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,September 26, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_______________from to
_______________---------- -----------
Commission file number 1-1370
------
BRIGGS & STRATTON CORPORATION
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(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
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(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,November 2, 1999
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COMMON STOCK, par value $0.01 per share 23,284,99923,134,402 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,
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets -
September 26, 1999 and June 27, 1999 3
Consolidated Condensed Statements of Income -
Three Months ended September 26, 1999 and
September 27, 1998 5
Consolidated Condensed Statements of Cash Flow -
Three Months ended September 26, 1999 and
September 27, 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 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
ASSETS
March 28,------
Sept. 26 June 28,27
1999 1998
-------- --------1999
---------- -------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 26,16612,970 $ 84,527
Receivables,60,806
Accounts receivable, net 342,958 136,629222,478 194,096
Inventories -
Finished products and parts 65,892 58,975134,715 72,196
Work in process 56,662 45,21768,693 59,665
Raw materials 5,372 3,6846,090 5,587
-------- --------
Total inventories 127,926 107,876209,498 137,448
Future income tax benefits 35,776 31,28736,228 34,383
Prepaid expenses 29,660 21,72716,492 16,119
-------- --------
Total current assets 562,486 382,046497,666 442,852
-------- --------
OTHER ASSETS:
Marketable securities 2,100 --and other investments 43,339 19,024
Deferred income tax assets 5,221 9,5551,534 2,039
Capitalized software 7,545 9,8817,156 7,516
-------- --------
Total other assets 14,866 19,43652,029 28,579
-------- --------
PLANT AND EQUIPMENT -EQUIPMENT:
Cost 842,040 812,428805,301 859,848
Less - Accumulated depreciation 444,495 420,501418,222 455,394
-------- --------
Total plant and equipment, net 397,545 391,927387,079 404,454
-------- --------
$974,897 $793,409$936,774 $875,885
======== ========
The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Continued)
(In thousands)
LIABILITIES & SHAREHOLDERS' INVESTMENT
March 28,Sept. 26 June 28,27
1999 1998
--------1999
--------- -------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $106,223 $ 76,915$110,531 $117,757
Domestic notes payable 81,025 4,70043,746 4,335
Foreign loans 18,952 14,33612,225 13,824
Current maturities of long-term debt 15,000 15,000
Accrued liabilities 131,372 101,465116,401 119,685
Dividends payable 6,762 --6,937 -
Federal and state income taxes 29,200 10,52927,469 11,901
-------- --------
Total current liabilities 388,534 222,945332,309 282,502
-------- --------
OTHER LIABILITIES:
Deferred revenue on sale of plant and equipment 15,823 15,89315,773 15,798
Accrued pension cost 19,494 26,47715,456 17,306
Accrued employee benefits 12,984 12,57113,421 13,185
Accrued postretirement health care obligation 70,691 70,93366,281 67,877
Long-term debt 128,256 128,102113,359 113,307
-------- --------
Total other liabilities 247,248 253,976224,290 227,473
-------- --------
SHAREHOLDERS' INVESTMENT:
Common stock-
Authorized 60,000 shares, $.01 par value,
Issued 28,927 shares 289 289
Additional paid-in capital 37,044 37,77637,729 37,657
Retained earnings 584,316 533,805631,576 612,807
Accumulated other comprehensive income (928) (1,732)
Unearned compensation on restricted stock (249) --
Unrealized gain on marketable securities 192 --
Cumulative translation adjustments (1,998) (2,110)(279) (235)
Treasury stock at cost, 5,7435,800 and 5,1035,476 shares,
respectively (280,479) (253,272)(288,212) (282,876)
-------- --------
Total shareholders' investment 339,115 316,488380,175 365,910
-------- --------
$974,897 $793,409$936,774 $875,885
======== ========
The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
Three Months Ended
Nine Months Ended
------------------ -------------------
March 28, March 29, March 28 March 29,----------------------------
Sept. 26 Sept. 27
1999 1998
1999 1998
------- ------- ------- --------------- --------
NET SALES $476,259 $469,055 $1,060,183 $948,093$298,933 $223,981
COST OF GOODS SOLD 373,428 374,282 848,269 776,012243,551 186,369
-------- -------- ---------- --------
Gross profit on sales 102,831 94,773 211,914 172,08155,382 37,612
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 32,140 33,103 90,495 92,34229,640 29,248
-------- -------- ---------- --------
Income from operations 70,691 61,670 121,419 79,73925,742 8,364
INTEREST EXPENSE (5,025) (5,870) (13,183) (14,912)(3,127) (3,410)
GAIN ON DISPOSITION OF FOUNDRY ASSETS 16,545 -
OTHER INCOME, net 1,250 1,908 5,198 5,2431,633 2,147
-------- -------- ---------- ---------------
Income before provision
for income taxes 66,916 57,708 113,434 70,07040,793 7,101
PROVISION FOR INCOME TAXES 25,103 21,930 42,543 26,63015,090 2,660
-------- -------- ---------- -----------------
Net income $ 41,81325,703 $ 35,778 $ 70,891 $ 43,4404,441
======== ======== ========== ========
EARNINGS PER SHARE DATA -
Average shares outstanding 23,271 24,514 23,399 24,861
====== ====== ====== ======23,132 23,635
Basic earnings per share $ 1.801.11 $ 1.46 $ 3.03 $ 1.75
====== ======.19
====== ======
Diluted average shares outstanding 23,357 24,600 23,480 25,008
====== ======23,281 23,701
====== ======
Diluted earnings per share $ 1.791.10 $ 1.45 $ 3.02 $ 1.74
====== ======.19
====== ======
CASH DIVIDENDS PER SHARE $ .29.30 $ .28 $ .87 $ .84
====== ======.29
====== ======
The accompanying notes are an integral part of these statements.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
NineThree Months Ended
----------------------------
March 28, March 29,
1999 1998
-------- --------
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: Sept. 26, 1999 Sept. 27, 1998
-------------- ---------------
Net income $ 70,89125,703 $ 43,4404,441
Adjustments to reconcile net income to net
cash used infor operating activities -
Depreciation 35,706 35,523
Amortizationand amortization 12,398 12,394
Equity in earnings of
discount on long-term debt 154 154
Amortization of compensation on
restricted stock 39 --
Lossunconsolidated affiliates (1,245) (886)
(Gain) loss on disposition of plant and
equipment 391 984
Provision(Benefit)(16,453) 147
Provision (credit) for deferred income taxes (278) 473(1,914) 3,174
Change in operating assets and liabilities -
Increase in accounts receivable (207,600) (172,156)(28,361) (13,714)
Increase in inventories (20,048) (8,634)
(Increase)Decrease(73,409) (48,805)
Increase in prepaid expenses (8,052) 1,229(884) (1,773)
Increase (decrease) in accounts payable
and accrued liabilities 87,009 40,70411,995 (8,136)
Other, net (5,882) (2,578)
--------- ---------(2,850) (1,790)
----------- -----------
Net cash used infor operating activities (47,670) (60,861)
--------- ---------(75,020) (54,948)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (43,903) (34,192)(21,661) (13,609)
Proceeds received on saledisposition of plant
and equipment 1,521 360
--------- ---------23,389 771
Other, net - (1,596)
----------- -----------
Net cash used inprovided from (used for) investing
activities (42,382) (33,832)
--------- ---------1,728 (14,434)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on domesticloans and foreign loans 81,417 83,220notes payable 37,812 12,960
Dividends (20,380) (20,802)(6,934) (6,853)
Purchase of common stock for treasury (58,006) (66,433)(9,138) (14,556)
Proceeds from exercise of stock options 28,682 9,027
--------- ---------3,814 82
----------- -----------
Net cash provided byfrom (used for)
financing activities 31,713 5,012
--------- ---------25,554 (8,367)
----------- -----------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS (22) (562)
--------- ---------(98) 330
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (58,361) (90,243)(47,836) (77,419)
CASH AND CASH EQUIVALENTS, beginning 60,806 84,527
112,859
--------- -------------------- -----------
CASH AND CASH EQUIVALENTS, ending $ 26,16612,970 $ 22,616
========= =========7,108
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 14,7514,963 $ 14,809
========= =========5,214
=========== ===========
Income taxes paid $ 23,6781,389 $ 9,144
========= =========1,176
=========== ===========
The accompanying notes are an integral part of these statements.
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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.
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
The caption entitled Marketable Securities and Other Investments
represents stock received inequity securities of other entities that are held by the sale of the Company's software business at the end of the first quarter of
fiscal 1999. These securitiesCompany.
Marketable 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 Securitiesvalue with any changes 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. Thefair market value reported in Other
Comprehensive Income. Other Investments represent investments in joint ventures
and affiliates and are accounted for using the equity method 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 adoptedaccounting.
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):
Three Months Ended Nine Months Ended
------------------ ------------------
Mar. 28 Mar. 29 Mar. 28 Mar. 29September
----------------------------
1999 1998
1999 1998
------- ------- ------- ----------- ----
Net income $ 41,813 $ 35,778 $ 70,891 $ 43,440
Foreign currency translation
adjustments (657) (14) 112 (679)$25,703 $4,441
Unrealized gain on marketable securities (net of tax) 256 -- 192 --
-------- -------- -------- --------896 -
Foreign currency translation adjustments (92) 526
------ ------
Total comprehensive income $26,507 $4,967
======= ======
The components of Accumulated Other Comprehensive Income is as follows
(in thousands):
Sept. 26 June 27
1999 1999
---- ----
Cumulative translation adjustments $(2,401) $(2,309)
Unrealized gain on marketable securities 1,473 577
------- -------
Accumulated other comprehensive income $ 41,412 $ 35,764 $ 71,195 $ 42,761
======== ======== ======== ========(928) $(1,732)
======= =======
At the end of August 1999, the Company contributed its two ductile iron
foundries to Metal Technologies Holding Company, Inc. in exchange for $23.6
million in cash and $45 million aggregate par value convertible preferred stock
which was recorded at its estimated fair value of $21.6 million. The transaction
resulted in a $16.5 million gain, and is shown as such on the income statement.
The provisions of the preferred stock include a 15% cumulative dividend and
conversion rights into a minimum of 31% of the common stock of Metal
Technologies Holding Company, Inc. Metal Technologies Holding Company, Inc.
becomes the primary supplier to Briggs & Stratton Corporation of ductile iron
castings for crankshafts and cam gears.
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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 $7three months ended September 1999 totaled $299
million, an increase of $75 million or 2%33% when compared to the same period of
the previouspreceding year. ThisThe reason for this change was a 36% 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 forThis was the nine months ended March 1999 increased $112 million
or 12% when compared to the first nine monthsresult of the priorboth domestic and international lawn and
garden equipment manufacturers taking delivery earlier this year than last 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 MARGIN
The gross profit percentagerate 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%19% in the current year from 18%17% in
the preceding year. TheThis 2% increase resultedwas primarily from the following factors: $14a $9 million of price increases, $7 million
attributed to the benefit
of highercaused by greater 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 werequarter, offset by a mix shift to lower
margin engines of $8 million and
increased overhead spending of $5$2 million.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
This category decreasedEngineering, selling and general and administrative expenses increased
$2.5 million from higher profit sharing expenses due to improved results, offset
by 3% or $1 million between the third fiscal
quarters of 1999 and 1998. This resulted from a $3$2 million decrease in costs related to the Company's POWERCOM software
business that was sold in the first quarter of the preceding year.
INTEREST EXPENSE
Interest expense decreased $.3 million. The repayment of $15 million of
higher interest rate debt at the end of fiscal year 1999 caused this change.
GAIN ON DISPOSITION OF FOUNDRY ASSETS
At the end of August 1999, the Company sold earliercontributed its two ductile iron
foundries to Metal Technologies Holding Company, Inc. in exchange for $23.6
million in cash and $45 million aggregate par value convertible preferred stock
which was recorded at its estimated fair value of $21.6 million. The transaction
resulted in a $16.5 million gain, and is shown as such on the fiscal year,
offset by a $2 million increase in profit sharing expense due to improved
results.income statement.
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 implementationprovisions of the Company's new
computer system. These decreases were offset bypreferred stock include a $2 million increase in both
advertising15% cumulative dividend and
profit sharing expenses.conversion rights into a minimum of 31% of the common stock of Metal
Technologies Holding Company, Inc. Metal Technologies Holding Company, Inc.
becomes the primary supplier to Briggs & Stratton Corporation of ductile iron
castings for crankshafts and cam gears.
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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 tax rate used in both the three-month and nine-month periods
for the current yearfiscal quarter was 37.5%37.0%.
This is management's estimate of what the rate will be for the entire 19992000
fiscal year. Last year's rate was 38% in both
periods; however, the final effective rate37.5% for the entire 19981999 fiscal year was
37.6%.year.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow used in operating activities for the nine-month period was $48$75 million in fiscal 19992000
and $61$55 million in 1998. In the nine-month period, net
income before depreciation providedfiscal 1999. The primary use of cash of $107 million for fiscal 1999was increases in
accounts receivable and $79
million for fiscal 1998.inventories. Accounts receivable increased $208$28 million
in fiscal
1999 and $172$14 million, in fiscal 1998. The increase in accounts receivable wasrespectively, caused by increased sales volume in first quarter
of the fiscal 1999 and the timing of payments.years. Inventory increased $20by $73 million in fiscal 19992000 compared
to $9$49 million in fiscal 1998.1999. The higher increase in inventoriesfiscal 2000 is attributed
to increased production levels in this fiscal 1999. Accounts payableyear.
These uses of cash were offset by net income excluding depreciation,
amortization, and accrued liabilities increased $87gain on disposition of assets of $22 million and $17 million
in fiscal
1999 and $41 million in fiscal 1998. The $46 million increase was primarily due
to a $27 millionthe respective years. In addition, an increase in accounts payable and
accrued liabilities provided $20 million between years, reflecting a $17 million
change in federal and state income taxes payable resulting from the higher level
of earnings.
In fiscal 2000, $2 million of cash was provided from investing
activities versus a $14 million use of cash in fiscal 1999. The $16 million
increase is attributed to $23 million in cash received on the disposition of the
Company's foundry assets offset by an $8 million increase in
accrued liabilities as a result of the timing of payments,capital
expenditures related to capacity increases and a $6 million
increase in the warranty reserve duenew products.
Net cash provided from financing activities amounted to increased sales volume.
Cash used in investing activities totaled $42$26 million in
the nine-month
period andfiscal 2000, a $34 million the same periodchange between fiscal years. This change resulted
from $25 million in additional borrowings, a reduction 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 $58purchases of common stock for the Company's stock repurchase program, and $4
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 1999.2000.
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,As of the end of September 1999, stock repurchases totaling .4.9
million shares were made during the third quarter in open market transactions. The latest shareThis repurchase
authorization is intended to minimize dilution from shares issued for employee
benefit plans andplans. Future purchases will be funded from available cash.
Management expects cash flows for capital expenditures for reinvestment in equipment
and new products to total $70$80
million in fiscal 1999.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
On April 21, 1999, the Company's Board of Directors approved capital
expenditures of $95 million for fiscal 2000.2000 and to be funded from available cash. 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,OUTLOOK
Overall, 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
smallmodest increase in fiscal 19992000 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 19981999. As discussed earlier,
the Company experienced adverse effects on revenue and
gross profit as a result ofsignificant increase in engine unit shipments in 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 fiscalfirst quarter of 1999, management believesfiscal 2000. It appears this represents a shift in original
equipment manufacturers' timing of purchases from later in the year to earlier
in the year. The Company expects the shift to continue in the second quarter of
fiscal 2000. The Company's recently completed retail inventory survey indicates
that year over year, end of season retail inventories have not increased
significantly. The Company continues to believe that the adverse effect on revenue and gross profit
for fiscal 1999year will be significantly less.a
good one if weather conditions are normal.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
OTHER MATTERS
Emissions
Environmental Protection Agency (EPA) finalizedYEAR 2000
The Company is addressing the final tasks related to 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 2001overall
comprehensive Year 2000 Readiness Program implemented 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 effectaddress year 2000
issues. This program was based on the financial condition or resultsAutomotive Industry Action Group's model
system consisting of operationsfive steps: Awareness; Inventory and Assessment;
Remediation; Testing; and Readiness Certification. Progress has been reported to
the Company's Board of the Company.
Year 2000 IssuesDirectors regularly.
The Company has completed implementation of its new company-wide
information system.system in January of 1999. 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 atestablished an off-site location which
will be usedon-site stand
alone system for complete testing of the new company-wide information system.
This testing is expected to beTesting was completed byin October; the middle of the 1999 calendar
year. The Company will also be establishing an on-siteresults were satisfactory. This stand
alone system will continue to be made available for
additional testing of unique and/or
specialized software programs if needed. The Company has made arrangements for a
business recovery program at an off-site location. Other internal year 2000
issues not directly related to the integrated information system.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESpreviously described project have been
addressed.
Project expenditures to date total $30$33 million. The Company expects to
incur anany
additional $6 million of incremental costs running through the 2002
fiscal year, because of related projects.to be immaterial.
The Company completed the assessment phase of its non-information
technology systems during the first quarter of the 1999 calendar year. An
outside companyconsultant was retained to audit these systems and to recommend remedial
actions for any non-compliant systems. TheseAll remedial activities will behave been
completed during
the second and third quarters of the 1999 calendar year.without material incremental costs. Based on the assessment, audit and
audit,remedial actions, the Company doeswill not anticipate the need to develop an extensive contingency plan for
non-information systems.
Random testing of both information and non-information systems so it is not expectinghas been
conducted and will continue to incur
material incremental costsbe conducted until the end of the calendar year
in order to do this.
Duringensure year 2000 readiness.
The Company's largest customers have certified that they will be year
2000 compliant before the second and third quartersend of calendar year 1999 as to their relationships
with the Company. The Company's vendors and financial institutions have also
been surveyed for year 2000 readiness. The Company will
be followingfollowed up with suppliers
who havehad not yet responded to the Company's survey and contactcontacted companies who
did respond to the survey but received a low readiness ranking from the Company.
Audits of suppliers will also beare being conducted to verify their readiness. At this time,
the Company believes that virtually all of their mission critical suppliers are
year 2000 compliant. Contingency plans have been developed to ensure that each
manufacturing facility will have materials on hand to operate for three to five
days without deliveries. The Company will not be open for operations from
December 31, 1999 to January 3, 2000. All major financial institutions with whom
the Company regularly conducts business have provided the Company with year 2000
preparedness statements.
The Company will utilize its December 31, 1999 to January 3, 2000
shutdown period to back up its systems, re-start those systems, resolve any open
issues and cycle representative plant equipment prior to the start of the 2000
calendar year manufacturing activities.
The Company's foreign exposure is not substantial. The Company's
foreign subsidiaries and distribution facilities have been internally audited to
confirm that they are prepared for year 2000. The Company does not plan to
develop a separate contingency plan for its foreign subsidiaries.
The last payroll for calendar year 1999 will be developedissued on December 29,
1999 and all arrangements for suppliers
based on the information receivedJanuary 3, 2000 dividend payment will be made
prior to December 31, 1999.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
The Company believes its Year 2000 Program is adequate to detect in
advance year 2000 compliance issues, and that it has the follow-up contacts.necessary resources to
remedy them. However, the year 2000 problem has many aspects and potential
consequences, some of which are not reasonably foreseeable, and there can be no
assurance that unforeseen consequences will not arise.
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, 19987, 1999 filing
of the Company's Annual Report on Form 10-K.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders on October 20, 1999, director
nominees named below were elected to a three-year term expiring in 2002, by the
indicated votes cast for and withheld with respect to each nominee.
Name of Nominee For Withheld
--------------- --- --------
Jay H. Baker 20,707,705 442,535
Michael E. Batten 20,694,781 455,459
Peter A. Georgescu 20,695,423 454,817
Directors whose terms of office continue past the Annual Meeting of
Shareholders are: Eunice M. Filter; Robert J. O'Toole; Clarence B. Rogers, Jr.;
John S. Shiely; Charles I. Story and Frederick P. Stratton, Jr.
At the Annual Meeting, shareholders voted to approve an amended and
restated Briggs & Stratton Corporation Stock Incentive Plan to reserve an
additional 2,000,000 shares for use under the Plan. Out of a total of 19,549,995
votes represented on the proposal, votes were cast as follows: 16,198,873 - For;
3,013,478 - Against and 337,644 - Abstain. There were 1,600,245 broker
non-votes.
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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,
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
------- -----------
10.0(a) Amended and Restated Stock Incentive Plan. (Filed as
Exhibit A to the Company's 1999 Annual Meeting Proxy
Statement and incorporated by reference herein.)
10.0(b) Amendment to Amended and Restated Stock Incentive Plan*
10.1 Release and Settlement Agreement*
11 Computation of Earnings Per Share of Common Stock*
12 Computation of Ratio of Earnings to Fixed Charges*
27 Financial Data Schedule, September 26, 1999*
*Filed herewith
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the thirdfirst quarter ended March 28,September
26, 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
--------------------------------------------------Date: November 8, 1999 --------------------------------------
J. E. Brenn
Senior Vice President, and Chief Financial
Officer Date: May 7, 1999& Treasurer
/s/ T. J. Teske
---------------------------------------------------Date: November 8, 1999 --------------------------------------
T. J. Teske
Controller
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
10.0(a) Amended and Restated Stock Incentive Plan. (Filed as
Exhibit A to the Company's 1999 Annual Meeting Proxy
Statement and incorporated by reference herein.)
10.0(b) Amendment to Amended and Restated Stock Incentive Plan
(Filed herewith)
10.1 Release and Settlement Agreement
with Executive Officer*(Filed herewith)
11 Computation of Earnings Per Share of Common Stock*Stock
(Filed herewith)
12 Computation of Ratio of Earnings to Fixed Charges*Charges
(Filed herewith)
27 Financial Data Schedule
March 28, 1999*(Filed herewith)
* Filed herewith.
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