Briggs Stock Falls After Loss Warning

Briggs & Stratton Corp. warned Monday that it expects to post a $1.5 million quarterly loss because it might not be able to collect part of $40 million from a key customer.

Following the surprise announcement, Briggs shares dropped 9.3 percent, to close at $71.26, down $7.34.

The Wauwatosa, Wis. company said its expected loss for the quarter ended Sept. 30 will be about $1.5 million, or 6 cents a share, when it reports results Thursday.

Before the announcement, analysts had expected the company to post a quarterly profit of about 25 cents a share.

Now, Briggs said it will beef up its reserve for uncollectible receivables by $10 million in the event that some of the $40 million goes uncollected.

Briggs would not identify the customer; however, industry analysts say it was Murray, Briggs' third-largest customer and a manufacturer of riding lawn mowers, snow blowers and other equipment sold in stores such as Wal-Mart, Sears and Home Depot.

Murray, based in Brentwood, Tenn., has been put up for sale amid financial turmoil swirling about its Chinese parent company. Murray recently laid off a third of its salaried work force in Tennessee in an effort to cut costs and become more attractive to potential buyers.

Briggs is bracing itself for a one-time, $10 million write-off should Murray file for bankruptcy, Michael Schneider, an analyst with Robert W. Baird & Co., noted in a research report published Monday.

Rising costs of steel and plastics also were behind Briggs' warning that earnings would be lower than expected for the quarter and possibly for the year, according to Schneider.

Briggs officials would not comment about Murray. But even if one large customer went out of business, others would step in to fill voids in the retail marketplace, says James Brenn, Briggs' chief financial officer.

"We would continue to supply the engines, so it's not going to have a negative impact on our business going forward," he says.

Murray was acquired in October 2000 by an affiliate of D'Long International Strategic Investment Co. of China, and then was sold in November 2003 to Shenyang Hejin Holding Co. That company is a publicly traded Chinese industrial supplier whose biggest investor is D'Long.

Two months ago, the Chinese government put a state agency in charge of D'Long, once the nation's largest private stock market investor. That action was the Chinese government's first rescue of a private company. It came after share prices in many D'Long companies plunged following disclosures it had pledged stocks as collateral for bank loans.

Murray officials would not comment on the company's finances, but the company's plant in Lawrenceburg, Tenn., continues to build snow blowers for this winter.

Aside from concerns about Murray and raw materials prices, Briggs has had a good year. Its sales of power generators and pressure washers have been robust following this year's hurricanes in Florida.

That surge in business will continue for months, said George Thompson III, Briggs' vice president of corporate communications.

For all of 2005, Briggs now projects net income of $150 million to $160 million, down from the range of $160 million to $165 million previously forecast.

The prices Briggs must pay for raw materials have surged and could cost an additional $45 million in 2005, according to the company. But the "tone of the business is solid," and Briggs should continue to do well, Schneider says.

Briggs made the right move in increasing its reserve should the debts from Murray be uncollectible, notes Dan Ariens, president of Ariens Co., a Brillion, Wis., manufacturer of lawn tractors and snow blowers.

"It's a reasonable approach, in this industry, to have the right kind of reserves," he says.

Ariens buys some Briggs engines and competes against Simplicity Mfg., a Port Washington division of Briggs.

Keith Russell of The Tennessean contributed to this report.