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Briggs & Stratton Corporation Reports Results for The Fourth Quarter and Twelve Months of Fiscal 2006 and a Plan to Repurchase Common Stock

MILWAUKEE, Aug. 10 /PRNewswire-FirstCall/ -- Briggs & Stratton Corporation (NYSE: BGG) -- Briggs & Stratton today announced fiscal 2006 fourth quarter consolidated net sales of $656.0 million and consolidated net income of $15.8 million or $.31 per diluted share. The fourth quarter of fiscal 2005 had consolidated net sales of $871.7 million and consolidated net income of $50.4 million or $.98 per diluted share. The consolidated net sales decrease of $215.7 million or 25% was due to a $120.5 million or 24% decrease in the Engines Segment's net sales and a $138.2 million or 29% decrease in the Power Products Segment's net sales. The $34.6 million decline in fourth quarter consolidated net income was primarily the result of decreased shipment volumes experienced across both operating segments.

For fiscal 2006, the Company had consolidated net sales of $2,542.2 million and consolidated net income of $102.3 million or $1.98 per diluted share. For fiscal 2005, consolidated net sales were $2,654.9 million, and consolidated net income was $136.6 million or $2.63 per diluted share. The $112.7 million or 4% decrease in consolidated net sales was primarily due to a decrease in the volume of engine shipments. Fiscal 2006 consolidated net income decreased $34.2 million or 25% from the previous year. Pricing improvements in both operating segments were offset by decreased shipping volumes, primarily in the Engines Segment, increased legal and professional fees, stock option expensing and expenses associated with the termination of operations and liquidation of assets acquired from Murray, Inc.

Engines:

Fiscal 2006 fourth quarter net sales were $384.8 million versus $505.3 million for the same period a year ago, a decrease of $120.5 million or 24%. The reduction in net sales was primarily the result of a 30% engine unit shipment decrease over the same period a year ago. We believe the decrease in unit shipments was the result of softer retail demand for lawn and garden equipment and efforts by retailers to maintain reasonable inventory levels in the distribution channels at the end of the selling season. The impact of the volume reduction was partially offset by improvements in pricing implemented at the start of the fiscal year.

Net sales for fiscal 2006 were $1,648.2 million versus $1,739.2 million in the prior year, a decrease of $91.0 million or 5%. The principal factor contributing to the net sales decrease was the fourth quarter engine unit shipment decrease described above, which caused the fiscal 2006 shipments to be 7% less than the prior year.

Income from operations for the fourth quarter of fiscal 2006 was $16.5 million, down $30.8 million from $47.3 million during the same period in the prior year. The major factor contributing to the decline was reduced engine unit shipments. The shipment decline also resulted in lower utilization of the operating facilities as production levels were reduced to manage our engine inventories. However, more favorable pricing and a gain on the sale of a facility offset the cost of lower production.

Income from operations for fiscal 2006 was $149.8 million, up $7.1 million from $142.7 million in fiscal 2005. The increase between years was the result of gains associated with certain asset sales. Pricing improvements offset the impact of lower shipment volumes and savings from cost reduction programs offset the unfavorable impact of lower utilization of the operating facilities and a product mix that favored units with lower margins. The absence of the prior year's $38.9 million bad debt expense was offset by increases in employee benefit costs and legal and professional fees.

Power Products:

Fiscal 2006 fourth quarter net sales were $340.5 million versus $478.7 million from the same period a year ago, a decrease of $138.2 million. A majority of the decrease in net sales was the result of the anticipated reduction of $112.9 million of sales of lawn and garden equipment to major retailers who moved away from Murray branded product for the 2006 lawn and garden season. The remainder of the net sales decrease was the result of lower shipment volumes of premium lawn and garden equipment and pressure washer product. Both product lines were affected by the lower retail demand and inventory control practices described above in the Engines Segment.

Net sales for fiscal 2006 were $1,186.0 million versus $1,193.6 million in the prior year, a $7.6 million decrease. The decline was the result of lower shipment volumes of lawn and garden products and pressure washers as described in the fourth quarter. Sales of generator products increased due to the strong hurricane activity during the fiscal year.

Income from operations was $9.4 million in the fourth quarter of fiscal 2006, a decrease of $20.7 million over the same period a year ago. The decrease was the result of lower sales volumes, an unfavorable mix of lawn and garden equipment sales that favored lower margined product and expenses associated with the liquidation of assets acquired from Murray, Inc.

Income from operations for fiscal 2006 was $29.6 million, a decrease of $19.7 million from the operating income generated for the same period a year ago. The major reasons for the decrease were lower sales volumes and expenses associated with the termination of operations and liquidation of assets acquired from Murray, Inc.

General:

Other income was less than in the prior year for both the fourth quarter and fiscal 2006 due to the Company's portion of lower earnings at joint ventures. The effective tax rate is 30.6% for the fourth quarter and 32.8% for fiscal 2006 versus the prior year's fourth quarter and full year rates of 31.7% and 33.0%, respectively.

The $19.8 million extraordinary gain recorded in fiscal 2005 resulted from the acquisition of selected Murray, Inc. assets.

During the fourth quarter, the Company purchased 247,000 shares of its common stock in the open market completing a one million share repurchase program approved by the Board of Directors. For fiscal 2006, this resulted in share repurchases totaling $34.9 million.

The Company repaid $99 million of long-term debt in the fourth quarter of fiscal 2006, resulting in $101 million of net long-term debt repayments for the entire fiscal year. Of the total repayments, $90 million was used to reduce the variable rate term notes due in 2008.

Share Repurchase Program:

The Company today announced that it intends to initiate repurchases of up to $120 million of its common stock through open market transactions over the next eighteen months. The timing and amount of purchases will be dependent upon the market price of the stock and certain governing loan covenants.

Outlook:

For fiscal 2007, the Company projects that net income will be in the range of $122 to $128 million or $2.43 to $2.55 per diluted share. The estimate is based on the assumption that consolidated net sales will grow 1.5% to 2.5% between years primarily due to volume. Operating income margins are projected to be in the range of 8.2% to 8.6%, and interest expense and other income are forecasted at $42.0 million and $13.9 million, respectively. The effective tax rate for the full year is projected to be 33% to 35%. Fiscal 2007 first quarter consolidated net sales are projected to be in the range of $420 to $450 million. Lower first quarter sales and production schedules result in a projected net loss in the first quarter in the range of $10 to $12 million or $.20 to $.24 per diluted share.

The Company will host a conference call today at 10:00 AM (EDT) 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) 244-4630. 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 941703.

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", "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 disposable income; changes in foreign economic conditions, including currency rate fluctuations; our customer's ability to successfully obtain financing; the actions of customers of our OEM customers; actions by potential acquirers of certain OEMs; the ability to successfully realize the maximum market value of acquired assets; 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. 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 June
                    (In Thousands, except per share data)
                                 (Unaudited)

                                     Fourth Quarter        Twelve Months

                                     2006      2005       2006        2005
    NET SALES                      $655,955  $871,717  $2,542,171  $2,654,875
    COST OF GOODS SOLD              543,864   709,514   2,050,487   2,149,984
      Gross Profit on Sales         112,091   162,203     491,684     504,891
    ENGINEERING, SELLING, GENERAL
     AND ADMINISTRATIVE EXPENSES     83,976    85,261     315,718     314,123
      Income from Operations         28,115    76,942     175,966     190,768
    INTEREST EXPENSE                 (9,865)   (9,729)    (42,091)    (36,883)
    OTHER INCOME, Net                 4,496     6,486      18,491      20,430
      Income before Provision for
       Income Taxes                  22,746    73,699     152,366     174,315

    PROVISION FOR INCOME TAXES        6,953    23,328      50,020      57,548
      Income before Extraordinary
       Gain/(Loss)                   15,793    50,371     102,346     116,767
    EXTRAORDINARY GAIN/(LOSS)             -         -           -      19,800
      Net Income                    $15,793   $50,371    $102,346    $136,567

      Average Shares Outstanding     51,353    51,194      51,479      51,472
      Income before Extraordinary
       Gain                            0.31      0.98        1.99        2.27
      Extraordinary Gain                  -         -           -        0.38
    BASIC EARNINGS PER SHARE          $0.31     $0.98       $1.99       $2.65

      Diluted Average Shares
       Outstanding                   51,417    51,539      51,594      51,954
      Income before Extraordinary
       Gain                            0.31      0.98        1.98        2.25
      Extraordinary Gain                  -         -           -        0.38
    DILUTED EARNINGS PER SHARE        $0.31     $0.98       $1.98       $2.63


                             Segment Information
                                (In Thousands)
                                 (Unaudited)

                                     Fourth Quarter        Twelve Months

                                     2006      2005       2006        2005
    NET SALES:
      Engines                      $384,790  $505,332  $1,648,224  $1,739,184
      Power Products                340,539   478,704   1,186,025   1,193,616
      Inter-Segment Eliminations    (69,374) (112,319)   (292,078)   (277,925)
        Total*                     $655,955  $871,717  $2,542,171  $2,654,875

          *Includes international
            sales of                $91,641  $131,284    $526,952    $477,352

    GROSS PROFIT ON SALES:
      Engines                       $80,132  $105,526    $381,932    $372,162
      Power Products                 29,715    57,100     113,166     133,888
      Inter-Segment Eliminations      2,244      (423)     (3,414)     (1,159)
        Total                      $112,091  $162,203    $491,684    $504,891

    INCOME FROM OPERATIONS:
      Engines                       $16,485   $47,279    $149,760    $142,653
      Power Products                  9,386    30,086      29,620      49,274
      Inter-Segment Eliminations      2,244      (423)     (3,414)     (1,159)
        Total                       $28,115   $76,942    $175,966    $190,768


                BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

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

    CURRENT ASSETS:                      2006          2005
      Cash and Cash Equivalents         $95,091      $161,573
      Accounts Receivable, Net          273,502       360,786
      Inventories                       562,015       469,665
      Deferred Income Tax Asset          58,024        92,251
      Other                              43,020        34,930

        Total Current Assets          1,031,652     1,119,205

    OTHER ASSETS:
      Goodwill                          251,885       253,663
      Investments                        48,917        49,783
      Prepaid Pension                    75,789             -
      Deferred Loan Costs, Net            4,308         6,016
      Other Intangible Assets, Net       94,596        96,445
      Other Long-Term Assets, Net         6,765        26,601
        Total Other Assets              482,260       432,508

    PLANT AND EQUIPMENT:
      At Cost                         1,008,164     1,005,644
      Less - Accumulated Depreciation   577,876       558,389
        Plant and Equipment, Net        430,288       447,255
                                     $1,944,200    $1,998,968


    CURRENT LIABILITIES:                 2006          2005
      Accounts Payable                 $161,291      $155,973
      Short-Term Borrowings               3,474           443
      Accrued Liabilities               178,381       196,252
        Total Current Liabilities       343,146       352,668

    OTHER LIABILITIES:
      Deferred Income Tax Liability     102,862       113,794
      Accrued Pension Cost               25,587        47,944
      Accrued Employee Benefits          16,267        15,125
      Accrued Postretirement Health
       Care Obligation                   84,136        77,607
      Other Long-Term Liabilities         1,672        16,323
      Long-Term Debt                    383,324       486,321
        Total Other Liabilities         613,848       757,114
    SHAREHOLDERS' INVESTMENT:
      Common Stock and Additional
       Paid-in Capital                   67,904        56,372
       Retained Earnings              1,086,397     1,029,329
       Accumulated Other
        Comprehensive Income (Loss)       4,960       (48,331)
       Unearned Compensation on
        Restricted Stock                 (2,199)       (1,985)
       Treasury Stock, at Cost         (169,856)     (146,199)
         Total Shareholders'
          Investment                    987,206       889,186
                                     $1,944,200    $1,998,968


                BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

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

                                               Twelve Months Ended Fiscal June

    CASH FLOWS FROM OPERATING ACTIVITIES:             2006              2005
      Net Income                                  $102,346          $136,567
      Extraordinary Gain                                 -           (19,800)
      Depreciation and Amortization                 77,234            72,793
      (Gain) Loss on Disposition of Plant
       and Equipment                               (11,139)            2,418
      Provision for Deferred Income Taxes          (10,438)           (3,896)
      Decrease (Increase) in Accounts Receivable    87,284           (26,892)
      (Increase) Decrease in Inventories           (92,350)           12,784
      (Increase) Decrease in Other Current Assets  (12,302)            2,650
      Decrease in Accounts Payable and
       Accrued Liabilities                          (7,695)          (27,673)
      Other, Net                                    21,668              (393)
        Net Cash Provided by Operating Activities  154,608           148,558

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Additions to Plant and Equipment             (69,518)          (86,075)
      Proceeds Received on Disposition of
       Plant and Equipment                          11,518             1,940
      Investment in Joint Venture                     (900)           (1,500)
      Proceeds Received on Sale of Certain
       B&S Canada Assets                                 -             4,050
      Cash Paid for Acquisition, Net of
       Cash Received                                 6,347          (355,094)
      Loan Receivable                               (2,500)                -
        Net Cash Used in Investing Activities      (55,053)         (436,679)

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Net (Repayments) Borrowings on Loans
       and Notes Payable                          (100,794)          122,316
      Issuance Cost of Debt                              -              (925)
      Dividends                                    (45,279)          (35,065)
      Stock Option Exercise Proceeds and
       Tax Benefits                                 12,457            20,139
      Treasury Stock Purchases                     (34,919)                -
        Net Cash (Used in) Provided by
         Financing Activities                     (168,535)          106,465

    EFFECT OF EXCHANGE RATE CHANGES                  2,498               835
    NET DECREASE IN CASH AND CASH EQUIVALENTS      (66,482)         (180,821)
    CASH AND CASH EQUIVALENTS, Beginning           161,573           342,394
    CASH AND CASH EQUIVALENTS, Ending              $95,091          $161,573
SOURCE  Briggs & Stratton Corporation
    -0-                             08/10/2006
    /CONTACT:  James E. Brenn, Senior Vice President and Chief Financial
Officer, Briggs & Stratton Corporation, +1-414-259-5333/
    /Web site:  http://www.briggsandstratton.com/shareholders /
    (BGG)

CO:  Briggs & Stratton Corporation
ST:  Wisconsin
IN:  AUT MAC
SU:  ERN ERP CCA

AB-CM
-- CGTH002 --
7254 08/10/2006 07:46 EDT http://www.prnewswire.com