Mixed Quarter for Briggs & Stratton - Analyst Blog
25 Gennaio 2013 - 12:20PM
Zacks
Briggs & Stratton
Corp. (BGG) reported second-quarter 2013 adjusted earnings
per share (EPS) of 7 cents, well ahead of the Zacks Consensus
Estimate of 2 cents and 40% higher than the year-ago quarter EPS of
5 cents. Including special items, the company reported a loss of 2
cents per share compared to earnings of 5 cents in the year-ago
quarter.
Operational
Update
Total revenue dipped 2% year over
year to $439 million, and was well short of the Zacks Consensus
Estimate of $448 million. Increased sales of portable and standby
generators in response to Hurricane Sandy were offset by lower
sales of snow throwers and engines for snow throwers in the U.S.
and weak lawnmowers sales due to exceptionally dry conditions in
Australia.
Cost of goods sold improved 4% to
$359 million in the quarter. Adjusted gross profit increased 8% to
$80 million. Selling, general and administrative expenses declined
5.6% to $69 million in the quarter. Adjusted operating income in
the reported quarter was $10.9 million, a substantial improvement
from $0.6 million in the year-ago quarter.
Segment
Performance
The Engines segment’s sales fell
4% to $274 million on reduced shipments of engines used on snow
thrower equipment in the North American market and walk mowers in
the Australian market. Furthermore, an unfavorable mix of engines
sold that reflected proportionately lower sales of large engines
and reduced pricing arising from lower year-over-year material
costs. Adjusted operating profit for the segment increased to $13
million from $2 million in the year-ago quarter.
The Product segment reported
sales of $197 million, down 8% from the year-ago quarter. Results
were affected by lower demand for snow thrower equipment and
related service parts due to lack of adequate snowfall in the U.S.
and reduced sales of lawn and garden equipment owing to dry
conditions in the North American and Australian markets. However,
higher shipments of portable and standby generators due to
Hurricane Sandy and slightly improved pricing on lawn and garden
equipment sold in the North American market were the bright spots.
The segment reported an adjusted operating loss of $4.5 million
compared with operating income of $0.6 million in the year-ago
quarter.
Financials
Cash and cash equivalents were
$18.2 million as of Dec 31, 2012 compared with $13.9 million as of
Dec 31, 2011. Cash flow used in operating activities was $75
million during the first half of fiscal 2013 compared with $165
million in the comparable period last year. The improvement was
primarily based on lower working capital needs in the most recent
period associated with decreased receivables, lower production
levels and planned inventory reductions, partially offset by
contributions to the pension plan of $16.2 million in fiscal 2013.
Debt to capitalization ratio increased to 28.1% as of Dec 31, 2012
from 25.4% as of Dec 31, 2011.
During the first half of fiscal
2013, Briggs & Stratton repurchased 1.05 million shares at an
average price of $18.26 per share for a total price of $19.2
million.
Last month, the company completed
the aquisition of Brazil-based Branco for approximately $57 million
in cash. Branco is a leading brand in the Brazilian light power
equipment market with a broad range of outdoor power equipment used
primarily in light commercial applications in Brazil.
Restructuring
Actions
The company has been taking steps
to reconfigure and reduce its capacity and costs, diversify its
portfolio and expand in other regions of the world. The company's
restructuring program, started in fiscal 2012, achieved pre-tax
savings of $19.1 million during the first six months of fiscal
2013.
Among other initiatives, the
company has made progress toward finalizing its exit from the
Newbern, Tennessee and Ostrava, Czech Republic manufacturing
facilities and the consolidation of its Auburn, Alabama plant.
Given the increased demand for engines and portable generators from
storms that occurred in the first six months of fiscal 2013, the
Auburn plant consolidation will extend into fiscal 2014.
The total pre-tax costs of these
actions are expected to be $12 to $22 million in fiscal 2013. The
company anticipates annualized pre-tax savings from these
restructuring actions to be $30 to $35 million in fiscal 2013 and
$40 to $45 million in fiscal 2014.
Fiscal 2013
Outlook
For fiscal 2013, the company
expects adjusted net income in the range of $60 million to $75
million, or $1.25 to $1.55 per share. Net sales for fiscal 2013 are
expected to be in the range of $1.95 billion to $2.15 billion.
Operating margin is expected to be in the range of 5.1% to
5.6%.
Milwaukee, Wisconsin-based Briggs
& Stratton is the world's largest producer of gasoline engines
for outdoor power equipment. Its wholly owned subsidiary Briggs
& Stratton Power Products Group, LLC is a top manufacturer of
portable generators and pressure washers, and is a leading
designer, manufacturer and marketer of lawn and garden and turf
care through its Simplicity, Snapper, FerrisMurray and Victa
brands.
Briggs & Stratton retains a
short-term Zacks Rank #3 (Hold). The other companies in the farm
machinery industry such as AGCO Corporation
(AGCO), CNH Global NV (CNH) and Titan
International Inc. (TWI) are yet to announce their results
for the December quarter.
AGCO CORP (AGCO): Free Stock Analysis Report
BRIGGS & STRATT (BGG): Free Stock Analysis Report
CNH GLOBAL NV (CNH): Free Stock Analysis Report
TITAN INTL INC (TWI): Free Stock Analysis Report
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