MILWAUKEE — Briggs & Stratton Corp. (NYSE: BGG) announces financial results for its first fiscal quarter ended October 2, 2016.
- First quarter net sales were $287 million. Net sales decreased $3 million compared to last year.
- First quarter net loss was $14.1 million. Results improved from a net loss of $18.2 million or an adjusted net loss of $15.2 million last year.
- First quarter diluted loss per share was $0.34 compared to $0.42 (GAAP) and $0.35 (adjusted) last year.
- Repurchased $8.7 million in shares under the share repurchase program during the quarter.
- Increasing fiscal 2017 earnings outlook to $1.31 to $1.46 per diluted share from previous guidance of $1.26 to $1.41 per diluted share due to the impact to date of Hurricane Matthew.
"Our first quarter results were better than we expected, largely driven by engine shipments that occurred earlier than expected," says Todd J. Teske, chairman, president and chief executive officer. "Favorable weather in the U.S. and Europe has led to solid late season activity following a delayed start to this past season. We believe the impact of the late season activity has reduced lawn and garden channel inventories to near normal levels, similar to last year."
Teske continues, "We have increased our revenue and earnings guidance for the year given the increased sales of generators from the impact of Hurricane Matthew. The increase reflects the sales we have achieved to date and does not include estimates beyond this. We are currently experiencing increased activity, especially for our standby product offerings, however it is too early to quantify the impact of this activity on our outlook for the remainder of the fiscal year. Regarding the storm, we were able to get generators to affected areas to help people in their time of need. I am proud of the efforts of our team who diligently worked with our retail partners throughout the development and aftermath of the storm."
Engines Segment Highlights
- Starting in fiscal 2017, we implemented new sales terms for engines shipped to overseas customers, which result in earlier revenue recognition compared to the terms we used during previous fiscal years. The change in terms caused units shipped and net sales to be higher by approximately 150,000 units and $18 million, respectively, in the first quarter of fiscal 2017.
- Using comparable sales terms, engine volumes shipped decreased by 13% or approximately 130,000 engines in the first quarter of fiscal 2017. The decrease is due to lower sales of engines used on snowthrowers due to elevated channel inventories and our continued anticipation that our customers will produce later in fiscal 2017 compared to fiscal 2016.
- Gross profit percentage improved due to favorable sales mix, slightly lower material costs, favorable foreign exchange and manufacturing efficiency improvements. Production volume decreased by 7% as planned.
- Equity in earnings of unconsolidated affiliates increased by $1.2 million largely due to the increased ownership in our service parts distributor.
Product Segment Highlights
- Net sales decreased by $11.7 million, primarily due to lower shipments of snowthrowers, pressure washers, and service parts, partially offset by higher shipments of high-end residential and commercial lawn and garden equipment through our North American dealer channel.
- Gross profit percentage decreased by 150 basis points. Adjusted gross profit percentage decreased 290 basis points, primarily due to unfavorable foreign exchange and reduced production of snowthrowers due to elevated channel inventories.
- Equity in earnings of unconsolidated affiliates increased by $0.6 million due to the increased ownership in our service parts distributor.
Our previous fiscal 2017 outlook did not contemplate storms. Subsequent to the end of our first quarter, Hurricane Matthew impacted portions of the southeastern United States, which resulted in power outages and drove increased demand for generators. Although it is too early to fully assess the impact Hurricane Matthew will have on generator sales for the remainder of fiscal 2017, we are able to estimate the sales to date that we attribute to the storm. We are increasing our fiscal 2017 net sales and earnings guidance to account for this portion of the storm impact. It is possible that the storm will drive increased sales for the remainder of the fiscal year. As we progress through our fiscal year, we will be able to better assess potential additional sales benefit from the storm.
Updated fiscal 2017 guidance:
- Net sales are expected to be in a range of $1.86 billion to $1.90 billion, up from previous guidance of $1.84 billion to $1.89 billion. We continue to expect that the U.S. residential lawn and garden market will improve by 1% to 4% including expected improvements in the housing market and more seasonal spring weather in key markets.
- Net income is expected to be in a range of $57 million to $64 million or $1.31 to $1.46 per diluted share (prior to the impact of any share repurchases), up from previous guidance of $55 million to $62 million or $1.26 to $1.41 per diluted share.
- Operating margins are expected to be approximately 5.5% to 5.8%, reflecting the benefit of the storm. Adjusted operating margins for fiscal 2016 were 5.0% (2.6% GAAP), which included the equity in earnings of unconsolidated affiliates for the second half of the fiscal year (5.2% if equity in earnings of unconsolidated affiliates had been included for the full year (2.7% GAAP)).
- The effective tax rate is expected to be in a range of 31% to 33%.
- Capital expenditures are now expected to be $70 million to $80 million.