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| BGG > SEC Filings for BGG > Form 10-Q on 4-Nov-2009 | All Recent SEC Filings |
4-Nov-2009
Quarterly Report
The following is management's discussion and analysis of the Company's financial condition and results of operations for the periods included in the accompanying consolidated condensed financial statements:
SALES
Consolidated net sales for the first quarter of fiscal 2010 were $325 million, a decrease of $134 million or 29% when compared to the same period a year ago.
First quarter fiscal 2010 net sales for the Engines Segment were $210 million versus $259 million in fiscal 2010, a decrease of $49 million or 19%. This decrease reflects a 22% decrease in engine unit shipments from the prior year attributable to softer consumer demand for lawn and garden equipment and a decrease in demand for engines for portable generators due to the lack of landed hurricanes year over year.
First quarter fiscal 2010 Power Products Segment net sales were $164 million, a $92 million or 36% decrease from the first quarter of fiscal 2009. This decrease was primarily attributable to decreased portable generator sales due to the lack of hurricanes making landfall in the U.S. in this year's first quarter. Additionally, unit shipments of lawn and garden products were soft, especially the premium equipment sold through the dealer channel.
GROSS PROFIT MARGIN
The consolidated gross profit margin improved to 16.1% in the first quarter of fiscal 2010 from 14.1% in the same period last year.
Engines Segment gross profit margin increased to 17.3% in the first quarter of fiscal 2010 from 15.6% in the first quarter of fiscal 2009. This improvement was due to lower production costs, resulting from lower costs for purchased materials and components, lower transportation costs and lower warranty expenses.
The Power Products Segment gross profit margin increased to 13.5% for the first quarter of fiscal 2010 from 8.4% in the first quarter of fiscal 2009. This improvement primarily resulted from lower production costs for materials and components, improved absorption related to the mix of product manufactured and certain pricing improvements.
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Engineering, selling, general and administrative expenses were $60.8 million in the first quarter of fiscal 2010, a decrease of $4.1 million or 6% from the first quarter of fiscal 2009. This decrease is due to planned reductions in salaries, fringes and professional services expenses.
INTEREST EXPENSE
Interest expense for the first quarter of fiscal 2010 was $6.5 million compared to the $7.9 million in fiscal 2009. This decrease is attributable to lower borrowings for working capital and lower average interest rates.
PROVISION FOR INCOME TAXES
The effective tax rate was 36% versus the 71% used in the first quarter last year. The effective tax rate for the first quarter of fiscal 2010 was significantly lower than the 2009 period because 2009 included the favorable tax impact of foreign dividends.
Cash provided by operating activities in the first quarter of fiscal 2010 was $11.9 million, a $14.0 million improvement from the $2.1 million used by operating activities in the first quarter of fiscal 2009. This improvement was primarily attributable to $17.1 million less of working capital requirements compared to the first quarter of fiscal 2009, which was primarily due to a $63.1 million reduction in accounts receivable offset by a $44.0 million increase in inventory.
Cash used by investing activities was $7.0 million and $34.4 million in the first quarters of fiscal 2010 and fiscal 2009, respectively. The $27.4 million decrease was primarily the result of the absence of the $24.8 million used for the acquisition of Victa Lawncare Pty. Ltd. in the first quarter of fiscal 2009 and planned reductions to plant and equipment spending.
Cash provided by financing activities was $4.8 million and $38.1 million in the first quarters of fiscal 2010 and fiscal 2009, respectively. This decrease is attributable to decreased net borrowings for working capital purposes.
On July 12, 2007, the Company entered into a $500 million amended and restated multicurrency credit agreement. The Amended Credit Agreement ("Revolver") provides a revolving credit facility for up to $500 million in revolving loans, including up to $25 million in swing-line loans. The Revolver has a term of five years and all outstanding borrowings on the Revolver are due and payable on July 12, 2012. As of September 27, 2009, the unused availability of the revolving credit facility was approximately $457 million. This credit facility and the Company's other indebtedness contain restrictive covenants as described in Note 9 of the Notes to the Consolidated Financial Statements of the Company's Annual Report on Form 10-K. As of the end of the first quarter of fiscal 2010, the Company was in compliance with these covenants.
The Company expects capital expenditures to be approximately $40 to $45 million in fiscal 2010. These anticipated expenditures reflect our plans to continue to reinvest in equipment, new products, and capacity enhancements.
The Company is not required to make any contributions to the qualified pension plan during fiscal 2010, but may be required to make contributions in future years depending upon the actual return on plan assets and the funded status of the plan in future periods.
Management believes that available cash, cash generated from operations and existing lines of credit will be adequate to fund the Company's capital requirements for the foreseeable future.
There have been no material changes since the August 27, 2009, filing of the Company's Annual Report on Form 10-K.
There have been no material changes since the August 27, 2009, filing of the Company's Annual Report on Form 10-K.
There have been no material changes in the Company's critical accounting policies since the August 27, 2009 filing of its Annual Report on Form 10-K. As discussed in our annual report, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements.
The most significant accounting estimates inherent in the preparation of our financial statements include a goodwill assessment, estimates as to the realizability of accounts receivable and inventory assets, as well as estimates used in the determination of liabilities related to customer rebates, pension obligations, postretirement benefits, warranty, product liability, group health insurance, litigation and taxation. Various assumptions and other factors underlie the determination of these significant estimates. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and, in some instances, actuarial techniques. The Company re-evaluates these significant factors as facts and circumstances change.
A discussion of new accounting pronouncements is included in the Notes to Consolidated Condensed Financial Statements of this Form 10-Q under the heading New Accounting Pronouncements and incorporated herein by reference.
This report contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. The words "anticipate", "believe", "could", "estimate", "expect", "forecast", "intend", "may", "objective", "plan", "project", "seek", "think", "will", and similar expressions are intended to identify forward-looking statements. The forward-looking statements are based on the company's current views and assumptions and involve risks and uncertainties that include, among other things, the ability to successfully forecast demand for our products and appropriately adjust our manufacturing and inventory levels; changes in our operating expenses; changes in interest rates; the effects of weather on the purchasing patterns of consumers and original equipment manufacturers (OEMs); actions of engine manufacturers and OEMs with whom we compete; the seasonal nature of our business; changes in laws and regulations, including environmental, tax, pension funding and accounting standards; the ability of ourselves and our customers to secure adequate working capital funding and meet related covenants; work stoppages or other consequences of any deterioration in our employee relations; work stoppages by other unions that affect the ability of suppliers or customers to manufacture; acts of war or terrorism that may disrupt our business operations or those of our customers and suppliers; changes in customer and OEM demand; changes in prices of raw materials and parts that we purchase; changes in domestic economic conditions, including housing starts and consumer confidence; changes in the market value of the assets in our defined benefit pension plan and any related funding requirements; changes in foreign economic conditions, including currency rate fluctuations; the actions of customers of our OEM customers; the ability to bring new productive capacity on line efficiently and with good quality; the ability to successfully realize the maximum market value of assets that may require disposal if products or production methods change; new facts that come to light in the future course of litigation proceedings which could affect our assessment of those matters; and other factors that may be disclosed from time to time in our SEC filings or otherwise, including the factors discussed in Item 1A, Risk Factors, of the company's Annual Report on Form 10-K and in its periodic reports on Form 10-Q. Some or all of the factors may be beyond our control. We caution you that any forward-looking statement reflects only our belief at the time the statement is made. We undertake no obligation to
update any forward-looking statement to reflect events or circumstances after the date on which the statement is made.
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