MILWAUKEE, Wis. — Briggs & Stratton Corporation (NYSE: BGG), a recognized global leader in providing power to get work done, today announced financial results for its second quarter of fiscal 2020, ended December 29, 2019.
Fiscal Second Quarter 2020 Highlights:
- Net sales of $438 million declined from $505 million for the prior year, predominantly driven by the expected impact of the timing of shipments of small engines to OEMs and lower storm-related sales, as well as lower than expected sales of job site products. For the quarter, Engines segment sales declined 19% and Products segment sales declined 5%.
- Gross profit margin of 15.5% (GAAP) and adjusted gross profit margin of 17.3% decreased from a gross profit margin of 18.3% (GAAP) and adjusted gross profit margin of 18.6% for the second quarter last year primarily as a result of the lower sales volumes and production. Efficiency improvements in operations continue to be on track.
- GAAP net loss was $15.3 million, or $0.37 per share, including pretax charges of $9.6 million primarily related to the Company's small engine manufacturing consolidation initiative. For the second quarter last year, GAAP net loss was $2.6 million, or $0.07 per share, including pretax charges of $11.2 million primarily related to the Company's business optimization program. Excluding these items, adjusted net loss was $8.1 million, or $0.20 per share, versus adjusted net income of $8.4 million, or $0.20 per diluted share last year.
Market Dynamics Project Highlights:
- The Company recently completed its previously announced project to more fully analyze market dynamics to position the business for more sustained growth and higher returns. The project expanded to encompass a review of the Company's current portfolio and how to best focus and simplify the business to be nimbler and compete more effectively.
- Entering multi-week planning period to finalize steps in the Company's repositioning plan, which is expected to include certain asset sales and a renewed focus on the Company's core strength of power application.
- Plan also includes a shift in the Company's capital allocation priorities, including the suspension of the dividend, effective immediately, in an effort to strengthen the balance sheet and provide additional funds to invest for future initiatives.
- Expects to host special strategic investor call following the conclusion of its planning process within the next four-to-six weeks.
"Areas of market-related softness drove sales below expectations and we are incrementally more cautious about the second half of the year," said Todd J. Teske, Chairman, President and Chief Executive Officer. "Softer than anticipated retail activity this fall has left channel inventories of residential mowers elevated in North America and Europe and channel partners have signaled a conservative approach to ordering for the upcoming season. Despite market conditions, we have made material progress on several fronts that have positioned us to meet customer needs during the peak season and deliver efficiency improvements. We also remain on track to meet our goal for inventory reduction by fiscal year-end, as part of our focus on improving working capital and de-levering the balance sheet."
Teske added, "During the first half of the year, we devoted significant time to our market dynamics project. These efforts have been very constructive and support our belief that a sharp focus on our core strength of power application will better position the Company for long-term sustainable growth and higher returns. We are currently finalizing the next steps forward for this plan, which will simplify our business and improve our financial flexibility. We will announce further details and begin implementing our plans in the third quarter."
Fiscal 2020 Outlook:
The Company is revising its outlook for fiscal 2020 to reflect some increased uncertainty related to the upcoming lawn and garden selling season in North America and Europe.
|Current Fiscal 2020 Outlook*||Prior Fiscal 2020 Outlook*|
|Net Sales||$1.83 – $1.97 billion||$1.91 – 1.97 billion|
|Adjusted Net Income||$3 – $14 million||$9 - $17 million|
|Adjusted Earnings per Diluted Share||$0.05 - $0.33 per share||$0.20 - $0.40 per share|
|Operating Margins||2.1% to 2.9%||
2.5% to 3.0%
|Unconsolidated Affiliate Earnings||
Approximately $7.5 million
|Approximately $10.0 million|
|Interest Expense||$35.5 million||$34.0 million|
* This outlook excludes the costs of the business optimization program, the engine manufacturing consolidation project, and any potential asset sales.
Teske concluded, "Given uncertainty around elevated channel inventory and ongoing global weather related challenges, we are now forecasting slightly reduced financial results across our segments. We also expect slightly higher consolidated interest expense associated with our ABL credit facility compared to previous estimates. We remain focused on our key strategic priorities including the realization of value from our business optimization program and our small engine production consolidation, as well as reducing our inventories through the peak season and strengthening our balance sheet. We believe our strategic plan focused on power application will complement the hard work that has been done to improve our business and are excited to share the final details of that plan with our shareholders and other stakeholders in a few weeks."