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Briggs & Stratton Corporation Reports Results for the Second Quarter of Fiscal 2009

MILWAUKEE, Jan. 15 /PRNewswire-FirstCall/ -- Briggs & Stratton Corporation (NYSE: BGG)

Briggs & Stratton today announced second quarter fiscal 2009 consolidated net sales of $477.5 million and consolidated net income of $3.2 million or $0.06 per diluted share. The second quarter of fiscal 2008 had consolidated net sales of $477.5 million and consolidated net income of $4.1 million or $0.08 per diluted share. Consolidated net sales were essentially the same between years; however, the Engines Segment sales were greater than last year and the Power Products Segment sales were lower. The prior year's second quarter results included two significant items, a $37.0 million gain ($25.0 million after tax) resulting from the sale of an investment in preferred stock including the final dividend paid on the preferred stock, offset by a $17.7 million warranty expense ($12.7 million after tax) for a snow engine recall. Excluding these items, net income improved $11.4 million from last year resulting from a more favorable mix of product both shipped and manufactured, offset in part by commodity costs that were higher than in the same period a year ago.

For the first six months of fiscal 2009, the company had consolidated net sales of $935.6 million and consolidated net income of $1.2 million or $0.02 per diluted share. For the same period a year ago, consolidated net sales were $844.6 million and there was a consolidated net loss of $16.7 million or $0.34 per diluted share. The increase in the first six months' consolidated net sales of $91.0 million, or 11%, was attributable to stronger shipments of both engines and portable generators. Excluding the preferred stock event and snow engine recall, net income improved $29.4 million reflecting improved sales results and higher production volumes in both operating segments, offset in part by commodity costs that were higher than in the same period a year ago.

Engines:

Fiscal 2009 second quarter net sales were $339.3 million versus $315.5 million for the same period a year ago, an increase of 8%. The increase resulted primarily from an 11% increase in engine unit shipments between quarters driven by increased engine requirements for portable generator and snow removal equipment.

Net sales for the first half of fiscal 2009 were $597.9 million versus $524.0 million in the prior year, a 14% increase. This improvement reflects a 16% increase in engine unit shipments between years. The first six months sales improvement in engine unit volume resulted from strong demand for engines for portable generators due to weather events, and snow removal product for the current snow season. In addition, engine demand resulted from low channel inventories of lawn and garden equipment that needed to be replenished because of retail demand during the first fiscal quarter.

The second quarter of fiscal 2009 had income from operations of $22.0 million, up $27.9 million from the same period a year ago. The year over year increase in income from operations was positively impacted by the absence of the $17.7 million warranty expense associated with the snow engine recall in fiscal 2008. The remainder of the improved income from operations resulted from an 11% increase in shipments, production volumes that were 3% greater than the prior year and planned reductions of selected operating expenses. The improvements to income from operations were offset by commodity costs that continue to be higher than they were in the previous year.

Income from operations for the first half of fiscal 2009 was $16.5 million, a $33.6 million increase over the loss from operations of $17.1 million for the same period a year ago. For the six-month period, the absence of $19.8 million of warranty expense associated with the snow engine recall in the same period in fiscal 2008 contributed positively to the improvement in income from operations. Additionally, the improved income from operations resulted primarily from the 16% increase in sales volume, with 3% greater production volumes and planned reductions of selected operating expenses. Again, a major offset to the improvement in income from operations was commodity costs that were higher than they were in the previous year. In addition, pricing on engines sold to Europe was less favorable than last year due to currency fluctuations.

Power Products:

Fiscal 2009 second quarter net sales were $192.0 million, a $3.7 million decrease from the same period a year ago. The lower net sales were primarily the result of decreased shipments of pressure washer product. Demand for this product softened between years as consumer sentiment weakened. An offset to the net sales decrease was $12.0 million of sales related to our June 30, 2008 acquisition of Victa Lawncare Pty. Ltd. ("Victa").

Net sales for the first six months of fiscal 2009 were $447.5 million, a $64.4 million increase over the same period a year ago. The sales improvement was the result of the Victa acquisition ($25.2 million) and increased sales of portable generators due to a number of hurricanes making landfall in the United States in our first quarter of fiscal 2009. The strong portable generator demand was partially offset by the weaker pressure washer product demand in the second quarter.

The loss from operations for the second quarter of fiscal 2009 was $8.6 million, an improvement of $8.3 million over the loss for the same period a year ago. The improvement was primarily the result of a favorable mix of portable generator unit shipments and better plant utilization caused by ongoing portable generator demand. Pricing improvement experienced in the quarter was offset by the increased cost of commodities and components.

The loss from operations for the first six months of fiscal 2009 was $6.0 million, a $21.1 million improvement over the loss from operations for the same period a year ago. The improvement in income from operations between years resulted in part from higher sales and production volumes combined with an improvement year over year in margins resulting from a favorable product mix and lower engineering, selling and administrative expenses.

General:

Interest expense was lower in the second quarter of fiscal 2009 because of lower average borrowings and interest rates. The second quarter and year to date fiscal 2009 effective tax rates are at 30% and 155%, respectively versus the 23% and 33% used in the same respective periods last year. The effective tax rate fluctuation between the second quarters was due to the difference in dividends. The difference between the year to date rates was due to the resolution of federal tax matters.

Other income in the second quarter and first six months of fiscal 2008 reflects the gain on the redemption of an investment in preferred stock and the associated dividends.

Other Matters:

On December 1, 2008, a fire destroyed inventory and equipment in a leased warehouse facility in Dyersburg, TN. The destroyed facility supported our lawn and garden manufacturing operations in Newbern, TN where production was temporarily suspended as replacement parts and components were expedited. Production at the Newbern plant has since resumed to normal levels. We believe the property losses incurred are covered under our property insurance policies subject to customary incurred loss deductibles.

Outlook:

The company continues to estimate net income in a range from $40 to $50 million or $0.81 to $1.01 per diluted share for the full year. This range reflects our belief that channel inventories of lawn and garden products are at normal levels after the 2008 season and our projections related to our product placement for fiscal 2009 are still valid. The forecast continues to reflect the uncertainty of the upcoming spring selling season for outdoor power equipment given the current economic conditions. The company also projects that the third quarter's results will lag the comparable period from a year ago because major retailers will control their working capital commitment to the category and be more comfortable with chasing demand this year while they assess the strength of consumer demand during the spring.

The company will host a conference call today at 10:00 AM (EST) to review this information. A live web cast of the conference call will be available on our corporate website: http://www.briggsandstratton.com/shareholders. Also available is a dial-in number to access the call real-time at (866) 814-1917. A replay will be offered beginning approximately two hours after the call ends and will be available for one week. Dial (888) 266-2081 to access the replay. The pass code will be 1317462.

This release contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. The words "anticipate", "believe", "could", "estimate", "expect", "forecast", "intend", "may", "objective", "plan", "project", "seek", "think", "will", and similar expressions are intended to identify forward-looking statements. The forward- looking statements are based on the company's current views and assumptions and involve risks and uncertainties that include, among other things, the ability to successfully forecast demand for our products and appropriately adjust our manufacturing and inventory levels; changes in our operating expenses; changes in interest rates; the effects of weather on the purchasing patterns of consumers and original equipment manufacturers (OEMs); actions of engine manufacturers and OEMs with whom we compete; the seasonal nature of our business; changes in laws and regulations, including environmental, tax, pension funding and accounting standards; work stoppages or other consequences of any deterioration in our employee relations; work stoppages by other unions that affect the ability of suppliers or customers to manufacture; acts of war or terrorism that may disrupt our business operations or those of our customers and suppliers; changes in customer and OEM demand; changes in prices of raw materials and parts that we purchase; changes in domestic economic conditions, including housing starts and changes in consumer confidence; changes in the market value of the assets in our defined benefit pension plan and any related funding requirements; changes in foreign economic conditions, including currency rate fluctuations; the actions of customers of our OEM customers; the ability to bring new productive capacity on line efficiently and with good quality; the ability to successfully realize the maximum market value of assets that may require disposal if products or production methods change; new facts that come to light in the future course of litigation proceedings which could affect our assessment of those matters; and other factors that may be disclosed from time to time in our SEC filings or otherwise, including the factors discussed in Item 1A, Risk Factors, of the company's Annual Report on Form 10-K and in its periodic reports on Form 10-Q. Some or all of the factors may be beyond our control. We caution you that any forward-looking statement reflects only our belief at the time the statement is made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made.

                BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

  Consolidated Statements of Earnings for the Fiscal Periods Ended December
                    (In Thousands, except per share data)
                                 (Unaudited)

                                         Second Quarter        Six Months
                                         2008      2007      2008      2007
    NET SALES                          $477,481  $477,537  $935,632  $844,606
    COST OF GOODS SOLD                  401,584   433,220   795,016   757,445
      Gross Profit on Sales              75,897    44,317   140,616    87,161

    ENGINEERING, SELLING, GENERAL
     AND ADMINISTRATIVE EXPENSES         63,302    66,430   128,153   130,570
      Income (Loss) from Operations      12,595   (22,113)   12,463   (43,409)

    INTEREST EXPENSE                     (8,714)  (10,610)  (16,611)  (19,583)
    OTHER INCOME, Net                       687    37,995     1,886    38,017
      Income (Loss) before Provision for
       Income Taxes                       4,568     5,272    (2,262)  (24,975)

    PROVISION (CREDIT) FOR INCOME TAXES   1,376     1,209    (3,498)   (8,226)
      Net Income (Loss)                  $3,192    $4,063    $1,236  $(16,749)

      Average Shares Outstanding         49,571    49,536    49,567    49,543
    BASIC EARNINGS (LOSS) PER SHARE       $0.06     $0.08     $0.02    $(0.34)

      Diluted Average Shares Outstanding 49,707    49,637    49,664    49,543
    DILUTED EARNINGS (LOSS) PER SHARE     $0.06     $0.08     $0.02    $(0.34)



                             Segment Information
                                (In Thousands)
                                 (Unaudited)

                                         Second Quarter        Six Months
                                         2008      2007      2008      2007
    NET SALES:
      Engines                          $339,287  $315,537  $597,908  $523,953
      Power Products                    192,012   195,695   447,543   383,086
      Inter-Segment Eliminations        (53,818)  (33,695) (109,819)  (62,433)
        Total *                        $477,481  $477,537  $935,632  $844,606

        * Includes international sales
          based on product shipment
          destination of               $165,225  $152,019  $276,394  $255,437

    GROSS PROFIT ON SALES:
      Engines                           $65,697   $42,421  $106,124   $76,675
      Power Products                     10,953     1,236    32,484     9,661
      Inter-Segment Eliminations           (753)      660     2,008       825
        Total                           $75,897   $44,317  $140,616   $87,161

    INCOME (LOSS) FROM OPERATIONS:
      Engines                           $21,970   $(5,857)  $16,459  $(17,085)
      Power Products                     (8,622)  (16,916)   (6,004)  (27,149)
      Inter-Segment Eliminations           (753)      660     2,008       825
        Total                           $12,595  $(22,113)  $12,463  $(43,409)



                BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

         Consolidated Balance Sheets as of the End of Fiscal December
                                (In Thousands)
                                 (Unaudited)

    CURRENT ASSETS:                                    2008           2007
      Cash and Cash Equivalents                      $19,036        $48,921
      Accounts Receivable, Net                       329,593        342,410
      Inventories                                    608,220        631,581
      Deferred Income Tax Asset                       54,608         52,695
      Other                                           45,707         38,726
        Total Current Assets                       1,057,164      1,114,333

    OTHER ASSETS:
      Goodwill                                       248,546        250,107
      Investments                                     16,968         18,170
      Prepaid Pension                                 97,119        105,032
      Deferred Loan Costs, Net                         2,360          3,748
      Other Intangible Assets, Net                    98,518         91,621
      Other Long-Term Assets, Net                      8,646          6,921
        Total Other Assets                           472,157        475,599


    PLANT AND EQUIPMENT:
      At Cost                                      1,017,261      1,008,428
      Less - Accumulated Depreciation                637,334        614,959
        Plant and Equipment, Net                     379,927        393,469
                                                  $1,909,248     $1,983,401



    CURRENT LIABILITIES:                               2008           2007
      Accounts Payable                              $194,223       $139,305
      Short-Term Borrowings                          204,894        281,059
      Accrued Liabilities                            169,631        168,274
        Total Current Liabilities                    568,748        588,638

    OTHER LIABILITIES:
      Deferred Income Tax Liability                   50,833         38,942
      Accrued Pension Cost                            36,936         40,176
      Accrued Employee Benefits                       18,685         20,293
      Accrued Postretirement Health Care Obligation  156,406        185,997
      Other Long-Term Liabilities                     32,936         36,307
      Long-Term Debt                                 246,848        266,197
        Total Other Liabilities                      542,644        587,912

    SHAREHOLDERS' INVESTMENT:
      Common Stock and Additional Paid-in Capital     76,732         76,100
      Retained Earnings                            1,061,978      1,064,979
      Accumulated Other Comprehensive Loss          (131,793)      (122,349)
      Treasury Stock, at Cost                       (209,061)      (211,879)
       Total Shareholders' Investment                797,856        806,851
                                                  $1,909,248     $1,983,401



                BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

                    Consolidated Statements of Cash Flows
                                (In Thousands)
                                 (Unaudited)

                                              Six Months Ended Fiscal December
    CASH FLOWS FROM OPERATING ACTIVITIES:            2008               2007
      Net Income (Loss)                             $1,236           $(16,749)
      Depreciation and Amortization                 34,580             34,930
      Stock Compensation Expense                     2,560              3,261
      Loss (Gain) on Disposition of Plant
       and Equipment                                   641               (404)
      Gain on Sale of Investment                         -            (36,960)
      (Provision) Credit for Deferred
       Income Taxes                                      4               (701)
      Increase in Accounts Receivable               (8,344)           (14,933)
      Increase in Inventories                      (68,125)           (81,498)
      Decrease (Increase) in Other Current Assets     (355)             8,797
      Increase (Decrease) in Accounts
       Payable and Accrued Liabilities               4,958            (51,429)
      Other, Net                                    (5,896)            (6,957)
        Net Cash Used by Operating Activities      (38,741)          (162,643)

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Additions to Plant and Equipment             (21,140)           (34,177)
      Cash Paid for Acquisition, Net of
       Cash Acquired                               (24,757)                 -
      Proceeds Received on Disposition of
       Plant and Equipment                           2,211                523
      Proceeds Received on Sale of Investment            -             66,011
      Other, Net                                         -               (503)
        Net Cash Provided (Used) by Investing
         Activities                                (43,686)            31,854

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Net Borrowings on Loans, Notes
       Payable and Long-Term Debt                   81,650            159,920
      Issuance Cost of Amended Revolver                  -             (1,286)
      Dividends                                    (10,906)           (10,901)
      Stock Option Exercise Proceeds and
       Tax Benefits                                      -                991
        Net Cash Provided by Financing
         Activities                                 70,744            148,724

    EFFECT OF EXCHANGE RATE CHANGES                 (1,749)             1,517
    NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS                              (13,432)            19,452
    CASH AND CASH EQUIVALENTS, Beginning            32,468             29,469
    CASH AND CASH EQUIVALENTS, Ending              $19,036            $48,921

SOURCE Briggs & Stratton Corporation

/CONTACT: Investor Relations, James E. Brenn, Senior VP and Chief Financial Officer of Briggs & Stratton Corporation, +1-414-259-5333/
/Web site: http://www.briggsandstratton.com / (BGG)