Highlights:

• Third quarter fiscal 2016 consolidated net sales were $604 million, a decrease of $15 million or 2.5% compared to the prior year. Net sales decreased $9 million or 1.4% before currency impacts.
• Third quarter fiscal 2016 consolidated adjusted net income was $34.9 million compared to the adjusted net income of $39.2 million in the third quarter of fiscal 2015. Third quarter fiscal 2016 consolidated net income was $26.8 million compared to the net income of $33.9 million in the third quarter of fiscal 2015.
• Third quarter fiscal 2016 adjusted diluted earnings per share was $0.80 compared to the adjusted diluted earnings per share of $0.86 last year. Third quarter fiscal 2016 diluted earnings per share was $0.61 compared to the diluted earnings per share of $0.75 last year.
• The company recorded a non-cash goodwill impairment charge of $7.7 million during the third quarter of fiscal 2016 within the Job Site reporting unit of its products Segment.
• The company reaffirms full year earnings guidance.
• The board of directors authorized an additional $50 million in share repurchases.

"Our fiscal 2016 third quarter results were impacted by many economic factors. In the U.S., we continue to be encouraged by the housing recovery as well as some positive signs of regional early season demand for outdoor power equipment. Our Job Site business continues to be impacted by the downturn in U.S. oil production which is masking the improvements in other areas of our products Segment. The first nine months year-over-year negative impact on pre-tax earnings of our Job Site business is $10 million, prior to the impact of the goodwill impairment charge. We have made solid progress in pivoting to the construction and rental markets; however, there continues to be elevated job site equipment in the channel. Internationally our sales were down by 16% in the quarter driven by a delayed start to the European lawn and garden market combined with continued global economic uncertainty and a stronger U.S. dollar," commented Todd J. Teske, chairman, president and chief executive officer of Briggs & Stratton Corp.

Teske continued, "Despite the headwinds, we continue to see improvement in our products segment as we focus more on commercial equipment and driving innovation throughout the segment.  We also see solid performance from our engines segment as we continue to introduce engines with new, innovative features.  We remain optimistic for the lawn and garden season and for the opportunity for more people to experience our innovative new products that make work easier."  

Consolidated Results

Consolidated net sales for the third quarter of fiscal 2016 were $604 million, a decrease of $15 million or 2.5% from the third quarter of fiscal 2015. Net sales decreased during the quarter partially due to an unfavorable foreign currency impact, net of price increases, of $6.5 million, predominately related to the weakening of the Euro, Australian Dollar, and Brazilian Real.  Excluding currency impacts, net sales decreased by $9 million. The decrease in net sales was primarily a result of lower shipments in international regions, particularly Europe, Australia and Brazil, as well as lower sales of job site products. Partially offsetting this decrease were increased shipments of engines to customers in North America, higher sales of commercial lawn and garden products in North America, and sales from Billy Goat, which was acquired in May 2015. The third quarter fiscal 2016 consolidated net income and diluted earnings per share, which includes restructuring charges and a goodwill impairment charge, were $26.8 million and $0.61, respectively, compared to net income of $33.9 million and diluted earnings per share of $0.75 in the third quarter of fiscal 2015. The third quarter fiscal 2016 adjusted consolidated net income was $34.9 million or $0.80 per diluted share as compared to adjusted consolidated net income of $39.2 million or $0.86 per diluted share in the third quarter of fiscal 2015.  

Consolidated net sales for the first nine months of fiscal 2016 were $1.31 billion, a decrease of $49 million or 3.6% from the first nine months of fiscal 2015. Net sales decreased during the first nine months of fiscal year 2016 partially due to an unfavorable foreign currency impact, net of price increases, of $21.4 million, predominately related to the weakening of the Euro, Australian Dollar, and Brazilian Real.  Excluding currency impacts, net sales decreased by $27.9 million. The decrease in net sales was primarily from lower shipments to international regions, and an approximately $20 milliondecrease in sales of job site products due to higher channel inventory. Partially offsetting this decrease were higher shipments of small engines used on walk mowers to North American customers, increased sales of commercial lawn and garden products, and sales from Billy Goat. Consolidated net income for the first nine months of fiscal 2016, which includes restructuring charges, goodwill impairment charge, acquisition-related charges, litigation charges, and the reinstatement of a deferred tax asset, was $21.2 million or $0.48 per diluted share. The first nine months of fiscal 2015 consolidated net income, which included restructuring charges and acquisition-related charges, was $25.6 million or $0.56 per diluted share. The first nine months of fiscal 2016 adjusted consolidated net income was $34.9 million or $0.79 per diluted share as compared to adjusted consolidated net income of $41.8 million or $0.91 per diluted share in the first nine months of fiscal 2015.

Outlook

For fiscal 2016, we continue to expect that adjusted consolidated net income will be in a range of $56 million to $63 million or $1.25 to $1.41 per diluted share; prior to the impact of any previously recognized adjustments, additional restructuring actions or share repurchases. Operating margins, which now include equity in earnings of unconsolidated affiliates for the second half of fiscal 2016, are expected to be approximately 5.1% to 5.3%. Operating margins for fiscal 2015 were 5.2% including the equity in earnings of unconsolidated affiliates for the second half of the fiscal year.  Compared to last year, operating margins are expected to be consistent as product margin expansion and manufacturing cost reductions are tempered by reduced international sales, including the impacts of a stronger U.S. dollar, and reduced plant utilization in response to lower sales, particularly within the job site products business.

Due to weakness in consumer spending for outdoor power equipment in our international markets and reduced demand for job site products due to elevated channel inventories, we are revising our fiscal 2016 consolidated net sales to be in a range of $1.85 billion to $1.92 billion, down from previous guidance of $1.90 billion to $1.96 billion.  We continue to estimate that the retail market for U.S. lawn and garden products will increase an estimated 1% to 3% this season, reflecting a gradual improvement in the housing market. The lower end of our range includes the possibility that sales of lawn and garden products shift to later in the season due to retail sales patterns, retailer reorders, and OEM production schedules. Acquisitions completed in fiscal 2015 are expected to add approximately 1.5% to net sales reflecting reduced job site products sales. Offsetting the U.S. lawn and garden organic growth 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.

Interest expense is estimated to be approximately $21 million. Other income, which excludes equity in earnings of unconsolidated affiliates for the second half of fiscal 2016, is expected to be $5.5 million.  We estimate that approximately $3.0 million of equity in earnings of unconsolidated affiliates will shift to income from operations due to the reporting change implemented in the third quarter of fiscal 2016.  The effective tax rate excluding restructuring charges is projected to be in a range of 29% to 31% and capital expenditures are projected to be approximately $65 million to $70 million.

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