Briggs & Stratton Corp.
), reported second-quarter fiscal 2014 (ended Dec 29, 2013)
adjusted earnings of 5 cents per share, which declined 29% year
over year. The results also lagged the Zacks Consensus Estimate
of 10 cents. At the same time, management slashed its outlook for
fiscal year 2014, following which the company's shares fell 6.7%
yesterday and closed at $21.20 at the end of trading.
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Excluding the restructuring charges per share of 4 cents and 9
cents respectively, Briggs & Stratton posted earnings of a
penny in second-quarter 2014 compared with a loss per share of 2
cents in the prior-year quarter.
Net sales fell 5% year over year to $416.6 million in the second
quarter, falling short of the Zacks Consensus Estimate of $433
million. The year-over-year decrease was due to lower sales of
standby and portable generators, partially offset by higher sales
of engines as well as lawn and garden products.
Cost of sales went down 6% year over year to $337 million.
Adjusted gross profit was $79 million as against $80 million in
the prior-year quarter. Adjusted gross margin expanded 100 basis
points (bps) year over year to 19%.
Engineering, selling, general and administrative expenses
increased 3.7% year over year to $71.8 million. Adjusted earnings
from operations were $7.5 million compared with $10.9 million in
the year-ago quarter.
Net sales in this segment declined 3% year over year to $265.7
million, driven by lower sales of engines used in generators
partially. The decline was partly offset by higher North American
sales of engines used on lawn and garden equipment and related
services. Adjusted loss from operation for the segment was $10
million versus $13 million in the year-ago quarter.
The Product segment reported sales of $171.5 million, down 13%
from the year-ago quarter. Results were affected by fall in net
sales of standby and portable generators, along with unfavorable
foreign exchange. This was partially offset by favorable late
season growing conditions during the second quarter as well as
higher sales of pressure washers and service parts. Net sales
also benefited from the Branco acquisition. The segment reported
an adjusted loss of $3.9 million compared with a loss of $4.4
million in the year-ago quarter.
Cash and cash equivalents were $98 million as of Dec 29, 2013, a
substantial improvement from $18 million as of Dec 30, 2012. The
company recorded net cash usage in operating activities of $45
million in the first half of fiscal 2014, compared with $75
million in the year-ago comparable period. The improvement in
operating cash flows was primarily related to lower seasonal
growth in accounts receivable and fall in inventory due to lower
production levels and planned inventory reduction.
Net debt as of Dec 29, 2013 was $126.8 million, lower than $228.7
million as of Dec 30, 2012. Debt-to-capitalization ratio
contracted to 27% as of Dec 29, 2013 from 28% in the prior-year
On Aug 2012, the board of Briggs & Stratton authorized up to
$50 million in funds associated with a share repurchase program
with an expiry date of Jun 2014. Additionally, on Jan 22, 2014,
the company declared an addition of $50 million to the buyback
program and extended the expiry to Jun 2016.
Briggs & Stratton achieved pre-tax savings of $1.1 million
during the quarter. The company is progressing well toward moving
horizontal engine manufacturing from its Auburn, Alabama plant to
Pre-tax restructuring costs for fiscal 2014 is expected in the
range of $6-$8 million. The company also anticipates savings of
$2 million to $4 million from these restructuring actions in
Briggs & Stratton slashed its net income guidance of $50-$62
million to $48-$57 million for fiscal 2014, mainly to exclude the
potential positive benefit of landed hurricanes from its guidance
and to reflect foreign currency impacts and weak European snow
Briggs & Stratton also lowered its earnings per share outlook
from range $1.04-$1.28 to $1.00-$1.18 before the effects of any
additional share repurchases and costs related to an announced
restructuring. Net sales were modified at $1.88-$2.00 billion for
2014 from $1.88-$2.03 billion.
Operating margins were also revised from 4.5%-5% to 4.5%-4.8%,
reflecting positive impact from the restructuring action. Capital
expenditures were reiterated at $50 million to $55 million.
The company, however, remains optimistic about an improved lawn
and garden market with year-over-year-gain in retail sales.
Briggs & Stratton expects retail sales to increase in the
band of 4%-6% in the U.S.
In addition, Briggs & Stratton will benefit from strong sales
of pressure washers and engines. Moreover, continuous focus on
margin growth and geographical expansion through strategic
acquisition will help the company in the near term.
Milwaukee, Wis.-based 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 top manufacturer of portable
generators and pressure washers. This subsidiary also leads in
the designing, manufacturing and marketing of standby generators
and lawn, garden and turf care products through its popular
Briggs & Stratton currently has a Zacks Rank #3 (Hold).
However, other better-ranked stocks worth a look in the
industrial product sector include
ARC Document Solutions, Inc.
Altra Industrial Motion Corp.
Barnes Group Inc.
). While ARC Document Solutions sports a Zacks Rank #1 (Strong
Buy), Altra Industrial Motion and Barnes Group carry a Zacks Rank