Briggs & Stratton F4Q10 (Qtr End 05/31/10) Earnings Call Transcript

Briggs & Stratton F4Q10 (Qtr End 05/31/10) Earnings Call Transcript
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Briggs & Stratton (BGG)

F4Q10 (Qtr End 05/31/10)

August 12, 2010 10:00 a.m. ET

Executives

Todd Teske – President and Chief Executive Officer

Dave Rogers

-

Chief Financial Officer

Analysts

Mark Rookie - Longbow Research

Sam Darkatsh - Raymond James

Ned Borland - Hudson Securities

Mike Hamilton - RBC

Brad Safalow - PAA Research

Craig Kennison - Robert W. Baird

Jad Fakhry - Farallon Capital

Presentation

Operator

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Good day and welcome to the Briggs & Stratton fourth quarter earnings release conference call. [Operator instructions.] I would now like to turn the conference over to Dave Rogers. You may begin.

Dave Rogers

Good morning and welcome to the Briggs & Stratton fiscal 2010 fourth quarter and year end conference call. I’m Dave Rogers, chief financial officer, and joining me today is Todd Teske, our president and chief executive officer.

Today’s presentation and our answers to your questions will include forward-looking statements. These statements are based on our current assessment of the markets we operate in and actual results could differ materially from any stated or implied projections due to changes in one or more of the factors as described in the Safe Harbor section of today’s earnings release as well as our filings with the SEC.

This conference call will be made available on our website approximately two hours after the end of this call. A phone replay will also be available within a few hours of the completion of this call.

Now here’s Todd.

Todd Teske

Good morning everyone and thank you for joining us today. While our fiscal 2010 represented continuing challenges for our industry, it appears that demand in the U.S. for our outdoor power equipment has grown for the first time in five years.

Heading into the spring selling season, we saw OEMs, retailers, and equipment dealers continuing to manage inventory levels cautiously and as a result we saw engine shipments move from our second to our third fiscal quarter. While participants in the supply chain remain cautious, they generally stocked a reasonable level of inventory for the spring selling season. The questions at that time were whether or not the consumers would be spending their money at retail and whether reorders for product would follow.

At the time of our third quarter earnings release we discussed that the lawn and garden market in the U.S. was very active. The weather cooperated with adequate ground moisture in most key markets, along with an early spring warm-up in the northern half of the country. Due to this early spring warm-up in the northern markets, we saw both the northern and southern seasons start almost simultaneously. In the fourth quarter, it turned out that consumer demand continued strong.

Consequently, reorders for our engines were quite good during the fourth quarter. Our units shipped were higher than last year’s fourth quarter by 22%. In fact, our total units shipped for fiscal 2010 were nominally higher than last year by a few thousand units despite the negative impact of no landed hurricane activity this fiscal year.

Most of the improvement from last year was here in the U.S. While our shipments to European customers was slightly higher than last year’s fourth quarter, European channel participants continued to manage inventories to the lowest levels possible given the continued economic slowdown in Europe. We believe that here in the U.S. inventory levels throughout the channel were in good shape as we exited the spring selling season.

In addition to higher volumes, we saw an improvement in our mix of engines sold that positively contributed to our financial performance. Growth in engines sold for use in riding equipment applications outpaced sales unit growth for engines used on walk mowers.

Turning to our power products business, in addition to the lawn and garden market improving, we continued to see steady year over year growth in the pressure washer market. We believe our growth in pressure washers is due to new product introductions we delivered over the past year in response to what we heard consumers and our retail customers ask for.

We also believe that fewer water restrictions in the mid to southern U.S. and high pollen counts have contributed favorably to demand in this category. Our lawn and garden products performed as expected, although it appears the dealer base continues to manage their cash flow and thus reduce inventories in their dealerships.

Perhaps the most notable item in the product segment this fiscal year was a lack of landed hurricanes which we also discussed in earlier quarters. The lack of storms had a negative year over year effect on our products business as well as our engine business.

While our products business remains a financial challenge, we remain committed to improving the profitability of the power products segment. While the lawn and garden market has not returned to volumes seen earlier in the decade, and portable generator volumes were dampened by the lack of landed hurricanes in the past year, the power product segment had positive income from operations in the fourth fiscal quarter, an improvement over the prior year and a key milestone for this business.

The action to move our Jefferson, Wisconsin plant operations to other company facilities was completed during fiscal 2010. While it is a difficult decision to close this facility, it will have a positive impact on this segment for the longer term.

Earlier in fiscal 2010 we reduced salaries and the 401K company match contributions for all of our salaried U.S. personnel. Due to the improved results in the fourth quarter we decided to reimburse the remaining salaries and benefits that were reduced during the first half of fiscal 2010. Our employees responded to the challenges of the economic downturn with additional resolve and determination to make Briggs & Stratton successful. I couldn’t be more proud of the way our entire team responded to these challenges, which is why I am so pleased that our financial results allow us to repay those lost wages and benefits.

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