FORM 10-K/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended JUNE 30, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-1370
BRIGGS & STRATTON CORPORATION
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(Exact name of registrant as specified in its charter)
A Wisconsin Corporation 39-0182330
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12301 WEST WIRTH STREET
WAUWATOSA, WISCONSIN 53222
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 414-259-5333
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock (par value $0.01 per share) New York Stock Exchange
Common Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was approximately $794,324,000 based on the reported last sale price
of such securities as of August 22, 2002.
Number of Shares of Common Stock Outstanding at August 22, 2002: 21,645,984.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Part of Form 10-K Into Which Portions
Document of Document are Incorporated
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Proxy Statement for Annual Meeting
on October 16, 2002 Part III
The Exhibit Index is located on page 42.
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
2002 Annual Report on Form 10-K/A
Amendment No. 1
This amendment is being filed to correct certain typographical errors
found in the edgarized version of the original 10-K. The Company does not
believe that these typographical errors caused our original disclosures to be
misleading or materially incorrect. More specifically, this amendment corrects
the following typographical errors.
As
Previously Correct
Reported Amount
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ITEM 6.
Selected Financial Data - Fiscal Year 1998, "Gross Profit on Sales" 254,356 254,358
ITEM 8.
Consolidated Balance Sheets - Fiscal 2002, "Plant & Equipment-Buildings" 153,049 153,043
Consolidated Statements of Earnings - Fiscal 2002, "Income from
Operations" 116,358 118,358
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Fiscal 1999 - Fiscal year change, "Accumulated Other
Comprehensive Loss" (2,189) (2,199)
Note 4 - Fiscal 2000, "Current" total 76,608 78,608
Note 4 - Fiscal 2002, "Future Income Tax Benefits - Payroll Related 4,890 4,880
Accruals"
Note 5 - Fiscal 2002, "Income from Operations" total 118,356 118,358
Note 5 - Fiscal 2001, "Income from Operations" total 99,108 99,106
Note 5 - Fiscal 2001, geographic sales table - "United States" 1,226,035 1,226,034
Note 5 - Fiscal 2001, geographic sales table - "Total" 1,310,179 1,310,173
Note 5 - Fiscal 2002, - major customer sales table "Customer A - Sales" 229,785 299,785
Note 5 - Fiscal 2002, - major customer sales table "Total - Sales" 720,754 720,574
Note 7 - Fiscal 2002, "Income from Investments" 70,071 7,071
While these corrections have no impact on the reported earnings and
per-share information, the Company wishes to correct the information for future
reference.
1
ITEM 6. SELECTED FINANCIAL DATA
Fiscal Year 2002 2001 2000 1999 1998
----------- ---- ---- ---- ---- ----
(dollars in thousands, except per share data)
SUMMARY OF OPERATIONS(1)
NET SALES(2) ............................ $1,529,372 $1,310,173 $1,591,236 $1,502,522 $1,329,141
GROSS PROFIT ON SALES(2) ................ 272,033 236,790 338,126 303,913 254,358
PROVISION FOR INCOME TAXES .............. 27,390 23,860 80,150 63,670 42,500
NET INCOME(3) ........................... 53,120 48,013 136,473 106,101 70,645
PER SHARE OF COMMON STOCK:
Basic Earnings ........................ 2.46 2.22 5.99 4.55 2.86
Diluted Earnings ...................... 2.36 2.21 5.97 4.52 2.85
Cash Dividends ........................ 1.26 1.24 1.20 1.16 1.12
Shareholders' Investment .............. $ 20.78 $ 19.57 $ 18.83 $ 15.77 $ 13.28
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING (in 000's) .... 21,615 21,598 22,788 23,344 24,666
DILUTED NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING (in 000's) .... 24,452 21,966 22,842 23,459 24,775
OTHER DATA(1)
SHAREHOLDERS' INVESTMENT ................ $ 449,646 $ 422,752 $ 409,465 $ 365,910 $ 316,488
LONG-TERM DEBT .......................... 499,022 508,134 98,512 113,307 128,102
TOTAL ASSETS ............................ 1,349,033 1,296,195 930,245 875,885 793,409
PLANT AND EQUIPMENT ..................... 879,635 890,191 838,655 859,848 812,428
PLANT AND EQUIPMENT, NET OF RESERVES..... 395,215 416,361 395,580 404,454 391,927
PROVISION FOR DEPRECIATION .............. 61,091 56,117 51,097 49,346 47,511
EXPENDITURES FOR PLANT AND EQUIPMENT..... 43,928 61,322 71,441 65,998 45,893
WORKING CAPITAL ......................... $ 403,921 $ 371,248 $ 158,516 $ 160,350 $ 149,846
Current Ratio ......................... 2.5 to 1 2.5 to 1 1.5 to 1 1.6 to 1 1.7 to 1
NUMBER OF EMPLOYEES AT YEAR END ......... 6,971 6,974 7,233 7,994 7,265
NUMBER OF SHAREHOLDERS AT YEAR END ...... 4,686 4,129 4,385 4,628 4,911
QUOTED MARKET PRICE:
High .................................. $ 48.39 $ 48.38 $ 63.63 $ 70.94 $ 53.38
Low ................................... $ 29.65 $ 30.38 $ 31.00 $ 33.69 $ 36.88
(1) The amounts include the acquisition of GPP since May 15, 2001. Refer to the
Notes to Consolidated Financial Statements.
(2) Reflects the adoption of EITF No. 01-09 for all fiscal years presented.
Refer to the Notes to Consolidated Financial Statements.
(3) Fiscal year 2000 includes a $10.4 million gain on the disposition of foundry
assets. Refer to the Notes to Consolidated Financial Statements.
2
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
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AS OF JUNE 30, 2002 AND JULY 1, 2001
(in thousands)
ASSETS 2002 2001
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CURRENT ASSETS:
Cash and Cash Equivalents ............................................... $ 215,945 $ 88,743
Receivables, Less Reserves of $1,703 and $1,599, Respectively ........... 201,910 145,138
Inventories-
Finished Products and Parts ................................. 126,152 218,671
Work in Process ............................................. 61,748 99,247
Raw Materials ............................................... 3,059 3,782
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Total Inventories ............................... 190,959 321,700
Future Income Tax Benefits .............................................. 41,383 38,434
Prepaid Expenses and Other Current Assets ............................... 19,747 19,415
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Total Current Assets ............................ 669,944 613,430
GOODWILL, Net ......................................................................... 161,030 166,659
INVESTMENTS ........................................................................... 46,889 46,071
PREPAID PENSION ....................................................................... 60,343 36,275
DEFERRED LOAN COSTS, Net .............................................................. 9,304 10,429
OTHER LONG-TERM ASSETS, Net ........................................................... 6,308 6,970
PLANT AND EQUIPMENT:
Land and Land Improvements............................................... 16,356 16,308
Buildings ............................................................... 153,043 150,396
Machinery and Equipment ................................................. 691,334 694,416
Construction in Progress ................................................ 18,902 29,071
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879,635 890,191
Less- Accumulated Depreciation .......................................... 484,420 473,830
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Total Plant and Equipment, Net .................. 395,215 416,361
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$1,349,033 $1,296,195
========== ==========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
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AS OF JUNE 30, 2002 AND JULY 1, 2001
(in thousands, except per share data)
2002 2001
---- ----
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts Payable ........................................................ $ 103,648 $ 102,559
Domestic Notes Payable .................................................. 2,625 3,300
Foreign Loans ........................................................... 15,270 16,291
Accrued Liabilities-
Wages and Salaries .......................................... 28,408 21,084
Warranty .................................................... 46,346 47,480
Other ....................................................... 56,828 47,161
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Total Accrued Liabilities ....................... 131,582 115,725
Federal and State Income Taxes .......................................... 12,898 4,307
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Total Current Liabilities ....................... 266,023 242,182
DEFERRED REVENUE ON SALE OF PLANT AND EQUIPMENT ....................................... 15,364 15,536
DEFERRED INCOME TAX LIABILITY ......................................................... 27,405 18,351
ACCRUED PENSION COST .................................................................. 15,750 14,494
ACCRUED EMPLOYEE BENEFITS ............................................................. 13,070 12,979
ACCRUED POSTRETIREMENT HEALTH CARE OBLIGATION ......................................... 62,753 61,767
LONG-TERM DEBT ........................................................................ 499,022 508,134
COMMITMENTS AND CONTINGENCIES..........................................................
SHAREHOLDERS' INVESTMENT:
Common Stock-
Authorized 60,000 Shares $.01 Par Value,
Issued 28,927 in 2002 and 2001 .................. 289 289
Additional Paid-In Capital .............................................. 35,459 36,043
Retained Earnings ....................................................... 769,131 743,230
Accumulated Other Comprehensive Loss .................................... (6,626) (6,182)
Unearned Compensation on Restricted Stock ............................... (199) (305)
Treasury Stock at cost,
7,288 Shares in 2002 and 7,328 Shares in 2001 ............... (348,408) (350,323)
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Total Shareholders' Investment .................. 449,646 422,752
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$1,349,033 $1,296,195
========== ==========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
CONSOLIDATED STATEMENTS OF EARNINGS
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FOR THE FISCAL YEARS ENDED JUNE 30, 2002, JULY 1, 2001 AND JULY 2, 2000
(in thousands, except per share data)
2002 2001 2000
---- ---- ----
NET SALES .................................................. $ 1,529,372 $ 1,310,173 $ 1,591,236
COST OF GOODS SOLD ......................................... 1,257,339 1,073,383 1,253,110
----------- ----------- -----------
Gross Profit on Sales ................................ 272,033 236,790 338,126
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES .................................. 153,675 137,684 132,897
----------- ----------- -----------
Income from Operations ............................... 118,358 99,106 205,229
INTEREST EXPENSE ........................................... (44,433) (30,665) (21,267)
GAIN ON DISPOSITION OF FOUNDRY ASSETS ...................... -- -- 16,545
OTHER INCOME, Net .......................................... 6,585 3,432 16,116
----------- ----------- -----------
Income Before Provision for Income Taxes ............. 80,510 71,873 216,623
PROVISION FOR INCOME TAXES ................................. 27,390 23,860 80,150
----------- ----------- -----------
NET INCOME ................................................. $ 53,120 $ 48,013 $ 136,473
=========== =========== ===========
Weighted Average Shares Outstanding .................. 21,615 21,598 22,788
BASIC EARNINGS PER SHARE ................................... $ 2.46 $ 2.22 $ 5.99
=========== =========== ===========
Diluted Average Shares Outstanding ................... 24,452 21,966 22,842
DILUTED EARNINGS PER SHARE ................................. $ 2.36 $ 2.21 $ 5.97
=========== =========== ===========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
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FOR THE FISCAL YEARS ENDED JUNE 30, 2002, JULY 1, 2001 AND JULY 2, 2000
(in thousands, except per share data)
Accumulated Unearned
Additional Other Com- Compensation
Common Paid-In Retained prehensive on Restricted Treasury Comprehensive
Stock Capital Earnings Loss Stock Stock Income
-------- -------- --------- ----------- -------- ------- --------
BALANCES, JUNE 27, 1999 .................. $ 289 $ 37,657 $ 612,807 $ (1,732) $ (235) $(282,876)
Comprehensive Income -
Net Income .............................. -- -- 136,473 -- -- -- $ 136,473
Foreign Currency Translation
Adjustments ........................... -- -- -- (1,816) -- -- (1,816)
Unrealized Loss on Marketable
Securities, net of tax of $(247) ...... -- -- -- (383) -- -- (383)
---------
Total Comprehensive Income .............. -- -- -- -- -- -- $ 134,274
=========
Cash Dividends Paid
($1.20 per share) ....................... -- -- (27,300) -- -- --
Purchase of Common Stock
for Treasury ............................ -- -- -- -- -- (69,083)
Exercise of Stock Options ................ -- (1,194) -- -- -- 6,755
Restricted Stock Issued .................. -- 10 -- -- (60) 50
Amortization of Unearned
Compensation ............................ -- -- -- -- 69 --
Shares Issued to Directors ............... -- 5 -- -- -- 29
--------------------------------------------------------------------------
BALANCES, JULY 2, 2000 ................... $ 289 $ 36,478 $ 721,980 $ (3,931) $ (226) $ (345,125)
Comprehensive Income -
Net Income .............................. -- -- 48,013 -- -- -- $ 48,013
Foreign Currency Translation
Adjustments ............................ -- -- -- (2,530) -- -- (2,530)
Unrealized Loss on Marketable
Securities, net of tax of $(607) ....... -- -- -- (947) -- -- (947)
Unrealized Gain on Derivatives .......... -- -- -- 1,226 -- -- 1,226
---------
Total Comprehensive Income .............. -- -- -- -- -- -- $ 45,762
=========
Cash Dividends Paid
($1.24 per share) ....................... -- -- (26,763) -- -- --
Purchase of Common Stock
for Treasury ............................ -- -- -- -- -- (6,118)
Exercise of Stock Options ................ -- (368) -- -- -- 643
Restricted Stock Issued .................. -- (58) -- -- (181) 239
Amortization of Unearned
Compensation ............................ -- -- -- -- 102 --
Shares Issued to Directors ............... -- (9) -- -- -- 38
--------------------------------------------------------------------------
BALANCES, JULY 1, 2001 ................... $ 289 $ 36,043 $ 743,230 $ (6,182) $ (305) $(350,323)
COMPREHENSIVE INCOME -
NET INCOME .............................. -- -- 53,120 -- -- -- $ 53,120
FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS ............................ -- -- -- 4,017 -- -- 4,017
UNREALIZED LOSS ON MARKETABLE
SECURITIES, NET OF TAX OF $(95) ........ -- -- -- (148) -- -- (148)
UNREALIZED LOSS ON DERIVATIVES .......... -- -- -- (4,313) -- -- (4,313)
---------
TOTAL COMPREHENSIVE INCOME .............. -- -- -- -- -- -- $ 52,676
=========
CASH DIVIDENDS PAID
($1.26 PER SHARE) ....................... -- -- (27,219) -- -- --
EXERCISE OF STOCK OPTIONS ................ -- (576) -- -- -- 1,877
AMORTIZATION OF UNEARNED
COMPENSATION ............................ -- -- -- -- 106 --
SHARES ISSUED TO DIRECTORS ............... -- (8) -- -- -- 38
--------------------------------------------------------------------------
BALANCES, JUNE 30, 2002 .................. $ 289 $ 35,459 $ 769,131 $ (6,626) $ (199) $(348,408)
==========================================================================
The accompanying notes to consolidated financial statements are an
integral part of these statements.
6
CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE FISCAL YEARS ENDED JUNE 30, 2002, JULY 1, 2001 AND JULY 2, 2000
(in thousands)
2002 2001 2000
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ............................................... $ 53,120 $ 48,013 $ 136,473
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities -
Depreciation and Amortization .......................... 65,968 59,711 53,277
Equity in Earnings of Unconsolidated Affiliates ........ (6,181) (5,041) (13,333)
(Gain) Loss on Disposition of Plant and Equipment ...... 3,192 1,493 (14,167)
Provision for Deferred Income Taxes .................... 20,286 17,973 1,542
Change in Operating Assets and Liabilities, Net of Effects
of Acquisition -
(Increase) Decrease in Receivables ..................... (56,772) 34,686 51,837
(Increase) Decrease in Inventories ..................... 120,719 (7,307) (121,685)
Increase in Prepaid Expenses and
Other Current Assets .................................. (2,996) (50) (2,488)
Increase (Decrease) in Accounts Payable,
Accrued Liabilities and Income Taxes .................. 26,061 (46,740) 1,519
Increase in Prepaid Pension ............................ (22,812) (28,378) (10,509)
Other, Net ............................................. (768) (6,392) (4,984)
--------- --------- ---------
Net Cash Provided by Operating Activities ............ 199,817 67,968 77,482
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Plant and Equipment ......................... (43,928) (61,322) (71,441)
Proceeds Received on Disposition of Plant and Equipment .. 406 4,152 23,511
Cash Paid for Acquisition, Net of Cash Acquired .......... - (267,174) -
Other, Net ............................................... 5,120 6,296 5,142
--------- --------- ---------
Net Cash Used by Investing Activities ................ (38,402) (318,048) (42,788)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) on Loans and Notes Payable ... (1,696) (42,574) 44,005
Borrowings (Repayments) on Long-Term Debt ................ (10,393) 399,415 (30,000)
Cash Dividends Paid ...................................... (27,219) (26,763) (27,300)
Purchase of Common Stock for Treasury .................... - (6,118) (69,083)
Proceeds from Exercise of Stock Options .................. 1,078 275 5,561
--------- --------- ---------
Net Cash Provided by (Used by) Financing Activities... (38,230) 324,235 (76,817)
--------- --------- ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS ..................... 4,017 (2,401) (1,694)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ......................................... 127,202 71,754 (43,817)
CASH AND CASH EQUIVALENTS:
Beginning of Year ........................................ 88,743 16,989 60,806
--------- --------- ---------
End of Year .............................................. $ 215,945 $ 88,743 $ 16,989
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest Paid ............................................ $ 39,669 $ 26,339 $ 21,202
========= ========= =========
Income Taxes Paid ........................................ $ 2,904 $ 7,831 $ 84,535
========= ========= =========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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FOR THE FISCAL YEARS ENDED JUNE 30, 2002, JULY 1, 2001 AND JULY 2, 2000
(1) NATURE OF OPERATIONS:
Briggs & Stratton ("the Company") is a U.S. based producer of air cooled
gasoline engines. These engines are sold worldwide, primarily to original
equipment manufacturers of lawn and garden equipment and other gasoline engine
powered equipment. Additionally, through the Company's wholly owned subsidiary,
Generac Portable Products, LLC (GPP), the company is a designer, manufacturer
and marketer of portable and standby generators, pressure washers and related
accessories. GPP's products are sold throughout the United States, Canada and
Europe.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year: The Company's fiscal year consists of 52 or 53 weeks, ending on the
Sunday nearest the last day of June in each year. Therefore, the 2002 and 2001
fiscal years were 52 weeks long, and the 2000 fiscal year was 53 weeks long. All
references to years relate to fiscal years rather than calendar years.
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its wholly owned domestic and foreign subsidiaries
after elimination of intercompany accounts and transactions.
Accounting Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates.
Cash and Cash Equivalents: This caption includes cash, commercial paper and
certificates of deposit. The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Inventories: Inventories are stated at cost, which does not exceed market. The
last-in, first-out (LIFO) method was used for determining the cost of
approximately 68% of total inventories at June 30, 2002 and 77% of total
inventories at July 1, 2001. The cost for the remaining portion of the
inventories was determined using the first-in, first-out (FIFO) method. During
2002, a reduction in inventory quantities resulted in a liquidation of LIFO
inventories carried at lower costs prevailing in prior years. The liquidation of
these inventories has reduced cost of sales by $2.6 million in 2002. If the FIFO
inventory valuation method had been used exclusively, inventories would have
been $44.8 million and $51.2 million higher in the respective years. The LIFO
inventory adjustment was determined on an overall basis, and accordingly, each
class of inventory reflects an allocation based on the FIFO amounts.
Investments: This caption represents the Company's investments in three
50%-owned joint ventures, preferred stock in a privately held iron castings
business and common stock in a publicly traded software company. The common
stock in the publicly traded company is being classified as available-for-sale
and is reported at a fair market value. Unrealized losses incurred on this stock
are recorded as a component of Accumulated Other Comprehensive Loss in the
Shareholders' Investment section of the balance sheet. The investments in the
joint ventures and the privately held business are accounted for under the
equity method.
Deferred Loan Costs: Expenses associated with the issuance of debt instruments
are capitalized and are being amortized over the terms of the respective
financing arrangement using the straight-line method over periods ranging from
five to ten years. Accumulated amortization amounted to $1.6 million as of June
30, 2002 and $.1 million as of July 1, 2001.
Other Long-Term Assets: This caption primarily represents costs of software used
in the Company's business. Amortization of capitalized software is computed on
an item-by-item basis over a period of three to ten years, depending on the
estimated useful life of the software. Accumulated amortization amounted to $8.4
million as of June 30, 2002 and $7.4 million as of July 1, 2001.
Goodwill: This caption represents goodwill related to the acquisition of GPP in
fiscal 2001 (See Note 3). Goodwill reflects the cost of an acquisition in excess
of the fair values assigned to identifiable net assets acquired. The carrying
value of goodwill was
8
NOTES ...
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$161.0 million and $166.7 million at June 30, 2002 and July 1, 2001,
respectively. In accordance with SFAS 142, no goodwill amortization was recorded
in fiscal year 2002, $1.1 million was reported in fiscal year 2001. The Company
performed the required impairment test of goodwill in fiscal 2002 and found no
impairment of the asset.
Plant and Equipment and Depreciation: Plant and equipment are stated at cost and
depreciation is computed using the straight-line method at rates based upon the
estimated useful lives of the assets (20-30 years for land improvements, 20-50
years for buildings and 8-16 years for machinery and equipment).
Expenditures for repairs and maintenance are charged to expense as incurred.
Expenditures for major renewals and betterments, which significantly extend the
useful lives of existing plant and equipment, are capitalized and depreciated.
Upon retirement or disposition of plant and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in other income.
Impairment of Long-Lived Assets: Property, plant and equipment and other
long-term assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected undiscounted cash flows is less than the carrying value of
the related asset or group of assets, a loss is recognized for the difference
between the fair value and carrying value of the asset or group of assets. There
were no adjustments to the carrying value of long-lived assets in fiscal 2002,
2001 and 2000.
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," which
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of." SFAS No. 144 also supersedes the
accounting and reporting provisions of APB Opinion No. 30, related to the
disposal of a segment of a business. The Company adopted SFAS No. 144 on July 1,
2002. Management does not expect SFAS No. 144 to have a material impact on the
Company's consolidated financial statements.
Revenue Recognition: Revenue is recognized when title to the products being sold
transfers to the customer, which is upon shipment.
Deferred Revenue on Sale of Plant and Equipment: In fiscal 1997, the Company
sold its Menomonee Falls, Wisconsin facility for approximately $16.0 million.
The provisions of the contract state that the Company will continue to own and
occupy the warehouse portion of the facility for a period of up to ten years
(the Reservation Period). The contract also contains a buyout clause, at the
buyer's option and under certain circumstances, of the remaining Reservation
Period. Under the provisions of SFAS No. 66, "Accounting for Sales of Real
Estate," the Company is required to account for this as a financing transaction
as long as it continues to have substantial involvement with the facility during
the Reservation Period or until the buyout option is exercised. Under this
method, the cash received is reflected as deferred revenue and the assets and
the accumulated depreciation remain on the Company's books. Depreciation expense
continues to be recorded each period and imputed interest expense is also
recorded and added to deferred revenue. Offsetting this is the imputed fair
value lease income on the non-Briggs & Stratton occupied portion of the
building. A pretax gain, which will be recognized at the earlier of the exercise
of the buyout option or the expiration of the Reservation Period, is estimated
to be $10 - $12 million. The annual cost of operating the warehouse portion of
the facility is not material.
Income Taxes: The Provision for Income Taxes includes Federal, state and foreign
income taxes currently payable and those deferred or prepaid because of
temporary differences between the financial statement and tax basis of assets
and liabilities. The Future Income Tax Benefits represent temporary differences
relating to current assets and current liabilities and the Deferred Income Tax
Assets/Liabilities represent temporary differences relating to noncurrent assets
and liabilities.
Research and Development Costs: Expenditures relating to the development of new
products and processes, including significant improvements and refinements to
existing products, are expensed as incurred. The amounts charged against income
were $23.7 million in fiscal 2002, $21.5 million in fiscal 2001 and $24.3
million in fiscal 2000.
9
NOTES ...
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Advertising Costs: Advertising costs, included in Engineering, Selling, General
and Administrative Expenses on the accompanying Consolidated Statements of
Earnings, are expensed as incurred. These expenses totaled $8.3 million in
fiscal 2002, $7.8 million in fiscal 2001 and $6.8 million in fiscal 2000.
The Company adopted EITF No. 01-09, "Accounting for Consideration Given by a
Vendor to a Customer (Including a Reseller of Vendor's Products)," in the third
quarter of fiscal 2002. Pursuant to EITF No. 01-09, the Company was required to
reclassify co-op advertising expense previously reported as selling expense as a
reduction in net sales. The impact of adopting EITF 01-09 was to reduce net
sales by $7.2 million, $2.3 million and $1.3 million in fiscal 2002, 2001 and
2000, respectively.
Shipping and Handling Fees and Costs: Revenue received from shipping and
handling fees is reflected in net sales. Shipping fee revenue for fiscal 2002,
2001 and 2000 was $1.6 million, $1.7 million and $2.0 million, respectively.
Shipping and handling costs are included in cost of goods sold.
Foreign Currency Translation: Foreign currency balance sheet accounts are
translated into United States dollars at the rates of exchange in effect at
fiscal year end. Income and expenses are translated at the average rates of
exchange in effect during the year. The related translation adjustments are made
directly to a separate component of Shareholders' Investment.
Earnings Per Share: The Company's earnings per share were computed by dividing
net income by the weighted average number of shares of common stock outstanding
during the period. Diluted earnings per share, for each period presented, were
computed on the assumption that stock options were exercised at the beginning of
the periods reported. The difference between weighted average shares outstanding
and diluted average shares outstanding reflects the dilutive effects of stock
options and the convertible senior notes.
The shares outstanding used to compute diluted earnings per share for fiscal
2002, 2001 and 2000 excluded outstanding options to purchase 1,841,640,
1,679,564 and 1,079,564 shares of common stock, respectively, with
weighted-average exercise prices of $55.14, $56.33 and $61.95, respectively. The
options were excluded because their exercise prices were greater than the
average market price of the common shares and their inclusion in the computation
would have been antidilutive.
Information on earnings per share is as follows (in thousands of dollars, except
per share data):
FISCAL YEAR ENDED
------------------------------------------------------
JUNE 30, 2002 July 1, 2001 July 2, 2000
------------- ------------ ------------
Net income used in basic earnings per share ................................ $ 53,120 $ 48,013 $ 136,473
Adjustment to net income to add after-tax interest expense on
convertible notes .......................................................... 4,620 576 -
----------- ---------- ----------
Adjusted net income used in diluted earnings per share ..................... $ 57,740 $ 48,589 $ 136,473
=========== ========== ==========
Average shares of common stock outstanding ................................. 21,615 21,598 22,788
Incremental common shares applicable to common stock options based on the
common stock average market price during the period ...................... 6 10 52
Incremental common shares applicable to restricted common stock based on
the common stock average market price during the period .................. 5 5 2
Incremental common shares applicable to convertible notes based on the
conversion provisions of the convertible notes ........................... 2,826 353 -
----------- ---------- ----------
Diluted average common shares outstanding .................................. 24,452 21,966 22,842
=========== ========== ==========
10
NOTES ...
--------------------------------------------------------------------------------
Comprehensive Income: SFAS No. 130, "Reporting Comprehensive Income," requires
the reporting of comprehensive income in addition to net income from operations.
Comprehensive income is a more inclusive financial reporting method that
includes disclosure of financial information that historically has not been
recognized in the calculation of net income. The Company has chosen to report
Comprehensive Income and Accumulated Other Comprehensive Income (Loss) which
encompasses net income, unrealized gain (loss) on marketable securities, foreign
currency translation, and unrealized gain on derivatives in the Consolidated
Statements of Shareholders' Investment. Information on accumulated other
comprehensive income (loss) is as follows (in thousands of dollars):
Unrealized Accumulated
Gain (Loss) Cumulative Unrealized Other
on Marketable Translation Gain (Loss) on Comprehensive
Securities Adjustments Derivatives Loss
---------- ----------- ----------- ----
Balance at June 27, 1999 ...... $ 577 $ (2,309) $ - $ (1,732)
Fiscal year change ............ (383) (1,816) - (2,199)
---------- --------- ---------- ---------
Balance at July 2, 2000 ....... 194 (4,125) - (3,931)
Fiscal year change ............ (947) (2,530) 1,226 (2,251)
---------- --------- ---------- ---------
BALANCE AT JULY 1, 2001 ....... (753) (6,655) 1,226 (6,182)
FISCAL YEAR CHANGE ............ (148) 4,017 (4,313) (444)
---------- --------- ---------- ---------
BALANCE AT JUNE 30, 2002 ...... $ (901) $ (2,638) $ (3,087) $ (6,626)
========== ========= ========== =========
Derivatives: The Company enters into derivative contracts designated as cash
flow hedges to manage its foreign currency exposures. These instruments
generally do not have a maturity of more than twelve months. SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Any changes in fair value of these instruments are
recorded in the income statement or other comprehensive income. On July 2, 2000,
the impact of adopting SFAS No. 133 on Accumulated Other Comprehensive Loss
resulted in a loss of $15 thousand. The Company reclassified immaterial amounts
to the income statement during fiscal 2002 and 2001. The cumulative effect of
adopting SFAS No. 133 on the results of operations was immaterial.
During the fiscal year, there were no derivative instruments that were deemed to
be ineffective. The amounts included in Accumulated Other Comprehensive Loss
will be reclassified into income when the forecasted transaction occurs,
generally within the next twelve months. These forecasted transactions represent
the exporting of products for which the Company will receive foreign currency
and the importing of products for which the Company will be required to pay in a
foreign currency.
Reclassification: Certain amounts in prior year financial statements have been
reclassified to conform to current year presentation.
Business Combinations: In June 2001, the Financial Accounting Standards Board
issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and
Other Intangible Assets" having a required effective date for fiscal years
beginning after December 31, 2001. Under the new rules, goodwill and other
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over their
useful lives.
The Company adopted the new rules on accounting for goodwill and other
intangible assets in the first quarter of fiscal 2002. The Company performed the
required impairment test of goodwill and indefinite lived intangible assets in
fiscal 2002 and found no impairment of the assets as of June 30, 2002. Had the
provisions of SFAS No. 142 been applied in fiscal 2001, the Company's fiscal
2001 net income would have increased $.7 million, or $.03 per basic and diluted
earnings per share.
Future Accounting Pronouncement: In June 2002, the FASB issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities" SFAS No. 146
nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)" and requires that a
liability for a cost
11
NOTES ...
--------------------------------------------------------------------------------
associated with an exit or disposal activity be recognized when the liability is
incurred. SFAS No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. The Company does not expect that the adoption
of this statement will have a material impact on the Company's results of
operations or financial position.
(3) ACQUISITION:
On May 15, 2001, the Company acquired Generac Portable Products, Inc. Generac
Portable Products, Inc. was merged with, and into Generac Portable Products, LLC
(GPP) on June 30, 2002. GPP is a designer, manufacturer and marketer of portable
and standby generators, pressure washers and related accessories. The aggregate
purchase price of $288.1 million included $267.6 million of cash and $20.5
million of liabilities assumed. The cash paid included $.5 million of cash
acquired and $4.5 million of direct acquisition costs, and was funded through
the issuance of the 8.875% senior notes as more fully described in Note 6.
The provisions of the acquisition included a contingent purchase price based on
the operating results of GPP. The Company will not pay any additional purchase
price pursuant to these provisions.
The provisions of the acquisition also provide for a potential purchase price
refund based on the final valuation of the acquired inventory. The amount of
this purchase price refund, if any, will be recorded as a reduction in goodwill
when it is received.
The acquisition has been accounted for using the purchase method of accounting.
The purchase price was allocated on a preliminary basis to identifiable assets
acquired and liabilities assumed based upon their estimated fair values, with
the excess purchase price recorded as goodwill. This initial purchase price
allocation resulted in approximately $167.7 million of goodwill which was
amortized on a straight-line basis over twenty years until the Company adopted
SFAS No. 142 on July 2, 2001. Under SFAS No. 142, goodwill is no longer
amortized, but is subject to periodic impairment tests.
In 2002 the Company reduced goodwill by approximately $5.7 million related to
the finalization of the purchase price allocation. This decrease was primarily
the result of recording $16.0 million of deferred taxes related to differences
in GPP's financial reporting versus tax reporting, offset by approximately $10.3
million of additional inventory and fixed asset reserves.
The following table sets forth the unaudited pro forma information for the
Company as if the acquisition of GPP had occurred on July 2, 2000 (in millions,
except per share data):
2001
----
Net Sales ......................... $ 1,465.3
Net Income ........................ $ 26.6
Basic Earnings Per Share .......... $ 1.23
Diluted Earnings Per Share ........ $ 1.21
(4) INCOME TAXES:
The provision for income taxes consists of the following (in thousands of
dollars):
2002 2001 2000
Current ---- ---- ----
Federal ............ $ 4,950 $ 4,042 $ 66,169
State .............. 587 594 10,425
Foreign ............ 1,567 1,251 2,014
-------- -------- --------
7,104 5,887 78,608
Deferred ............. 20,286 17,973 1,542
-------- -------- --------
$ 27,390 $ 23,860 $ 80,150
======== ======== ========
A reconciliation of the U.S. statutory tax rates to the effective tax rates
follows:
2002 2001 2000
---- ---- ----
U.S. statutory rate ..... 35.0% 35.0% 35.0%
State taxes, net of
Federal tax benefit ... 2.4% 2.5% 3.2%
Foreign Sales Corporation
tax benefit ........... (1.5%) (3.5%) (.5%)
Other ................... (1.9%) (.8%) (.7%)
---- ---- ----
Effective tax rate ...... 34.0% 33.2% 37.0%
==== ==== ====
The Company received a refund of Foreign Sales Corporation tax benefits in
fiscal 2002 and 2001.
The components of deferred income taxes at the end of the fiscal year were (in
thousands of dollars):
2002 2001
---- ----
Future Income Tax Benefits:
Inventory ......................... $ 6,971 $ 3,424
Payroll related accruals .......... 4,880 3,846
Warranty reserves ................. 17,780 18,311
Other accrued liabilities ......... 15,501 10,769
Miscellaneous ..................... (3,749) 2,084
-------- --------
$ 41,383 $ 38,434
======== ========
12
NOTES ...
--------------------------------------------------------------------------------
2002 2001
---- ----
Deferred Income Taxes:
Difference between book and
tax methods applied to
maintenance and supply
inventories ...................... $ 9,325 $ 10,723
Pension cost ...................... (22,532) (13,187)
Accumulated depreciation .......... (56,025) (55,163)
Accrued employee benefits ......... 10,570 10,060
Postretirement
health care obligation ........... 24,474 24,089
Deferred revenue on sale
of plant & equipment ............. 5,992 6,059
Miscellaneous ..................... 791 (932)
-------- --------
$(27,405) $(18,351)
======== ========
The Company has not recorded deferred income taxes applicable to undistributed
earnings of foreign subsidiaries that are indefinitely reinvested in foreign
operations. These undistributed earnings amounted to approximately $8.0 million
at June 30, 2002. If these earnings were remitted to the U.S., they would be
subject to U.S. income tax.
However, this tax would be substantially less than the U.S. statutory income tax
because of available foreign tax credits.
(5) SEGMENT AND GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS:
In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" and subsequent to the May 15, 2001 acquisition
described in Note 3, the Company has concluded that it operates two reportable
business segments that are managed separately based on fundamental differences
in their operations. Summarized segment data is as follows (in thousands of
dollars):
2002 2001 2000
---- ---- ----
NET SALES -
Engines .......................... $ 1,366,947 $ 1,289,858 $ 1,591,236
Power Products ................... 216,006 29,587 -
Eliminations ..................... (53,581) (9,272) -
----------- ----------- -----------
$ 1,529,372 $ 1,310,173 $ 1,591,236
=========== =========== ===========
INCOME FROM OPERATIONS -
Engines .......................... $ 117,104 $ 99,156 $ 205,229
Power Products ................... 2,052 1,118 -
Eliminations ..................... (798) (1,168) -
----------- ----------- -----------
$ 118,358 $ 99,106 $ 205,229
=========== =========== ===========
ASSETS -
Engines .......................... $ 1,080,259 $ 1,012,438 $ 930,245
Power Products ................... 279,199 287,058 -
Eliminations ..................... (10,425) (3,301) -
----------- ----------- -----------
$ 1,349,033 $ 1,296,195 $ 930,245
=========== =========== ===========
CAPITAL EXPENDITURES -
Engines .......................... $ 42,086 $ 60,841 $ 71,441
Power Products ................... 1,842 481 -
----------- ----------- -----------
$ 43,928 $ 61,322 $ 71,441
=========== =========== ===========
DEPRECIATION & AMORTIZATION -
Engines .......................... $ 63,157 $ 58,362 $ 53,277
Power Products ................... 2,811 1,349 -
----------- ----------- -----------
$ 65,968 $ 59,711 $ 53,277
=========== =========== ===========
Information regarding the Company's geographic sales by the location the sale
originated is as follows (in thousands of dollars):
2002 2001 2000
---- ---- ----
United States ...................... $ 1,437,739 $ 1,226,034 $ 1,502,402
All Other Countries ................ 91,633 84,139 88,834
----------- ----------- -----------
Total .............................. $ 1,529,372 $ 1,310,173 $ 1,591,236
=========== =========== ===========
The Company has no material long lived assets in an individual foreign country.
In the fiscal years 2002, 2001 and 2000, there were sales to three major engine
customers that individually exceeded 10% of total Company net sales. The sales
to these customers are summarized below (in thousands of dollars and percent of
total Company net sales):
2002 2001 2000
---- ---- ----
Customer SALES % Sales % Sales %
----- - ----- - ----- -
A $299,785 19% $267,516 20% $287,769 18%
B 255,119 17% 187,001 14% 229,873 15%
C 165,670 11% 150,682 12% 190,659 12%
-------- ---- -------- ---- -------- ----
$720,574 47% $605,199 46% $708,301 45%
======== ==== ======== ==== ======== ====
13
NOTES ...
--------------------------------------------------------------------------------
(6) INDEBTEDNESS:
As of November 15, 2001, the Company replaced its $250 million revolving credit
facility that would have expired in April 2002, with a three-year $300 million
revolving credit facility (the credit facility) that expires in September 2004.
The Company also has access to domestic lines of credit (domestic lines)
totaling $15.0 million that remain in effect until canceled by either party. The
domestic lines provide amounts for short-term use at the then prevailing rate.
There are no significant compensating balance requirements for any of these
domestic lines. There were no borrowings using these domestic lines or the
credit facility as of June 30, 2002 and July 1, 2001.
Borrowings under the credit facility by the Company bear interest at a rate per
annum equal to, at its option, either:
(1) a 1, 2, 3 or 6 month LIBOR rate plus a margin varying from 0.50% to 1.75%,
depending upon the rating of the Company's long-term debt by Standard & Poor's
Rating group, a division of McGraw-Hill Companies (S&P) and Moody's Investors
Service, Inc. (Moody's) or
(2) the higher of (a) the federal funds rate plus 0.50% or (b) the bank's prime
rate plus a margin of up to 0.25%, also depending on the Company's long-term
credit ratings.
In addition, the Company is subject to a 0.10% to 0.35% commitment fee and a
0.50% to 1.75% letter of credit fee, depending on the Company's long-term credit
ratings.
The following data relates to domestic notes payable (in thousands of dollars):
2002 2001
---- ----
Balance at
Fiscal Year End .... $ 2,625 $ 3,300
Weighted Average
Interest Rate at
Fiscal Year End .... 4.00% 5.18%
The lines of credit available to the Company in foreign countries are in
connection with short-term borrowings and bank overdrafts used in the normal
course of business. These amounts total $26.2 million, expire at various times
through April, 2003 and are renewable. There were borrowings of $15.3 million at
June 30, 2002 using these lines of credit and are included in foreign loans.
None of these arrangements had material commitment fees or compensating balance
requirements.
The following information relates to foreign loans (in thousands of dollars):
2002 2001
---- ----
Balance at
Fiscal Year End .... $ 15,270 $ 16,291
Weighted Average
Interest Rate at
Fiscal Year End .... 5.41% 5.80%
The Long-Term Debt caption consists of the following (in thousands of dollars):
2002 2001
---- ----
5.00% Convertible Senior Notes
Due 2006 ............................ $140,000 $140,000
7.25% Senior Notes Due 2007,
Net of Unamortized Discount of
$969 in 2002 and
$1,282 in 2001 ...................... 89,031 98,718
8.875% Senior Notes Due 2011,
Net of Unamortized Discount of
$5,009 in 2002 and
$5,584 in 2001 ...................... 269,991 269,416
-------- --------
Total Long-Term Debt ................ $499,022 $508,134
======== ========
In May 2001, the Company issued $275.0 million of 8.875% Senior Notes due March
15, 2011 and $140.0 million of 5.00% Convertible Senior Notes due May 15, 2006.
The convertible senior notes are convertible at the option of the holders into
the Company's common stock at the conversion rate of 20.1846 shares per each
$1,000 of convertible notes. Interest is paid semi-annually on both series of
notes. No principal payments are due before the maturity dates.
The net proceeds from the sale of the 8.875% senior notes and 5.00% convertible
senior notes were used to fund the Company's acquisition of GPP, including the
replacement of GPP's outstanding debt and to repay a portion of the Company's
unrated commercial paper and short-term borrowings under its credit facilities.
The 7.25% senior notes are due September 15, 2007. In accordance with the
agreement, no principal payments are due before the maturity date, however the
Company repurchased $10 million of the bonds in the fourth quarter of fiscal
year 2002 after receiving unsolicited offers from bondholders.
The separate indentures providing for the 7.25% senior notes, the 8.875% senior
notes, the 5.00% convertible senior notes and the Company's credit
14
NOTES...
--------------------------------------------------------------------------------
facility (collectively, the Domestic Indebtedness) each include a number of
financial and operating restrictions. These covenants include restrictions on
the Company's ability to: pay dividends; incur indebtedness; create liens; enter
into sale and leaseback transactions; consolidate, merge, sell or lease all or
substantially all of its assets; and dispose of assets or the proceeds of sales
of its assets. The credit facility contains financial covenants that require the
Company to maintain a minimum interest coverage ratio and net worth (for fiscal
2003 the Company is required to maintain a minimum net worth of $376.6 million),
impose a maximum leverage ratio and total funded debt to EBITDA ratio and impose
capital expenditure limits. In addition, the credit facility contains provisions
that only apply if the Company's credit rating from S&P is BB or below or from
Moody's is Ba2 or below. As of June 30, 2002, the Company was in compliance with
these covenants.
Additionally, under the terms of the indentures governing the Domestic
Indebtedness, GPP became a joint and several guarantor of amounts outstanding
under the Domestic Indebtedness. Refer to Note 15 to the Consolidated Financial
Statements for subsidiary guarantor financial information.
(7) OTHER INCOME:
The components of other income (expense) are (in thousands of dollars):
2002 2001 2000
------- ------- -------
Interest income ........................ $ 2,189 $ 2,069 $ 1,589
Loss on the disposition of
plant and equipment .................. (3,192) (1,493) (2,378)
Income from investments ................ 7,071 5,485 14,364
Transaction gain (loss) ................ 3,757 (4,973) 206
Derivatives gain (loss) ................ (3,829) 1,438 -
Deferred financing costs ............... (1,420) (133) -
Amortization of intangibles ............ (56) (1,052) -
Other items ............................ 2,065 2,091 2,335
------- ------- -------
Total .................................. $ 6,585 $ 3,432 $16,116
======= ======= =======
(8) COMMITMENTS AND CONTINGENCIES:
Product and general liability claims arise against the Company from time to time
in the ordinary course of business. The Company is generally self-insured for
claims up to $1 million per claim. Accordingly, a reserve is maintained for the
estimated costs of such claims. On June 30, 2002 and July 1, 2001 the reserve
for product and general liability claims was $2.8 million and $3.6 million,
respectively. Because there is inherent uncertainty as to the eventual
resolution of unsettled claims, no reasonable range of possible losses can be
determined. Management does not anticipate that these claims, excluding the
impact of insurance proceeds and reserves, will have a material adverse effect
on the financial condition or results of operations of the Company.
The Company has no material commitments for materials or capital expenditures as
of June 30, 2002.
(9) STOCK OPTIONS:
The Company has a Stock Incentive Plan under which 5,361,935 shares of common
stock have been reserved for issuance. The Company accounts for the plan under
Accounting Principles Board Opinion No. 25, and no compensation cost has been
recognized. Had compensation cost for these plans been determined consistent
with SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net
income and earnings per share would have been reduced to the following pro forma
amounts:
2002 2001 2000
---- ---- ----
Net Income (in thousands):
As Reported ................... $53,120 $48,013 $136,473
Pro Forma ..................... $49,494 $44,814 $134,600
Basic Earnings Per Share:
As Reported ................... $2.46 $2.22 $5.99
Pro Forma ..................... $2.29 $2.07 $5.91
Diluted Earnings Per Share:
As Reported ................... $2.36 $2.21 $5.97
Pro Forma ..................... $2.21 $2.04 $5.89
Information on the options outstanding is as follows:
Wtd. Avg.
Shares Ex. Price
------ ---------
Balance, June 27, 1999......................... 1,042,011 $ 49.28
Granted during the year........................ 471,020 74.53
Exercised during the year...................... (151,033) 38.49
Expired during the year........................ (58,970) 67.55
---------
Balance, July 2, 2000.......................... 1,303,028 $ 58.83
Granted during the year........................ 600,000 $ 46.22
Exercised during the year...................... (13,449) 20.45
Expired during the year........................ (180,738) 49.08
---------
BALANCE, JULY 1, 2001.......................... 1,708,841 $ 55.73
GRANTED DURING THE YEAR........................ 371,490 $ 49.19
EXERCISED DURING THE YEAR...................... (39,597) 27.64
EXPIRED DURING THE YEAR........................ (199,094) 54.59
---------
BALANCE, JUNE 30, 2002......................... 1,841,640 $ 55.14
=========
15
NOTES...
--------------------------------------------------------------------------------
Grant Summary
--------------------------------------------------------------------------------
Fiscal Grant Exercise Date Options Expiration
Year Date Price Exercisable Outstanding Date
------ ---- -------- ----------- ----------- ----
1998 8-5-97 65.690 8-5-00 223,440 8-5-02
1999 8-5-98 44.980 8-5-01 307,070 8-5-03
2000 8-4-99 74.530 8-4-02 403,670 8-4-04
2001 8-3-00 46.220 8-3-03 559,910 8-3-07
2002 8-7-01 49.190 8-7-04 347,550 8-7-08
The fair value of each option is estimated using the Black-Scholes option
pricing model. The grant-date fair market value of the options and assumptions
used to determine such value are:
Options granted during 2002 2001 2000
---- ---- ----
Grant date fair value ........ $12.53 $11.47 $13.07
Assumptions:
Risk-free interest rate .... 5.1% 6.0% 6.0%
Expected volatility ........ 40.3% 37.6% 30.1%
Expected dividend yield .... 3.1% 2.6% 2.5%
Expected term (in years) ... 7.0 7.0 5.0
(10) SHAREHOLDER RIGHTS PLAN:
On August 6, 1996, the Board of Directors declared a dividend distribution of
one common stock purchase right (a right) for each share of the Company's common
stock outstanding on August 19, 1996. Each right would entitle shareowners to
buy one-half of one share of the Company's common stock at an exercise price of
$160.00 per full common share, subject to adjustment. The rights are not
currently exercisable, but would become exercisable if events occurred relating
to a person or group acquiring or attempting to acquire 15 percent or more of
the outstanding shares of common stock. The rights expire on August 19, 2006,
unless redeemed or exchanged by the Company earlier.
(11) FOREIGN EXCHANGE RISK MANAGEMENT:
The Company enters into forward exchange contracts to hedge purchases and sales
that are denominated in foreign currencies. The terms of these currency
derivatives generally do not exceed twelve months and the purpose is to protect
the Company from the risk that the eventual dollars being transferred will be
adversely affected by changes in exchange rates.
The Company has forward foreign currency exchange contracts to purchase Japanese
yen. These contracts are used to hedge the commitments to purchase engines from
the Company's Japanese joint venture. The Company also has forward contracts to
sell foreign currency. These contracts are used to hedge foreign currency
collections on sales of inventory. The Company's foreign currency forward
contracts are carried at fair value based on current exchange rates.
The Company has the following forward currency contracts outstanding at the end
of fiscal 2002:
In Millions
Hedge ---------------------------------------------------
--------------------------- Notional Contract Fair Market (Gain)/Loss Conversion Latest
Currency Contract Value Value Value at Fair Value Currency Expiration Date
-------- -------- -------- -------- ----------- ------------- ---------- ---------------
Japanese Yen Buy 239.5 1.8 2.0 (.2) U.S. September 2002
Euro Sell 100.9 93.6 99.2 5.6 U.S. April 2003
Australian Dollar Sell 2.0 1.1 1.1 - U.S. December 2002
Canadian Dollar Sell .9 .6 .6 - U.S. November 2002
The Company's foreign subsidiaries have the following forward currency contracts
outstanding at the end of fiscal 2002:
In Millions
Hedge ---------------------------------------------------
--------------------------- Notional Contract Fair Market (Gain)/Loss Conversion Latest
Currency Contract Value Value Value at Fair Value Currency Expiration Date
-------- -------- -------- -------- ----------- ------------- ---------- ---------------
Japanese Yen Sell 26.9 .4 .4 - Australian August 2002
U.S. Dollars Buy .4 .8 .8 - Australian August 2002
British Pounds Buy .6 1.7 1.7 - Australian June 2003
The Company continuously evaluates the effectiveness of its hedging program by
evaluating its foreign exchange contracts compared to the anticipated underlying
transactions.
16
NOTES...
--------------------------------------------------------------------------------
(12) EMPLOYEE BENEFIT COSTS:
Retirement Plan and Postretirement Benefits
The Company has noncontributory, defined benefit retirement plans and
postretirement benefit plans covering most Wisconsin employees. The following
provides a reconciliation of obligations, plan assets and funded status of the
plans for the two years indicated, (dollars in thousands):
Pension Benefits Other Postretirement Benefits
------------------------ -----------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Actuarial Assumptions:
Discounted Rate Used to Determine Present
Value of Projected Benefit Obligation ........... 7.25% 7.5% 7.25% 7.5%
Expected Rate of Future Compensation
Level Increases ................................. 4.0-5.0% 4.0-5.0% N/A n/a
Expected Long-Term Rate of Return on
Plan Assets ..................................... 9.0% 9.0% N/A n/a
Change in Benefit Obligations:
Actuarial Present Value of Benefit Obligations
at Beginning of Year ............................ $ 703,275 $ 666,392 $ 108,557 $ 99,793
Service Cost ...................................... 10,014 9,482 1,341 1,215
Interest Cost ..................................... 51,203 48,079 8,028 7,091
Plan Amendments ................................... - 29,190 - -
Acquisition ....................................... - 2,671 - -
Special Termination Benefits ...................... 4,907 - 2,183 -
Actuarial (Gain) Loss ............................. 30,692 (10,478) 12,337 13,035
Benefits Paid ..................................... (52,470) (42,061) (8,981) (12,577)
--------- --------- --------- ---------
Actuarial Present Value of Benefit Obligation
at End of Year .................................. $ 747,621 $ 703,275 $ 123,465 $ 108,557
--------- --------- --------- ---------
Change in Plan Assets:
Plan Assets at Fair Value at Beginning of Year .... $ 940,582 $ 951,757 $ - $ -
Actual Return on Plan Assets ...................... (32,866) 29,084 - -
Acquisition ....................................... - 1,018 - -
Employer Contributions ............................ 1,257 784 8,981 12,577
Benefits Paid ..................................... (52,470) (42,061) (8,981) (12,577)
--------- --------- --------- ---------
Plan Assets at Fair Value at End of Year .......... $ 856,503 $ 940,582 $ - $ -
--------- --------- --------- ---------
Plan Assets in Excess of (Less Than) Projected
Benefit Obligation .............................. $ 108,882 $ 237,307 $(123,465) $(108,557)
Remaining Unrecognized Net Obligation (Asset) ..... - (4,517) 275 321
Unrecognized Net Loss (Gain) ...................... (95,547) (244,579) 40,177 29,673
Unrecognized Prior Service Cost ................... 29,942 32,739 71 103
--------- --------- --------- ---------
Net Amount Recognized at End of Year .............. $ 43,277 $ 20,950 $ (82,942) $ (78,460)
========= ========= ========= =========
Amounts Recognized on the Balance Sheets:
Prepaid Pension ................................... $ 60,343 $ 36,275 $ - $ -
Accrued Pension Cost .............................. (15,750) (14,494) - -
Accrued Wages and Salaries ........................ (1,316) (831) - -
Accrued Post Retirement Health Care Obligation .... - - (62,753) (61,767)
Other Accruals .................................... - - (8,000) (4,800)
Accrued Employee Benefits ......................... - - (12,189) (11,893)
--------- --------- --------- ---------
Net Amount Recognized at End of Year .............. $ 43,277 $ 20,950 $ (82,942) $ (78,460)
========= ========= ========= =========
17
NOTES...
--------------------------------------------------------------------------------
The following table summarizes the plans' income and expense for the three years
indicated (dollars in thousands):
Pension Benefits Other Postretirement Benefits
------------------------------------ ----------------------------------
2002 2001 2000 2002 2001 2000
-------- -------- -------- -------- -------- --------
Components of Net Periodic Benefit Cost:
Service Cost-Benefits Earned During the Year .... $ 10,014 $ 9,482 $ 10,622 $ 1,341 $ 1,215 $ 1,307
Interest Cost on Projected Benefit Obligation ... 51,203 48,079 47,475 8,028 7,091 7,343
Expected Return on Plan Assets .................. (77,192) (73,053) (63,845) - - -
Amortization of:
Transition Obligation (Asset) ................ (4,517) (5,306) (5,306) 46 47 46
Prior Service Cost ........................... 2,797 242 186 31 31 31
Actuarial (Gain) Loss ........................ (8,328) (7,822) 359 1,834 583 1,111
-------- -------- -------- -------- -------- --------
Net Periodic Benefit Expense (Income) ........... $(26,023) $(28,378) $(10,509) $ 11,280 $ 8,967 $ 9,838
======== ======== ======== ======== ======== ========
In the second quarter of fiscal 2002, the Company offered and finalized an early
retirement incentive program. As a result, the Company recorded $4.9 million of
expense offsetting pension income of $26 million and $2.2 million was added to
postretirement health care expense. The impact for the full fiscal year of 2002
reduced net income on an after-tax basis by $2.5 million, after consideration of
salary and related expenditures savings.
In July 2001, the Company extended its collective bargaining agreement with one
of its unions. As part of this contract extension, the Company agreed to pay
certain amounts to employees who were hired prior to January 1, 1980 upon their
retirement. The impact of this plan amendment is included in the above tables.
As described in Note 14, the Company contributed its two ductile iron foundries
to Metal Technologies Holding Company, Inc. (MTHC). In connection with the
contribution, MTHC agreed to assume pension and postretirement benefit
obligations related to employees working at the foundries at the time of the
transaction. The Company transferred to MTHC pension assets amounting to $11.3
million in fiscal 2001. The assumption of obligations by MTHC and transfer of
pension assets did not result in a gain or loss to the Company.
The Company's supplemental pension plan has benefit obligations in excess of
plan assets. The benefit obligation, accumulated benefit obligation and fair
value of plan assets were $25.2 million, $17.9 million and $.1 million
respectively for fiscal year 2002 and $19.0 million, $14.9 million and $0
respectively for fiscal year 2001. The postretirement benefit plans are
essentially unfunded.
For measurement purposes a 9% annual rate of increase in the per capita cost of
covered health care claims was assumed for the fiscal year 2003 decreasing
gradually to 5% for the fiscal year 2008. The health care cost trend rate
assumption has a significant effect on the amounts reported. An increase of one
percentage point, would increase the accumulated postretirement benefit by $8.1
million and would increase the service and interest cost by $.8 million for the
year. A corresponding decrease of one percentage point, would decrease the
accumulated postretirement benefit by $7.5 million and decrease the service and
interest cost by $.7 million for the fiscal year.
Defined Contribution Plans
The Company has a defined contribution retirement plan that includes most U.S.
non-Wisconsin employees. Under the plan, the Company makes an annual
contribution on behalf of covered employees equal to 2% of each participant's
gross income, as defined. For the fiscal years 2002, 2001 and 2000, the net
expense related to these plans was $1.6 million, $.2 million and $2.1 million,
respectively.
Wisconsin employees of the Company may participate in a salary reduction
deferred compensation retirement plan. A maximum of 1-1/2% or 3% of each
participant's salary, depending upon the participant's group, is matched by the
Company. The Company contributions totaled $4.1 million in 2002, $4.7 million in
2001 and $4.6 million in 2000.
18
NOTES...
--------------------------------------------------------------------------------
Postemployment Benefits
The Company accrues the expected cost of postemployment benefits over the years
that the employees render service. These benefits are substantially smaller
amounts because they apply only to employees who permanently terminate
employment prior to retirement. The items include disability payments, life
insurance and medical benefits. These amounts are also discounted using an
interest rate of 7.25% and 7.5% for fiscal year 2002 and 2001, respectively.
Amounts are included in Accrued Employee Benefits in the balance sheet.
(13) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and Cash Equivalents, Receivables, Accounts Payable, Domestic Notes
Payable, Foreign Loans and Accrued Liabilities: The carrying amounts approximate
fair market value because of the short maturity of these instruments.
Long-Term Debt: The fair market value of the Company's long-term debt is
estimated based on market quotations at year end.
The estimated fair market values of the Company's financial instruments are (in
thousands of dollars):
2002
-------------------------------
CARRYING FAIR
AMOUNT VALUE
------ -----
CASH AND CASH EQUIVALENTS .......... $ 215,945 $ 215,945
RECEIVABLES ........................ $ 201,910 $ 201,910
ACCOUNTS PAYABLE ................... $ 103,648 $ 103,648
DOMESTIC NOTES PAYABLE ............. $ 2,625 $ 2,625
FOREIGN LOANS ...................... $ 15,270 $ 15,270
ACCRUED LIABILITIES ................ $ 131,582 $ 131,582
LONG-TERM DEBT -
5.00% CONVERTIBLE NOTES
DUE 2006 ....................... $ 140,000 $ 150,865
7.25% NOTES DUE 2007 ............. $ 89,031 $ 88,712
8.875% NOTES DUE 2011 ............ $ 269,991 $ 288,562
2001
-------------------------------
Carrying Fair
Amount Value
------ -----
Cash and cash equivalents .......... $ 88,743 $ 88,743
Receivables ........................ $ 145,138 $ 145,138
Accounts payable ................... $ 102,559 $ 102,559
Domestic notes payable ............. $ 3,300 $ 3,300
Foreign loans ...................... $ 16,291 $ 16,291
Accrued liabilities ................ $ 115,725 $ 115,725
Long-term debt -
5.00% Convertible Notes
due 2006 ....................... $ 140,000 $ 150,066
7.25% Notes due 2007 ............. $ 98,718 $ 96,237
8.875% Notes due 2011 ............ $ 269,416 $ 277,608
(14) DISPOSITION OF BUSINESS:
At the end of August 1999, the Company contributed its two ductile iron
foundries to MTHC in exchange for $23.6 million in cash and $45.0 million
aggregate par value convertible preferred stock. The provisions of the preferred
stock include a 15% cumulative dividend and conversion rights into a minimum of
31% of MTHC common stock. Pursuant to EITF Abstract No. 86-29, the Company
considered this contribution to be a monetary transaction, given the significant
amount of cash received and recorded the consideration received at fair value.
The preferred stock received was determined to have a fair value of $21.6
million based on provisions of the stock and the prevailing market returns for
similar investments, estimated to be 30%, as of the date of the transaction.
MTHC is the primary supplier to the Company for iron castings. There are no
other material arrangements between the Company and MTHC.
Based on the above and the fair market value of all consideration received, the
transaction resulted in a $16.5 million gain.
19
NOTES...
--------------------------------------------------------------------------------
(15) SEPARATE FINANCIAL INFORMATION OF SUBSIDIARY GUARANTORS OF INDEBTEDNESS
Under the terms of the Company's Domestic Indebtedness (described in Note 6),
GPP became a joint and several guarantor of the Domestic Indebtedness.
Additionally, if at any time a domestic subsidiary of the Company constitutes a
significant domestic subsidiary, then the domestic subsidiary will also become a
guarantor of the Domestic Indebtedness. Each guarantee of the Domestic
Indebtedness is the obligation of the guarantor and ranks equally and ratably
with the existing and future senior unsecured obligations of that guarantor;
accordingly, GPP has provided a full and unconditional guarantee of the Domestic
Indebtedness. The condensed supplemental consolidating financial information
reflects the operations of GPP (in thousands of dollars):
BALANCE SHEET: BRIGGS & STRATTON GUARANTOR NON-GUARANTOR
AS OF JUNE 30, 2002 CORPORATION SUBSIDIARY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------------- ----------- ---------- ------------ ------------ ------------
Current Assets................................... $ 527,111 $ 96,534 $ 70,387 $ (24,088) $ 669,944
Investment in Subsidiary......................... 312,679 - - (312,679) -
Noncurrent Assets................................ 494,052 182,665 2,372 - 679,089
------------ ----------- ------------ ----------- -----------
$ 1,333,842 $ 279,199 $ 72,759 $ (336,767) $ 1,349,033
============ =========== ============ =========== ===========
Current Liabilities.............................. $ 244,497 $ 10,133 $ 30,327 $ (18,934) $ 266,023
Long-Term Debt................................... 499,022 - - - 499,022
Other Long-Term Obligations...................... 135,192 (850) - - 134,342
Stockholders' Equity............................. 455,131 269,916 42,432 (317,833) 449,646
------------ ----------- ------------ ----------- -----------
$ 1,333,842 $ 279,199 $ 72,759 $ (336,767) $ 1,349,033
============ =========== ============ =========== ===========
STATEMENT OF EARNINGS:
FOR THE FISCAL YEAR ENDED JUNE 30, 2002
---------------------------------------
Net Sales........................................ $ 1,334,891 $ 216,006 $ 80,976 $ (102,501) $ 1,529,372
Cost of Goods Sold............................... 1,102,548 195,533 62,416 (103,158) 1,257,339
------------ ----------- ------------ ----------- -----------
Gross Profit................................... 232,343 20,473 18,560 657 272,033
Engineering, Selling, General and
Administrative Expenses........................ 123,114 18,420 12,141 - 153,675
------------ ----------- ------------ ----------- -----------
Income from Operations......................... 109,229 2,053 6,419 657 118,358
Interest Expense................................. (43,600) (50) (889) 106 (44,433)
Other (Expense) Income, Net...................... 12,553 149 13,609 (19,726) 6,585
------------ ----------- ------------ ----------- -----------
Income Before Provision for Income Taxes....... 78,182 2,152 19,139 (18,963) 80,510
Provision for Income Taxes....................... 25,062 761 1,567 - 27,390
------------ ----------- ------------ ----------- -----------
Net Income....................................... $ 53,120 $ 1,391 $ 17,572 $ (18,963) $ 53,120
============ =========== ============ =========== ===========
20
NOTES...
--------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS: BRIGGS & STRATTON GUARANTOR NON-GUARANTOR
FOR THE FISCAL YEAR ENDED JUNE 30, 2002 CORPORATION SUBSIDIARY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------------------------------- ----------- ---------- ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ........................................ $ 53,120 $ 1,391 $ 17,572 $ (18,963) $ 53,120
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities-
Depreciation and Amortization ................... 62,590 2,812 566 - 65,968
Equity in Earnings of Unconsolidated Affiliates.. (23,222) - 189 16,852 (6,181)
(Gain) Loss on Disposition of Plant and
Equipment ...................................... 3,593 (387) (14) - 3,192
Provision for Deferred Income Taxes ............. 12,103 8,183 - - 20,286
Change in Operating Assets and Liabilities-
(Increase) Decrease in Receivables .............. (44,781) (1,361) (15,942) 5,312 (56,772)
(Increase) Decrease in Inventories .............. 125,277 (2,352) (1,549) (657) 120,719
Increase in Prepaid Expenses and
Other Current Assets ........................... (2,763) (122) (111) - (2,996)
Increase (Decrease) in Accounts Payable,
Accrued Liabilities and Income Taxes ........... 32,714 (2,958) 1,617 (5,312) 26,061
(Increase) Decrease in Prepaid Pension .......... (23,101) 289 - - (22,812)
Other, Net ........................................ (17) (751) - - (768)
--------- --------- --------- --------- ---------
Net Cash Provided by Operating Activities ...... $ 195,513 $ 4,744 $ 2,328 $ (2,768) $ 199,817
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Plant and Equipment .................. $ (41,048) $ (1,824) $ (1,056) $ - $ (43,928)
Proceeds Received on Disposition of
Plant and Equipment ............................. 362 9 35 - 406
Other, Net ........................................ 5,120 - - - 5,120
--------- --------- --------- --------- ---------
Net Cash Used by Investing Activities .......... $ (35,566) $ (1,815) $ (1,021) $ - $ (38,402)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) on Loans and
Notes Payable ................................... $ 3,022 $ (3,697) $ (1,021) $ - $ (1,696)
Borrowings (Repayments) on
Long-Term Debt .................................. (10,393) - - - (10,393)
Cash Dividends Paid ............................... (27,219) - (2,768) 2,768 (27,219)
Proceeds from Exercise of Stock Options ........... 1,078 - - - 1,078
Net Cash Provided by (Used by)
--------- --------- --------- --------- ---------
Financing Activities ........................ $ (33,512) $ (3,697) $ (3,789) $ 2,768 $ (38,230)
--------- --------- --------- --------- ---------
EFFECT OF FOREIGN CURRENCY
EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS .............................. $ (106) $ 1,040 $ 3,083 $ - $ 4,017
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS .................................. $ 126,329 $ 272 $ 601 $ - $ 127,202
Cash and Cash Equivalents, Beginning of Year ....... 85,282 683 2,778 - 88,743
--------- --------- --------- --------- ---------
Cash and Cash Equivalents, End of Year ............. $ 211,611 $ 955 $ 3,379 $ - $ 215,945
========= ========= ========= ========= =========
21
NOTES ...
--------------------------------------------------------------------------------
The condensed supplemental consolidating financial information reflects the
operations of GPP for the 2001 fiscal year (in thousands of dollars):
BALANCE SHEET: BRIGGS & STRATTON GUARANTOR NON-GUARANTOR
AS OF JULY 1, 2001 CORPORATION SUBSIDIARY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------------ ----------- ---------- ------------ ------------ ------------
Current Assets .............................. $ 482,158 $ 98,523 $ 52,182 $ (19,433) $ 613,430
Investment in Subsidiary .................... 292,543 - - (292,543) -
Noncurrent Assets ........................... 491,624 188,535 2,606 - 682,765
----------- ----------- ----------- ------------ -----------
$ 1,266,325 $ 287,058 $ 54,788 $ (311,976) $ 1,296,195
=========== =========== =========== ============ ===========
Current Liabilities ......................... $ 207,336 $ 18,737 $ 29,731 $ (13,622) $ 242,182
Long-Term Debt .............................. 508,134 - - - 508,134
Other Long-Term Obligations ................. 122,292 835 - - 123,127
Stockholders' Equity ........................ 428,563 267,486 25,057 (298,354) 422,752
----------- ----------- ----------- ------------ -----------
$ 1,266,325 $ 287,058 $ 54,788 $ (311,976) $ 1,296,195
=========== =========== =========== ============ ===========
STATEMENT OF EARNINGS:
FOR THE FISCAL YEAR ENDED JULY 1, 2001
--------------------------------------
Net Sales ................................... $ 1,251,462 $ 29,587 $ 80,701 $ (51,577) $ 1,310,173
Cost of Goods Sold .......................... 1,037,817 25,814 61,159 (51,407) 1,073,383
----------- ----------- ----------- ------------ -----------
Gross Profit .............................. 213,645 3,773 19,542 (170) 236,790
Engineering, Selling, General and
Administrative Expenses ................... 124,146 2,656 10,882 - 137,684
----------- ----------- ----------- ------------ -----------
Income from Operations .................... 89,499 1,117 8,660 (170) 99,106
Interest Expense ............................ (28,024) (23) (2,642) 24 (30,665)
Other (Expense) Income, Net ................. 8,574 (1,073) 8,841 (12,910) 3,432
----------- ----------- ----------- ------------ -----------
Income Before Provision for Income Taxes... 70,049 21 14,859 (13,056) 71,873
Provision for Income Taxes .................. 22,036 7 1,817 - 23,860
----------- ----------- ----------- ------------ -----------
Net Income .................................. $ 48,013 $ 14 $ 13,042 $ (13,056) $ 48,013
=========== =========== =========== ============ ===========
22
NOTES ...
--------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS: BRIGGS & STRATTON GUARANTOR NON-GUARANTOR
FOR THE FISCAL YEAR ENDED JULY 1, 2001 CORPORATION SUBSIDIARY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------------------------------- ----------- ---------- ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ....................................... $ 48,013 $ 14 $ 13,042 $ (13,056) $ 48,013
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities-
Depreciation and Amortization ................... 57,724 1,349 638 - 59,711
Equity in Earnings of Unconsolidated Affiliates.. (5,762) - 159 562 (5,041)
(Gain) Loss on Disposition of Plant and
Equipment ...................................... 1,499 - (6) - 1,493
Provision for Deferred Income Taxes ............. 17,691 282 - - 17,973
Change in Operating Assets and Liabilities-
Decrease in Receivables ......................... 35,479 1,868 5,375 (8,036) 34,686
(Increase) Decrease in Inventories .............. (6,325) (2,811) 1,659 170 (7,307)
(Increase) Decrease in Prepaid Expenses and
Other Current Assets ........................... 22 89 (161) - (50)
Increase (Decrease) in Accounts Payable,
Accrued Liabilities and Income Taxes ........... (47,372) 4,349 (11,753) 8,036 (46,740)
(Increase) Decrease in Prepaid Pension .......... (28,646) 268 - - (28,378)
Other, Net ....................................... (6,183) (209) - - (6,392)
--------- --------- --------- --------- ---------
Net Cash Provided by (Used in)
Operating Activities .......................... $ 66,140 $ 5,199 $ 8,953 $ (12,324) $ 67,968
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Plant and Equipment ................. $ (60,262) $ (481) $ (579) $ - $ (61,322)
Proceeds Received on Disposition of
Plant and Equipment ............................. 4,113 - 39 - 4,152
Investments in Subsidiaries, Net of
Cash Acquired ................................... (270,632) 456 3,002 - (267,174)
Other, Net ....................................... 6,434 - (138) - 6,296
--------- --------- --------- --------- ---------
Net Cash Provided by (Used by)
Investing Activities .......................... $(320,347) $ (25) $ 2,324 $ - $(318,048)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) on Loans and
Notes Payable ................................... $ (41,175) $ (4,334) $ 2,935 $ - $ (42,574)
Borrowings (Repayments) on
Long-Term Debt .................................. 399,415 - - - 399,415
Cash Dividends Paid .............................. (26,763) - (12,324) 12,324 (26,763)
Proceeds from Exercise of Stock Options .......... (5,843) - - - (5,843)
Net Cash Provided by (Used by) --------- --------- --------- --------- ---------
Financing Activities .......................... $ 325,634 $ (4,334) $ (9,389) $ 12,324 $ 324,235
--------- --------- --------- --------- ---------
EFFECT OF FOREIGN CURRENCY
EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS ............................. $ - $ (157) $ (2,244) $ - $ (2,401)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ................................. $ 71,427 $ 683 $ (356) $ - $ 71,754
Cash and Cash Equivalents, Beginning of Year ...... 13,855 - 3,134 - 16,989
--------- --------- --------- --------- ---------
Cash and Cash Equivalents, End of Year ............ $ 85,282 $ 683 $ 2,778 $ - $ 88,743
========= ========= ========= ========= =========
23
INDEPENDENT AUDITORS' REPORTS
--------------------------------------------------------------------------------
To the Shareholders of
Briggs & Stratton Corporation:
We have audited the accompanying consolidated balance sheet of Briggs & Stratton
Corporation (a Wisconsin Corporation) and subsidiaries, as of June 30, 2002, and
the related consolidated statement of earnings, shareholders' investment and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The consolidated
financial statements of Briggs & Stratton Corporation as of July 1, 2001 and
for the years ended July 1, 2001 and July 2, 2000 were audited by other
auditors who have ceased operations. Those other auditors expressed an
unqualified opinion on those consolidated financial statements in their report
dated July 26, 2001.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such 2002 financial statements present fairly, in all material
respects, the financial position of Briggs & Stratton Corporation and
subsidiaries, as of June 30, 2002, and the results of their operations and their
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
August 1, 2002
THIS REPORT SET FORTH BELOW IS A COPY OF A PREVIOUSLY ISSUED AUDIT REPORT BY
ARTHUR ANDERSEN LLP. THIS REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH ITS INCLUSION IN THIS FORM 10-K.
To the Shareholders of
Briggs & Stratton Corporation:
We have audited the accompanying consolidated balance sheets of Briggs &
Stratton Corporation (a Wisconsin Corporation) and subsidiaries as of July 1,
2001 and July 2, 2000 and the related consolidated statements of earnings,
shareholders' investment and cash flow for each of the three years in the period
ended July 1, 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Briggs & Stratton Corporation
and subsidiaries as of July 1, 2001 and July 2, 2000 and the results of their
operations and their cash flows for each of the three years in the period ended
July 1, 2001, in conformity with accounting principles generally accepted in the
United States.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
July 26, 2001
24
QUARTERLY FINANCIAL DATA, DIVIDEND AND MARKET INFORMATION (UNAUDITED)
---------------------------------------------------------------------
In Thousands Per Share of Common Stock
--------------------------------------------- ---------------------------------------------------
Market Price Range
on New York
Net Net Stock Exchange
Quarter Net Gross Income Income Dividends -------------------
Ended Sales Profit (Loss) (Loss) Declared High Low
----- ----- ------ ------ ------ -------- ------ ------
FISCAL 2002
SEPTEMBER $ 219,629(1) $ 19,821(1) $ (17,424) $ (.81) $ .31 $ 43.85 $ 29.65
DECEMBER 333,689(1) 54,994(1) 2,379 .11 .31 43.99 29.81
MARCH 516,758 102,495 37,614 1.58 .32 48.39 38.54
JUNE 459,296 94,723 30,551 1.30 .32 46.35 36.71
---------- ---------- ---------- ---------- ----------
TOTAL $1,529,372 $ 272,033 $ 53,120 $ 2.36(2) $ 1.26
========== ========== ========== ========== ==========
Fiscal 2001
September $ 180,763(1) $ 25,312(1) $ (6,304) $ (.29) $ .31 $ 44.56 $ 32.13
December 367,720(1) 69,117(1) 19,928 .92 .31 46.00 30.38
March 430,187 85,899 29,889 1.38 .31 48.38 36.50
June 331,503 56,462 4,500 .21 .31 45.90 35.00
---------- ---------- ---------- ---------- ----------
Total $1,310,173 $ 236,790 $ 48,013 $ 2.21(2) $ 1.24
========== ========== ========== ========== ==========
The number of record holders of Briggs & Stratton Corporation Common Stock
on August 22, 2002 was 4,669.
The above amounts include the acquisition of GPP since May 15, 2001. Refer
to the Notes to Consolidated Financial Statements.
Net Income per share of Common Stock represents Diluted Earnings per Share.
(1) Reflects the adoption of EITF No. 01-09 in the third quarter of fiscal
2002. Refer to the Notes to Consolidated Financial Statements.
(2) Refer to Note 2 to Consolidated Financial Statements, for information
about earnings per share. Amounts do not total because of differing numbers of
shares outstanding at the end of each quarter.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BRIGGS & STRATTON CORPORATION
By /s/ James E. Brenn
------------------------------------
November 15, 2002 James E. Brenn, Senior Vice President
and Chief Financial Officer - Principal
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.*
/s/ John S. Shiely /s/ David L. Burner
----------------------------------- ----------------------------------------
John S. Shiely David L. Burner
President and Chief Executive Director
Officer and Director (Principal
Executive Officer)
/s/ E. Margie Filter
----------------------------------------
/s/ James E. Brenn E. Margie Filter
----------------------------------- Director
James E. Brenn
Senior Vice President and Chief
Financial Officer (Principal
Financial Officer and /s/ Robert J. O'Toole
Principal Accounting Officer) ----------------------------------------
Robert J. O'Toole
Director
/s/ F. P. Stratton, Jr.
-----------------------------------
F. P. Stratton, Jr. /s/ Charles I. Story
Chairman and Director ----------------------------------------
Charles I. Story
/s/ Jay H. Baker Director
-----------------------------------
Jay H. Baker
Director /s/ Brian C. Walker
----------------------------------------
/s/ Michael E. Batten Brian C. Walker
----------------------------------- Director
Michael E. Batten
Director
*Each signature affixed as of
November 15, 2002
26
CERTIFICATIONS
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, John S. Shiely, certify that:
(1) I have reviewed this Annual Report on Form 10-K of Briggs &
Stratton Corporation;
(2) Based on my knowledge, this Annual Report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
Annual Report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this Annual Report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this Annual Report.
DATE: November 15, 2002
/s/ John S. Shiely
---------------------------------------
John S. Shiely, President and Chief
Executive Officer - Principal Executive
Officer
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, James E. Brenn, certify that:
(1) I have reviewed this Annual Report on Form 10-K of Briggs &
Stratton Corporation;
(2) Based on my knowledge, this Annual Report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
Annual Report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this Annual Report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this Annual Report.
DATE: November 15, 2002
/s/ James E. Brenn
----------------------------------------
James E. Brenn, Senior Vice President
and Chief Financial Officer - Principal
Financial Officer
27
EXHIBIT INDEX
Exhibit
Number Description
23.1 Independent Auditors' Consent*
23.2 Statement Regarding Consent of Arthur Andersen LLP*
99.1 Certification of Principal Executive Officer Pursuant
to Section 906 of Sarbanes-Oxley Act of 2002*
99.2 Certification of Principal Financial Officer Pursuant
to Section 906 of Sarbanes-Oxley Act of 2002*
*Filed herewith
28