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 SeptemberDecember 26, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period fromfrom_______________ to ---------- -----------_______________
Commission file number 1-1370
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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 November 2, 1999January 28, 2000
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COMMON STOCK, par value $0.01 per share 23,134,40222,981,270 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 -
SeptemberDecember 26, 1999 and June 27, 1999 3
Consolidated Condensed Statements of Income -
Three Months and Six Months ended
SeptemberDecember 26, 1999 and SeptemberDecember 27, 1998 5
Consolidated Condensed Statements of Cash Flow -
ThreeSix Months ended SeptemberDecember 26, 1999 and
SeptemberDecember 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 1211
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
------
Sept.
December 26, June 27,
1999 1999
---------- ------------------- --------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 12,97010,282 $ 60,806
Accounts receivable, net 222,478395,033 194,096
Inventories -
Finished products and parts 134,715177,240 72,196
Work in process 68,69371,455 59,665
Raw materials 6,0905,473 5,587
-------- ------------------- -----------
Total inventories 209,498254,168 137,448
Future income tax benefits 36,22837,951 34,383
Prepaid expenses 16,49218,964 16,119
-------- ------------------- -----------
Total current assets 497,666716,398 442,852
-------- ------------------- -----------
OTHER ASSETS:
Marketable securities and other investments 43,33944,528 19,024
Deferred income tax assets 1,534647 2,039
Capitalized software 7,1566,873 7,516
-------- ------------------- -----------
Total other assets 52,02952,048 28,579
-------- ------------------- -----------
PLANT AND EQUIPMENT:
Cost 805,301812,392 859,848
Less - Accumulatedaccumulated depreciation 418,222420,527 455,394
-------- ------------------- -----------
Total plant and equipment, net 387,079391,865 404,454
-------- --------
$936,774 $875,885
======== ========----------- -----------
$ 1,160,311 $ 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
Sept.December 26, June 27,
1999 1999
------------ ---------
-------
(Unaudited)
CURRENT LIABILITIES:
CURRENT LIABILITIES:
Accounts payable $110,531 $117,757$ 109,108 $ 117,757
Domestic notes payable 43,746229,967 4,335
Foreign loans 12,22517,445 13,824
Current maturities of long-term debt 15,000 15,000
Accrued liabilities 116,401131,467 119,685
Dividends payable 6,9376,926 -
Federal and state income taxes 27,46921,610 11,901
-------- ------------------- -----------
Total current liabilities 332,309531,523 282,502
-------- ------------------- -----------
OTHER LIABILITIES:
Deferred revenue on sale of plant and equipment 15,77315,742 15,798
Accrued pension cost 15,45611,620 17,306
Accrued employee benefits 13,42113,653 13,185
Accrued postretirement health care obligation 66,28167,286 67,877
Long-term debt 113,359113,410 113,307
-------- ------------------- -----------
Total other liabilities 224,290221,711 227,473
-------- ------------------- -----------
SHAREHOLDERS' INVESTMENT:
Common stock-
Authorized 60,000 shares, $.01 par value,
Issued 28,927 shares 289 289
Additional paid-in capital 37,72936,946 37,657
Retained earnings 631,576665,797 612,807
Accumulated other comprehensive income (928)(1,211) (1,732)
Unearned compensation on restricted stock (279)(261) (235)
Treasury stock at cost, 5,8005,910 and 5,476 shares,
respectively (288,212)(294,483) (282,876)
-------- ------------------- -----------
Total shareholders' investment 380,175407,077 365,910
-------- --------
$936,774 $875,885
======== ========----------- -----------
$ 1,160,311 $ 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 ----------------------------
Sept.Six Months Ended
------------------ ----------------
Dec. 26 Sept.Dec. 27 Dec. 26 Dec. 27
1999 1998 -------- --------1999 1998
------- ------- ------- -------
NET SALES $298,933 $223,981$ 422,238 $ 359,943 $ 721,171 $ 583,924
COST OF GOODS SOLD 243,551 186,369
-------- --------322,515 288,472 566,066 474,841
--------- --------- --------- ---------
Gross profit on sales 55,382 37,61299,723 71,471 155,105 109,083
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 29,640 29,248
-------- --------33,196 29,107 62,836 58,355
--------- --------- --------- ---------
Income from operations 25,742 8,36466,527 42,364 92,269 50,728
INTEREST EXPENSE (3,127) (3,410)(5,208) (4,748) (8,335) (8,158)
GAIN ON DISPOSITION OF FOUNDRY ASSETS - - 16,545 -
OTHER INCOME, net 1,633 2,147
-------- -------3,985 1,801 5,618 3,948
--------- --------- --------- ---------
Income before provision
for income taxes 40,793 7,10165,304 39,417 106,097 46,518
PROVISION FOR INCOME TAXES 15,090 2,660
--------24,160 14,780 39,250 17,440
--------- --------- --------- ---------
Net income $ 25,70341,144 $ 4,441
======== ========24,637 $ 66,847 $ 29,078
========= ========= ========= =========
EARNINGS PER SHARE DATA -
Average shares outstanding 23,132 23,63523,092 23,308 23,120 23,467
====== ====== ====== ======
Basic earnings per share $ 1.111.78 $ .191.06 $ 2.89 $ 1.24
====== ====== ====== ======
Diluted average shares outstanding 23,281 23,70123,190 23,481 23,254 23,588
====== ====== ====== ======
Diluted earnings per share $ 1.101.77 $ .191.05 $ 2.87 $ 1.23
====== ====== ====== ======
CASH DIVIDENDS PER SHARE $ .30 $ .29 $ .60 $ .58
====== ====== ====== ======
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)
ThreeSix Months Ended
---------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: Sept.Dec. 26, 1999 Sept.Dec. 27, 1998
-------------- ---------------------------- -------------
Net income $ 25,70366,847 $ 4,44129,078
Adjustments to reconcile net income to net
cash used for operating activities -
Depreciation and amortization 12,398 12,39425,052 23,825
Equity in earnings of
unconsolidated affiliates (1,245) (886)(4,655) (1,687)
(Gain) loss on disposition of plant and
equipment (16,453) 147(16,236) 195
Provision (credit) for deferred income taxes (1,914) 3,174(2,913) 2,450
Change in operating assets and liabilities -
Increase in accounts receivable (28,361) (13,714)(200,916) (166,692)
Increase in inventories (73,409) (48,805)(118,079) (64,625)
Increase in prepaid expenses (884) (1,773)(3,356) (1,174)
Increase (decrease) in accounts payable
and accrued liabilities 11,995 (8,136)19,768 30,557
Other, net (2,850) (1,790)(5,131) (4,262)
----------- -----------
Net cash used forin operating activities (75,020) (54,948)(239,619) (152,335)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (21,661) (13,609)(39,440) (29,881)
Proceeds received on disposition of plant
and equipment 23,389 77123,509 1,382
Other, net - (1,596)2,641 (391)
----------- -----------
Net cash provided from (used for)used in investing activities 1,728 (14,434)(13,290) (28,890)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on loans and notes payable 37,812 12,960229,253 138,714
Dividends (6,934) (6,853)(13,857) (13,618)
Purchase of common stock for treasury (9,138) (14,556)(17,661) (35,614)
Proceeds from exercise of stock options 3,814 825,248 8,897
----------- -----------
Net cash provided from (used for)by financing activities 25,554 (8,367)202,983 98,379
----------- -----------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS (98) 330(598) 562
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (47,836) (77,419)(50,524) (82,284)
CASH AND CASH EQUIVALENTS, beginning 60,806 84,527
----------- -----------
CASH AND CASH EQUIVALENTS, ending $ 12,97010,282 $ 7,1082,243
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 4,9636,872 $ 5,2147,559
=========== ===========
Income taxes paid $ 1,38932,400 $ 1,1762,937
=========== ===========
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 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
equity securities of other entities that are held by the Company. Marketable
Securities are classified as available-for-sale and are reported at fair market
value with any changes in fair market value reported in Accumulated Other
Comprehensive Income. Other Investments represent investments in joint ventures
and affiliates and are accounted for using the equity method of accounting.
Financial Accounting Standard (FAS) No. 130, Reporting Comprehensive
Income, 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. Total
comprehensive income is as follows (in thousands):
Three Months Ended September
----------------------------Six Months Ended
------------------------ ------------------------
Dec. 26 Dec. 27 Dec. 26 Dec. 27
1999 1998 ---- ----1999 1998
------- ------- ------- -------
Net income $25,703 $4,441$ 41,144 $ 24,637 $ 66,847 $ 29,078
Unrealized gain (loss) on marketable securities 896 -257 (64) 1,153 (64)
Foreign currency translation adjustments (92) 526
------ ------(540) 243 (632) 769
-------- -------- -------- --------
Total comprehensive income $26,507 $4,967
======= ======$ 40,861 $ 24,816 $ 67,368 $ 29,783
======== ======== ======== ========
The components of Accumulated Other Comprehensive Income isare as follows (in
thousands):
Sept.Dec. 26 June 27
1999 1999
---- ----------- -------
Cumulative translation adjustments $(2,401) $(2,309)$ (2,941) $ (2,309)
Unrealized gain on marketable securities 1,4731,730 577
------- ---------------- --------
Accumulated other comprehensive income $ (928) $(1,732)
======= =======(1,211) $ (1,732)
========= ========
At the end of August 1999, the Company contributed its two ductile iron
foundries to Metal Technologies Holding Company, Inc. ("MTHC") in exchange for
$23.6 million in cash and $45$45.0 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.
becomesMTHC. MTHC became 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 three months ended September 1999second fiscal quarter totaled $299$422 million, an increase
of $75$62 million or 33% when17% compared to the same period of the preceding year. The reason for thisThis
increase resulted from the following factors: a favorable mix change wasin engines
sold of $48 million, a 36%$23 million increase in sales dollars due to a 6%
increase in engine unit shipments.shipments, and $6 million from increased prices. The $23
million increase from engine unit sales is offset by a $15 million decrease of
casting sales resulting from the disposition of the foundry assets in the first
quarter of fiscal 2000.
Net sales for the six months ended December 1999 totaled $721 million, an
increase of $137 million or 24% compared to the first six months of the prior
year. This wasincrease resulted from the resultfollowing factors: an $88 million increase
in sales dollars resulting from a 17% increase in engine unit shipments, a
favorable mix change to higher-priced units of both domestic$59 million, and international lawn and
garden equipment manufacturers taking delivery earlier this year than last year.$6 million from
increased prices. These increases were offset by a $16 million decrease in
casting sales for reasons discussed above.
GROSS PROFIT MARGIN
The gross profit rate increased to 19%24% in the current quarter from 20% in
the preceding year's second quarter. This resulted in additional gross profit
totaling $16 million. Significant reasons for this improvement were $12 million
attributed to the benefit of higher production, and $6 million of price
increases.
The gross profit rate for the six-month period increased to 22% in the
current year from 17%19% in the preceding year. This 2%resulted in additional gross
profit totaling $20 million. This increase wasresulted primarily from the same
factors discussed above for the quarter. An increase in engine units produced
attributed a $9favorable $20 million, benefit
caused by greater production during the quarter, offset byand $6 million of price increases.
Offsetting these improvements was a $2 million mix shift to the lower margin
engines of $2 million.engines.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
This category increased $4 million or 14% between the second fiscal
quarters of 2000 and 1999. This resulted primarily from a $2 million increase in
engineering costs related to development and testing of new products and a $1
million increase in profit sharing expense due to improved results.
The $4 million or 8% increase for the comparative six-month periods was due
primarily to the same factors discussed above for the quarter. Engineering sellingcosts
and general and administrative expenses increased
$2.5 million from higher profit sharing expenses due to improved results,both increased $3 million. These increases were
offset by a $2 million decrease in costs related to the Company's POWERCOM
software business that was sold in the first quarter of the preceding year.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INTEREST EXPENSE
Interest expense decreased $.3 million. The repaymentincreased 10% or $.5 million in the three-month comparison
and increased 2% or $.2 million in the six-month comparison. These increases
were the result of $15 millionthe Company's higher level of higher interest rate debt atshort-term borrowings in the
endlatter part of the second quarter of fiscal year 1999 caused this change.2000 to fund working capital needs.
GAIN ON DISPOSITION OF FOUNDRY ASSETS
At the end of August 1999, the Company contributed its two ductile iron
foundries to Metal Technologies Holding Company, Inc. ("MTHC") in exchange for
$23.6 million in cash and $45$45.0 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.
becomesMTHC. MTHC became 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
PROVISION FOR INCOME TAXES
The effective tax rate used in both the three-month and six-month periods
for the current fiscal quarteryear was 37.0%. This is management's estimate of what the rate
will be for the entire 2000 fiscal year. Last year's rate was 37.5% forin both
periods.
EARNINGS PER SHARE
The six-month diluted earnings per share calculation included herein
reflects an immaterial change from the entire 1999 fiscal year.diluted earnings per share presented in
the Company's press release of second quarter financial results. The change
resulted from a correction in diluted shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Cash flowNet cash used in operating activities was $75 million infor the six-month periods of fiscal
2000 and $55 million in fiscal 1999. The primary use of cash was increases in
accounts receivable and inventories. Accounts receivable increased $281999 were $240 million and $14$152 million, respectively, caused by increased sales volume in first quarter
ofrespectively. The
significant increase was due to the fiscal years. Inventory increased by $73 million infollowing:
The fiscal 2000 compared
to $49 million in fiscal 1999. The higher increase in fiscal 2000 is attributed
to increased production levels in this fiscal year.
These uses of cash were offset byflow from operating activities reflects improved net
income, excluding depreciation
amortization, and gain on disposition of assetsplant and equipment,
of $22$23 million. Offsetting this improvement is an increased requirement for
working capital of $110 million, and $17caused primarily by three factors. First is a
$53 million in the respective years. In addition, an increase in inventories in anticipation of third quarter in-season
demand for engine units. Second is a $34 million increase in accounts receivable
attributed to the increased sales volume when compared to the previous year.
Last are decreased accounts payable and accrued liabilities provided $20 million between years, reflecting a $17 million
change inof $11 million.
Accounts payable and federal and state income taxes payable resulting fromboth decreased
between the comparable six months, $12 million and $3 million respectively,
caused by timing of payments. Accrued liabilities increased $4 million
attributed to an increase in the warranty reserve due to higher level
of earnings.
In fiscal 2000, $2sales volume.
Net cash used in investing activities totaled $13 million and $29 million,
respectively. The $16 million decrease is attributed primarily to $23 million of
cash was providedreceived from investing
activities versusthe foundry transaction, offset by a $14 million use of cash in fiscal 1999. The $16$9 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 of
capital expenditures related to capacity increases and new products.
Net cash provided fromby financing activities amounted to $26$203 million and $98
million in fiscal 2000 and 1999, respectively. These financing activities
reflect higher levels of short-term borrowings in the latter part of the second
quarter of fiscal 2000 to fund working capital requirements, causing a $34$91
million changeincrease in debt between fiscal years. This change resulted
from $25 million in additional borrowings, a reductionthe periods. Also, the Company did not
repurchase as many shares of $5 million in
purchases ofits common stock forin the Company's stock repurchase program, and $4
million in additional proceeds from stock options exercised inopen market during fiscal
2000.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
FUTURE LIQUIDITY AND CAPITAL RESOURCES
In January 1999, the Board of Directors approved a repurchase of up to 1.3
million shares of the Company's common stock in open market or private
transactions. As of the end of SeptemberDecember 1999, stock repurchases totaling .91.0
million shares were made in open market transactions. This repurchase
authorization is intended to minimize dilution from shares issued for employee
benefit plans. Future purchases will be funded from available cash.
Management expects cash flows for capital expenditures to total $80 million
in fiscal 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 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.
OUTLOOK
Overall, the Company expects that engine unit sales will reflect a
modest increase by
approximately 3% to 5% in fiscal 2000 compared to fiscal 1999. As discussed
earlier, the Company experienced a significant increase in engine unit shipments
in the first quartersix months of fiscal 2000. It appears this represents a shift in
original equipment manufacturers' timing of purchases from later in the year to
earlier in the year. Lawn and garden equipment manufacturers are building
product, particularly lawn tractors, earlier this year, hoping to avoid the
engine shortages that developed in the peak selling season last year and the
year before.
The Company believes that demand from the lawn and garden segment will
remain strong through the third fiscal quarter but weaken in the fourth fiscal
quarter. Most of the market's requirements will have been built by the end of
the third fiscal quarter. The Company expects the shift to continuea modest improvement in third
quarter earnings and lower sales and earnings in the second quarter offourth quarter. Higher
sales and earnings are expected for the full 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 fiscal year will be a
good one if weather conditions are normal.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESyear.
OTHER MATTERS
YEAR 2000
The Company is addressing the final tasks related to its overall
comprehensive Year 2000 Readiness Program implemented to address year 2000
issues. This program was based on the Automotive Industry Action Group's model
system consisting of five steps: Awareness; Inventory and Assessment;
Remediation; Testing; and Readiness Certification. Progress has been reported to
the Company's Board of Directors regularly.
The Company completed implementation of its new company-wide
information system in January of 1999. All business transactions are being
processed on the new system, which addresses allnot experienced any significant information
technology year 2000 computer issues. The Company established an on-site stand
alone system for complete testing of the new company-wide information system.
Testing was completed in October; the results were satisfactory. This stand
alone system will continue to be made available for 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 previously described project have been
addressed.
Project expenditures to date total $33 million.date.
The Company expects any
additional incremental costscontinues 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 consultant was retained to audit these systems and to recommend remedial
actions for any non-compliant systems. All remedial activities have been
completed without material incremental costs. Based on the assessment, audit and
remedial actions, the Company will not develop an extensive contingency plan for
non-information systems.
Random testing of both information and non-information systems has been
conducted and will continue to be conducted until the end of the calendar year
in order to ensure year 2000 readiness.
The Company's largest customers have certified that they will be year
2000 compliant before the end 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 followed up with suppliers
who had not yet responded to the Company's survey and contacted companies who
did respond to the survey but received a low readiness ranking from the Company.
Audits of suppliers are 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 issued on December 29,
1999 and all arrangements for the January 3, 2000 dividend payment will be made
prior to December 31, 1999.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
The Company believesmonitor its Year 2000 Program is adequate to detect in
advance year 2000 compliancefor unexpected issues
and that it has the necessary resources to
remedy them. However, thecould possibly still develop. 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.
The Company has spent to date $33 million on its enterprise-wide
information system. The Company does not expect any additional incremental costs
related to year 2000 matters.
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
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 7, 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
AtThe information required by this item was previously reported in the
Annual Meeting of Shareholders on October 20, 1999, director
nominees named below were elected to a three-year term expiring in 2002, byCompany's Form 10-Q for 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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12
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
first quarter ended September 26, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
------------- -----------
10.0(a)10.0 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*Deferred Compensation Plan for Directors*
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*
*FiledDecember 26, 1999*
[FN]
* Filed herewith
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the firstsecond quarter ended SeptemberDecember 26,
1999.
11
12
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
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: February 4, 2000 /s/ J.James E. Brenn
Date: November 8, 1999 --------------------------------------
J.-------------------------------------------------
James E. Brenn
Senior Vice President and Chief Financial Officer
& TreasurerDate: February 4, 2000 /s/ T.Todd J. Teske
Date: November 8, 1999 --------------------------------------
T.-------------------------------------------------
Todd J. Teske
Controller
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13
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Description
------------- -----------
10.0(a)10.0 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 IncentiveDeferred Compensation Plan (Filed herewith)
10.1 Release and Settlement Agreementfor Directors
(Filed herewith)
11 Computation of Earnings Per Share of Common Stock
(Filed herewith)
12 Computation of Ratio of Earnings to Fixed Charges
(Filed herewith)
27 Financial Data Schedule
(Filed herewith)
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