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MILWAUKEE – Briggs & Stratton Corp., on Thursday reported a lower than expected profit for its second quarter and said it would reduce staffing levels in the current period.
Briggs also said it plans to cut between 6 and 8 percent of its workforce by Feb. 15, a move that will lower fiscal third-quarter profit by 3 cents per share. The job cuts will result in $10 million to $15 million in annual savings starting in fiscal 2007, Briggs said.
Briggs reported net income of $21.8 million, or 42 cents per share, versus a prior-year profit of $7.1 million, or 14 cents per share, which included a $30 million bad debt expense. Stripping out that expense, the latest quarterly results would have declined compared to last year, weighed down by higher professional fees and fringe benefits – mostly related to employee pensions and stock options – in the engines segment. The company had projected second-quarter earnings of 44 cents per share in October.
Revenue rose 14 percent to $574.3 million from $503.7 million a year ago.
The company also projected engine volume will decline between 1 percent to 2 percent from last year, in response to recent price increases.
For the first six months of fiscal 2006, the company had consolidated net sales of $1.086 billion and consolidated net income of $26.5 million. For the same period a year ago, consolidated net sales were $942.7 million and consolidated net income was $5.6 million. All of the $143.3 million or 15-percent increase in consolidated net sales was due to the inclusion of sales from the Murray acquisition. Consolidated net income increased $20.9 million over the same period a year ago. The improvement reflects that the results for the first six months of fiscal 2005 contained a $40 million ($26.4 million after tax) expense for a bad debt and the first six months of fiscal 2006 had a $6.4 million ($4.2 million after tax) gain on the sale of a manufacturing property. Without the effect of the bad debt and property sale, consolidated net income for the first six months of fiscal 2006 was lower than in the same period a year ago for the same reasons identified above for the second quarter.
For the company’s engines segment, second-quarter net sales were $380.9 million, a 2-percent increase over $374.9 million for the same period a year ago. The increase is attributed to a 4-percent boost in engine unit shipments between quarters that were partially offset by a mix of product that favored lower-priced units. Sales for the first half of fiscal 2006 were $666.3 million vs. $629 million in the previous year.
Briggs & Stratton’s power products business had net sales of $256.6 million, an $87.5 million increase over the same period a year ago. A majority of the increase in net sales was the result of adding $63.4 million of sales from the company’s Murray asset acquisition. The remainder of the increase was primarily generator sales resulting from continued replenishment of retail inventories that were depleted during the hurricane season.
Income from operations for the second quarter of fiscal 2006 was $5.6 million, up $6.2 million from the same period in the prior year. The majority of the improvement was driven by higher sales and production volume for generator product. In addition, operating income improved on premium lawn and garden equipment, primarily due to the absence of purchasing accounting adjustments in fiscal 2006. Offsetting these improvements was $2.5 million in losses associated with the wind down of operations at Murray.
Income from operations for the first six months of fiscal 2006 was $5.7 million, an increase of $1.2 million from the operating income generated for the same period a year ago. Operating income improved $11.9 million as a result of higher sales and production volumes for generator product, offset by $10.7 million in expenses associated with the wind down of Murray. Through six months, operating losses associated with premium lawn and garden equipment are essentially flat.
Additionally, interest expense was higher in the second quarter and first six months of fiscal 2006 because outstanding debt was higher than last year. The second-quarter and year-to-date effective tax rate is at 35 percent vs. 34 percent used in the comparable periods last year.
The Associated Press contributed to this report.