Briggs & Stratton Corporation Reports Results for the Second Quarter of Fiscal 2009
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MILWAUKEE, Jan. 15, 2009: Briggs & Stratton today announced second quarter fiscal 2009 consolidated net sales of $477.5 million and consolidated net income of $3.2 million or $0.06 per diluted share. The second quarter of fiscal 2008 had consolidated net sales of $477.5 million and consolidated net income of $4.1 million or $0.08 per diluted share. Consolidated net sales were essentially the same between years; however, the Engines Segment sales were greater than last year and the Power Products Segment sales were lower. The prior year's second quarter results included two significant items, a $37.0 million gain ($25.0 million after tax) resulting from the sale of an investment in preferred stock including the final dividend paid on the preferred stock, offset by a $17.7 million warranty expense ($12.7 million after tax) for a snow engine recall. Excluding these items, net income improved $11.4 million from last year resulting from a more favorable mix of product both shipped and manufactured, offset in part by commodity costs that were higher than in the same period a year ago.
For the first six months of fiscal 2009, the company had consolidated net sales of $935.6 million and consolidated net income of $1.2 million or $0.02 per diluted share. For the same period a year ago, consolidated net sales were $844.6 million and there was a consolidated net loss of $16.7 million or $0.34 per diluted share. The increase in the first six months' consolidated net sales of $91.0 million, or 11%, was attributable to stronger shipments of both engines and portable generators. Excluding the preferred stock event and snow engine recall, net income improved $29.4 million reflecting improved sales results and higher production volumes in both operating segments, offset in part by commodity costs that were higher than in the same period a year ago.
Engines:
Fiscal 2009 second quarter net sales were $339.3 million versus $315.5 million for the same period a year ago, an increase of 8%. The increase resulted primarily from an 11% increase in engine unit shipments between quarters driven by increased engine requirements for portable generator and snow removal equipment.
Net sales for the first half of fiscal 2009 were $597.9 million versus $524.0 million in the prior year, a 14% increase. This improvement reflects a 16% increase in engine unit shipments between years. The first six months sales improvement in engine unit volume resulted from strong demand for engines for portable generators due to weather events, and snow removal product for the current snow season. In addition, engine demand resulted from low channel inventories of lawn and garden equipment that needed to be replenished because of retail demand during the first fiscal quarter.
The second quarter of fiscal 2009 had income from operations of $22.0 million, up $27.9 million from the same period a year ago. The year over year increase in income from operations was positively impacted by the absence of the $17.7 million warranty expense associated with the snow engine recall in fiscal 2008. The remainder of the improved income from operations resulted from an 11% increase in shipments, production volumes that were 3% greater than the prior year and planned reductions of selected operating expenses. The improvements to income from operations were offset by commodity costs that continue to be higher than they were in the previous year.
Income from operations for the first half of fiscal 2009 was $16.5 million, a $33.6 million increase over the loss from operations of $17.1 million for the same period a year ago. For the six-month period, the absence of $19.8 million of warranty expense associated with the snow engine recall in the same period in fiscal 2008 contributed positively to the improvement in income from operations. Additionally, the improved income from operations resulted primarily from the 16% increase in sales volume, with 3% greater production volumes and planned reductions of selected operating expenses. Again, a major offset to the improvement in income from operations was commodity costs that were higher than they were in the previous year. In addition, pricing on engines sold to Europe was less favorable than last year due to currency fluctuations.
Power Products:
Fiscal 2009 second quarter net sales were $192.0 million, a $3.7 million decrease from the same period a year ago. The lower net sales were primarily the result of decreased shipments of pressure washer product. Demand for this product softened between years as consumer sentiment weakened. An offset to the net sales decrease was $12.0 million of sales related to our June 30, 2008 acquisition of Victa Lawncare Pty. Ltd. ("Victa").
Net sales for the first six months of fiscal 2009 were $447.5 million, a $64.4 million increase over the same period a year ago. The sales improvement was the result of the Victa acquisition ($25.2 million) and increased sales of portable generators due to a number of hurricanes making landfall in the United States in our first quarter of fiscal 2009. The strong portable generator demand was partially offset by the weaker pressure washer product demand in the second quarter.
The loss from operations for the second quarter of fiscal 2009 was $8.6 million, an improvement of $8.3 million over the loss for the same period a year ago. The improvement was primarily the result of a favorable mix of portable generator unit shipments and better plant utilization caused by ongoing portable generator demand. Pricing improvement experienced in the quarter was offset by the increased cost of commodities and components.
The loss from operations for the first six months of fiscal 2009 was $6.0 million, a $21.1 million improvement over the loss from operations for the same period a year ago. The improvement in income from operations between years resulted in part from higher sales and production volumes combined with an improvement year over year in margins resulting from a favorable product mix and lower engineering, selling and administrative expenses.
General:
Interest expense was lower in the second quarter of fiscal 2009 because of lower average borrowings and interest rates. The second quarter and year to date fiscal 2009 effective tax rates are at 30% and 155%, respectively versus the 23% and 33% used in the same respective periods last year. The effective tax rate fluctuation between the second quarters was due to the difference in dividends. The difference between the year to date rates was due to the resolution of federal tax matters.
Other income in the second quarter and first six months of fiscal 2008 reflects the gain on the redemption of an investment in preferred stock and the associated dividends.
Other Matters:
On December 1, 2008, a fire destroyed inventory and equipment in a leased warehouse facility in Dyersburg, TN. The destroyed facility supported our lawn and garden manufacturing operations in Newbern, TN where production was temporarily suspended as replacement parts and components were expedited. Production at the Newbern plant has since resumed to normal levels. We believe the property losses incurred are covered under our property insurance policies subject to customary incurred loss deductibles.
Outlook:
The company continues to estimate net income in a range from $40 to $50 million or $0.81 to $1.01 per diluted share for the full year. This range reflects our belief that channel inventories of lawn and garden products are at normal levels after the 2008 season and our projections related to our product placement for fiscal 2009 are still valid. The forecast continues to reflect the uncertainty of the upcoming spring selling season for outdoor power equipment given the current economic conditions. The company also projects that the third quarter's results will lag the comparable period from a year ago because major retailers will control their working capital commitment to the category and be more comfortable with chasing demand this year while they assess the strength of consumer demand during the spring.
The company will host a conference call today at 10:00 AM (EST) to review this information. A live web cast of the conference call will be available on our corporate website: BRIGGS AND STRATTON. Also available is a dial-in number to access the call real-time at (866) 814-1917. A replay will be offered beginning approximately two hours after the call ends and will be available for one week. Dial (888) 266-2081 to access the replay. The pass code will be 1317462.