Briggs & Stratton Corporation (BGG) reported fourth-quarter fiscal 2013 (ended Jun 30, 2013) adjusted earnings of 22 cents per share, flat with the prior-year quarter’s earnings. The results surpassed the Zacks Consensus Estimate of 19 cents.
On a reported basis, Briggs & Stratton posted loss of $1.17 per share compared with a loss per share of 18 cents in the year-ago quarter. Reported loss includes restructuring charges of 5 cents, goodwill and tradename impairment of $1.30 and litigation settlement of 3 cents. The prior-year quarter’s earnings included restructuring charges of 40 cents per share.
On an adjusted basis, earnings for full-year 2013 were 93 cents per share compared with $1.15 posted in 2012. The results exceeded the Zacks Consensus Estimate of 89 cents. Earnings were below management’s guidance of $1.16–$1.33 a share. On a reported basis, Briggs & Stratton reported a loss of 73 cents per share compared with earnings per share of 57 cents in the prior year.
Operational Update
Net sales decreased 4.8% year over year to $477 million. However, sales were ahead of the Zacks Consensus Estimate of $475 million. The year-over-year decline was due to a delayed spring in the U.S. and Europe and as well as the company’s decision to stop selling lawn and garden products to large mass retailers in the U.S.
Revenues for the full year fell 9.9% to $1,862.4 million from $2,006.5 million in 2012, and were weaker than management’s guidance of $1.95 billion to $2.0 billion. The results beat the Zacks Consensus Estimate of $1,860 million.
Cost of sales declined 3.6% year over year to $391.8 million in the quarter. Adjusted gross profit was $85.4 million compared with $94.7 million in the prior-year quarter. Adjusted gross margin contracted 100 basis points (bps) year over year to 17.9%.
Engineering, selling, general and administrative expenses declined 6.7% year over year to $70.6 million in the quarter. Adjusted operating profit was $16.6 million in the quarter compared with $19 million in the year-ago quarter.
Segment Performance
Engines Segment: Net sales at the Engines Segment dropped 7.3% year over year to $299 million, due to reduced shipments of engines used on walk and ride equipment in European and North American markets, poor mix of engines sold and unfavorable foreign exchange. Adjusted operating profit for the segment decreased to $14 million from $23 million in the year-ago quarter.
Product Segment: The Product segment reported sales of $203 million, down 7.7% from the year-ago quarter. Results were affected by the company’s exit from the sale of lawn and garden equipment through national mass retailers and a decrease in sales of pressure washers in North America, partly offset by higher sales of lawn and garden equipment in the U.S. and increased net sales in Brazil from the Branco acquisition. The segment reported an adjusted loss of $0.92 million compared with a loss of $5.5 million in the year-ago quarter.
Financials
Cash and cash equivalents were $188 million for full-year 2013 compared with $156 million in the prior year. For the year ended Jun 30, 2013, cash flow provided by operating activities was $160.8 million compared with $66 million in the comparable period last year. The improvement in operating cash flows was primarily related to lower working capital needs in fiscal 2013 associated with lower levels of accounts receivable and inventory compared to the prior year.
Net debt as of Jun 30, 2013 was $36.9 million, lower than $71.9 million in the prior-year quarter. Debt-to-capitalization ratio contracted to 25.2% as of Jun 30, 2013 from 26.5% as of Jun 30, 2012.
During fiscal 2013, the company repurchased around 1.5 million shares for $29.4 million.
Restructuring Actions
In the fourth quarter of fiscal 2013, Briggs & Stratton closed the sale of Ostrava, Czech Republic manufacturing facility and completed almost all activities associated with exiting the Newbern, Tennessee manufacturing facility. The company continues to make progress towards moving horizontal engine manufacturing from its Auburn, Alabama plant to China.
The total pre-tax costs of these actions are expected to be $4 million to $8 million in fiscal 2014. The company anticipates incremental restructuring savings of $3 million to $5 million from these restructuring actions in fiscal 2014.
Outlook
Briggs & Stratton projected net income of $50 million to $62 million in fiscal 2014. The company forecasted earnings per share range of $1.04 to $1.28. Net sales expected to be in a range of $1.88 billion to $2.03 billion for 2014. It is also estimated that the retail market for lawn and garden products will increase 4%-6% in the U.S.
Operating income margins are expected to improve in the range of 4.–5%, reflecting the positive impact of the restructuring actions. Capital expenditures are projected at about $50 million to $55 million.
Based in Milwaukee, Wis., Briggs & Stratton is the world's largest producer of gasoline engines for outdoor power equipment. Its wholly owned subsidiary, Briggs & Stratton Power Products Group LLC, is North America's number one manufacturer of portable generators and pressure washers, and is a leading designer, manufacturer and marketer of standby generators, along with lawn, garden and turf care products through its popular brands.
Briggs & Stratton currently retains a Zacks Rank #5 (Strong Sell). Other stocks in the same industry with a favorable Zacks rank are Alamo Group, Inc. (ALG) with Zacks Rank #1 (Strong Buy), and AGCO Corporation (AGCO) and CNH Global NV (CNH) with Zacks Rank #2 (Buy).
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