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Briggs & Stratton Reveals Prelim Q4 Sales & Restructuring Actions

Zacks Equity Research

Briggs & Stratton Corp. (BGG) provided a sneak peak at its fourth-quarter fiscal 2014 (ended Jun 29, 2014) sales ahead of its results which is slated to release after the closing bell on Wednesday, Aug 13, 2014. The company also announced plans to adjust its Snapper residential product offerings and consolidate manufacturing facilities to cut down costs.

Fourth Quarter and Fiscal 2014 Preliminary Results

The producer of gasoline engines for outdoor power equipment expects net sales to grow 4% year over year to $495 million in the fourth quarter, while for fiscal 2014 sales are expected to remain flat at $1.86 billion compared with the prior fiscal.

Fiscal 2013 sales had benefitted by $100 million from storm related engine and generator sales but that did not recur in fiscal 2014. The Zacks Research Estimate for sales in the fourth quarter is at $495 million and for fiscal 2014 is currently at $1.86 billion, both in line with management’s expectations. The Zacks Consensus Estimate for earnings is at 39 cents, reflecting a 75% year-over-year growth for the fourth quarter of fiscal 2014 while for fiscal 2014 is at 89 cents, projecting a 4.30% year-over-year decline.

Restructuring Actions Simplify Product Line

In order to improve the operating performance of its Products business, Briggs & Stratton is planning to simplify its Snapper product line and reduce offerings of certain low volume and lower-priced Snapper lawn and garden products. The company will instead focus on the premium residential products through its Snapper and Simplicity brands and commercial products through its Snapper Pro and Ferris brands that generate higher margins and returns.

Consolidation of manufacturing facilities

Briggs & Stratton will also consolidate manufacturing facilities to reduce the related manufacturing capacity and expenses. The company will close its McDonough, GA, location which currently manufactures pressure washers, snow throwers, zero-turn lawn mowers and smaller lawn and garden tractors.  Production of pressure washers, snow throwers and lawn tractors will be shifted to the Wauwatosa, WI manufacturing facility, and production of zero-turn lawnmowers will be moved to its Munnsville, NY facility.  Production is estimated to be completed in McDonough and transitioned to the other facilities during the first quarter of calendar 2015.  

The closure will affect approximately 475 jobs and Briggs & Stratton will provide assistance programs, continued benefits and outplacement services to the affected employees.  Shifting production to the Wauwatosa, WI, facility will add approximately 220 new full-time positions and up to approximately 150 temporary seasonal employments.  Employment at the Munnsville, NY, facility will however remain at current levels.

Financial Impact

Total restructuring charges from these actions is expected at approximately $30 to $37 million. This includes non-cash write-downs of approximately $15 to $20 million, to be recorded during fiscal 2015.  Total cash costs related to these actions are anticipated to be approximately $15 to $17 million, with the majority of the cash costs being incurred in fiscal 2015.

Products segment sales will however be negatively impacted by approximately $20 to $25 million in fiscal 2015 and $35 to $45 million annually beginning in fiscal 2016.  The company does not expect a material change in the sales or production volumes of engines.  

Briggs & Stratton projects annual savings of approximately $15 to $20 million from these actions. Approximately $5 million to $7 million is expected to be realized in fiscal 2015 while the rest is to be realized in fiscal 2016 upon completion of the transition in the fourth quarter of fiscal 2015.   

Milwaukee, WI-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 North America's top manufacturer of portable generators and pressure washers. This subsidiary is a leader in designing, manufacturing and marketing of standby generators and lawn, garden and turf care products through its popular brands.

Currently, Briggs & Stratton has a Zacks Rank #5 (Sell). Some better performing stocks worth considering in the sector include Blount International Inc. (BLT), EnPro Industries, Inc. (NPO) and Altra Industrial Motion Corp. (AIMC). While Blount International and EnPro sport a Zacks Rank #1 (Strong Buy), Altra Industrial Motion carries a Zacks Rank #2 (Buy).

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