USA. Briggs & Stratton reports Q1 07 $18 million net loss
Friday, 20 October 2006
Briggs & Stratton Corporation (NYSE:BGG) -- Briggs & Stratton Corporation has announced first quarter consolidated net sales of $338.2 million and a net loss of $18.0 million or $.36 per diluted share. Consolidated net sales decreased $173.5 million or 34% from the prior year while net income decreased $22.8 million from the same period a year ago.
The $173.5 million consolidated net sales decrease was the result of reductions in unit volume experienced in both segments. One major cause of the reduction in volume was the lack of landed-hurricane activity this year as opposed to last year's significant events. This impacted the sales of both generator product and the engines used to power them. The other major contributors to the lower volume between years were the reduced OEM demand for engines for lawn and garden equipment due to this year's soft retail season and the reduction of lawn equipment shipments to retailers in the 2006 lawn and garden season.
The $22.8 million reduction in net income is primarily the result of lost gross profits associated with the reduced unit volumes discussed above.
Fiscal 2007 first quarter net sales were $189.6 million, a $95.8 million or 34% reduction from the prior year. This decrease reflects 37% lower engine unit shipments compared to the same period a year ago. In fiscal 2006, first quarter shipments benefited from a normal U.S. retail lawn and garden season and increased OEM demand from Europe. A soft retail sales environment negatively impacted the first quarter of fiscal 2007. There was improved late summer demand that moved retail inventories, but did not result in a meaningful replenishment of engines. In addition, the lack of weather related events that drive generator sales caused replenishment demand for engines to be less than a year ago.
There was a $24.1 million loss from operations in the first quarter of fiscal 2007. This loss was $32.9 million less than the operating income of $8.8 million reported for the same period a year ago. The decrease in operating income between years was primarily the result of lower engine shipments.
Fiscal 2007 first quarter net sales were $186.9 million, a $113.7 million or 38% reduction from the same period a year ago. The decrease in net sales results primarily from a decrease in unit shipments in several product categories that experienced softer retail demand during the period. In the first quarter of fiscal 2006 generator sales were positively impacted by two hurricanes that made land fall. The lack of landed-hurricanes in the first quarter of fiscal 2007 caused unit shipments to be down approximately 50% between years. Our sales of lawn and garden equipment are down approximately $53.5 million due to lower shipments of Murray branded products. Pressure washer sales are lower than a year ago as a result of approximately 45% lower unit shipments. Similar to lawn and garden product, sales of pressure washers at retail were soft this season.
The first quarter of fiscal 2007 had income from operations of $2.8 million. This represents a $2.6 million increase over income from operations generated in the same period a year ago. An improvement of $11.6 million in operating income between years resulted from the absence of the loss associated with the closing down of Murray, Inc. operations in the first quarter a year ago. The partial offset to this improvement was caused primarily by increased manufacturing costs, and lower sales and production volumes associated with generator and pressure washer products.
Interest expense was lower in the first quarter of fiscal 2007 because a repayment in the fourth quarter of fiscal 2006 lowered outstanding debt. The effective tax rate was at 34.5% versus the 35.0% used in the first quarter last year.
Share Repurchase Program:
The Company has repurchased $48 million of its common stock through open market transactions in the first quarter of fiscal 2007. The Company has authorization to repurchase another $72 million of common stock, with the timing and amount of purchases dependent on the market price of the stock and certain governing loan covenants.
We believe that the placement of a majority of the engine business for the 2007 lawn and garden season can now be identified. We currently project the market to be flat between years and anticipate that our market share may be down slightly.
Two significant issues at this time are the lack of hurricane related generator sales and a less than anticipated demand for snow thrower product. Lack of retail demand caused by these two issues has significantly impacted our outlook for fiscal 2007 in both of our segments. Our projections for the Power Products Segment now assume that there will be no hurricane events in fiscal 2007 and the current inventory of generators at the major retailers may not require substantial replenishment until the next hurricane season. The fall off in seasonal generator needs, early soft demand for snow product and a lower forecast for pressure washer market growth decreases our sales and production volume forecasts in the Power Products Segment. We estimate that the Power Products Segment sales will now be $1.05 billion and income from operations in the range of $49 to $55 million.
The Engines Segment sales and production volumes are projected lower for the year based on the assumption of a flat lawn and garden market in the spring of 2007 and the recognition that we are a market leader in providing engines for the domestic portable generator market. We now project a decline in engine unit shipment volume of approximately 8% from last year that is weighted to larger displacement, generator-related product. This reduces our current sales forecast for the segment to approximately $1.55 billion. We are currently lowering our production output to address the reduced demand forecast but the loss of production volume will also increase our operating costs as we get less utilization of our fixed investment at several plants. The impact of reduced sales and production volumes results in an income from operations projection in the range of $91 to $105 million for the Engines Segment.
Interest expense and other income are forecasted to be $43.0 million and $13.6 million, respectively. The effective tax rate for the full year is projected to be in a range from 33.0% to 35.0%. The current forecast results in net income for fiscal 2007 in the range of $75 to $85 million or $1.51 to $1.71 per diluted share.
Net income for the second quarter of fiscal 2007 is projected to be in the range of breakeven to a loss of $5.0 million. The second quarter forecasted results are lower than in the same period a year ago because there are significantly lower sales of generators and a corresponding reduction in shipments and production related to engines used on generator applications. In addition, shipments of engines for lawn and garden equipment for the spring of 2007 are lower between years because equipment manufacturers are scheduling more of their deliveries for the second half of the fiscal year, closer to the season.
Last Updated ( Friday, 20 October 2006 )