UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(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 27,October 2, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the transition period from to
Commission file number 1-1370
BRIGGS & STRATTON CORPORATION
(Exact name of registrant as specified in its charter)
| ||||
------------------------------------------------------------------------------------------------------------------------------------------------------- | ||||
(Exact name of registrant as specified in its charter) | ||||
Wisconsin | 39-0182330 | |||
------------------------------------------------------------------------------------------------------------------------------------------------------- | ||||
(State or other jurisdiction of | (I.R.S. Employer | |||
incorporation or organization) |
Identification No.) | |||
12301 West Wirth Street, Wauwatosa, Wisconsin 53222 | ||||
------------------------------------------------------------------------------------------------------------------------------------------------------- | ||||
(Address of Principal Executive Offices) (Zip Code) | ||||
414/259-5333 | ||||
------------------------------------------------------------------------------------------------------------------------------------------------------- | ||||
(Registrant’s telephone number, including area code) |
12301 West Wirth Street, Wauwatosa, Wisconsin 53222
(Address of Principal Executive Offices) (Zip Code)
414/259-5333
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x X No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x X No ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No X
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 |
| October 28, 2005 | |||
COMMON STOCK, par value $0.01 per share | 51,733,751 Shares |
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
INDEX
2
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
ASSETS
ASSETS
| October 2, |
| July 3, |
| |||||||||
March 27, 2005 | June 27, 2004 |
| 2005 |
| 2005 |
| |||||||
(Unaudited) |
| (Unaudited) |
|
|
| ||||||||
CURRENT ASSETS: |
|
|
|
|
| ||||||||
Cash and cash equivalents | $ | 40,755 | $ | 342,394 |
| $ | 84,567 |
| $ | 161,573 |
| ||
Accounts receivable, net | 471,192 | 230,510 |
| 343,650 |
| 360,786 |
| ||||||
Inventories - |
|
|
|
|
| ||||||||
Finished products and parts | 327,315 | 206,638 |
| 366,643 |
| 283,405 |
| ||||||
Work in process | 191,288 | 124,483 |
| 193,374 |
| 174,648 |
| ||||||
Raw materials | 12,304 | 6,610 |
| 12,628 |
| 11,612 |
| ||||||
Total inventories | 530,907 | 337,731 |
| 572,645 |
| 469,665 |
| ||||||
Deferred income tax asset | 61,485 | 47,623 |
| 97,498 |
| 92,251 |
| ||||||
Prepaid expenses and other current assets | 20,371 | 23,735 |
| 35,001 |
| 34,930 |
| ||||||
Total current assets | 1,124,710 | 981,993 |
| 1,133,361 |
| 1,119,205 |
| ||||||
|
|
|
|
| |||||||||
OTHER ASSETS: |
|
|
|
|
| ||||||||
Goodwill | 251,395 | 151,991 |
| 253,066 |
| 253,066 |
| ||||||
Other intangible assets, net | 96,908 | 217 | |||||||||||
Prepaid pension | 83,789 | 81,730 | |||||||||||
Investments | 45,661 | 49,259 |
| 46,640 |
| 49,783 |
| ||||||
Deferred loan costs, net | 6,383 | 6,325 |
| 5,650 |
| 6,016 |
| ||||||
Other intangible assets, net |
| 96,062 |
| 96,445 |
| ||||||||
Other long-term assets, net | 11,887 | 9,096 |
| 28,031 |
| 27,198 |
| ||||||
Total other assets | 496,023 | 298,618 |
| 429,449 |
| 432,508 |
| ||||||
|
|
|
|
| |||||||||
PLANT AND EQUIPMENT: |
|
|
|
|
| ||||||||
Cost | 974,047 | 867,987 |
| 1,006,145 |
| 1,005,644 |
| ||||||
Less - accumulated depreciation | 544,048 | 511,445 |
| 564,899 |
| 558,389 |
| ||||||
Total plant and equipment, net | 429,999 | 356,542 |
| 441,246 |
| 447,255 |
| ||||||
| $ | 2,004,056 |
| $ | 1,998,968 |
| |||||||
$ | 2,050,732 | $ | 1,637,153 |
|
|
|
|
| |||||
The accompanying notes are an integral part of these statements.
3
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (Continued)
(In thousands, except per share data)
LIABILITIES & SHAREHOLDERS’ INVESTMENT
March 27, 2005 | June 27, 2004 | |||||||
(Unaudited) | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 173,724 | $ | 120,409 | ||||
Accrued liabilities | 233,123 | 177,025 | ||||||
Dividends payable | 8,770 | — | ||||||
Short-term debt | 10,622 | 3,127 | ||||||
Total current liabilities | 426,239 | 300,561 | ||||||
OTHER LIABILITIES: | ||||||||
Long-term debt | 486,131 | 360,562 | ||||||
Deferred income tax liability | 107,221 | 70,454 | ||||||
Accrued pension cost | 22,120 | 20,603 | ||||||
Accrued employee benefits | 14,885 | 14,201 | ||||||
Accrued postretirement health care obligation | 77,144 | 38,248 | ||||||
Other long-term liabilities | 15,780 | 14,929 | ||||||
Total other liabilities | 723,281 | 518,997 | ||||||
SHAREHOLDERS’ INVESTMENT: | ||||||||
Common stock - | ||||||||
Authorized 120,000* and 60,000 shares, $.01 par value, issued 57,854* and 28,927 shares, respectively | 579 | 289 | ||||||
Additional paid-in capital | 54,987 | 48,657 | ||||||
Retained earnings | 987,736 | 927,766 | ||||||
Accumulated other comprehensive income | 7,293 | 4,028 | ||||||
Unearned compensation on restricted stock | (1,863 | ) | (1,490 | ) | ||||
Treasury stock, at cost 6,170* shares in FY2005 and 3,382 in FY2004 | (147,520 | ) | (161,655 | ) | ||||
Total shareholders’ investment | 901,212 | 817,595 | ||||||
$ | 2,050,732 | $ | 1,637,153 | |||||
|
| October 2, |
| July 3, | ||||
|
| 2005 |
| 2005 | ||||
|
| (Unaudited) |
|
| ||||
|
|
|
|
|
|
| ||
CURRENT LIABILITIES: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 142,037 |
|
| $ | 155,973 |
|
Accrued liabilities |
| 191,990 |
|
| 196,252 |
| ||
Dividends payable |
| 11,406 |
|
| - |
| ||
Current maturity on long-term debt |
| 40,000 |
|
| - |
| ||
Short-term debt |
| 4,721 |
|
| 443 |
| ||
Total current liabilities |
| 390,154 |
|
| 352,668 |
| ||
|
|
|
|
|
|
| ||
OTHER LIABILITIES: |
|
|
|
|
|
| ||
Long-term debt |
| 446,510 |
|
| 486,321 |
| ||
Deferred income tax liability |
| 111,295 |
|
| 113,794 |
| ||
Accrued pension cost |
| 50,806 |
|
| 47,944 |
| ||
Accrued employee benefits |
| 15,468 |
|
| 15,125 |
| ||
Accrued postretirement health care obligation |
| 80,091 |
|
| 77,607 |
| ||
Other long-term liabilities |
| 15,940 |
|
| 16,323 |
| ||
Total other liabilities |
| 720,110 |
|
| 757,114 |
| ||
|
|
|
|
|
|
| ||
SHAREHOLDERS’ INVESTMENT: |
|
|
|
|
|
| ||
Common stock - |
|
|
|
|
|
| ||
Authorized 120,000 shares, $.01 par value, issued 57,854 shares |
| 579 |
|
| 579 |
| ||
Additional paid-in capital |
| 58,597 |
|
| 55,793 |
| ||
Retained earnings |
| 1,022,677 |
|
| 1,029,329 |
| ||
Accumulated other comprehensive loss |
| (41,684 | ) |
| (48,331 | ) | ||
Unearned compensation on restricted stock |
| (2,946 | ) |
| (1,985 | ) | ||
Treasury stock at cost, 5,999 and 6,114 shares, respectively |
| (143,431 | ) |
| (146,199 | ) | ||
Total shareholders’ investment |
| 893,792 |
|
| 889,186 |
| ||
|
| $ | 2,004,056 |
|
| $ | 1,998,968 |
|
The accompanying notes are an integral part of these statements.
4
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
March 27, 2005 | March 28, 2004 | March 27, 2005 | March 28, 2004 | |||||||||||||
NET SALES | $ | 840,463 | $ | 654,681 | $ | 1,783,158 | $ | 1,402,060 | ||||||||
COST OF GOODS SOLD | 674,735 | 486,914 | 1,440,470 | 1,083,252 | ||||||||||||
Gross profit on sales | 165,728 | 167,767 | 342,688 | 318,808 | ||||||||||||
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 68,244 | 53,263 | 228,862 | 151,333 | ||||||||||||
Income from operations | 97,484 | 114,504 | 113,826 | 167,475 | ||||||||||||
INTEREST EXPENSE | (10,240 | ) | (9,603 | ) | (27,154 | ) | (29,031 | ) | ||||||||
OTHER INCOME, net | 4,930 | 2,467 | 13,944 | 5,175 | ||||||||||||
Income before income taxes | 92,174 | 107,368 | 100,616 | 143,619 | ||||||||||||
PROVISION FOR INCOME TAXES | 31,350 | 36,100 | 34,220 | 47,700 | ||||||||||||
Income before extraordinary item | 60,824 | 71,268 | 66,396 | 95,919 | ||||||||||||
EXTRAORDINARY GAIN - NEGATIVE GOODWILL | 19,800 | — | 19,800 | — | ||||||||||||
NET INCOME | $ | 80,624 | $ | 71,268 | $ | 86,196 | $ | 95,919 | ||||||||
EARNINGS PER SHARE DATA*- | ||||||||||||||||
Average shares outstanding | 51,194 | 44,307 | 51,428 | 44,430 | ||||||||||||
Income before extraordinary item | 1.19 | 1.61 | 1.29 | 2.16 | ||||||||||||
Extraordinary gain | 0.38 | — | 0.38 | — | ||||||||||||
Basic earnings per share | $ | 1.57 | $ | 1.61 | $ | 1.67 | $ | 2.16 | ||||||||
Diluted average shares outstanding | 51,710 | 50,331 | 51,964 | 50,428 | ||||||||||||
Income before extraordinary item | 1.18 | 1.44 | 1.28 | 1.97 | ||||||||||||
Extraordinary gain | 0.38 | — | 0.38 | — | ||||||||||||
Diluted earnings per share | $ | 1.56 | $ | 1.44 | $ | 1.66 | $ | 1.97 | ||||||||
CASH DIVIDENDS DECLARED PER SHARE* | $ | 0.170 | $ | 0.165 | $ | 0.510 | $ | 0.495 | ||||||||
|
| Three Months Ended |
| ||||||
|
| October 2, |
| September 26, |
| ||||
|
| 2005 |
| 2004 |
| ||||
|
|
|
|
|
|
|
| ||
NET SALES |
| $ | 511,709 |
|
| $ | 438,995 |
|
|
|
|
|
|
|
|
|
| ||
COST OF GOODS SOLD |
| 430,401 |
|
| 368,177 |
|
| ||
|
|
|
|
|
|
|
| ||
Gross profit on sales |
| 81,308 |
|
| 70,818 |
|
| ||
|
|
|
|
|
|
|
| ||
ENGINEERING, SELLING, GENERAL AND |
| 70,277 |
|
| 67,960 |
|
| ||
|
|
|
|
|
|
|
| ||
Income from operations |
| 11,031 |
|
| 2,858 |
|
| ||
|
|
|
|
|
|
|
| ||
INTEREST EXPENSE |
| (10,028 | ) |
| (8,119 | ) |
| ||
|
|
|
|
|
|
|
| ||
OTHER INCOME, net |
| 6,264 |
|
| 2,933 |
|
| ||
|
|
|
|
|
|
|
| ||
Income (Loss) before provision (credit) for income taxes |
| 7,267 |
|
| (2,328 | ) |
| ||
|
|
|
|
|
|
|
| ||
PROVISION (CREDIT) FOR INCOME TAXES |
| 2,540 |
|
| (840 | ) |
| ||
|
|
|
|
|
|
|
| ||
NET INCOME (LOSS) |
| $ | 4,727 |
|
| $ | (1,488 | ) |
|
|
|
|
|
|
|
|
| ||
EARNINGS PER SHARE DATA - |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
Average shares outstanding |
| 51,695 |
|
| 51,191 |
|
| ||
|
|
|
|
|
|
|
| ||
Basic earnings (loss) per share |
| $ | 0.09 |
|
| $ | (0.03 | ) |
|
|
|
|
|
|
|
|
| ||
Diluted average shares outstanding |
| 52,158 |
|
| 51,191 |
|
| ||
|
|
|
|
|
|
|
| ||
Diluted earnings (loss) per share |
| $ | 0.09 |
|
| $ | (0.03 | ) |
|
|
|
|
|
|
|
|
| ||
CASH DIVIDENDS PER SHARE |
| $ | 0.22 |
|
| $ | 0.17 |
|
|
The accompanying notes are an integral part of these statements.
5
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended |
| |||||||||||||||
Nine Months Ended |
| October 2, |
| September 26, |
| ||||||||||||
March 27, 2005 | March 28, 2004 |
| 2005 |
| 2004 |
| |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
| ||||||||||
Net income | $ | 86,196 | $ | 95,919 | |||||||||||||
Adjustments to reconcile net income to net cash used in operating activities - | |||||||||||||||||
Extraordinary gain | (19,800 | ) | — | ||||||||||||||
Net income (loss) |
| $ | 4,727 |
|
| $ | (1,488 | ) |
| ||||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
| ||||||||||
Depreciation and amortization | 54,182 | 48,167 |
| 19,424 |
|
| 17,769 |
|
| ||||||||
Earnings of unconsolidated affiliates | (12,914 | ) | (2,807 | ) | |||||||||||||
Loss on disposition of plant and equipment | 1,922 | 4,507 | |||||||||||||||
(Credit) provision for deferred income taxes | (15,428 | ) | 1,119 | ||||||||||||||
Provision for bad debt | 38,916 | — | |||||||||||||||
Changes in operating assets and liabilities, net of acquired assets and liabilities; | |||||||||||||||||
Increase in accounts receivable | (176,766 | ) | (217,725 | ) | |||||||||||||
Earnings of unconsolidated affiliates, net of dividends |
| 2,494 |
|
| 3,728 |
|
| ||||||||||
(Gain) Loss on disposition of plant and equipment |
| (6,156 | ) |
| 716 |
|
| ||||||||||
Provision for deferred income taxes |
| (7,746 | ) |
| (13,377 | ) |
| ||||||||||
Stock compensation expense |
| 2,096 |
|
| 117 |
|
| ||||||||||
Change in operating assets and liabilities: |
|
|
|
|
|
|
| ||||||||||
Decrease (Increase) in receivables |
| 17,136 |
|
| (15,192 | ) |
| ||||||||||
Increase in inventories | (49,996 | ) | (121,955 | ) |
| (102,980 | ) |
| (58,546 | ) |
| ||||||
Decrease in prepaid expenses and other current assets | 5,960 | 3,460 | |||||||||||||||
Increase in accounts payable and accrued liabilities | 37,615 | 68,830 | |||||||||||||||
(Increase) Decrease in prepaid expenses and other current assets |
| (5,450 | ) |
| 755 |
|
| ||||||||||
Decrease in accounts payable, accrued liabilities, and income taxes |
| (7,303 | ) |
| (30,920 | ) |
| ||||||||||
Increase (Decrease) in accrued/prepaid pension |
| 2,862 |
|
| (347 | ) |
| ||||||||||
Other, net | 1,908 | (10,168 | ) |
| (4,186 | ) |
| 1,300 |
|
| |||||||
Net cash used in operating activities | (48,205 | ) | (130,653 | ) |
| (85,082 | ) |
| (95,485 | ) |
| ||||||
|
|
|
|
|
|
| |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
| ||||||||||
Additions to plant and equipment | (61,027 | ) | (35,456 | ) |
| (16,317 | ) |
| (17,695 | ) |
| ||||||
Proceeds received on disposition of plant and equipment | 758 | 617 | |||||||||||||||
Proceeds received on sale of plant and equipment |
| 10,474 |
|
| 56 |
|
| ||||||||||
Proceeds received on sale of certain assets of a subsidiary | 4,050 | — |
| - |
|
| 4,050 |
|
| ||||||||
Cash paid for acquisitions, net of cash acquired | (350,044 | ) | — | ||||||||||||||
Investment in joint venture | (1,500 | ) | — | ||||||||||||||
Dividends received | 18,351 | 3,500 | |||||||||||||||
Cash paid for acquisition, net of cash acquired |
| - |
|
| (222,548 | ) |
| ||||||||||
Refund of cash paid for acquisition | — | 5,686 |
| 6,347 |
|
| - |
|
| ||||||||
Net cash used in investing activities | (389,412 | ) | (25,653 | ) | |||||||||||||
Net cash provided by (used in) investing activities |
| 504 |
|
| (236,137 | ) |
| ||||||||||
|
|
|
|
|
|
| |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
| ||||||||||
Net borrowings (repayments) on loans and notes payable | 131,570 | (331 | ) |
| 4,278 |
|
| (123 | ) |
| |||||||
Dividends paid | (17,502 | ) | (14,667 | ) | |||||||||||||
Proceeds from exercise of stock options | 19,037 | 29,415 |
| 2,366 |
|
| 17,648 |
|
| ||||||||
Net cash provided by financing activities | 133,105 | 14,417 |
| 6,644 |
|
| 17,525 |
|
| ||||||||
|
|
|
|
|
|
| |||||||||||
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 2,873 | 1,874 |
| 928 |
|
| 560 |
|
| ||||||||
|
|
|
|
|
|
| |||||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (301,639 | ) | (140,015 | ) |
| (77,006 | ) |
| (313,537 | ) |
| ||||||
|
|
|
|
|
|
|
| ||||||||||
CASH AND CASH EQUIVALENTS, beginning | 342,394 | 324,815 |
| 161,573 |
|
| 342,394 |
|
| ||||||||
|
|
|
|
|
|
| |||||||||||
CASH AND CASH EQUIVALENTS, ending | $ | 40,755 | $ | 184,800 |
| $ | 84,567 |
|
| $ | 28,857 |
|
| ||||
|
|
|
|
|
|
| |||||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
| ||||||||||
Interest paid | $ | 34,652 | $ | 33,771 |
| $ | 17,258 |
|
| $ | 15,604 |
|
| ||||
Income taxes paid | $ | 11,498 | $ | 11,867 |
| $ | 1,778 |
|
| $ | 1,652 |
|
| ||||
The accompanying notes are an integral part of these statements.
6
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
General Information
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 accounting principles generally accepted in the United States.U.S. However, in the opinion of Briggs & Stratton Corporation, 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 consolidated condensed financial statements should be read in conjunction with the financial statements and the notes there-tothereto which were included in our latest Annual Report on Form 10-K.
Common Stock
On August 4, 2004, Briggs & Stratton’s board approved a two-for-one stock split of its common stock, which became effective on October 29, 2004 followingupon shareholder approval of the amendment to the Briggs & Stratton Corporation Articles of Incorporation. The stock split was distributedpayable on November 9, 2004 to shareholders of record onas of October 29, 2004. CertainThe split was in the form of a stock dividend, with shareholders receiving an additional share for each existing share held. All references in the Consolidated Condensed Financial Statements to the number of common shares and related per share amounts have been restated to reflect the effect of the stock split.
Basic earnings per share, for each period presented, is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share, for each period presented, is computed reflecting the potential dilution that would occur if options or other contracts to issue common stock were exercised or converted into common stock at the beginning of the period.
Shares outstanding used to compute diluted earnings per share for the quarter ended September 26, 2004 excluded 85,000 shares of restricted stock and outstanding options to purchase 2,540,176 shares of common stock. The impact of such common stock equivalents and their effects on income were excluded from the calculation of net loss per share on a diluted basis as their effect is anti-dilutive. There were no shares excluded from the computation of diluted earnings per share for the quarter ended October 2, 2005.
7
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Information on earnings per share is as follows (in thousands):
Three Months Ended | Nine Months Ended | |||||||||||
March 27, 2005 | March 28, 2004 | March 27, 2005 | March 28, 2004 | |||||||||
Net income | $ | 80,624 | $ | 71,268 | $ | 86,196 | $ | 95,919 | ||||
Adjustments to net income to add after tax interest expense on convertible notes | — | 1,162 | — | 3,507 | ||||||||
Adjusted net income used in diluted earnings per share | $ | 80,624 | $ | 72,430 | $ | 86,196 | $ | 99,426 | ||||
Average shares of common stock outstanding* | 51,194 | 44,307 | 51,428 | 44,430 | ||||||||
Incremental common shares applicable to common stock options based on the common stock average market price during the period* | 485 | 351 | 502 | 317 | ||||||||
Incremental common shares applicable to restricted common stock based on the common stock average market price during the period* | 31 | 21 | 34 | 29 | ||||||||
Incremental common shares applicable to convertible notes based on the conversion provisions of the convertible notes* | — | 5,652 | — | 5,652 | ||||||||
Diluted average common shares outstanding* | 51,710 | 50,331 | 51,964 | 50,428 | ||||||||
|
| Three Months Ended |
| ||||||
|
| October 2, |
| September 26, |
| ||||
|
| 2005 |
| 2004 |
| ||||
|
|
|
|
|
|
|
| ||
Net income (loss) |
| $ | 4,727 |
|
| $ | (1,488 | ) |
|
|
|
|
|
|
|
|
| ||
Average shares of common stock outstanding |
| 51,695 |
|
| 51,191 |
|
| ||
|
|
|
|
|
|
|
| ||
Incremental common shares applicable to common |
| 427 |
|
| - |
|
| ||
|
|
|
|
|
|
|
| ||
Incremental common shares applicable to restricted market price during the period |
| 36 |
|
| - |
|
| ||
|
|
|
|
|
|
|
| ||
Diluted average shares of common stock outstanding |
| 52,158 |
|
| 51,191 |
|
| ||
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Comprehensive Income
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. Comprehensive income is defined as net income and other changes in shareholders’ investment from transactions and events other than with shareholders. Total comprehensive income (loss) is as follows (in thousands):
Three Months Ended | Nine Months Ended | |||||||||||||||
March 27, 2005 | March 28, 2004 | March 27, 2005 | March 28, 2004 | |||||||||||||
Net income | $ | 80,624 | $ | 71,268 | $ | 86,196 | $ | 95,919 | ||||||||
Cumulative translation adjustments | (46 | ) | (1,402 | ) | 3,473 | 2,014 | ||||||||||
Unrealized gain (loss) on derivative instruments | 1,050 | 8,016 | (208 | ) | (90 | ) | ||||||||||
Total comprehensive income | $ | 81,628 | $ | 77,882 | $ | 89,461 | $ | 97,843 | ||||||||
|
| Three Months Ended |
| ||||||
|
| October 2, |
| September 26, |
| ||||
|
| 2005 |
| 2004 |
| ||||
|
|
|
|
|
|
|
| ||
Net income (loss) |
| $ | 4,727 |
|
| $ | (1,488 | ) |
|
Cumulative translation adjustments |
| 820 |
|
| 414 |
|
| ||
Unrealized gain (loss) on derivative instruments |
| 5,827 |
|
| (405 | ) |
| ||
Total comprehensive income (loss) |
| $ | 11,374 |
|
| $ | (1,479 | ) |
|
The components of Accumulated Other Comprehensive Income (Loss) are as follows (in thousands):
|
| October 2, |
| July 3, |
| ||||||||||||||
| 2005 |
| 2005 |
| |||||||||||||||
March 27, 2005 | June 27, 2004 |
|
|
|
|
|
|
| |||||||||||
Cumulative translation adjustments | $ | 8,331 | $ | 4,858 |
| $ | 6,559 |
|
| $ | 5,739 |
|
| ||||||
Unrealized gain on derivative instruments | 292 | 500 |
| 6,746 |
|
| 919 |
|
| ||||||||||
Minimum pension liability adjustment | (1,330 | ) | (1,330 | ) |
| (54,989 | ) |
| (54,989 | ) |
| ||||||||
Accumulated other comprehensive loss |
| $ | (41,684 | ) |
| $ | (48,331 | ) |
| ||||||||||
Accumulated other comprehensive income | $ | 7,293 | $ | 4,028 | |||||||||||||||
8
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Derivatives
Derivatives are recorded on the balance sheet as assets or liabilities, measured at fair value. Briggs & Stratton enters into derivative contracts designated as cash flow hedges to manage its foreign currency exposures. These instruments generally do not have a maturity of more than twelve months. Briggs & Stratton has used interest rate swaps designated as fair value hedges to manage its debt portfolio. These instruments generally have maturities and terms consistent with the underlying debt instrument. In April 2004, all interest rate swaps were terminated.
Changes in the fair value of cash flow hedges are recorded on the Consolidated Condensed Statements of Income or on the Consolidated Condensed Balance Sheets as a component of Accumulated Other Comprehensive Income (Loss). The amounts included in Accumulated Other Comprehensive Income (Loss) will be reclassified into income when the forecasted transactions occur, generally within the next twelve months. These forecasted transactions represent the exporting of products for which Briggs & Stratton will receive foreign currency and the importing of products for which it will be required to pay in a foreign currency. Changes in the fair value of fair value hedges related to interest rate swaps were recorded as either an increase or decrease to long-term debt. Changes in the fair value of all derivatives deemed to be ineffective are recorded as either income or expense in the accompanying Consolidated Condensed Statements of Income.
BRIGGSBriggs & STRATTON CORPORATION AND SUBSIDIARIESStratton manages its exposure to fluctuation in the cost of natural gas used by its operating facilities through participation in a third party managed dollar cost averaging program linked to NYMEX futures. As a participant in the program, Briggs & Stratton hedges a minimum of 50% of its anticipated monthly natural gas usage along with a pool of other companies. Briggs & Stratton does not hold any actual futures contracts and actual delivery of natural gas is not required of the participants in the program. Cash settlements occur on a monthly basis based on the difference between the average dollar price of the underlying NYMEX futures held by the third party and the actual price of natural gas paid by Briggs & Stratton in the period. The fair value of the underlying NYMEX futures is reflected as an asset or liability on the accompanying Consolidated Condensed Balance Sheets. Changes in fair value are reflected as a Component of Accumulated Other Comprehensive Income (Loss), which are reclassified into the income statement as the monthly cash settlements occur and actual natural gas is consumed.
Segment and Geographic Information
Briggs & Stratton operates in two reportable business segments that are managed separately based on fundamental differences in their operations. Summarized segment data is as follows (in thousands):
|
| Three Months Ended |
| ||||||
|
| October 2, |
| September 26, |
| ||||
|
| 2005 |
| 2004 |
| ||||
NET SALES: |
|
|
|
|
| ||||
Engines |
| $ | 285,429 |
|
| $ | 254,112 |
|
|
Power Products |
| 300,607 |
|
| 222,154 |
|
| ||
Inter-Segment Eliminations |
| (74,327 | ) |
| (37,271 | ) |
| ||
Total* |
| $ | 511,709 |
|
| $ | 438,995 |
|
|
|
|
|
|
|
|
|
| ||
* International Sales (included in above) |
|
|
|
|
|
|
| ||
Engines |
| $ | 93,301 |
|
| $ | 54,086 |
|
|
Power Products |
| 22,236 |
|
| 7,162 |
|
| ||
Total |
| $ | 115,537 |
|
| $ | 61,248 |
|
|
|
|
|
|
|
|
|
| ||
GROSS PROFIT ON SALES: |
|
|
|
|
|
|
| ||
Engines |
| $ | 59,684 |
|
| $ | 44,245 |
|
|
Power Products |
| 19,504 |
|
| 24,198 |
|
| ||
Inter-Segment Eliminations |
| 2,120 |
|
| 2,375 |
|
| ||
Total |
| $ | 81,308 |
|
| $ | 70,818 |
|
|
|
|
|
|
|
|
|
| ||
INCOME (LOSS) FROM OPERATIONS: |
|
|
|
|
|
|
| ||
Engines |
| $ | 8,767 |
|
| $ | (4,676 | ) |
|
Power Products |
| 144 |
|
| 5,159 |
|
| ||
Inter-Segment Eliminations |
| 2,120 |
|
| 2,375 |
|
| ||
Total |
| $ | 11,031 |
|
| $ | 2,858 |
|
|
9
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Three Months Ended | Nine Months Ended | |||||||||||||||
March 27, 2005 | March 28, 2004 | March 27, 2005 | March 28, 2004 | |||||||||||||
NET SALES: | ||||||||||||||||
Engines | $ | 604,866 | $ | 581,915 | $ | 1,233,852 | $ | 1,174,111 | ||||||||
Power Products | 323,650 | 125,637 | 714,912 | 348,800 | ||||||||||||
Inter-Segment Eliminations | (88,053 | ) | (52,871 | ) | (165,606 | ) | (120,851 | ) | ||||||||
Total* | $ | 840,463 | $ | 654,681 | $ | 1,783,158 | $ | 1,402,060 | ||||||||
* International Sales (included in the above) | ||||||||||||||||
Engines | $ | 144,846 | $ | 121,813 | $ | 301,650 | $ | 274,767 | ||||||||
Power Products | 28,472 | 705 | 43,591 | 8,215 | ||||||||||||
Total | $ | 173,318 | $ | 122,518 | $ | 345,241 | $ | 282,982 | ||||||||
GROSS PROFIT ON SALES: | ||||||||||||||||
Engines | $ | 133,710 | $ | 156,450 | $ | 266,636 | $ | 279,823 | ||||||||
Power Products | 34,741 | 14,146 | 76,788 | 42,107 | ||||||||||||
Inter-Segment Eliminations | (2,723 | ) | (2,829 | ) | (736 | ) | (3,122 | ) | ||||||||
Total | $ | 165,728 | $ | 167,767 | $ | 342,688 | $ | 318,808 | ||||||||
INCOME FROM OPERATIONS: | ||||||||||||||||
Engines | $ | 85,522 | $ | 110,019 | $ | 95,374 | $ | 148,731 | ||||||||
Power Products | 14,685 | 7,314 | 19,188 | 21,866 | ||||||||||||
Inter-Segment Eliminations | (2,723 | ) | (2,829 | ) | (736 | ) | (3,122 | ) | ||||||||
Total | $ | 97,484 | $ | 114,504 | $ | 113,826 | $ | 167,475 | ||||||||
Warranty
Briggs & Stratton recognizes the cost associated with its standard warranty on Engines and Power Products at the time of sale. The amount recognized is based on historical failure rates and current claim cost experience. The following is a reconciliation of the changes in accrued warranty costs for the reporting period (in thousands):
Balance, June 27, 2004 | $ | 43,148 | ||
Balance Related to Acquistions | 12,273 | |||
Payments | (27,476 | ) | ||
Provision for Current Year Warranties | 30,197 | |||
Provision for Prior Year Warranties | (238 | ) | ||
Balance, End of Period | $ | 57,904 | ||
|
| Three Months Ended |
| ||||||
|
| October 2, |
| September 26, |
| ||||
|
| 2005 |
| 2004 |
| ||||
Beginning balance |
| $ | 59,625 |
|
| $ | 43,148 |
|
|
Balance related to acquisition |
| - |
|
| 8,773 |
|
| ||
Payments |
| (9,436 | ) |
| (9,015 | ) |
| ||
Provision for current year warranties |
| 8,609 |
|
| 8,167 |
|
| ||
Adjustments to prior years warranties |
| (1,800 | ) |
| (1,235 | ) |
| ||
Ending balance |
| $ | 56,998 |
|
| $ | 49,838 |
|
|
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Stock Options
Effective July 4, 2005, Briggs & Stratton has anStratton’s Incentive Compensation Plan that is accounted for under Statement of Financial Accounting Standard (“SFAS”) No. 123R, “Share Based Payment”. During the quarter ended October 2, 2005, the Company recognized approximately $1.9 million in stock option compensation expense. Prior to July 4, 2005, the plan was accounted for according to Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. Under the plan,Thus, no compensation cost has been recognized.was recognized prior to fiscal year 2006. Had compensation cost for this plan been determined consistent with Statement of Financial Accounting Standard (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” and SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”,123R, the Company’s net income and earnings per share would have been reduced to the following pro forma amounts (in thousands, except per share data):
Three Months Ended | Nine Months Ended | |||||||||||||||
March 27, 2005 | March 28, 2004 | March 27, 2005 | March 28, 2004 | |||||||||||||
Net income as reported: | $ | 80,624 | $ | 71,268 | $ | 86,196 | $ | 95,919 | ||||||||
Basic EPS: | ||||||||||||||||
Deduct employee compensation expense determined under a fair value based method, net of related tax effects | (1,322 | ) | (1,145 | ) | (3,784 | ) | (2,767 | ) | ||||||||
Income Available to Common Stockholders: | 79,302 | 70,123 | 82,412 | 93,152 | ||||||||||||
Diluted EPS: | ||||||||||||||||
Add reduction in interest expense related to convertible debt | — | 1,162 | — | 3,507 | ||||||||||||
Income Available to Common Stockholders: | $ | 79,302 | $ | 71,285 | $ | 82,412 | $ | 96,659 | ||||||||
Earnings per share*: | ||||||||||||||||
As reported | $ | 1.57 | $ | 1.61 | $ | 1.67 | $ | 2.16 | ||||||||
Pro forma | $ | 1.55 | $ | 1.58 | $ | 1.60 | $ | 2.10 | ||||||||
Diluted earnings per share*: | ||||||||||||||||
As reported | $ | 1.56 | $ | 1.44 | $ | 1.66 | $ | 1.96 | ||||||||
Pro forma | $ | 1.55 | $ | 1.42 | $ | 1.59 | $ | 1.92 |
|
| Three Months Ended |
| ||
|
| September 26, |
| ||
|
| 2004 |
| ||
|
|
|
|
| |
Net income (loss) as reported: |
| $ | (1,488 | ) |
|
Deduct employee compensation expense determined under a fair value based method, net of related tax effects |
| 1,105 |
|
| |
Pro forma net income (loss) |
| $ | (2,593 | ) |
|
|
|
|
|
| |
Basic earnings (loss) per share: |
|
|
|
| |
As reported |
| $ | (0.03 | ) |
|
Pro forma |
| $ | (0.05 | ) |
|
|
|
|
|
| |
Diluted earnings (loss) per share: |
|
|
|
| |
As reported |
| $ | (0.03 | ) |
|
Pro forma |
| $ | (0.05 | ) |
|
10
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Pension and Postretirement Benefits
Briggs & Stratton has noncontributory, defined benefit retirement plans and postretirement plans covering certain employees. The following tables summarize the plans’ income and expense for the periods indicated (in thousands):
| Pension Benefits |
| Other Postretirement Benefits |
| |||||||||||||||||||||||||||
Pension Benefits | Other Postretirement Benefits |
| Three Months Ended |
| Three Months Ended |
| |||||||||||||||||||||||||
Three Months Ended | Three Months Ended |
| October 2, |
| September 26, |
| October 2, |
| September 26, |
| |||||||||||||||||||||
March 27, 2005 | March 28, 2004 | March 27, 2005 | March 28, 2004 |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| |||||||||||||||||||
Components of Net Periodic (Income) Expense: | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Components of net periodic (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Service cost-benefits earned | $ | 3,243 | $ | 3,274 | $ | 678 | $ | 167 |
| $ | 4,022 |
|
| $ | 3,470 |
|
| $ | 876 |
|
| $ | 763 |
|
| ||||||
Interest cost on projected benefit obligation | 13,611 | 12,772 | 4,176 | 2,636 |
| 13,096 |
|
| 13,720 |
|
| 3,827 |
|
| 4,179 |
|
| ||||||||||||||
Expected return on plan assets | (17,700 | ) | (18,114 | ) | — | — |
| (17,205 | ) |
| (18,061 | ) |
| - |
|
| - |
|
| ||||||||||||
Amortization of: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Transition obligation | — | 2 | 12 | 35 |
| 2 |
|
| - |
|
| 11 |
|
| 11 |
|
| ||||||||||||||
Prior service cost | 785 | 770 | 8 | 7 |
| 774 |
|
| 785 |
|
| 8 |
|
| 8 |
|
| ||||||||||||||
Actuarial loss | 194 | 152 | 3,531 | 2,017 |
| 2,701 |
|
| 143 |
|
| 4,035 |
|
| 3,390 |
|
| ||||||||||||||
Net periodic (income) expense | $ | 133 | $ | (1,144 | ) | $ | 8,405 | $ | 4,862 | ||||||||||||||||||||||
Pension Benefits | Other Postretirement Benefits | ||||||||||||||||||||||||||||||
Nine Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||
March 27, 2005 | March 28, 2004 | March 27, 2005 | March 28, 2004 | ||||||||||||||||||||||||||||
Components of Net Periodic (Income) Expense: | |||||||||||||||||||||||||||||||
Service cost-benefits earned | $ | 9,730 | $ | 9,869 | $ | 2,050 | $ | 1,255 | |||||||||||||||||||||||
Interest cost on projected benefit obligation | 40,833 | 38,317 | 12,527 | 8,074 | |||||||||||||||||||||||||||
Expected return on plan assets | (53,100 | ) | (54,343 | ) | — | — | |||||||||||||||||||||||||
Amortization of: | |||||||||||||||||||||||||||||||
Transition obligation | — | 6 | 35 | 35 | |||||||||||||||||||||||||||
Prior service cost | 2,355 | 2,310 | 23 | 23 | |||||||||||||||||||||||||||
Actuarial loss | 582 | 455 | 10,687 | 6,265 | |||||||||||||||||||||||||||
Net periodic (income) expense | $ | 400 | $ | (3,386 | ) | $ | 25,322 | $ | 15,652 | ||||||||||||||||||||||
Net periodic expense |
| $ | 3,390 |
|
| $ | 57 |
|
| $ | 8,757 |
|
| $ | 8,351 |
|
|
Employer Contributions:
Briggs & Stratton doesis not expectrequired to make any contributions to the pension plans in fiscal 2005.2006.
Estimated Benefit Payments for Unfunded Plans:
Payments:
Briggs & Stratton expects to make benefit payments of approximately $1.5 million for its non-qualified pension plan during fiscal 2005.2006. As of March 27,October 2, 2005, Briggs & Stratton had made payments of approximately $1.1$0.5 million. Briggs & Stratton anticipates benefit payments of approximately $27.9$27.0 million for its other postretirement benefit plans during fiscal 2005.2006. As of March 27,October 2, 2005, Briggs & Stratton had made payments of approximately $20.9$6.7 million.
11
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
On July 7, 2004, Briggs & Stratton and its subsidiary, Briggs & Stratton Power Products Group, LLC (“BSPPG”) acquired Simplicity Manufacturing, Inc. (“Simplicity”). Simplicity designs, manufactures and markets a wide variety of premium yard and garden tractors, lawn tractors, riding mowers, snow throwers, attachments, and other lawn and garden products like rototillers and chipper shredders. The purchase price included $246.6 million of cash, a $5.9 million liability for future tax benefits, and $130.1 million of liabilities assumed. The cash paid included $17.8 million of cash acquired and $9.3 million of direct acquisition costs.
The Simplicity acquisition has been accounted for using the purchase method of accounting. The purchase price was allocated on a preliminary basis to identifiable assets acquired and liabilities assumed based upon their estimated fair values, with the excess purchase price recorded as goodwill. Final adjustments to the purchase price allocation, which will include the resolution of certain tax matters, are not expected to be material to the consolidated financial statements.
The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition:
(In thousands) | |||
Assets Acquired: | |||
Current assets | $ | 122,294 | |
Property, plant and equipment | 62,960 | ||
Goodwill | 98,289 | ||
Other intangible assets | 98,120 | ||
Other noncurrent assets | 866 | ||
Total assets | 382,529 | ||
Liabilities Assumed: | |||
Current liabilities | 47,916 | ||
Deferred tax liabilities | 45,002 | ||
Post retirement benefits | 36,665 | ||
Other noncurrent liabilities | 502 | ||
Total liabilities | 130,085 | ||
Net assets | $ | 252,444 | |
Other intangible assets are comprised of trademarks, patents and customer relationships. Patents have been assigned an estimated weighted average useful life of thirteen years. The customer relationships have been assigned an estimated useful life of twenty-five years. The patent and customer relationships are being amortized on a straight-line basis. The trademarks and goodwill, which are considered to have an indefinite life and will not be amortized, will be tested annually for impairment.
The following table summarizes pro forma results for the three and nine months ended March 28, 2004, as though the business combination had been completed at the beginning of the earliest comparable period (in thousands, except per share data):
Three Months Ended | Nine Months Ended | |||||
March 28, 2004 | March 28, 2004 | |||||
Net sales | $ | 744,338 | $ | 1,617,639 | ||
Net income | $ | 73,415 | $ | 96,373 | ||
Basic earnings per share | $ | 1.66 | $ | 2.17 | ||
Diluted earnings per share | $ | 1.48 | $ | 1.98 |
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
On February 11, 2005, Briggs & Stratton Corporation and its subsidiary, Briggs & Stratton Power Products Group, LLC (collectively “Briggs”) acquired certain assets of Murray, Inc. and Murray Canada Co. (collectively “Murray”) and entered into a transition supply agreement (“TSA”). The TSA gives Briggs the right to purchase finished lawn, garden and snow products from Murray for a period up to eighteen months. The cash purchase price was $121.3 million, including direct acquisition costs of $0.4 million. The Company financed the acquisition through the issuance of $125 million variable rate Term Notes due February 11, 2008, with no prepayment penalty. The Term Notes have financial and operating restrictions consistent with our other debt agreements, as disclosed in our Annual Report on Form 10-K. Although no liabilities were assumed pursuant to the asset purchase agreement, there are certain consumer and customer related obligations incident to the acquisition that have been considered. In addition, there were certain obligations created by the TSA that have been considered in our preliminary purchase accounting.
The Murray acquisition has been accounted for using the purchase method of accounting. The purchase price was allocated on a preliminary basis to identifiable assets acquired and liabilities recognized (as discussed above) based upon their estimated fair values. The estimated fair value of Murray assets acquired exceeded the acquisition cost by $19.8 million, after all tax considerations, and this amount was recognized as an extraordinary gain in the current quarter. Final adjustments to the purchase price allocation are not expected to be material to the consolidated financial statements.
The following table summarizes the fair value of the assets acquired and liabilities recognized at the date of acquisition:
(In thousands) | |||
Assets Acquired: | |||
Accounts receivable | $ | 78,409 | |
Inventory | 83,665 | ||
Total assets | 162,074 | ||
Liabilities Recognized: | |||
Federal and state taxes payable | 10,200 | ||
Rebates | 4,241 | ||
Warranty | 3,500 | ||
TSA obligations | 3,052 | ||
Total liabilities | 20,993 | ||
Net assets | $ | 141,081 | |
New Accounting Pronouncements
In December 2004, the FASB issued Statement 123R, “Share-Based Payment,”to be effective for annual periods beginning after June 15, 2005; thereby, becoming effective for Briggs & Stratton in the first quarter of fiscal 2006. Statement 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as an operating expense in the income statement. The cost is recognized over the requisite service period based on fair values measured on grant dates. The new standard may be adopted using either the modified prospective transition method or the modified retrospective method. We are currently evaluating our share-based employee compensation programs, the potential impact of this statement on our consolidated financial position and results of operations, and the alternative adoption methods.
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Financial Information of Subsidiary Guarantor of Indebtedness
In June 1997, Briggs & Stratton issued $100 million of 7.25% senior notes. Innotes, in May 2001, the Company issued $275 million of 8.875% senior notes, and in February 2005, the Company issued $125 million of variable rate term notes. In addition, Briggs & Stratton has a $350 million revolving credit facility that expires in May 2009 that is used to finance seasonal working capital needs.
Under the terms of Briggs & Stratton’s 8.875% senior notes, 7.25% senior notes, variable rate term notes, and the revolving credit agreement (collectively, the “Domestic Indebtedness”), BSPPGBriggs & Stratton Power Products Group, LLC and effective July 7, 2004, its wholly owned subsidiary, Simplicity Manufacturing, Inc., are joint and several guarantors of the Domestic Indebtedness (the “Guarantor”). The guarantees are full and unconditional guarantees. Additionally, if at any time a domestic subsidiary of Briggs & Stratton constitutes a significant domestic subsidiary, then such domestic subsidiary will also become a guarantor of the Domestic Indebtedness. Currently, all of the Domestic Indebtedness is unsecured. If Briggs & Stratton were to fail to make a payment of interest or principal on its due date, the Guarantor is obligated to pay the outstanding Domestic Indebtedness. Briggs & Stratton had the following outstanding amounts related to the guaranteed debt (in thousands):
|
| October 2, 2005 |
| Maximum |
| ||||||||
| Carrying Amount |
| Guarantee |
| |||||||||
March 27, 2005 Carrying Amount | Maximum Guarantee |
|
|
|
|
| |||||||
8.875% Senior Notes, due March 15, 2011 | $ | 271,589 | $ | 275,000 |
| $ | 271,875 |
| $ | 275,000 |
| ||
|
|
|
|
| |||||||||
7.25% Senior Notes, due September 15, 2007 |
| $ | 89,635 |
| $ | 90,000 |
| ||||||
|
|
|
|
|
| ||||||||
Variable Rate Term Notes, due February 11, 2008 | $ | 125,000 | $ | 125,000 |
| $ | 125,000 |
| $ | 125,000 |
| ||
|
|
|
|
| |||||||||
7.25% Senior Notes, due September 15, 2007 | $ | 89,542 | $ | 90,000 | |||||||||
Revolving Credit Facility, expiring May 2009 | $ | 9,850 | $ | 350,000 |
| $ | - |
| $ | 350,000 |
|
The following condensed supplemental consolidating financial information reflects the summarized financial information of Briggs & Stratton, its Guarantor and Non-Guarantor Subsidiaries (in thousands):
12
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
BALANCE SHEET
As of March 27,October 2, 2005
(In thousands)
|
| Briggs & Stratton |
| Guarantor |
| Non-Guarantor |
|
|
|
|
| ||||||||||
|
| Corporation |
| Subsidiary |
| Subsidiaries |
| Eliminations |
| Consolidated |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Current assets |
| $ | 760,175 |
|
| $ | 509,958 |
|
| $ | 179,218 |
|
| $ | (315,990 | ) |
| $ | 1,133,361 |
|
|
Investment in subsidiaries |
| 770,102 |
|
| - |
|
| - |
|
| (770,102 | ) |
| - |
|
| |||||
Non-current assets |
| 406,958 |
|
| 447,832 |
|
| 15,905 |
|
|
|
|
| 870,695 |
|
| |||||
|
| $ | 1,937,235 |
|
| $ | 957,790 |
|
| $ | 195,123 |
|
| $ | (1,086,092 | ) |
| $ | 2,004,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities |
| $ | 413,194 |
|
| $ | 158,716 |
|
| $ | 125,887 |
|
| $ | (307,643 | ) |
| $ | 390,154 |
|
|
Long-term debt |
| 446,510 |
|
| - |
|
| - |
|
| - |
|
| 446,510 |
|
| |||||
Other long-term obligations |
| 175,392 |
|
| 97,924 |
|
| 284 |
|
| - |
|
| 273,600 |
|
| |||||
Shareholders’ investment |
| 902,139 |
|
| 701,150 |
|
| 68,952 |
|
| (778,449 | ) |
| 893,792 |
|
| |||||
|
| $ | 1,937,235 |
|
| $ | 957,790 |
|
| $ | 195,123 |
|
| $ | (1,086,092 | ) |
| $ | 2,004,056 |
|
|
Briggs & Stratton Corporation | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||
Current Assets | $ | 633,214 | $ | 507,663 | $ | 296,242 | $ | (312,409 | ) | $ | 1,124,710 | |||||
Investment in Subsidiaries | 751,417 | — | — | (751,417 | ) | — | ||||||||||
Non-Current Assets | 474,110 | 436,456 | 15,456 | — | 926,022 | |||||||||||
$ | 1,858,741 | $ | 944,119 | $ | 311,698 | $ | (1,063,826 | ) | $ | 2,050,732 | ||||||
Current Liabilities | $ | 312,149 | $ | 170,937 | $ | 237,611 | $ | (300,328 | ) | $ | 420,369 | |||||
Payable to Seller | — | 5,870 | — | — | 5,870 | |||||||||||
Long-Term Debt | 486,131 | — | — | — | 486,131 | |||||||||||
Other Long-Term Obligations | 147,168 | 89,680 | 302 | — | 237,150 | |||||||||||
Shareholders’ Investment | 913,293 | 677,632 | 73,785 | (763,498 | ) | 901,212 | ||||||||||
$ | 1,858,741 | $ | 944,119 | $ | 311,698 | $ | (1,063,826 | ) | $ | 2,050,732 | ||||||
BALANCE SHEET
As of June 27, 2004
(In thousands)July 3, 2005
Briggs & Stratton Corporation | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||
Current Assets | $ | 739,007 | $ | 243,300 | $ | 227,786 | $ | (228,100 | ) | $ | 981,993 | |||||
Investment in Subsidiaries | 352,207 | — | — | (352,207 | ) | — | ||||||||||
Non-Current Assets | 471,395 | 175,439 | 8,326 | — | 655,160 | |||||||||||
$ | 1,562,609 | $ | 418,739 | $ | 236,112 | $ | (580,307 | ) | $ | 1,637,153 | ||||||
Current Liabilities | $ | 226,627 | $ | 111,992 | $ | 180,791 | $ | (218,849 | ) | $ | 300,561 | |||||
Long-Term Debt | 360,562 | — | — | — | 360,562 | |||||||||||
Other Long-Term Obligations | 148,574 | 9,861 | — | — | 158,435 | |||||||||||
Shareholders’ Investment | 826,846 | 296,886 | 55,321 | (361,458 | ) | 817,595 | ||||||||||
$ | 1,562,609 | $ | 418,739 | $ | 236,112 | $ | (580,307 | ) | $ | 1,637,153 | ||||||
|
| Briggs & Stratton |
| Guarantor |
| Non-Guarantor |
|
|
|
|
| ||||||||||
|
| Corporation |
| Subsidiary |
| Subsidiaries |
| Eliminations |
| Consolidated |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Current assets |
| $ | 702,178 |
|
| $ | 424,473 |
|
| $ | 185,436 |
|
| $ | (192,882 | ) |
| $ | 1,119,205 |
|
|
Investment in subsidiaries |
| 770,539 |
|
| - |
|
| - |
|
| (770,539 | ) |
| - |
|
| |||||
Non-current assets |
| 416,503 |
|
| 447,986 |
|
| 15,274 |
|
| - |
|
| 879,763 |
|
| |||||
|
| $ | 1,889,220 |
|
| $ | 872,459 |
|
| $ | 200,710 |
|
| $ | (963,421 | ) |
| $ | 1,998,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities |
| $ | 328,914 |
|
| $ | 74,890 |
|
| $ | 130,483 |
|
| $ | (181,619 | ) |
| $ | 352,668 |
|
|
Long-term debt |
| 486,321 |
|
| - |
|
| - |
|
| - |
|
| 486,321 |
|
| |||||
Other long-term obligations |
| 173,536 |
|
| 96,974 |
|
| 283 |
|
| - |
|
| 270,793 |
|
| |||||
Shareholders’ investment |
| 900,449 |
|
| 700,595 |
|
| 69,944 |
|
| (781,802 | ) |
| 889,186 |
|
| |||||
|
| $ | 1,889,220 |
|
| $ | 872,459 |
|
| $ | 200,710 |
|
| $ | (963,421 | ) |
| $ | 1,998,968 |
|
|
13
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
STATEMENT OF INCOME
For the Three Months Ended March 27,October 2, 2005
(In thousands)
Briggs & Stratton Corporation | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net Sales | $ | 587,013 | $ | 332,930 | $ | 43,055 | $ | (122,535 | ) | $ | 840,463 | |||||||||
Cost of Goods Sold | 458,363 | 299,889 | 37,416 | (120,933 | ) | 674,735 | ||||||||||||||
�� | ||||||||||||||||||||
Gross Profit | 128,650 | 33,041 | 5,639 | (1,602 | ) | 165,728 | ||||||||||||||
Engineering, Selling, General and Administrative Expenses | 40,365 | 19,775 | 8,104 | — | 68,244 | |||||||||||||||
Income (Loss) from Operations | 88,285 | 13,266 | (2,465 | ) | (1,602 | ) | 97,484 | |||||||||||||
Interest Expense | (10,175 | ) | (3 | ) | (18 | ) | (44 | ) | (10,240 | ) | ||||||||||
Other Income (Expense), Net | 28,653 | 304 | 159 | (24,186 | ) | 4,930 | ||||||||||||||
Income Before Income Taxes | 106,763 | 13,567 | (2,324 | ) | (25,832 | ) | 92,174 | |||||||||||||
Provision for Income Taxes | 36,299 | 5,177 | 34 | (10,160 | ) | 31,350 | ||||||||||||||
Income Before Extraordinary Item | 70,464 | 8,390 | (2,358 | ) | (15,672 | ) | 60,824 | |||||||||||||
Extraordinary Gain | — | 19,800 | — | — | 19,800 | |||||||||||||||
Net Income (Loss) | $ | 70,464 | $ | 28,190 | $ | (2,358 | ) | $ | (15,672 | ) | $ | 80,624 | ||||||||
STATEMENT OF INCOME
For the Nine Months Ended March 27, 2005
(In thousands)
Briggs & Stratton Corporation | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net Sales | $ | 1,191,345 | $ | 755,666 | $ | 120,287 | $ | (284,140 | ) | $ | 1,783,158 | |||||||||
Cost of Goods Sold | 946,024 | 680,358 | 94,963 | (280,875 | ) | 1,440,470 | ||||||||||||||
Gross Profit | 245,321 | 75,308 | 25,324 | (3,265 | ) | 342,688 | ||||||||||||||
Engineering, Selling, General and Administrative Expenses | 149,609 | 56,985 | 22,268 | — | 228,862 | |||||||||||||||
Income from Operations | 95,712 | 18,323 | 3,056 | (3,265 | ) | 113,826 | ||||||||||||||
Interest Expense | (26,440 | ) | (27 | ) | (90 | ) | (597 | ) | (27,154 | ) | ||||||||||
Other Income (Expense), Net | 43,161 | 260 | 170 | (29,647 | ) | 13,944 | ||||||||||||||
Income Before Income Taxes | 112,433 | 18,556 | 3,136 | (33,509 | ) | 100,616 | ||||||||||||||
Provision for Income Taxes | 38,227 | 7,150 | 833 | (11,990 | ) | 34,220 | ||||||||||||||
Income Before Extraordinary Item | 74,206 | 11,406 | 2,303 | (21,519 | ) | 66,396 | ||||||||||||||
Extraordinary Gain | — | 19,800 | — | — | 19,800 | |||||||||||||||
Net Income | $ | 74,206 | $ | 31,206 | $ | 2,303 | $ | (21,519 | ) | $ | 86,196 | |||||||||
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
|
| Briggs & Stratton |
| Guarantor |
| Non-Guarantor |
|
|
|
|
| ||||||||||
|
| Corporation |
| Subsidiary |
| Subsidiaries |
| Eliminations |
| Consolidated |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net sales |
| $ | 267,041 |
|
| $ | 297,859 |
|
| $ | 50,305 |
|
| $ | (103,496 | ) |
| $ | 511,709 |
|
|
Cost of goods sold |
| 214,529 |
|
| 280,463 |
|
| 41,540 |
|
| (106,131 | ) |
| 430,401 |
|
| |||||
Gross profit |
| 52,512 |
|
| 17,396 |
|
| 8,765 |
|
| 2,635 |
|
| 81,308 |
|
| |||||
Engineering, selling, general and administrative expenses |
| 42,923 |
|
| 18,289 |
|
| 9,065 |
|
| - |
|
| 70,277 |
|
| |||||
Income (Loss) from operations |
| 9,589 |
|
| (893 | ) |
| (300 | ) |
| 2,635 |
|
| 11,031 |
|
| |||||
Interest expense |
| (11,371 | ) |
| (14 | ) |
| (53 | ) |
| 1,410 |
|
| (10,028 | ) |
| |||||
Other income (expense), net |
| 7,711 |
|
| 1,776 |
|
| (988 | ) |
| (2,235 | ) |
| 6,264 |
|
| |||||
Income (Loss) before income taxes |
| 5,929 |
|
| 869 |
|
| (1,341 | ) |
| 1,810 |
|
| 7,267 |
|
| |||||
Provision (Credit) for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
income taxes |
| 2,075 |
|
| 698 |
|
| 640 |
|
| (873 | ) |
| 2,540 |
|
| |||||
Net income (loss) |
| $ | 3,854 |
|
| $ | 171 |
|
| $ | (1,981 | ) |
| $ | 2,683 |
|
| $ | 4,727 |
|
|
STATEMENT OF INCOME
For the Three Months Ended March 28,September 26, 2004
|
| Briggs & Stratton |
| Guarantor |
| Non-Guarantor |
|
|
|
|
| ||||||||||
|
| Corporation |
| Subsidiary |
| Subsidiaries |
| Eliminations |
| Consolidated |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net sales |
| $ | 242,165 |
|
| $ | 235,175 |
|
| $ | 37,459 |
|
| $ | (75,804 | ) |
| $ | 438,995 |
|
|
Cost of goods sold |
| 205,218 |
|
| 210,932 |
|
| 29,064 |
|
| (77,037 | ) |
| 368,177 |
|
| |||||
Gross profit |
| 36,947 |
|
| 24,243 |
|
| 8,395 |
|
| 1,233 |
|
| 70,818 |
|
| |||||
Engineering, selling, general and administrative expenses |
| 42,184 |
|
| 18,890 |
|
| 6,886 |
|
| - |
|
| 67,960 |
|
| |||||
Income (Loss) from operations |
| (5,237 | ) |
| 5,353 |
|
| 1,509 |
|
| 1,233 |
|
| 2,858 |
|
| |||||
Interest expense |
| (7,575 | ) |
| (28 | ) |
| (41 | ) |
| (475 | ) |
| (8,119 | ) |
| |||||
Other income (expense), net |
| 8,303 |
|
| (388 | ) |
| (82 | ) |
| (4,900 | ) |
| 2,933 |
|
| |||||
Income (Loss) before income taxes |
| (4,509 | ) |
| 4,937 |
|
| 1,386 |
|
| (4,142 | ) |
| (2,328 | ) |
| |||||
Provision (Credit) for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
income taxes |
| (1,623 | ) |
| 1,906 |
|
| 275 |
|
| (1,398 | ) |
| (840 | ) |
| |||||
Net income (loss) |
| $ | (2,886 | ) |
| $ | 3,031 |
|
| $ | 1,111 |
|
| $ | (2,744 | ) |
| $ | (1,488 | ) |
|
(In thousands)14
Briggs & Stratton Corporation | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net Sales | $ | 560,741 | $ | 120,930 | $ | 45,120 | $ | (72,110 | ) | $ | 654,681 | |||||||||
Cost of Goods Sold | 413,658 | 107,630 | 34,280 | (68,654 | ) | 486,914 | ||||||||||||||
Gross Profit | 147,083 | 13,300 | 10,840 | (3,456 | ) | 167,767 | ||||||||||||||
Engineering, Selling, General and Administrative Expenses | 39,957 | 6,059 | 7,247 | — | 53,263 | |||||||||||||||
Income from Operations | 107,126 | 7,241 | 3,593 | (3,456 | ) | 114,504 | ||||||||||||||
Interest Expense | (9,494 | ) | — | (10 | ) | (99 | ) | (9,603 | ) | |||||||||||
Other Income (Expense), Net | 5,715 | (14 | ) | 271 | (3,505 | ) | 2,467 | |||||||||||||
Income Before Income Taxes | 103,347 | 7,227 | 3,854 | (7,060 | ) | 107,368 | ||||||||||||||
Provision for Income Taxes | 34,678 | 3,194 | 827 | (2,599 | ) | 36,100 | ||||||||||||||
Net Income | $ | 68,669 | $ | 4,033 | $ | 3,027 | $ | (4,461 | ) | $ | 71,268 | |||||||||
STATEMENT OF INCOME
For the Nine Months Ended March 28, 2004
(In thousands)
Briggs & Stratton Corporation | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net Sales | $ | 1,132,809 | $ | 327,769 | $ | 111,352 | $ | (169,870 | ) | $ | 1,402,060 | |||||||||
Cost of Goods Sold | 873,137 | 288,220 | 86,777 | (164,882 | ) | 1,083,252 | ||||||||||||||
Gross Profit | 259,672 | 39,549 | 24,575 | (4,988 | ) | 318,808 | ||||||||||||||
Engineering, Selling, General and Administrative Expenses | 116,058 | 17,918 | 17,357 | — | 151,333 | |||||||||||||||
Income from Operations | 143,614 | 21,631 | 7,218 | (4,988 | ) | 167,475 | ||||||||||||||
Interest Expense | (28,733 | ) | (2 | ) | (50 | ) | (246 | ) | (29,031 | ) | ||||||||||
Other Income (Expense), Net | 19,007 | (44 | ) | 331 | (14,119 | ) | 5,175 | |||||||||||||
Income Before Income Taxes | 133,888 | 21,585 | 7,499 | (19,353 | ) | 143,619 | ||||||||||||||
Provision for Income Taxes | 44,451 | 8,240 | 1,491 | (6,482 | ) | 47,700 | ||||||||||||||
Net Income | $ | 89,437 | $ | 13,345 | $ | 6,008 | $ | (12,871 | ) | $ | 95,919 | |||||||||
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
For the NineThree Months Ended March 27,October 2, 2005
(In thousands)
|
| Briggs & Stratton |
| Guarantor |
| Non-Guarantor |
|
|
|
|
| ||||||||||
|
| Corporation |
| Subsidiary |
| Subsidiaries |
| Eliminations |
| Consolidated |
| ||||||||||
Net Cash (Used in) Provided by Operating Activities |
| $ | (131,711 | ) |
| $ | 38,685 |
|
| $ | (1,598 | ) |
| $ | 9,542 |
|
| $ | (85,082 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Additions to plant and equipment |
| (11,457 | ) |
| (4,094 | ) |
| (766 | ) |
| - |
|
| (16,317 | ) |
| |||||
Proceeds received on sale of plant and equipment |
| 10,455 |
|
| 19 |
|
| - |
|
| - |
|
| 10,474 |
|
| |||||
Refund of cash paid for acquisition |
| - |
|
| 6,347 |
|
| - |
|
| - |
|
| 6,347 |
|
| |||||
Capital contributions to subsidiary |
| (383 | ) |
| - |
|
| - |
|
| 383 |
|
| - |
|
| |||||
Net Cash (Used in) Provided by Investing Activities |
| (1,385 | ) |
| 2,272 |
|
| (766 | ) |
| 383 |
|
| 504 |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net borrowings (repayments) on loans and notes payable |
| 39,636 |
|
| (39,547 | ) |
| 13,731 |
|
| (9,542 | ) |
| 4,278 |
|
| |||||
Proceeds from exercise of stock options |
| 2,366 |
|
| - |
|
| - |
|
| - |
|
| 2,366 |
|
| |||||
Capital contributions received |
| - |
|
| 383 |
|
| - |
|
| (383 | ) |
| - |
|
| |||||
Net Cash Provided by (Used in) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financing Activities |
| 42,002 |
|
| (39,164 | ) |
| 13,731 |
|
| (9,925 | ) |
| 6,644 |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Effect of Foreign Currency Exchange Rate Changes on Cash and Cash Equivalents |
| - |
|
| - |
|
| 928 |
|
| - |
|
| 928 |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net (Decrease) Increase in Cash and Cash Equivalents |
| (91,094 | ) |
| 1,793 |
|
| 12,295 |
|
| - |
|
| (77,006 | ) |
| |||||
Cash and Cash Equivalents, Beginning |
| 143,034 |
|
| 6,376 |
|
| 12,163 |
|
| - |
|
| 161,573 |
|
| |||||
Cash and Cash Equivalents, Ending |
| $ | 51,940 |
|
| $ | 8,169 |
|
| $ | 24,458 |
|
| $ | - |
|
| $ | 84,567 |
|
|
Briggs & Stratton Corporation | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net Cash (Used in) Provided by Operating Activities | $ | (89,661 | ) | $ | 39,120 | $ | (4,379 | ) | $ | 6,715 | $ | (48,205 | ) | |||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||
Additions to Plant and Equipment | (45,094 | ) | (9,222 | ) | (6,711 | ) | — | (61,027 | ) | |||||||||||
Proceeds Received on Disposition of Plant and Equipment | 557 | 10 | 191 | — | 758 | |||||||||||||||
Proceeds Received on Sale of Briggs & Stratton Canada | — | — | 4,050 | — | 4,050 | |||||||||||||||
Cash Paid for Acquistion, Net of Cash Acquired | (719 | ) | (332,662 | ) | (16,663 | ) | — | (350,044 | ) | |||||||||||
Cash Investment in Subsidiary | (369,148 | ) | — | (12,469 | ) | 381,617 | — | |||||||||||||
Investment in Joint Venture | (1,500 | ) | — | — | — | (1,500 | ) | |||||||||||||
Dividends Received | 18,674 | — | (323 | ) | — | 18,351 | ||||||||||||||
Net Cash Used in Investing Activities | (397,230 | ) | (341,874 | ) | (31,925 | ) | 381,617 | (389,412 | ) | |||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||
Net Borrowings (Repayments) on Loans and Notes Payable | 177,691 | (44,969 | ) | 11,317 | (12,469 | ) | 131,570 | |||||||||||||
Dividends Paid | (17,455 | ) | — | (5,801 | ) | 5,754 | (17,502 | ) | ||||||||||||
Capital Contributions Received | — | 349,542 | 32,075 | (381,617 | ) | — | ||||||||||||||
Proceeds from Exercise of Stock Options | 19,037 | — | — | — | 19,037 | |||||||||||||||
Net Cash Provided by Financing Activities | 179,273 | 304,573 | 37,591 | (388,332 | ) | 133,105 | ||||||||||||||
Effect of Exchange Rate Changes | — | — | 2,873 | — | 2,873 | |||||||||||||||
Net (Decrease) Increase in Cash and Cash Equivalents | (307,618 | ) | 1,819 | 4,160 | — | (301,639 | ) | |||||||||||||
Cash and Cash Equivalents, Beginning | 326,809 | 4,007 | 11,578 | — | 342,394 | |||||||||||||||
Cash and Cash Equivalents, Ending | $ | 19,191 | $ | 5,826 | $ | 15,738 | $ | — | $ | 40,755 | ||||||||||
15
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
For the NineThree Months Ended March 28,September 26, 2004
(In thousands)
|
| Briggs & Stratton |
| Guarantor |
| Non-Guarantor |
|
|
|
|
| ||||||||||
|
| Corporation |
| Subsidiary |
| Subsidiaries |
| Eliminations |
| Consolidated |
| ||||||||||
Net Cash (Used in) Provided by Operating Activities |
| $ | (151,174 | ) |
| $ | 52,475 |
|
| $ | 2,983 |
|
| $ | 231 |
|
| $ | (95,485 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Additions to plant and equipment |
| (13,884 | ) |
| (1,877 | ) |
| (1,934 | ) |
| - |
|
| (17,695 | ) |
| |||||
Proceeds received on sale of plant and equipment |
| 52 |
|
| - |
|
| 4 |
|
| - |
|
| 56 |
|
| |||||
Proceeds received on sale of certain assets of a subsidiary |
| - |
|
| - |
|
| 4,050 |
|
| - |
|
| 4,050 |
|
| |||||
Capital contributions to subsidiary |
| (238,713 | ) |
| - |
|
| - |
|
| 238,713 |
|
| - |
|
| |||||
Cash paid for acquisition, net of cash acquired |
| (719 | ) |
| (221,829 | ) |
| - |
|
| - |
|
| (222,548 | ) |
| |||||
Other, net |
| (2,656 | ) |
| - |
|
| 2,656 |
|
| - |
|
| - |
|
| |||||
Net Cash (Used in) Provided by Investing Activities |
| (255,920 | ) |
| (223,706 | ) |
| 4,776 |
|
| 238,713 |
|
| (236,137 | ) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net borrowings (repayments) on loans and notes payable |
| 64,297 |
|
| (64,291 | ) |
| 102 |
|
| (231 | ) |
| (123 | ) |
| |||||
Proceeds from exercise of stock options |
| 17,648 |
|
| - |
|
| - |
|
| - |
|
| 17,648 |
|
| |||||
Capital contributions received |
| - |
|
| 238,713 |
|
| - |
|
| (238,713 | ) |
| - |
|
| |||||
Net Cash Provided by (Used in) Financing Activities |
| 81,945 |
|
| 174,422 |
|
| 102 |
|
| (238,944 | ) |
| 17,525 |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Effect of Foreign Currency Exchange Rate Changes on Cash and Cash Equivalents |
| - |
|
| - |
|
| 560 |
|
| - |
|
| 560 |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net (Decrease) Increase in Cash and Cash Equivalents |
| (325,149 | ) |
| 3,191 |
|
| 8,421 |
|
| - |
|
| (313,537 | ) |
| |||||
Cash and Cash Equivalents, Beginning |
| 326,809 |
|
| 4,007 |
|
| 11,578 |
|
| - |
|
| 342,394 |
|
| |||||
Cash and Cash Equivalents, Ending |
| $ | 1,660 |
|
| $ | 7,198 |
|
| $ | 19,999 |
|
| $ | - |
|
| $ | 28,857 |
|
|
Briggs & Stratton Corporation | Guarantor Subsidiary | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net Cash (Used in) Provided by Operating Activities | $ | (81,486 | ) | $ | (49,779 | ) | $ | (17,308 | ) | $ | 17,920 | $ | (130,653 | ) | ||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||
Additions to Plant and Equipment | (30,052 | ) | (4,506 | ) | (898 | ) | — | (35,456 | ) | |||||||||||
Proceeds Received on Disposition of Plant and Equipment | 556 | 61 | — | — | 617 | |||||||||||||||
Dividends Received | 3,725 | — | — | — | 3,725 | |||||||||||||||
Refund of Cash Paid for Acquisition | 5,686 | — | (225 | ) | — | 5,461 | ||||||||||||||
Net Cash Used in Investing Activities | (20,085 | ) | (4,445 | ) | (1,123 | ) | — | (25,653 | ) | |||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||
Net Borrowings (Repayments) on Loans and Notes Payable | (52,251 | ) | 52,762 | 17,078 | (17,920 | ) | (331 | ) | ||||||||||||
Dividends Paid | (14,667 | ) | — | — | — | (14,667 | ) | |||||||||||||
Proceeds from Exercise of Stock Options | 29,415 | — | — | — | 29,415 | |||||||||||||||
Net Cash Provided by (Used in) Financing Activities | (37,503 | ) | 52,762 | 17,078 | (17,920 | ) | 14,417 | |||||||||||||
Effect of Exchange Rate Changes | — | (675 | ) | 2,549 | — | 1,874 | ||||||||||||||
Net Decrease in Cash and Cash Equivalents | (139,074 | ) | (2,137 | ) | 1,196 | — | (140,015 | ) | ||||||||||||
Cash and Cash Equivalents, Beginning | 304,103 | 1,575 | 19,137 | — | 324,815 | |||||||||||||||
Cash and Cash Equivalents, Ending | $ | 165,029 | $ | (562 | ) | $ | 20,333 | $ | — | $ | 184,800 | |||||||||
16
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 Briggs & Stratton’s financial condition and results of operations for the periods included in the accompanying consolidated condensed financial statements:
RESULTS OF OPERATIONS
SALES
Consolidated net sales for the thirdfirst quarter of fiscal 20052006 totaled $840$512 million, an increase of $186$73 million or 28%17% when compared to fiscal 2004. The increase is attributable primarily to the inclusionsame period of $108 million in sales from Simplicity and the inclusion of $72 million in sales of Murray product, both acquired in the current fiscalpreceding year.
Third quarter net sales for the Engine Segment were $605 million in fiscal 2005 and $582 million in fiscal 2004. The 4%, or $23 million, improvement is the result of a 12% increase in engine shipments that contributed $56 million and a $15 million benefit from favorable exchange rate on Euro denominated sales. These increases were partially offset by an engine mix that favored lower priced product resulting in a net sales reduction of $27 million, lower service parts and component sales of $13 million and an increase in sales incentives in the period. The engine mix and sales incentives were the expected reversals of the favorable experience from the first half of the year. The reduction in service parts and component sales reflects the efforts of our independent distribution network to reduce its inventories in the current year.
Third quarter Power Products Segment sales were $324 million versus $126 million in the same period a year ago. The $198 million improvement is primarily the result of the inclusion of $108 million of sales from Simplicity and $72 million in net sales from the Murray asset acquisition. The remaining increase was the result of generator and pressure washer volume increases. Generator net sales increased 15% while unit volume increased 12%. Generator demand continues to be strong due to continued replenishment of inventory caused by the major hurricane activity in this year’s first fiscal quarter. Net sales growth also reflects price increases instituted in January 2005. Pressure washer net sales increased 17% while unit volume increased 29%. The volume growth reflects the build-up of redesigned product at retail in anticipation of spring and summer demand, as well as the placement of incremental SKU’s at retail. The sales mix of pressure washers favored smaller, lower priced units.
Consolidated net sales for the nine-months ended March 27, 2005 totaled $1,783 million, an increase of $381 million or 27%. This increase reflects the inclusion of $260 million in net sales from Simplicity and $72 million of net sales of Murray product in the current year.
Nine-months sales for the Engine Segment totaled $1,234 million in fiscal 2005 versus $1,174 million in the prior year, a 5% or $60 million improvement. The main drivers for the net sales increases were; $40 million from an engine unit shipment increase of 4% and $33 million from favorable price and Euro exchange rates. Offsetting these increases were lower service parts and component sales of $14.3 million, primarily in the third quarter.
Power Products Segment net sales for nine-months were $715increased $78 million, compared to $349 million in the prior year. As previously discussed, this increase reflectsdriven by the inclusion of $80 million of sales from our Simplicityrelated to Murray branded lawn and Murray acquisitions of $260 million and $72 million, respectively. The remaining improvement was the result of a generator sales increase of 20% due to a volume increase as a result of hurricane activitysnow equipment, in the first fiscal quarter.current year. Generator sales benefited from two hurricanes in the current year, but the increase was offset by lower pressure washer and premium lawn and garden equipment sales. Pressure washer sales were up 3% on a 9% unit volume increase. The mixdecreases reflect changing operating procedures at certain retailers in their effort to carry less inventory. Premium lawn and garden equipment sales declines reflect lower replenishment sales to dealers due to higher inventories in certain areas of pressure washer sales favored smaller, lower priced units.
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESthe country caused by dry weather.
The Engine Segment net sales increase was $31 million or 12% between years. This increase is volume driven due to improved shipments to Europe and increased shipments of engines to generator manufacturers.
GROSS PROFIT MARGIN
The consolidated gross profit margin decreased to 20% from 26% experiencedwas 16% in the preceding year’s third quarter.first quarter of fiscal 2006 and fiscal 2005. Engine Segment margins decreasedincreased to 21% in fiscal 2006 from 27%17% in the prior year to 22% in the current year. This decline in margin was driven primarily by a $23 millionfiscal 2005. The increase in manufacturing costs. The majority of the cost increases reflect $16 million from increased prices on aluminum and steel. We are anticipating raw material and component costs to remain at these higher levels for the remainder of the fiscal year. The remaining increase in manufacturing costsmargin is attributable to $7 million in increased overhead costs, such as utilities and fringe benefits, which were not offset by our ongoing cost reduction efforts. Lower production volume, resulting ina $6 million gain recorded on the sale of lower fixed costs absorption, also contributed to the lower Engine Segment margins. Pricing initiatives and a stronger Euro, offset by a negative mix of product that favored lower margined units, contributed $12 million to the Engine Segment margins in the third quarter, but this was not enough to overcome the cost increases. Power Products Segment margins were 11% in the third quarter of fiscal 2005 and fiscal 2004.an operating asset. The acquisition of Simplicity contributed margins of $17 million (7% gross margin) after the application of purchase accounting on acquired inventory. Murray sales in the third quarter were at zero margin after the application of purchase accounting. This reduced the overall segment margin by 3%. The margin on generators and pressure washers improved between years due to lower spending on manufacturing costs in the quarter, an 11% increase in unit production driven primarily by anticipated demand for pressure washers, and a favorable mix of higher margined pressure washers.
The consolidated gross profit margin for the nine-month period decreased from 22% in the prior year to 19% in the current year. The Engine Segment margin decreased from 24% in fiscal 2004 to 22% in fiscal 2005. Manufacturing cost increases of $56 million consisting primarily of increased aluminum and steel prices, were only partially offset by pricing initiatives and a favorable Euro exchange rate. Power Products Segment margins for the nine-month periodfirst quarter decreased from 12%11% in fiscal 2005 to 6% in fiscal 2006. Losses on sales of Murray branded product in the prior year to 11% in the current year. The acquisition of Simplicity contributed $38 million (6% gross margin) after the application of purchase accounting on acquired inventory. Murray sales were at zero margin after the application of purchase accounting. Thisquarter reduced the overallan improved segment margin by 1%. Theof 13% to 6% due to the expenses associated with winding down the Transition Supply Agreement with the estate of Murray, Inc. Improved margins on the generatorgenerators and pressure washer businesswashers attributable to pricing improvements and operating efficiencies were flat between years. The impactpartially offset by lower margins on premium lawn and garden product due to increased expense because of higher interest rates on dealer financing costs and lower production volumes and manufacturing cost increases were offset by the increased generator sales volume and price increases.levels.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Engineering, selling, generalSelling, General and administrative expenses were $68Administrative Expenses increased by $12 million between years, excluding the impact of the $10 million bad debt expense on the Murray, Inc. trade receivable, taken in the thirdfirst quarter of fiscal 2005 versus $532005. The current year increases were driven primarily by planned increases in advertising and promotional costs of $3 million; increased salaries and fringe benefits of $3 million in fiscal 2004. The $15and increased professional service fees of $3 million, increase is attributable to the inclusion of Simplicity expenseswhich included legal fees and consulting for information technology enhancements. In addition, we adopted SFAS 123R in the current year.quarter, which resulted in the recognition of compensation expense on certain outstanding stock options of $2 million.
This category increased $78 million for the nine-month comparative periods. The write-down of the trade receivable from Murray accounts for $39 million of the increase. The remaining increase is attributable to the inclusion of $39 million in expenses of Simplicity.
INTEREST EXPENSE
Interest expense was $10 million in the third quartersfirst quarter of fiscal 2005 and2006, compared to $8 million in the first quarter of fiscal 2004. Interest expense decreased $2 million for the nine-month comparative periods.2005. The decreaseincrease is attributable to lowerhigher borrowings between years.
PROVISION FOR INCOME TAXES
The effective tax rate forassociated with the $125 million Term Notes used to finance the acquisition of certain assets of Murray, Inc. in the third quarter of fiscal 2005 and 2004 was 34%. The effective tax rate was 34% for the fiscal 2005 nine-month period and 33% in the prior year. The increase in the rate in the current year reflects decreases in foreign income and state tax credits and the elimination of the tax benefit from the closing of a tax audit year.2005.
17
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
EXTRAORDINARY GAINPROVISION FOR INCOME TAXES
The extraordinary gaineffective tax rate used in the thirdfirst quarter of fiscal 2006 was 35%. This is management’s estimate of what the rate will be for the entire year. The rate for the first quarter of fiscal 2005 representswas 36% and was ultimately decreased to 33% for the difference between the estimated fair valueentire fiscal year. The increase of the selected assets acquired from Murrayrate in the current year is attributable to increased earnings expectations and lower dividend income expected in the current year and the cash paid, after allresulting foreign tax considerations.credit implications.
Cash used in operating activities for the nine-month periodfirst quarter of fiscal 20052006 was $48$85 million, a decrease of $83$10 million from the first quarter of fiscal 2004, driven by reduced2005. This resulted from a lower deferred tax provision between years and $4 million of decreased working capital requirements. The nine-month periodrequirements between years. In the first quarter of fiscal 2005, experienced lessgenerator and pressure washer inventory declined $47 million from the fiscal year end balance. This decline provided an offset to the buildup that occurred in the Engine Segment inventory. The first quarter of an inventory build-up than the prior year. This was driven primarily byfiscal 2006 started out with significantly lower generator and pressure washer inventories primarily because of generator demand created by a June 2005 tax incentive program in Florida. Consequently, the fiscal 2006 inventory increase represents the buildup of Engine Segment inventory. The increase in inventory carrying values for the period was more than offset by lower bonus and other accrual payouts in the current year. In addition,quarter, as well as, lower receivables were lower between years attributabledue to the elimination of the$29 million in receivables from Murray, receivable.Inc.
In the nine-month periodfirst quarter of fiscal 2006, cash provided by investing activities was $1 million compared to the use of $236 million in fiscal 2005. The $237 million decrease in use of cash is attributable to the $223 million acquisition of Simplicity Manufacturing, Inc. in the first quarter of fiscal 2005 we used $389 million in investing activities compared to $26 million in fiscal 2004. $350 million of cash was used on acquisitions in the current year. The acquisition of Simplicity used $229 million of cash and $121 million of cash was used for the acquisition of selected Murray assets. Planned increases in capital spending of $26 million and an investment in a joint venture of $2 million were partially offset by cash received ongreater proceeds from the sale of certain assets of a subsidiary. In the prior year, we received $6 million as a refund of a portion of the cash paid for the BSPPG acquisition in fiscal 2001. The amount was to adjust the original purchase price for the actual value received in acquired receivables and inventory. No such refund was received in the current year. In 2005 we received $13 million in cash dividends from our equity investment in Metal Technologies, Inc., the entity that acquired our two ductile iron foundries in August 1999. These were our first dividends from this investment.quarter of fiscal 2006.
Net cash provided by financing activities was $133$7 million in fiscal 2005, a $1192006, an $11 million increasedecrease from the $18 million net cash provided by financing activities in fiscal 2004.2005. The increasedecrease is attributable primarily to the issuance of $125 million of Term Notes used to finance the acquisition of selected Murray assets in the current year. Increased dividend payments of $3 million and lower cash fromreduced stock option activity in the current year of $10 million, were partially offset by increased net borrowings under pre-existing loan agreements of $7 million.year.
FUTURE LIQUIDITY AND CAPITAL RESOURCES
On March 18, 2005 we increased the maximum amount available under our Revolving Credit Facility to Briggs & Stratton has a $350 million from $275 million. The amended agreementrevolving credit faculty that expires in May 2009.
The $125 million of Term Notes issued on February 11, 2005, require a payment of $40 million on August 11, 2006 with the remainder due February 11, 2008, therecredit facility is no prepayment penalty. These Notes were used to finance the acquisition of selected Murray assets. We do not believe the Term Notes or the acquisition of selected assets of Murray will significantly alter our future liquidityfund seasonal working capital requirements and capitalother financing needs.
We acquired Simplicity in July 2004, using available cash. We do not believe the acquisition of Simplicity will significantly alter our future liquidity and capital needs given its profitability and existing receivable financing arrangements.
We have remainingManagement has authorization to buy up to 1.8 million shares of ourBriggs & Stratton common stock in open market or private transactions under thea June 2000 Board of Directors’ authorization to repurchase up to 2.0 million shares. Weauthorization. The Company did not purchase any shares in the first nine-monthsquarter of fiscal 2005.2006.
Management expects cash outflows for capital expenditures to be approximately $80 to $87 million in fiscal 2005.2006. These anticipated expenditures provide for continued investmentsinvestment in equipment and new products. These expenditures will be funded using available cash.
Management believes that available cash, the credit facility, cash generated from operations, existing lines of credit and access to debt markets will be adequate to fund our capital requirements for the foreseeable future.
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
OFF-BALANCE SHEET ARRANGEMENTS
There have been no material changes since the September 9, 200416, 2005, filing of the Company’s Annual Report on Form 10-K.
CONTRACTUAL OBLIGATIONS
18
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
During the first quarter of fiscal 2006, Briggs & Stratton extended the term of its collective bargaining agreement governing certain Milwaukee area employees through July 31, 2010. Other agreements expire at various times ranging from 2006-2008.
There have been no material changes since the September 9, 200416, 2005, filing of the Company’s Annual Report on Form 10-K other than the issuance of $125 million in variable rate Term Notes with $40 million due August 11, 2006 and the remainder due February 11, 2008. As of March 27, 2005, the interest rate on these notes was 4.04%. As a result, the Company will incur additional interest expense of approximately $1.9 million, $5.1 million, $3.7 million and $2.1 million in fiscal years 2005, 2006, 2007 and 2008, respectively on these notes.10-K.
There have been no material changes in Briggs & Stratton’s critical accounting policies since the September 9, 200416, 2005 filing of its Annual Report on Form 10-K. As discussed in our annual report, the preparation of financial statements in conformity with accounting principles generally accepted in the United StatesU.S. requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results caninevitably will differ from those estimates, and such differences may be material to the financial statements.
The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the recovery of accounts receivable and inventory reserves, as well as those used in the determination of liabilities related to customer rebates, pension obligations, post-retirement benefits, warranty, product liability, group health insurance and taxation. Various assumptions and other factors underlie the determination of these significant estimates. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and, in some instances, actuarial techniques. Briggs & Stratton re-evaluates these significant factors as facts and circumstances change.
This report contains certain 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”, “approval”, “believe”, “conditions”, “determine”, “estimate”, “evaluate”, “expect”, “forecast”,
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
“if”, “intend”, “may”, “negotiate”, “objective”, “outcome”, “plan”, “project”, “seek”, “subject to”, “think”, “will”, and 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 ability to successfully forecast demand for our products and appropriately adjust our manufacturing and inventory levels; changes in our operating expenses; changes in interest rates; the effects of weather on the purchasing patterns of consumers and original equipment manufacturers (OEMs); actions of engine manufacturers and OEMs with whom we compete; the seasonal nature of our business; changes in laws and regulations, including environmental, tax, pension funding and accounting standards; work stoppages or other consequences of any deterioration in our employee relations; work stoppages by other unions that affect the ability of suppliers or customers to manufacture; acts of war or terrorism that may disrupt our business operations or those of our customers and suppliers; changes in customer and OEM demand; changes in prices of purchased raw materials and parts that we purchase; changes in domestic economic conditions, including housing starts and changes in consumer disposable income; changes in foreign economic conditions, including currency rate fluctuations; our customers’ ability to successfully obtain financing; the actions of customers of our OEM customers; actions by potential acquirers of certain OEMs; the ability to successfully realize the maximum market value of acquired assets; new facts that come to light in the future course of litigation proceedings which could affect our assessment of those matters; a successful transition supply agreement with Murray; the actions of other suppliers and the customers of Murray; the ability to successfully realize the maximum market value of acquired assets; work stoppages or other consequences of any deterioration in Murray’s employee relations; and other factors that may be disclosed from time to time in our SEC filings or otherwise. Some or all of the factors may be beyond our control. We caution you that any forward-looking statement reflects only our belief at the time the statement is made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made.
19
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes since the September 9, 200416, 2005, filing of the Company’s Annual Report on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.
There havehas not been any changeschange in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first fiscal quarter to which this report relates that havehas materially affected, or areis reasonably likely to materially affect, the Company’s internal control over financial reporting.
20
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
ITEM 1. Legal Proceedings4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Briggs & Stratton is subject At the Annual Meeting of Shareholders on October 19, 2005, director nominees named below were elected to various unresolved legal actions which arisea three-year term expiring in the normal course of its business, the most prevalent of which relate to product liability (including asbestos-related liability) and patent and trademark matters.
On June 3, 2004, eight individuals who claim to have purchased lawnmowers in Illinois and Minnesota filed a lawsuit (Ronnie Phillips et al. v. Sears Roebuck Corporation et al., No. 04-L-334 (20th Judicial Circuit, St. Clair County, IL)) against the Company and other defendants alleging that the horsepower labels on the products they purchased were inaccurate. The plaintiffs seek certification of a class of all persons in the United States who, beginning January 1, 1995 through the present, purchased a lawnmower containing a two stroke or four stroke gas combustion engine up to 20 horsepower that was manufactured2008 by the defendants. The complaint seeks an injunction, compensatoryindicated votes cast for and punitive damages, and attorneys’ fees. The Company intends to vigorously defend this case. On April 20, 2005, the court issued a Staywithheld with respect to this case pending settlement negotiations.each nominee.
Name of Nominee |
| For |
| Withheld |
Jay H. Baker |
| 48,006,375 |
| 157,749 |
Michael E. Batten |
| 47,701,435 |
| 461,244 |
Brian C. Walker |
| 48,014,986 |
| 146,138 |
Directors whose terms of office continue past the Annual Meeting of Shareholders are:
William F. Achtmeyer, David L. Burner, Mary K. Bush, Robert J. O’Toole, John S. Shiely, and Charles I. Story.
Although it is not possible to predictShareholders ratified the selection of PricewaterhouseCoopers LLP as the company’s independent registered public accounting firm. The vote was 46,406,304 for the proposal, 1,673,499 against, with certainty the outcome of these unresolved legal actions or the range of possible loss, Briggs & Stratton believes these unresolved legal actions will not have a material effect on its financial position or results of operations.81,319 abstentions.
Exhibit | |||
| Description | ||
10.1 | Briggs & Stratton | ||
(Filed as Exhibit 10.1 to the Company’s | |||
10.2 | Amended and Restated Economic Value Added Incentive Compensation Plan effective August 9, 2005 | ||
(Filed as Exhibit 10.2 to the Company’s | |||
10.3 | Summary of Named Executive Officer Salary Increase | ||
(Filed herewith) | |||
10.4 | Retention and Consulting Agreement | ||
(Filed as Exhibit 10.1 to the Company’s | |||
31.1 | |||
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
(Filed herewith) | |||
31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
(Filed herewith) | |||
32.1 | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
(Furnished herewith) | |||
32.2 | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
(Furnished herewith) |
21
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
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: | /s/ James E. Brenn | |||||||
James E. Brenn | ||||||||
Senior Vice President and Chief Financial Officer and | ||||||||
Duly Authorized Officer |
22
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Exhibit | |||
| Description | ||
10.1 | Briggs & Stratton | ||
10.2 | Amended and Restated Economic Value Added Incentive Compensation Plan effective August 9, 2005 | ||
(Filed as Exhibit 10.2 to the Company’s | |||
10.3 | Summary of Named Executive Officer Salary Increase | ||
(Filed herewith) | |||
10.4 | Retention and Consulting Agreement | ||
(Filed as Exhibit 10.1 to the Company’s | |||
31.1 | |||
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
(Filed herewith) | |||
31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
(Filed herewith) | |||
32.1 | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
(Furnished herewith) | |||
32.2 | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
(Furnished herewith) | |||
2823