surviving spouse may be entitled under any qualified
defined benefit pension plan maintained by the Employer and any
unfunded supplemental defined benefit pension plan maintained by the
Employer. To the extent that Employee is covered by a plan or plans
described in the preceding sentence, he shall make all such elections
and file all such papers as the Employer shall require so that benefits
under such plans shall be payable in the form and at the time specified
in the first sentence of this Section 4. To the extent that the
benefits specified under this Section 4 exceed the benefits payable
under such plans, any and all such benefits shall be an unfunded
obligation of the Employer as to which the Employee and any person
claiming through the Employee shall be merely a general unsecured
creditor of the Employer; provided that the Employer shall cause this
benefit to be covered by the "rabbi" trust which it maintains with
respect to other executive benefits.
If Employee's employment is terminated prior to June 30, 1999,
under the rules of Section 1.(a) hereof, he shall be entitled to the
benefits described in the first paragraph of this Section 4, commencing
on the first day of the first calendar month commencing after the date
that his employment is so terminated except
2
<PAGE> 4
that the number set forth in the schedule below shall be substituted
for $20,000.00 (and one-half of such number shall be substituted for
$10,000.00).
Date of Termination of Employment Monthly Benefit Amount
--------------------------------- ----------------------
On or after July 1, 1998, but prior
to June 30, 1999 $19,166.67
5. Medical Coverage. If Employee's employment shall continue
until June 30, 1999, he and/or his spouse shall have the option at any
time to purchase medical coverage of any kind then available to Company
employees at such active employee group rate as shall be in force at
such time, for the period commencing on his Separation Date and
continuing until he (or she) reaches age 65 (or such later date should
Medicare or Medicaid eligibility be changed) as though he (or she) were
covered by the medical coverage continuation rules of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") for
that entire period.
6. Non-Competition. As a condition to the receipt of the
benefits described in Section 4 hereof which are in excess of the
benefits which would otherwise be payable to Employee under any
qualified defined benefit pension plan or unfunded supplemental defined
benefit pension plan maintained by Employer and covering other senior
executives of the Employer, Employee agrees to abide by the terms of
this Section 6. For a period of three (3) years after the Employee's
Separation Date with the Employer, Employee will not, directly or
indirectly, own, manage, operate, control, be connected with the
ownership, management, operation or control of any entity in the United
States of America which competes with the Employer, or be employed by,
perform service for, consult with or solicit business for any such
entity. Employee agrees that the restrictions set forth in this Section
6 are fair and reasonable and are reasonably required for the
protection of the Employer. Employer's sole remedy for Employee's
breach of this Section 6 shall be to forever withhold from Employee,
and any person claiming through Employee, any further payments
described in the first clause of the first sentence of this Section 6.
7. Non-Disclosure and Non-Solicitation. As a condition of
the receipt of the benefits described in the first clause of the first
sentence of Section 4 hereof, during the term of his employment with
the Employer and for three (3) years after the termination of his
employment with the Employer 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 Employer of
any suspected breach of this Section 7.) to ensure that any persons or
entities over
3
<PAGE> 5
which Employee has control do not, directly or indirectly, use any of
the Employer's proprietary or other confidential information for any
purpose not associated with Employer's activities, or disseminate or
disclose any such information to any person or entity not affiliated
with the Employer. Such Employer proprietary or other confidential
information includes without limitation sales or pricing methods,
programs or practices, 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 or process information, prototypes, new product
plans, proposed product improvements, methods of presentation and any
other plans, programs and materials used in managing, marketing or
furthering the Employer's business. Upon termination of Employee's
employment relationship with the Employer, Employee shall return to the
Employer all documents, records, notebooks, manuals, computer disks and
similar repositories of or containing Employer 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 Employer
proprietary or other confidential information shall be maintained.
As a condition of the receipt of the benefits described in
the first clause of the first sentence of Section 4 hereof, for a
period of three (3) years after the termination of Employee's
employment with the Employer for any reason, Employee shall not
solicit, take away, hire, employ or endeavor to employ any of the
employees of the Employer.
8. Remedies. In view of the services which Employee will
perform for the Employer, which are special, unique, extraordinary and
intellectual in character, which place him in a position of confidence
and trust with the suppliers, customers and employees of the Employer,
and which provide him with access to confidential financial
information, trade secrets, "know-how" and other confidential and
proprietary information of the Employer, in view of the geographic
scope and nature of the business in which the Employer 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
Employer, 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 Employer 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
4
<PAGE> 6
law for any breach or threatened breach of this Agreement will be
inadequate and, accordingly, that the Employer, in addition to all
other 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 6. and 7. of
this Agreement, he shall not receive any further payments from the
Employer pursuant to this Agreement.
9. Release. As a condition to the receipt of the benefits
described in the first clause of the first sentence of Section 4
hereof, the Employee shall execute such release as the Employer shall
specify.
10. Integration. This Agreement sets forth the entire
agreement of the parties hereto, and it supersedes any and all prior
agreements, contracts and understandings between the parties hereto,
whether written or oral, with regard to the subject matter hereof,
including without limitation, the two documents each entitled
"Employment Agreement," one of which is dated November 20, 1987, and
the other of which is dated February 19, 1990 and the document entitled
"Agreement" which is dated October 26, 1995. This Agreement may be
amended only in writing executed by the parties hereto.
11. Governing Law. This Agreement shall be governed by the
internal laws of the State of Wisconsin.
12. 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.
13. Binding Effect. The rights and obligations of the Employer
hereunder shall inure to the benefit of and shall be binding upon the
respective successors and assigns of Employer.
5
<PAGE> 7
14. Non-waiver. The waiver by Employer of a breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any other or subsequent breach by the Employee.
15. Approval. This Agreement shall be subject to the approval
of the Nominating, Compensation and Governance Committee of the Board
of Directors of the Employer.
16. Headings. Headings are for convenience of reference only.
BRIGGS & STRATTON CORPORATION
By /s/ C. B. Rogers, Jr. /s/ James A. Wier
----------------------------- --------------------------
C.B. Rogers, Jr., Chairman James A. Wier (Employee)
Nominating, Compensation and
Governance Committee
6
<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 28, March 29, March 28, March 29,
1999 1998 1999 1998
--------- --------- --------- ---------
COMPUTATIONS FOR STATEMENTS OF INCOME
<S> <C> <C> <C> <C>
Net Income $ 41,813 $ 35,778 $ 70,891 $ 43,440
========= ========= ========= =========
Basic earnings per share of common stock:
Average shares of common stock outstanding 23,271 24,514 23,399 24,861
========= ========= ========= =========
Basic earnings per share of common stock $ 1.80 $ 1.46 $ 3.03 $ 1.75
========= ========= ========= =========
Diluted earnings per share of common stock:
Average shares of common stock outstanding 23,271 24,514 23,399 24,861
Incremental common shares applicable to
common stock options based on the common
stock average market price during the period 84 86 80 147
Incremental common shares applicable to
restricted common stock based on the common
stock average market price during the period 2 -- 1 --
--------- --------- --------- ---------
Average common shares assuming dilution 23,357 24,600 23,480 25,008
========= ========= ========= =========
Fully diluted earnings per average share of
common stock, assuming conversion of all
applicable securities $ 1.79 $ 1.45 $ 3.02 $ 1.74
========= ========= ========= =========
</TABLE>
<PAGE> 1
EXHIBIT 12
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
March 28, 1999 March 29, 1998
-------------- --------------
<S> <C> <C>
Net income $ 70,891 $ 43,440
Add:
Interest 13,183 14,912
Income tax expense and other taxes on income 42,543 26,630
Fixed charges of unconsolidated subsidiaries 226 392
-------------- --------------
Earnings as defined $ 126,843 $ 85,374
============== ==============
Interest $ 13,183 $ 14,912
Fixed charges of unconsolidated subsidiaries 226 392
-------------- --------------
Fixed charges as defined $ 13,409 $ 15,304
============== ==============
Ratio of earnings to fixed charges 9.46x 5.58x
============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BRIGGS & STRATTON CORPORATION FOR THE NINE MONTHS ENDED
MARCH 28, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-27-1999
<PERIOD-START> JUN-29-1998
<PERIOD-END> MAR-28-1999
<CASH> 26166
<SECURITIES> 0
<RECEIVABLES> 342958
<ALLOWANCES> 0
<INVENTORY> 127926
<CURRENT-ASSETS> 562486
<PP&E> 842040
<DEPRECIATION> 444495
<TOTAL-ASSETS> 974897
<CURRENT-LIABILITIES> 388534
<BONDS> 0
0
0
<COMMON> 289
<OTHER-SE> 338826
<TOTAL-LIABILITY-AND-EQUITY> 974897
<SALES> 1060183
<TOTAL-REVENUES> 1060183
<CGS> 848269
<TOTAL-COSTS> 848269
<OTHER-EXPENSES> 85297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13183
<INCOME-PRETAX> 113434
<INCOME-TAX> 42543
<INCOME-CONTINUING> 70891
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70891
<EPS-PRIMARY> 3.03
<EPS-DILUTED> 3.02
</TABLE>
