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[April 18, 2008]
After Briggs warning, shares hit 15-year low: Lawn equipment sales off to slow spring start
(Milwaukee Journal Sentinel, The (KRT) Via Thomson Dialog NewsEdge) Apr. 18--Investors punished Briggs & Stratton Corp. on Thursday, after the supplier of lawn-mower engines and yard products warned of lower sales and profit because of a slow start to the spring selling season for lawn and garden equipment.
The Wauwatosa manufacturer's shares fell $2.46, or 14%, and closed at $14.82, the lowest point in more than 15 years.
The sell-off in heavy trading came after the company reported a nearly fourfold jump in profit in the third quarter, but lower income than analysts projected.
Earnings per share were 75 cents, 57 cents higher than a year ago but 10 cents below analysts' projections.
"In this market environment, anybody that misses gets abused," said Ned Borland, managing director and director of research at Next Generation Equity Research in Chicago.
The key concern for investors was the company's warning that it might halt production of engines in May because Briggs might be hit by another slow season for sales of lawn and garden equipment.
"They're kind of in this lawn-and-garden-demand no-man's land where it could be a decent season, but they don't have enough information because it's gotten off to a sluggish start," Borland said.
Industry forecasts call for lawn-mower sales to drop 5% to 7% as a result of the housing industry's problems and the economic slowdown. Briggs had been hoping for solid growth this year but projects results similar to those of a year ago.
Inventories are high for engines at mower manufacturers and for mowers at retailers. Because of that, and concerns about consumer sentiment, "We are anticipating much lower sales of both our engines and end products," said John Shiely, Briggs chairman, president and chief executive officer.
But the jury is still out, because the selling season might hit a better stride after a slow start, Shiely said. That's why the company won't stop production of engines immediately, he added.
The company is also seeing slower demand for pressure washers, which homeowners use to clean their decks, and for generators, Shiely and Chief Financial Officer Jim Brenn said.
And the challenges don't stop there, given the rising cost of key commodities such as steel and aluminum.
At current levels, high steel prices could cost Briggs $65 million to $80 million during the fiscal year that starts in July, Brenn said.
Despite the earnings warning, Briggs has no plans to cut its quarterly stock dividend.
"We've always been able to sustain the dividend through tough times," Shiely said.
Also Thursday, Briggs said it discovered accounting errors in annual reports that it has filed with regulators in recent years. Correcting those errors reduced 2005 earnings by $1.8 million, 2006 earnings by $2.3 million and earnings so far this year by $700,000. The corrections increased 2007 earnings by $200,000.
Briggs & Stratton Corp.
3/31 2008 2007 Change
Sales $724.8 $717.0 +1.1
Net income 37.1 9.3 +300.7
EPS (diluted) 0.75 0.18 +316.7
Sales $1,570.3 $1,479.3 +6.2
Net income 22.1 -10.8 n.a.
EPS (diluted) 0.45 -0.22 n.a.
Figures in millions except for earnings per share. Percentages are based on unrounded sales and income figures.
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