MILWAUKEE — Briggs & Stratton Corp. (NYSE:BGG) recently announced financial results for its fourth fiscal quarter ended July 3, 2016.

• Fourth quarter net sales were $502 million. Net sales decreased $32 million or 6.0% before currency impacts due to cooler than normal spring weather in North America and Europe.
• Fourth quarter net income was $5.3 million; adjusted net income was $20.1 million. Fourth quarter diluted earnings per share was $0.12; adjusted diluted earnings per share was $0.46.
• Fiscal 2016 net sales were $1.81 billion. Net sales decreased $65 million or 3.4% before currency impacts due to a $25 million reduction in job site products sales and lower sales caused by cool spring weather in North America and Europe as well as economic uncertainty in many international markets, including Europe.
• Fiscal 2016 net income was $26.6 million or $0.60 per diluted share; adjusted net income was $55.0 million or $1.25 per diluted share.
• Repurchased $37.4 million in shares under the share repurchase program and paid $23.6 million in dividends to shareholders during fiscal 2016.
• Announced a quarterly dividend increase of 4% to $0.14 per share; the third increase in three consecutive years.
• Fiscal 2017 revenues estimated to increase to a range of $1.84 billion to $1.89 billion.
• Fiscal 2017 earnings per share estimated to be $1.26 to $1.41, including $0.11 to $0.14 per share relating to additional investments to upgrade our ERP system and our commercial mowing capacity expansion. Also, includes additional pension expense and negative foreign currency for a combined impact of $0.09 per share as well as a higher income tax expense of approximately $0.08 per share as the income tax rate returns to normal levels.

"Our fiscal fourth quarter sales were impacted by cooler than normal temperatures in North America and Europe. Industry shipments in April and May were down significantly when compared to last year as the cooler weather impacted retail sell through. We believe that retail sell through has improved in the latter part of June and into July in both regions such that elevated channel inventories at the end of our fiscal year are reducing to more normal levels," commented Todd J. Teske, Chairman, President and Chief Executive Officer of Briggs & Stratton Corp. "Compounding this was the impact of global economic uncertainty, which has challenged consumer confidence and made goods exported to international markets relatively more expensive also impacting demand. In the U.S., commercial lawn and garden continues to be a bright spot for our business." Teske continued, "Our Ferris brand of commercial mowers and Billy Goat both achieved record sales and we grew our commercial engine sales as well. Our team has delivered superior products during a time when higher-end residential and multi-family housing has experienced strong growth. While we have observed slower growth of entry level housing to date, we have positioned ourselves well by delivering new and innovative products with features to attract new home buyers as they enter the market and to encourage existing home owners to replace their equipment to make work easier."

Outlook

For fiscal 2017, we anticipate net sales to be in a range of $1.84 billion to $1.89 billion. This sales range contemplates our expectation that the U.S. residential lawn and garden market improves by 1%-4% including expected improvements in the housing market and more seasonal spring weather in key markets. We expect that international regions will exhibit less growth than the U.S. in light of economic uncertainty. Sales of job site products are expected to modestly improve as channel inventories gradually subside. 

For fiscal 2017, we estimate net income to be in a range of $55-$62 million or $1.26 to $1.41 per diluted share; prior to the impact of share repurchases. Operating margins are expected to be approximately 5.4% to 5.7%. Adjusted operating margins for fiscal 2016 were 5.0%, 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). Compared to last year, operating margins are expected to improve due to product margin expansion, manufacturing cost reductions and higher equity in earnings of unconsolidated affiliates. Other income, which excludes equity in earnings of unconsolidated affiliates, is expected to be $2.5 million in fiscal 2017.

The improvement in operating margins is anticipated to be tempered by incremental pre-tax expenses of $7 million to $9 million ($0.11 to $0.14 per diluted share) for our ERP upgrade and commercial mowing capacity expansion projects. Higher pension costs and unfavorable foreign exchange impacts are expected of approximately $6 million pre-tax ($0.09 per diluted share). The effective tax rate is projected to return to a more normal rate to be in a range of 31% to 33% which represents an increased expense of $0.08 per diluted share compared to fiscal 2016. After factoring out the increased pension costs, unfavorable foreign exchange impacts, and the change in tax rate, the midpoint of our earnings range for fiscal 2017 contemplates over 20% growth in earnings compared with fiscal 2016 while funding important investments for our business. Capital expenditures are projected to be approximately $70 million to $75 million.

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