MILWAUKEE — Briggs & Stratton Corp. (NYSE:BGG) recently announced financial results for its first fiscal quarter ended September 27, 2015.
- First quarter fiscal 2016 consolidated net sales were $289 million, a decrease of $3 million or 1.1% compared to the prior year. Net sales increased $8 million or 2.6% before currency impacts.
- First quarter fiscal 2016 consolidated adjusted net loss was $15.2 million compared to the adjusted net loss of $9.3 million in the first quarter of fiscal 2015.
- First quarter fiscal 2016 adjusted diluted loss per share was $0.35, compared to the adjusted diluted loss per share of $0.21 last year.
"Our first quarter results were better than we expected, driven by solid late season activity in the major lawn and garden markets, especially in the U.S.," said Todd J. Teske, Chairman, President and Chief Executive Officer. "We believe the late season activity has resulted in more normal channel inventories compared to the end of last season. Also, we are encouraged by the continued profitability improvement of our Products business through a focus on selling high-end residential and commercial products while improving the efficiency of our operation." Teske continued, "While these factors are encouraging, we are cautious about the global economy and continued foreign currency headwinds as well as continued low oil prices which negatively impact a portion of our Job Site product sales."
Consolidated net sales for the first quarter of fiscal 2016 were $289 million, a decrease of $3 million or 1.1% from the first quarter of fiscal 2015. Net sales decreased during the quarter primarily due to an unfavorable foreign currency impact, net of price increases, of $10.8 million, predominately related to the weakening of the Euro, Australian Dollar, and Brazilian Real. Excluding currency impacts, net sales increased by $8 million. The increase was driven by the results of acquisitions completed during fiscal 2015, higher shipments of small engines used on walk mowers and increased sales of commercial lawn and garden equipment. The first quarter of fiscal 2016 adjusted consolidated net loss was $15.2 million or $0.35 per diluted share. The first quarter of fiscal 2015 adjusted consolidated net loss was $9.3 million or $0.21 per diluted share. Unfavorable foreign currencies in the first quarter of fiscal 2016 had an unfavorable impact on net income of approximately $1.2 millionor $0.03 per diluted share. Lower production in the first quarter of fiscal 2016, as anticipated due to last year's pre-production of inventory to support the McDonough plant closure, also had an unfavorable impact on net loss compared to last year.
Net debt at September 27, 2015 was $209.4 million (total debt of $263.4 million less$54.0 million of cash), or $46.3 million higher than the $163.1 million (total debt of$225.0 million less $61.9 million of cash) at September 28, 2014. The change in net debt is mainly attributable to the acquisition of Billy Goat for approximately $28.3 million in cash, net of cash acquired, during the fourth quarter of fiscal 2015. Cash flows used in operating activities for fiscal 2016 were $82.7 million compared to $48.9 million in fiscal 2015. The decrease in operating cash flows was primarily related to changes in working capital, primarily higher accounts receivable and lower accounts payable, partially offset by lower inventory levels. Inventory levels were elevated last year in the first quarter to support the McDonough plant closure.
During the first quarter of fiscal 2016, the Company made progress implementing the previously announced restructuring actions to narrow its assortment of lower-priced Snapper consumer lawn and garden equipment and consolidate its Products segment manufacturing facilities in order to reduce costs. Production of riding mowers, the last part of the manufacturing transition from the McDonough plant, began at theWauwatosa, Wisconsin plant during the first quarter. In addition to the Products segment restructuring, the Company implemented restructuring actions within the Engines segment. These actions, which were completed in the first quarter of fiscal 2016, included a headcount reduction at our plant in Chongqing, China to offset lower production of engines used on snow throwers as well as changes in salaried personnel in the United States. Pre-tax restructuring costs for the first quarter of fiscal 2016 were $1.4 million and $2.0 million related to the Engines and Products segments, respectively. Pre-tax restructuring cost estimates for the Products segment remain unchanged for fiscal 2016 at $4 million to $8 million. There are no additional charges anticipated related to the Engine segment restructuring actions. Incremental pre-tax savings related to the Products restructuring actions during the first quarter of fiscal 2016 were $1.7 million. Incremental cost savings as a result of these actions are anticipated to be $5 million to $7 million in fiscal 2016.
Share Repurchase Program
On August 13, 2014, the Board of Directors authorized up to $50 million in funds for use in the common share repurchase program. The common share repurchase program authorizes the purchase of shares of the Company's common stock on the open market or in private transactions from time to time, depending on market conditions and certain governing loan covenants. During the first quarter of fiscal 2016, the Company repurchased approximately 590,000 shares on the open market at an average price of $18.95 per share. As of September 27, 2015, the Company has remaining authorization to repurchase up to approximately $29 million of common stock with an expiration date of June 30, 2016.
We are reaffirming our guidance for fiscal 2016. We anticipate net sales for fiscal 2016 to be in a range of $1.90 billion to $1.96 billion. This sales range contemplates modest organic growth with our expectations of the U.S. and European markets to improve by 1% to 3% for the next season. Acquisitions completed in fiscal 2015 are expected to add up to 2% to net sales and reflects lower capital spending levels by oil and gas companies based on lower oil pricing compared with last year. Achievement of this growth will depend on the speed with which we further diversify our Allmand brand into construction and infrastructure sectors as well as internationally. Offsetting organic and acquisition growth are lower estimated sales of approximately 2% related to our reduction of the lower margin Snapper SKUs that were discontinued as part of the restructuring program and unfavorable net foreign currency impacts caused by a strong U.S. dollar.
We continue to estimate fiscal 2016 net income to be in a range of $54 million to $61 million or $1.20 to $1.36 per diluted share prior to the impact of any restructuring actions. Operating margins are estimated to be 4.8% to 5.2%. Compared to last year, operating margins are expected to be consistent as sales growth and manufacturing efficiency improvements are offset by a stronger dollar and increased pension expense caused by the adoption of new mortality tables to value our pension liability. Also, fiscal 2016 reflects an expected return to a more normalized tax rate in the range of 32% to 34% which represents a reduced benefit of approximately $0.14 per diluted share from fiscal 2015. Interest expense and other income is estimated to be $21 million and $8.5 million, respectively. Capital expenditures are estimated to be$65 million to $70 million.
View the complete release and financial tables.