FORM 10-K
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
Commission file number 1-1370
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 (Zip Code)
executive offices)
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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
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Common Stock (par value $0.01 per share) New York Stock Exchange
Common Share Purchase Rights New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: NONE
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. [x]
The aggregate market value of voting stock held by nonaffiliates of the registrant was approximately $1,353,195,000 based on the reported last sale price of such securities as of August 24, 1999.
Number of Shares of Common Stock Outstanding at August 24, 1999: 23,123,389.
Part of Form 10-K Into Which Portions
Document of Document are Incorporated
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Proxy Statement for Annual Meeting
on October 20, 1999 Part III
The Exhibit Index is located on page 30.
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BRIGGS & STRATTON CORPORATION
1999 FORM 10-K - TABLE OF CONTENTS
PART I PAGE
Item 1. Business 1
Item 2. Properties 3
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
Executive Officers of the Registrant 4
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 5
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 11
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 28
PART III
Item 10. Directors and Executive Officers of the Registrant 28
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain Beneficial Owners and Management 28
Item 13. Certain Relationships and Related Transactions 28
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 28
Signatures 29
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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements in Item 1. Business and Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations may contain 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", "estimate", "expect", "objective", and "think" or 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 effects of weather on the purchasing patterns of the Company's customers and end use purchasers of the Company's engines; the seasonal nature of the Company's business; actions of competitors; changes in laws and regulations, including accounting standards; employee relations; customer demand; prices of purchased raw materials and parts; domestic economic conditions, including housing starts and changes in consumer disposable income; foreign economic conditions, including currency rate fluctuations; the ability of the Company's customers and suppliers to meet year 2000 compliance; and unanticipated internal year 2000 issues. Some or all of the factors may be beyond the Company's control.
PART I
ITEM 1. BUSINESS
GENERAL
Briggs & Stratton Corporation is the world's largest producer of air cooled gasoline engines for outdoor power equipment. The Company designs, manufactures, markets and services these products for original equipment manufacturers (OEMs) worldwide. These engines are aluminum alloy gasoline engines ranging from 3 through 25 horsepower.
The Company's engines are used primarily by the lawn and garden equipment industry, which accounted for 77% of fiscal 1999 OEM engine sales. The major lawn and garden equipment applications include walk-behind lawn mowers, riding lawn mowers and garden tillers. The remaining 23% of OEM sales in fiscal 1999 were for use on many products for industrial, construction, agricultural and consumer applications, including generators, pumps and pressure washers. Many retailers specify the Company's engines on the powered equipment they sell, and the Briggs & Stratton name is often featured prominently on a product despite the fact that its engine is just a component. Briggs & Stratton engines are marketed under various brand names including Classic(TM), Sprint(TM), Quattro(TM), Quantum(R), INTEK(TM), I/C(R), Diamond I/C(R), Industrial Plus(TM) and Vanguard(TM).
In fiscal 1999, approximately 21% of the Company's net sales were derived from sales in international markets, primarily to customers in Europe. Briggs & Stratton serves its key international markets through its European regional office in Switzerland, its distribution center in the Netherlands and sales and service subsidiaries in Australia, Austria, Canada, the Czech Republic, France, Germany, Mexico, New Zealand, South Africa, Sweden and the United Kingdom. The Company is a leading supplier of gasoline engines in developed countries where there is an established lawn and garden equipment market. The Company also exports to developing nations where its engines are used in agricultural, marine, construction and other applications.
Briggs & Stratton engines are sold primarily by its worldwide sales force through direct calls on customers. The Company's marketing staff and engineers provide support and technical assistance to its sales force.
Briggs & Stratton also manufactures replacement engines and service parts and sells them to sales and service distributors. The Company owns its principal international distributors. In the United States the distributors are independently owned and operated. These distributors supply service parts and replacement engines directly to approximately 32,000 independently owned authorized service dealers throughout the world. These distributors and service dealers implement Briggs & Stratton's commitment to reliability and service.
CUSTOMERS
The Company's sales are made primarily to original equipment manufacturers. The Company's three largest customers in each of the last three fiscal years were AB Electrolux (including its Frigidaire Home Products group), MTD Products Inc., and Tomkins PLC (including its Murray subsidiary). Sales to each of these customers were more than 10% of net sales in fiscal 1999, 1998 and 1997. Sales to all three combined were 42% of net sales in fiscal 1999 and 46% of net sales in fiscal 1998 and 1997. Under purchasing plans available to all of its gasoline engine customers, the Company typically enters into annual engine supply arrangements with these large customers. The Company has no reason to anticipate a change in this practice or in its historical business relationships with these equipment manufacturers.
Over the past several years, sales in the United States of lawn and garden equipment by mass merchandisers have increased significantly, while sales by independent distributors and dealers have declined. The Company believes that in 1999 more than 75% of all lawn and garden equipment sold in the United States was sold through mass merchandisers such as Wal-Mart, Sears, Home Depot, Lowe's and Kmart. Given the buying power of the mass merchandisers, the Company, through its
customers, has experienced pricing pressure. The Company expects that this trend will continue in the foreseeable future. The Company believes that a similar trend has developed for commercial products for industrial and consumer applications.
COMPETITION
The small gasoline engine industry is highly competitive. The Company's major domestic competitors in engine manufacturing are Tecumseh Products Company, Honda Motor Co., Ltd., Kohler Co. and Kawasaki Heavy Industries, Ltd. Also, two domestic lawn mower manufacturers, Toro Co. under its Lawn-Boy brand, and Honda, manufacture their own engines. Eight Japanese small engine manufacturers, of which Honda and Kawasaki are the largest, compete directly with the Company in world markets in the sale of engines and indirectly through their sale of end products that compete with the end products produced by the Company's customers. Tecumseh Europa S.p.A., located in Italy, is a major competitor in Europe.
The Company believes the major areas of competition from all engine manufacturers include product quality, brand strength, price, timely delivery and service. Other factors affecting competition are short-term market share objectives, short-term profit objectives, exchange rate fluctuations, technology and product support and distribution strength. Briggs & Stratton believes its product value and service reputation have given it strong brand name recognition and enhance its competitive position.
SEASONALITY OF DEMAND
Sales of engines to lawn and garden equipment manufacturers are highly seasonal because of the buying patterns of retail customers. The majority of lawn and garden equipment is sold during the spring and summer months when most lawn care and gardening activities are performed. Sales of lawn and garden equipment are also influenced by weather conditions. Sales in the Company's fiscal third quarter have historically been the highest, while sales in the first fiscal quarter have historically been the lowest.
The sale of lawn and garden equipment has shifted from smaller dealers to larger mass merchandisers, who do not wish to carry large inventories of lawn and garden equipment. In order to efficiently use its capital investments and meet seasonal demand for engines, the Company pursues a balanced production schedule throughout the year, subject to ongoing adjustment to reflect changes in estimated demand, customer inventory levels and other matters outside the control of the Company. Accordingly, inventory levels are generally higher during the first and second fiscal quarters in anticipation of increased customer demand in the third fiscal quarter, at which time inventory levels begin to decrease as sales increase.
Lawn and garden equipment manufacturers have tended to purchase the majority of engines in the Company's third and fourth fiscal quarter. This seasonal pattern results in high inventories and low cash for the Company in the second and the beginning of the third fiscal quarters, with a rapid shift to lower inventories and ultimately higher cash in the latter portion of the third fiscal quarter and in the fourth fiscal quarter.
MANUFACTURING
Briggs & Stratton manufactures engines and parts at the following locations in the United States: Wauwatosa, Wisconsin; Murray, Kentucky; Poplar Bluff and Rolla, Missouri; Auburn, Alabama; and Statesboro, Georgia. The Company has a parts distribution center in Menomonee Falls, Wisconsin. The Company has recently experienced capacity shortages in some of its product offerings. Management believes that such a condition could persist into the future and, accordingly, the Company anticipates adding capacity over the next two fiscal years.
Briggs & Stratton manufactures a majority of the structural components used in its engines, including aluminum die castings and a high percentage of other major components, such as carburetors and ignition systems. The Company purchases certain finished standard commercial
parts such as piston rings, spark plugs, valves, ductile and grey iron castings, zinc die castings and plastic components, some stampings and screw machine parts and smaller quantities of other components. Raw material purchases are principally for aluminum and steel. The Company believes its sources of supply are adequate.
The Company has joint ventures with Daihatsu Motor Company for the manufacture of engines in Japan, with Puling Machinery Works and Yimin Machinery Plant for the production of engines in China, and with Starting Industrial of Japan for the production of rewind starters in the U.S. The Company also has two joint ventures in India. Kirloskar Briggs & Stratton, a joint venture with Kirloskar Oil Engines Ltd., is responsible for sales and distribution of Briggs & Stratton engines and parts in India and assembles and distributes generators and pumps powered by Briggs & Stratton engines. Hero Briggs & Stratton is a joint venture with Hero Motors, part of the Hero Group, for the manufacture of engines and transmissions to be used in two wheel transportation vehicles.
The Company has a strategic relationship with Mitsubishi Heavy Industries (MHI) for the international distribution of air-cooled gasoline engines manufactured by MHI in Japan.
OTHER GENERAL INFORMATION
The Company holds certain patents on features incorporated in its products; however, the success of the Company's business is not considered to be primarily dependent upon patent protection. Licenses, franchises and concessions are not a material factor in the Company's business.
For the years ending June 27, 1999, June 28, 1998 and June 29, 1997, the Company spent approximately $17,920,000, $19,950,000 and $19,525,000, respectively, on Company sponsored research activities relating to the development of new products or the improvement of existing products. Included in fiscal 1998 and fiscal 1997 were costs related to the Company's software business of $3,136,000 and $1,968,000, respectively. This business was sold in the first quarter of the 1999 fiscal year.
The average number of persons employed by the Company during the fiscal year was 7,615. Employment ranged from a low of 7,142 in August 1998 to a high of 7,994 in June 1999.
EXPORT SALES
Export sales for fiscal 1999 were $316,115,000 (21% of total sales), for fiscal 1998 were $288,510,000 (22% of total sales) and for fiscal 1997 were $304,230,000 (23% of total sales). These sales were principally to customers in European countries.
ITEM 2. PROPERTIES
The corporate offices and one of the Company's manufacturing facilities are located in a suburb of Milwaukee, Wisconsin. The Company also has manufacturing facilities in Murray, Kentucky; Poplar Bluff and Rolla, Missouri; Auburn, Alabama and Statesboro, Georgia. These are owned facilities containing 3.6 million square feet of office and production area. The Company occupies warehouse space totalling 400,000 square feet in a suburb of Milwaukee, Wisconsin under a reservation of interest agreement. The Company also leases 80,000 square feet of manufacturing space in the Milwaukee area.
The engine business is seasonal, with demand for engines at its height in the winter and early spring. Engine manufacturing operations run at capacity levels during the peak season, with many operations running three shifts. Engine operations generally run one shift in the summer, when demand is weakest and production is considerably under capacity. During the winter, when finished goods inventories reach their highest levels, owned warehouse space may be insufficient and capacity may be expanded through rented space. Excess warehouse space exists in the spring and summer seasons. The Company's owned properties are well maintained.
The Company leases 200,000 square feet of space to house its European warehouse in the Netherlands and its foreign sales and service operations in Australia, Austria, Canada, the Czech Republic, France, Germany, India, Mexico, New Zealand, Russia, South Africa, Sweden, Switzerland and the United Kingdom.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings that are required to be reported under this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the three months ended June 27, 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT
Name, Age, Position Business Experience for Past Five Years
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FREDERICK P. STRATTON, JR., 60 Mr. Stratton was elected to the position of Chief
Chairman and Chief Executive Officer Executive Officer in May 1977 and Chairman in
(1) (2) (3) November 1986.
JOHN S. SHIELY, 47 Mr. Shiely was elected to his current position in
President and Chief Operating Officer August 1994.
(1) (2)
ROBERT H. ELDRIDGE, 60 Mr. Eldridge was elected to the position of Executive
Executive Vice President and Vice President in April 1995 and Secretary-Treasurer
Secretary-Treasurer (1) in January 1984. He also served as Chief Financial
Officer from April 1995 to October 1998.
MICHAEL D. HAMILTON, 57 Mr. Hamilton was elected to his current position
Executive Vice President - effective June 1989.
Sales and Service
JAMES E. BRENN, 51 Mr. Brenn was elected to his current position in
Senior Vice President and October 1998, after serving as Vice President and
Chief Financial Officer Controller since November 1988.
RICHARD J. FOTSCH, 44 Mr. Fotsch was elected to his current position in May
Senior Vice President and 1999 after serving as Senior Vice President -
General Manager Operations since January 1999. He had previously
held the position Senior Vice President - Engine
Group since July 1997 and prior to that Vice
President; General Manager - Small Engine
Division since May 1993.
HUGO A. KELTZ, 51 Mr. Keltz was elected to his current position in May
Vice President - International 1992.
CURTIS E. LARSON, JR., 51 Mr. Larson was elected to this executive officer
Vice President - Distribution position in October 1995 after serving as Vice
Sales and Service President - Industrial Engine Division since January
1993.
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PAUL M. NEYLON, 52 Mr. Neylon was elected to his current position in
Vice President - Production May 1999, after serving as Vice President -
Operations Support since January 1999. He had
previously held the position of Vice President;
General Manager - Spectrum Division since 1993.
WILLIAM H. REITMAN, 43 Mr. Reitman was elected an executive officer
Vice President - Marketing effective April 20, 1998. He had served as Vice
President Marketing since November 1995, after
serving as Marketing Director - New Ventures since
March 1993.
STEPHEN H. RUGG, 52 Mr. Rugg was elected to his current position in May
Senior Vice President - Sales and Service 1999, after serving as Vice President - Sales since
November 1995. His prior position was Vice
President - Sales and Marketing.
THOMAS R. SAVAGE, 51 Mr. Savage was elected to his current position
Senior Vice President - Administration effective July 1997, after serving as Vice President
Administration and General Counsel since
November 1994. He joined the Company in April
1992 as General Counsel.
TODD J. TESKE, 34 Mr. Teske was elected to his current position in
Controller October 1998, after serving as Assistant Controller
since joining the Company in June 1996. He held the
position of Audit Manager at Arthur Andersen LLP,
a public accounting firm, from 1992 to 1996.
GERALD E. ZITZER, 52 Mr. Zitzer was elected to his current position in
Vice President - Human Resources November 1988.
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(1) Officer is also a Director of the Company.
(2) Member of Executive Committee.
(3) Member of Planning Committee.
Officers are elected annually and serve until they resign, die, are removed, or a different person is appointed to the office.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information required by this Item is incorporated by reference to "Quarterly Financial Data, Dividend and Market Information" on page 27.
ITEM 6. SELECTED FINANCIAL DATA
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Fiscal Year 1999 1998 1997 1996 1995
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(in thousands, except per share data)
SUMMARY OF OPERATIONS
NET SALES .......................... $1,501,726 $1,327,610 $1,316,413 $1,287,029 $1,339,677
GROSS PROFIT ON SALES .............. 305,355 254,674 221,216 261,748 271,618
PROVISION FOR INCOME TAXES ......... 63,670 42,500 37,740 56,640 65,570
NET INCOME ......................... 106,101 70,645 61,565 92,412 104,805
PER SHARE OF COMMON STOCK:
Basic Earnings ................... 4.55 2.86 2.16 3.19 3.62
Diluted Earnings ................. 4.52 2.85 2.15 3.18 3.61
Cash Dividends ................... 1.16 1.12 1.09 1.05 .98
Shareholders' Investment ......... $ 15.77 $ 13.28 $ 13.82 $ 17.30 $ 15.19
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING ....... 23,344 24,666 28,551 28,927 28,927
DILUTED NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING .......... 23,459 24,775 28,678 29,059 29,072
OTHER DATA
SHAREHOLDERS' INVESTMENT ........... $ 365,910 $ 316,488 $ 351,097 $ 500,505 $ 439,478
LONG-TERM DEBT ..................... 113,307 128,102 142,897 60,000 75,000
TOTAL ASSETS ....................... 875,885 793,409 842,189 838,164 798,493
PLANT AND EQUIPMENT ................ 859,848 812,428 796,714 776,638 726,331
PLANT AND EQUIPMENT, NET OF RESERVES 404,454 391,927 396,266 374,212 343,297
PROVISION FOR DEPRECIATION ......... 49,346 47,511 43,345 43,032 44,445
EXPENDITURES FOR PLANT AND EQUIPMENT 65,998 45,893 71,262 77,746 131,034
WORKING CAPITAL .................... $ 176,644 $ 159,101 $ 204,422 $ 266,208 $ 256,075
Current Ratio .................... 1.6 to 1 1.7 to 1 2.0 to 1 2.4 to 1 2.3 to 1
NUMBER OF EMPLOYEES AT YEAR END .... 7,994 7,265 7,661 7,199 6,958
NUMBER OF SHAREHOLDERS AT YEAR END . 4,628 4,911 5,336 5,879 6,792
QUOTED MARKET PRICE:
High ............................. $ 70-15/16 $ 53-3/8 $ 53-5/8 $ 46-7/8 $ 39-1/4
Low .............................. $ 33-11/16 $ 36-7/8 $ 36-1/2 $ 32-3/4 $ 30-1/2
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1999 COMPARED TO FISCAL 1998
Sales
Net sales for fiscal 1999 totaled $1,502 million, an increase of $174 million or 13% when compared to the prior year. This increase was due to a $120 million increase in sales dollars resulting from an 8% increase in unit shipments, a favorable mix change in engines sold of $38 million and $16 million from increased prices.
Gross Profit
The gross profit margin increased to 20% in the 1999 fiscal year from 19% in the preceding year. This increase resulted primarily from the following factors: $16 million of price increases, $15 million attributed to the benefit of higher production during the year and $14 million in lower costs for purchased parts and engines and raw material. Lower aluminum costs, the major raw material used in engines, accounted for $8 million of the lower raw material costs. Offsetting these improvements were a mix shift to lower margin engines of $22 million and inefficiencies of $3 million caused by operating plants at full capacity.
Engineering, Selling, General and Administrative Expenses
Engineering, selling, general and administrative expenses for fiscal 1999 decreased 4% or $5 million compared to fiscal 1998. This decrease was primarily due to a $10 million decrease in costs related to the Company's POWERCOM software business that was sold in the first quarter of this fiscal year. Costs related to implementing the Company's new enterprise-wide information system decreased $2 million between the fiscal years. Offsetting these reductions in costs was a $4 million increase in profit sharing expenses due to improved results and a $1 million increase in research and development expenses.
Interest Expense
Interest expense decreased 12% or $2 million for the 1999 fiscal year compared to the 1998 fiscal year. This decrease was the result of $15 million repayment of long-term debt at the end of the 1998 fiscal year and lower average interest rates on working capital borrowings throughout the year.
Provision for Income Taxes
The effective tax rate decreased to 37.5% in 1999 from 37.6% in the previous year due to lower state income taxes and reductions in other related items.
FISCAL 1998 COMPARED TO FISCAL 1997
Sales
Net sales for fiscal 1998 totaled $1,328 million, up 1% or $11 million from the preceding year. This increase resulted primarily from a $34 million increase in sales dollars due to a 3% increase in engine unit shipments and a $6 million increase in service parts sales due to increased demand. These increases were partially offset by a $19 million decrease in sales dollars due to a mix change to lower horsepower, lower priced engines and a $10 million decrease in revenue from European customers with whom the Company shares currency risk.
Gross Profit
The gross profit margin for the 1998 fiscal year increased to 19% from 17% in the 1997 fiscal year. The primary reason for this favorable change was the lack of the $37 million charge related to an early retirement window. There was also a $2 million increase due to improvements in manufacturing productivity. These were offset by the $10 million in lost gross profit due to the reduced revenue from European customers described above.
Engineering, Selling, General and Administrative Expenses
Engineering, selling, general and administrative expenses increased $12 million or 11% between years. This increase was caused primarily by the costs associated with the new enterprise-wide information system which totaled $7 million (discussed later) and increased costs of new venture activities which totaled $7 million, of which $4 million related to the Company's POWERCOM software business.
Interest Expense
Interest expense for the 1998 fiscal year was $9 million higher than in 1997. This resulted from using increased domestic short-term borrowings to finance seasonal increases in accounts receivable and inventories during the year and an increase in long-term debt over the preceding year. Seasonal borrowings were paid off by the end of the fiscal year.
Provision for Income Taxes
The effective tax rate decreased to 37.6% in 1998 from 38.0% in the previous year. This was due
primarily to reductions in the foreign tax provision and in other tax related items that were individually insignificant.
LIQUIDITY AND CAPITAL RESOURCES
FISCAL YEARS 1999, 1998 AND 1997
Cash flow from operating activities was $114 million, $136 million and $143 million, in fiscal 1999, 1998 and 1997, respectively. The primary source of funds was from net income excluding depreciation. The significant change between fiscal 1999 and fiscal 1998 amounts was due to changes in working capital as explained below.
The fiscal 1999 cash flow from operating activities reflects improved net income, excluding depreciation, of $37 million. Offsetting it is an increased requirement for operating capital of $60 million, caused primarily by strong fourth quarter business which increased year-end receivables and a restoration of inventories to higher year-end levels.
The fiscal 1998 cash flow from operating activities reflects a $7 million increase in accounts receivable and an $18 million decrease in inventories resulting from increased sales late in the last fiscal quarter.
The fiscal 1997 cash flow from operating activities reflects an increase in accounts receivable of $11 million and lower inventories of $11 million resulting from increased sales at the end of the fiscal year when compared to the previous year. Also, increased accounts payable of $17 million caused by the timing of payments, increased accrued liabilities of $5 million resulting primarily from increased profit sharing provisions, and increased federal and state income taxes payable of $4 million caused by the timing of payments, all contributed to the cash flows of the Company.
Net cash used in investing activities amounted to $65 million, $45 million and $51 million in fiscal 1999, 1998 and 1997, respectively. Cash flows used in investing activities included additions to plant and equipment of $66 million, $46 million and $71 million in fiscal 1999, 1998 and 1997, respectively. The fiscal 1999 and 1997 capital expenditures related primarily to reinvestment in equipment and new products. The fiscal 1998 capital expenditures principally related to investment in equipment. The 1997 cash flows from investing activities also included $16 million related to the sale of the Menomonee Falls, Wisconsin facility. The sale of this facility is described under "Other Matters."
Net cash used in financing activities amounted to $73 million, $119 million and $129 million in fiscal 1999, 1998 and 1997, respectively. These financing activities included the repurchase of the Company's common stock, totaling $75 million in 1999, $86 million in 1998 and $180 million in 1997. In each of the fiscal years, $15 million was paid on the 9.21% Senior Notes due 2001. Cash dividends totaled $27 million, $28 million and $31 million in fiscal 1999, 1998 and 1997, respectively. The cash dividends paid decreased from the preceding year because the common stock repurchase program resulted in less stock outstanding. In fiscal 1997, the Company issued ten-year notes which resulted in $98 million of net proceeds from the offering. Proceeds from the exercise of stock options amounted to $45 million in 1999, substantially higher than in prior years due to increased option activity.
Future Liquidity and Capital Resources
The Company has in place a $250 million revolving credit facility to be used to fund seasonal working capital requirements and other financing needs. This credit facility expires in April 2002 and contains certain restrictive covenants. Because the Company plans to use available cash to finance capacity expansions in fiscal 2000 and 2001, the Company will continue to utilize borrowings under the revolving credit facility to fund working capital needs. Accordingly, interest expense should stay approximately the same between years.
In April 1999, the Company's Board of Directors approved capital expenditures of $95 million for fiscal 2000. Of this, the Company expects to spend approximately $75 million in fiscal 2000, with the remainder spent in fiscal 2001. These anticipated expenditures include a significant amount for capacity increases, as well as, continuing investment in equipment and new products.
In May 1997, the Company filed a shelf registration for $175 million of debt securities to be issued periodically. Of this, $75 million has not yet been issued on the registration statement. The Company may decide to offer all or part of the remaining securities depending on many factors, including general economic conditions or cash required for operations.
Management believes that available cash, the credit facility, cash generated from operations, existing lines of credit and access to public debt markets will be adequate to fund the Company's capital requirements for the foreseeable future.
FINANCIAL STRATEGY
Management of the Company subscribes to the premise that the value of the Company is enhanced if the capital invested in the Company's operations yields a cash return that is greater than the Company's cost of capital. Given this belief, the Company implemented this financial strategy by means of a "dutch auction" tender offer (described below) and a public debt offering in fiscal 1997. The Company also continued the repurchase of its outstanding common stock in the open market in fiscal 1999 and 1998. The Company believes this will provide a capital structure that makes greater use of financial leverage without imposing excessive risk on either the Company's shareholders or creditors. The Company also believes that the substitution of lower (after-tax) cost debt for equity in its permanent capital structure will reduce its overall cost of capital and that its profitability and strong cash flows will accommodate the increased use of debt without impairing its ability to finance growth or increase cash dividends per share on its common stock.
The share repurchase program authorized by the Board of Directors in fiscal 1997 for $300 million of its common stock was completed in the second quarter of fiscal 1999. In January 1999, the Board of Directors approved a repurchase of up to 1.3 million additional shares of the Company's common stock in open market or private transactions. Under this authorization, stock repurchases totaling .7 million shares were made in the second half of the year in open market transactions. The latest share repurchase authorization is intended to minimize dilution from shares issued for employee benefit plans and will be funded from available cash.
Also as a part of its financial strategy, subject to the discretion of its Board of Directors and the requirements of applicable law, the Company currently intends to increase future cash dividends per share at a rate approximating the inflation rate.
OTHER MATTERS
Year 2000 Issues
The Company is continuing implementation of an overall comprehensive Year 2000
Readiness Program to address year 2000 issues. This program is based on the
Automotive Industry Action Group's model system consisting of five steps:
Awareness; Inventory and Assessment; Remediation; Testing; and Readiness
Certification. Progress is reported to the Company's Board of Directors
regularly.
The Company completed implementation of its new enterprise-wide information system in January of 1999. All business transactions are being processed on the new system which addresses the great majority of information technology year 2000 computer issues. Other internal year 2000 issues not directly related to the previously described project are being addressed and tested. These are expected to be completed by October of 1999.
Project expenditures to date total $33 million. The Company expects any additional incremental costs to be immaterial.
The Company completed assessment of its non-information technology systems. An outside auditor was utilized to review these systems. The vast majority of remedial activities have been completed without material incremental costs. All remedial activities are expected to be completed by October 1999.
Random testing of both information and non-information systems has been conducted and will continue to be conducted until the end of the calendar year in order to ensure year 2000 readiness.
The Company's largest customers have certified that they will be year 2000 compliant before the end of calendar year 1999 as to their relationships with the Company. The Company's vendors and financial institutions have also been surveyed for year 2000 readiness. Contingency plans have been developed to ensure that the Company will be able to continue operations for up to three days without deliveries. The Company will not be open for operations from December 31, 1999 to January 3, 2000. All major financial institutions have provided the Company with year 2000 preparedness statements.
The Company will utilize its December 31, 1999 to January 3, 2000 shutdown period to back up its systems, re-start those systems and resolve any open issues.
The last payroll for calendar year 1999 will be issued on December 29, 1999 and all arrangements for payment of the January 3, 2000 dividend payment will be made prior to December 31, 1999.
The Company believes its Year 2000 Program is adequate to detect in advance year 2000 compliance issues, and that it has the necessary resources to remedy them. However, the year 2000 problem has many aspects and potential consequences, some of which are not reasonably foreseeable, and there can be no assurance that unforeseen consequences will not arise.
Emissions
The U.S. Environmental Protection Agency (EPA) has developed national emission standards under a two phase process for small air cooled engines. The Company currently has a complete product offering which complies with EPA's Phase I engine emission standards. The EPA finalized its Phase II emission standards in March of 1999. The Phase II program will impose more stringent standards over the useful life of the engine and will be phased in from 2001 to 2005 for Class II (225 or greater cubic centimeter displacement) engines and from 2003 to 2008 for Class I (under 225 cubic centimeter displacement) engines. The Company does not believe compliance with the new standards will have a material adverse effect on its financial position or results of operations.
The Company submitted a supplemental compliance plan to the California Air Resources Board (CARB), as required of companies which sell more than a threshold number of Class I engines into California. The objective of the plan is to achieve additional reductions in extreme non-attainment areas. While CARB's aggressive program will result in a reduced product offering by the Company in California, the Company does not believe the California program will have a material effect on the financial condition or results of operations of the Company.
Sale of the Menomonee Falls, Wisconsin Facility
The sale of the Company's Menomonee Falls, Wisconsin facility for approximately $16.0 million was completed during fiscal 1997. 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 Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate," the Company is required to account for this as a financing transaction as the Company 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 a 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 fair value lease income on the non-Company 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 million to $12 million. The annual cost of operating the warehouse portion of the facility is not material.
New Accounting Pronouncements
In June 1998 the Financial Accounting Standards Board issued Financial Accounting Standard (FAS) No. 133 "Accounting for Derivative Instruments and Hedging Activities". This new standard as amended will be effective for the Company in fiscal 2001, and requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Any fair value changes will be recorded in net income or comprehensive income. The Company does not expect that the adoption of this standard will have a material effect on the results of operations.
Subsequent Event - Disposition of Foundry Assets
Effective August 23, 1999, the Company contributed certain assets related to its foundry operations to a third party. In exchange for this contribution, the Company received $23.6 million of cash and preferred stock with a face value of $45 million. The provisions of the preferred stock include a 15% cumulative dividend and is convertible into at least 31% of the common stock of the third party. The disposition will result in a gain.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in foreign exchange and interest rates. To reduce the risk from changes in foreign exchange rates, the Company selectively uses financial instruments. The Company does not hold or issue financial instruments for trading purposes.
FOREIGN CURRENCY
The Company's earnings are affected by fluctuations in the value of the U.S. dollar against foreign currencies primarily as a result of purchasing engines from its Japanese joint venture. The Company's foreign subsidiaries' earnings are also influenced by fluctuations of the local currency against the U.S. dollar as these subsidiaries purchase inventory from the parent in U.S. dollars. Forward foreign exchange contracts are used to partially hedge against the earnings effects of such fluctuations. At June 27, 1999, the Company had the following forward foreign exchange contracts outstanding at the Fair Value Gains and (Losses) shown (in thousands):
Notional U.S. Fair Value
Currency Value Dollars Gains and (Losses)
-------- ----- ------- ------------------
Japanese Yen 2,426,000 20,400 ($265)
Australian Dollars 10,000 6,400 (288)
Canadian Dollars 2,000 1,300 9
|
All of the above contracts expire in less than one year.
Although the Company sells its domestically produced engines to foreign customers in U.S. dollars, the Company has shared some of the currency risk with customers for certain sales transactions. Accordingly, the Company is exposed to fluctuations in foreign exchange rates, primarily related to the U.S. dollar/Euro rate. Historically, the Company has managed these risks through limitations on the amount of sharing provided to customers. These programs are generally for one year.
Fluctuations in currency exchange rates may also impact the stockholders' equity of the Company. Amounts invested in the Company's non-U.S. subsidiaries are translated into U.S. dollars at the exchange rates in effect at year end. The resulting translation adjustments are recorded in stockholders' equity as cumulative translation adjustments. The cumulative translation adjustments component of stockholders' equity decreased $0.2 million during the year. Using the year-end exchange rates, the total amount invested in subsidiaries at June 27, 1999 was approximately $19.1 million.
INTEREST RATES
The Company is exposed to interest rate fluctuations on its borrowings. The Company manages its interest rate exposure through a combination of fixed and variable rate debt. Depending on general economic conditions, the Company has typically used variable rate debt for short-term borrowings and fixed rate debt for longer-term borrowings.
At June 27, 1999, the Company had the following short-term loans outstanding
(amount in thousands):
Average Annual
Currency Amount Interest Rate
-------- ------ -------------
German Mark 20,519 5.25%
Dutch Guider 1,488 5.00%
Canadian Dollars 2,971 5.51%
Swedish Krona 1,000 8.05%
French Franc 200 5.19%
U.S. Dollars 4,335 5.31%
|
All of the above loans carry variable interest rates.
Long-term loans consisted of the following (amounts in thousands):
Description Amount Maturity
----------- ------ --------
9.21% Senior Notes $30,000 $15,000 in Fiscal 2000 and
2001
7.25% Notes 98,307 2007
|
Each of the above loans carries a fixed rate of interest.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ASSETS 1999 1998
---- ----
CURRENT ASSETS:
Cash and Cash Equivalents................................................. $ 60,806 $ 84,527
Receivables, Less Reserves of $1,516 and $1,537, Respectively............. 194,096 136,629
Inventories -
Finished Products and Parts............................................. 72,196 58,975
Work in Process......................................................... 59,665 45,217
Raw Materials........................................................... 5,587 3,684
-------- --------
Total Inventories..................................................... 137,448 107,876
Future Income Tax Benefits................................................ 34,383 31,287
Prepaid Expenses.......................................................... 32,413 21,727
-------- --------
Total Current Assets.................................................. 459,146 382,046
MARKETABLE SECURITIES...................................................... 2,730 -
DEFERRED INCOME TAX ASSETS................................................. 2,039 9,555
CAPITALIZED SOFTWARE....................................................... 7,516 9,881
PLANT AND EQUIPMENT:
Land and Land Improvements................................................ 16,024 15,781
Buildings................................................................. 151,035 148,868
Machinery and Equipment................................................... 651,129 630,043
Construction in Progress.................................................. 41,660 17,736
-------- --------
859,848 812,428
Less - Accumulated Depreciation........................................... 455,394 420,501
-------- --------
Total Plant and Equipment, Net........................................ 404,454 391,927
-------- --------
$875,885 $793,409
======== ========
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The accompanying notes to consolidated financial statements are an integral part of these statements.
LIABILITIES AND SHAREHOLDERS' INVESTMENT 1999 1998
---- ----
CURRENT LIABILITIES:
Accounts Payable...................................................... $ 117,757 $ 76,915
Domestic Notes Payable................................................ 4,335 4,700
Foreign Loans......................................................... 13,824 14,336
Current Maturities on Long-Term Debt.................................. 15,000 15,000
Accrued Liabilities -
Wages and Salaries.................................................. 38,744 29,502
Warranty............................................................ 36,978 29,565
Other............................................................... 43,963 42,398
--------- ---------
Total Accrued Liabilities......................................... 119,685 101,465
Federal and State Income Taxes........................................ 11,901 10,529
--------- ---------
Total Current Liabilities......................................... 282,502 222,945
DEFERRED REVENUE ON SALE OF PLANT AND EQUIPMENT......................... 15,798 15,893
ACCRUED PENSION COST.................................................... 17,306 26,477
ACCRUED EMPLOYEE BENEFITS............................................... 13,185 12,571
ACCRUED POSTRETIREMENT HEALTH CARE OBLIGATION........................... 67,877 70,933
LONG-TERM DEBT.......................................................... 113,307 128,102
COMMITMENTS AND CONTINGENCIES...........................................
SHAREHOLDERS' INVESTMENT
Common Stock-
Authorized 60,000 Shares $.01 Par Value,
Issued 28,927 in 1999 and 1998.................................... 289 289
Additional Paid-In Capital............................................ 37,657 37,776
Retained Earnings..................................................... 612,807 533,805
Accumulated Other Comprehensive Income................................ (1,732) (2,110)
Unearned Compensation on Restricted Stock............................. (235) --
Treasury Stock at cost,
5,727 Shares in 1999 and 5,103 in 1998.............................. (282,876) (253,272)
--------- ---------
Total Shareholders' Investment.................................... 365,910 316,488
--------- ---------
$ 875,885 $ 793,409
========= =========
|
The accompanying notes to consolidated financial statements are an integral part of these statements.
1999 1998 1997
---- ---- ----
NET SALES........................................ $1,501,726 $1,327,610 $1,316,413
COST OF GOODS SOLD............................... 1,196,371 1,072,936 1,095,197
---------- ---------- ----------
Gross Profit on Sales......................... 305,355 254,674 221,216
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES......................... 125,219 129,986 117,497
---------- ---------- ----------
Income from Operations........................ 180,136 124,688 103,719
INTEREST EXPENSE................................. (17,024) (19,352) (9,880)
OTHER INCOME, Net................................ 6,659 7,809 5,466
---------- ---------- ----------
Income Before Provision for Income Taxes...... 169,771 113,145 99,305
PROVISION FOR INCOME TAXES....................... 63,670 42,500 37,740
---------- ---------- ----------
NET INCOME....................................... $ 106,101 $ 70,645 $ 61,565
========== ========== ==========
Average Shares Outstanding.................... 23,344 24,666 28,551
BASIC EARNINGS PER SHARE......................... $ 4.55 $ 2.86 $ 2.16
========== ========== ==========
Diluted Average Shares Outstanding............ 23,459 24,775 28,678
DILUTED EARNINGS PER SHARE....................... $ 4.52 $ 2.85 $ 2.15
========== ========== ==========
|
The accompanying notes to consolidated financial statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
Accumulated
Additional Other
Common Paid-In Retained Comprehen-
Stock Capital Earnings sive Income
------ ---------- -------- ------------
BALANCES, JUNE 30, 1996 $289 $40,898 $459,666 $ (348)
Comprehensive Income -
Net Income - - 61,565 -
Foreign Currency Translation
Adjustments - - - (685)
Total Comprehensive Income - - - -
Cash Dividends Paid
($1.09 per share) - - (30,549) -
Purchase of Common Stock
for Treasury - - - -
Exercise of Stock Options - (365) - -
-------------------------------------------------------------------------
BALANCES, JUNE 29, 1997 $289 $40,533 $490,682 $(1,033)
Comprehensive Income -
Net Income - - 70,645 -
Foreign Currency Translation
Adjustments - - - (1,077)
Total Comprehensive Income - - - -
Cash Dividends Paid
($1.12 per share) - - (27,522) -
Purchase of Common Stock
for Treasury - - - -
Exercise of Stock Options - (2,757) - -
-------------------------------------------------------------------------
BALANCES, JUNE 28, 1998 $289 $37,776 $533,805 $(2,110)
Comprehensive Income -
Net Income - - 106,101 -
Foreign Currency Translation
Adjustments - - - (199)
Unrealized Gain on Marketable
Securities, net of tax of $368 - - - 577
Total Comprehensive Income - - - -
Cash Dividends Paid
($1.16 per share) - - (27,099) -
Purchase of Common Stock
for Treasury - - - -
Exercise of Stock Options - (13) - -
Restricted Stock Issued - (106) - -
Amortization of Unearned
Compensation - - - -
-------------------------------------------------------------------------
BALANCES, JUNE 27, 1999 $289 $37,657 $612,807 $(1,732)
=========================================================================
Unearned
Compensation
on Restricted Treasury Comprehensive
Stock Stock Income
------------- -------- -------------
BALANCES, JUNE 30, 1996 $ - $ -
Comprehensive Income -
Net Income - - $ 61,565
Foreign Currency Translation
Adjustments - - (685)
--------
Total Comprehensive Income - - $ 60,880
========
Cash Dividends Paid
($1.09 per share) - -
Purchase of Common Stock
for Treasury - (179,924)
Exercise of Stock Options - 550
----------------------------
BALANCES, JUNE 29, 1997 $ - $(179,374)
Comprehensive Income -
Net Income - - $ 70,645
Foreign Currency Translation
Adjustments - - (1,077)
--------
Total Comprehensive Income - - $ 69,568
========
Cash Dividends Paid
($1.12 per share) - -
Purchase of Common Stock
for Treasury - (85,943)
Exercise of Stock Options - 12,045
----------------------------
BALANCES, JUNE 28, 1998 $ - $(253,272)
Comprehensive Income -
Net Income - - $106,101
Foreign Currency Translation
Adjustments - - (199)
Unrealized Gain on Marketable
Securities, net of tax of $368 - - 577
--------
Total Comprehensive Income - - $106,479
========
Cash Dividends Paid
($1.16 per share) - -
Purchase of Common Stock
for Treasury - (75,141)
Exercise of Stock Options - 45,143
Restricted Stock Issued (288) 394
Amortization of Unearned
Compensation 53 -
----------------------------
BALANCES, JUNE 27, 1999 $ (235) $(282,876)
============================
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The accompanying notes to consolidated financial statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOW
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 106,101 $ 70,645 $ 61,565
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities -
Depreciation and Amortization 49,604 47,716 43,362
Loss on Disposition of Plant and Equipment 2,355 1,973 1,608
Provision (Credit) for Deferred Income Taxes 4,052 7,735 (16,105)
Change in Operating Assets and Liabilities -
Increase in Receivables (58,738) (6,752) (10,531)
(Increase) Decrease in Inventories (29,570) 18,081 11,446
Increase in Prepaid Expenses (10,805) (3,606) (2,396)
Increase in Accounts Payable,
Accrued Liabilities and Income Taxes 61,697 8,274 25,378
Other, Net (10,748) (7,676) 28,590
--------- --------- ---------
Net Cash Provided by Operating Activities 113,948 136,390 142,917
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Plant and Equipment (65,998) (45,893) (71,262)
Proceeds Received on Sale of Plant and Equipment 1,142 620 4,133
Proceeds Received on Sale of Menomonee Falls,
Wisconsin Facility -- -- 15,966
--------- --------- ---------
Net Cash Used in Investing Activities (64,856) (45,273) (51,163)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (Repayments) Borrowings on Loans and Notes Payable (401) 677 (1,563)
Net Borrowings on 7.25% Notes Due 2007 -- -- 97,880
Repayment on 9.21% Senior Notes Due 2001 (15,000) (15,000) (15,000)
Cash Dividends Paid (27,099) (27,522) (30,549)
Purchase of Common Stock for Treasury (75,141) (85,943) (179,924)
Proceeds from Exercise of Stock Options 45,130 9,288 185
--------- --------- ---------
Net Cash Used in Financing Activities (72,511) (118,500) (128,971)
--------- --------- ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS (302) (949) (563)
--------- --------- ---------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (23,721) (28,332) (37,780)
CASH AND CASH EQUIVALENTS:
Beginning of Year 84,527 112,859 150,639
--------- --------- ---------
End of Year $ 60,806 $ 84,527 $ 112,859
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest Paid $ 17,025 $ 17,989 $ 9,298
========= ========= =========
Income Taxes Paid $ 54,491 $ 33,352 $ 49,707
========= ========= =========
|
The accompanying notes to consolidated financial statements are an integral part of these statements.
(1) NATURE OF OPERATIONS:
Briggs & Stratton Corporation (the Company) is a U.S. based producer of air
cooled gasoline engines. These engines are sold primarily to original equipment
manufacturers of lawn and garden equipment and other gasoline engine powered
equipment worldwide.
(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 1999, 1998 and
1997 fiscal years were 52 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 Briggs & Stratton Corporation 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 generally accepted accounting principles 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 could 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 a 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 89% of total inventories at June 27, 1999, 88% at June 28, 1998 and 93% at June 29, 1997. The cost for the remaining portion of the inventories was determined using the first-in, first-out (FIFO) method. If the FIFO inventory valuation method had been used exclusively, inventories would have been $43,900,000, $48,100,000 and $48,894,000 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.
Marketable Securities: This caption represents stock received in the sale of the Company's POWERCOM software business at the end of the first quarter of fiscal 1999. These securities are being classified as available-for-sale and are being reported at fair market value. The unrealized gain incurred on this stock is recorded as Unrealized Gain on Marketable Securities in the Shareholders' Investment section of the balance sheet.
Capitalized Software: This caption 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 $5,655,000 as of June 27, 1999, and $7,137,000 as of June 28, 1998. Included in the 1998 fiscal year ending balance is $1,891,000 of amortization related to the Company's software business, which was sold in the first quarter of fiscal 1999.
Plant and Equipment and Depreciation: Plant and equipment is stated at cost, and depreciation is computed using the straight-line method at rates based upon the estimated useful lives of the assets.
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.
Deferred Revenue on Sale of Plant & Equipment: The sale of the Company's Menomonee Falls, Wisconsin facility for approximately $16.0 million was completed at the beginning of the fiscal quarter ended December 29, 1996. 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 Statement of Financial Accounting Standards (FAS) No. 66, "Accounting for Sales of Real Estate," the Company is required to account for this as a financing transaction as the Company 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 a 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-Company 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 million to $12 million. The annual cost of operating the warehouse portion of the facility is not material.
Accrued Employee Benefits: The Company's life insurance program includes payment of a death benefit to beneficiaries of retired employees. The Company accrues for the estimated cost of these benefits over the estimated working life of the employee. Past service costs for all retired employees have been fully provided for. The Company also accrues for the estimated cost of supplemental retirement and death benefit agreements with executive officers.
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 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 $17,920,000 in 1999, $19,950,000 in 1998 and $19,525,000 in 1997. Included in the fiscal 1998 and fiscal 1997 amounts were software development costs related to the Company's software business of $3,136,000 and $1,968,000, respectively.
Advertising Costs: Advertising costs, included in Engineering, Selling, General and Administrative Expenses on the accompanying Consolidated Statement of Earnings, are expensed as incurred. These expenses totaled $7,724,000 in 1999, $7,325,000 in 1998 and $7,989,000 in 1997.
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 adopted Financial Accounting Standard No. 128 during the second quarter of 1998. 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.
Earnings per share of common stock are computed based on the weighted average number of shares outstanding during each period. The Company's ongoing share repurchase program may affect the year-to-date comparisons.
Comprehensive Income: During fiscal 1999 the Company adopted Statement of Financial Accounting Standard (FAS) No. 130, "Reporting Comprehensive Income". This statement 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 certain 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 which encomposes net income, unrealized gain on marketable securities and foreign currency translation in the Consolidated Statement of Shareholder's Investment.
Accumulated
Unrealized Other
Gain on Cumulative Compre-
Marketable Translation hensive
Securities Adjustments Income
---------- ----------- -----------
Balance at June 30, 1996......... $ -- $ (348) $ (348)
Current year change.............. -- (685) (685)
---------- ----------- -----------
Balance at June 29, 1997......... -- (1,033) (1,033)
Current year change.............. -- (1,077) (1,077)
---------- ----------- -----------
Balance at June 28, 1998......... -- (2,110) (2,110)
Current year change.............. 577 (199) 378
---------- ----------- -----------
BALANCE AT JUNE 27, 1999......... $ 577 $ (2,309) $ (1,732)
========== =========== ===========
|
Derivatives: The Company uses derivative financial instruments to manage its foreign currency exposures. Gains and losses relating to hedges of probable transactions with noncontrolled subsidiaries and third parties are deferred and recognized as adjustments of carrying amounts when the transaction occurs. Gains and losses on hedges of transactions that are not probable of occurring and hedges of transactions with controlled subsidiaries are recognized in the Company's results of operations.
(3) INCOME TAXES:
The provision for income taxes consists of the following (in thousands of dollars):
Current 1999 1998 1997
---- ---- ----
Federal....................... $ 51,344 $ 29,295 $ 45,474
State......................... 7,014 4,442 6,723
Foreign....................... 1,260 1,028 1,648
-------- -------- --------
59,618 34,765 53,845
Deferred........................ 4,052 7,735 (16,105)
-------- -------- --------
Total........................... $ 63,670 $ 42,500 $ 37,740
======== ======== ========
|
A reconciliation of the U.S. statutory tax rates to the effective tax rates follows:
1999 1998 1997
---- ---- ----
U.S. statutory rate................. 35.0% 35.0% 35.0%
State taxes, net of
Federal tax benefit............... 2.9% 3.1% 3.1%
Foreign Sales Corporation
tax benefit....................... (.5%) (.8%) (.9%)
Other............................... .1% .3% .8%
---- ---- ----
Effective tax rate.................. 37.5% 37.6% 38.0%
==== ==== ====
|
The components of deferred tax assets and liabilities at the end of the fiscal year were (in thousands of dollars):
1999 1998
-------- --------
Future Income Tax Benefits:
Inventory...................... $ 3,402 $ 2,212
Payroll related accruals....... 4,363 3,602
Warranty reserves.............. 14,421 11,531
Other accrued liabilities...... 12,026 11,542
Miscellaneous.................. 171 2,400
-------- --------
$ 34,383 $ 31,287
======== ========
1999 1998
-------- --------
Deferred Income Taxes:
Difference between book and
tax methods applied to
maintenance and supply
inventories................... $ 11,463 $ 11,198
Pension cost................... 3,345 7,137
Accumulated depreciation....... (56,131) (53,109)
Accrued employee benefits...... 9,142 8,529
Postretirement
health care obligation........ 26,472 27,664
Deferred revenue on sale
of plant & equipment.......... 6,161 6,198
Miscellaneous.................. 1,587 1,938
-------- --------
$ 2,039 $ 9,555
======== ========
|
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 $8,100,000 at June 27, 1999. 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.
(4) GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS:
The Company reviewed the criteria for determining segments of an operating segment in accordance with FAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" and concluded that it operates as one segment. Geographic sales by the location in which the sale originated is as follows (in thousands of dollars):
1999 1998 1997
---- ---- ----
United States.................. $1,422,988 $1,258,609 $1,252,359
All Other Countries............ 78,738 69,001 64,054
---------- ---------- ----------
Total.......................... $1,501,726 $1,327,610 $1,316,413
========== ========== ==========
|
The Company has no material long lived assets in an individual foreign country.
In the fiscal years 1999, 1998 and 1997, 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 sales):
1999 1998 1997
---- ---- ----
Customer Sales % Sales % Sales %
----- --- ----- --- ----- ---
A $250,755 17% $235,552 18% $282,428 21%
B 219,209 14% 203,931 15% 180,770 14%
C 161,857 11% 165,937 13% 142,840 11%
-------- -- -------- -- -------- --
$631,821 42% $605,420 46% $606,038 46%
======== == ======== == ======== ==
|
(5) INDEBTEDNESS:
The Company has access to a $250,000,000 revolving credit facility (the Credit Facility) which expires in April 2002. The Company also has access to additional domestic lines of credit totaling $18,000,000 which remain in effect until canceled by either party. They provide amounts for short-term use at the then prevailing rate. There are no significant compensating balance requirements for any of these lines, and there were no borrowings at June 27, 1999 using these lines or the Credit Facility.
Borrowings under the Credit Facility by the Company bear interest at a rate per annum equal to, at its option, either:
(1) the higher of (a) the bank's reference rate or (b) 0.5% per annum above the Federal Funds rate; or
(2) LIBOR plus a margin that may be adjusted up or down based on the Company's debt ratings.
The Credit Facility contains certain restrictive covenants that require the Company to maintain certain financial conditions including a maximum limit on the ratio of debt to capital and a minimum fixed charge coverage ratio. The Credit Facility imposes limitations on liens, certain indebtedness, the sales of assets and certain investments.
The following data relates to domestic notes payable (in thousands of dollars):
1999 1998
---- ----
Balance at
Fiscal Year End............... $ 4,335 $ 4,700
Weighted Average
Interest Rate at
Fiscal Year End............... 5.31% 5.94%
|
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 $9,960,000, expire at various times through April, 2000 and are renewable. None of these arrangements had material commitment fees or compensating balance requirements.
The following information relates to foreign loans (in thousands of dollars):
1999 1998
---- ----
Balance at
Fiscal Year End............... $ 13,824 $ 14,336
Weighted Average
Interest Rate at
Fiscal Year End............... 5.30% 4.97%
|
The Long-Term Debt caption consists of the following (in thousands of dollars):
1999 1998
---- ----
9.21% Senior Notes Due 2001
at Face Amount................ $ 30,000 $ 45,000
7.25% Notes Due 2007, Net of
Unamortized Discount of
$1,693 in 1999 and
$1,898 in 1998................ 98,307 98,102
-------- --------
$128,307 $143,102
Less Current Maturities......... 15,000 15,000
-------- --------
Total Long-Term Debt.......... $113,307 $128,102
======== ========
|
The 9.21% Senior Notes are due June 15, 2001. Payments on these notes are due in five equal annual installments beginning in 1997. The notes include covenants that limit total borrowings, require maintenance of a minimum net worth and set certain restrictions on the sale or collateralizing of the Company's assets.
The 7.25% notes are due September 15, 2007. No principal payments are due before that date. These notes have covenants that limit secured funded debt and certain sale-leaseback transactions.
(6) OTHER INCOME:
The components of other income (expense) are (in thousands of dollars):
1999 1998 1997
---- ---- ----
Interest income............. $ 1,993 $ 2,720 $ 3,981
Loss on the
disposition of
plant and equipment........ (2,355) (1,973) (1,608)
Income from joint
ventures................... 5,442 5,232 3,026
Other items................. 1,579 1,830 67
------- ------- -------
Total....................... $ 6,659 $ 7,809 $ 5,466
======= ======= =======
|
(7) COMMITMENTS AND CONTINGENCIES:
The Company is a 50% guarantor on bank loans of three unconsolidated joint ventures. They are in Japan for the manufacture of engines, in the United States for the manufacture of parts and in India for the manufacture of engines and parts. These bank loans totaled approximately $3,100,000 at the end of 1999.
Product and general liability claims arise against the Company from time to time in the ordinary course of business. The Company is self-insured for future claims up to $1 million per claim. Accordingly, a reserve is maintained for the estimated costs of such claims. At June 27, 1999 and June 28, 1998, the reserve for product and general liability claims was $6.8 million and $5.8 million, respectively, based on available information. There is inherent uncertainty as to the eventual resolution of unsettled claims. Management, however, believes that any losses in excess of established reserves will not have a material effect on the Company's financial condition or results of operations.
The Company has no material commitments for materials or capital expenditures at June 27, 1999.
(8) STOCK OPTIONS:
The Company has a Stock Incentive Plan under which 3,361,935 shares of common stock have been reserved for issuance. The Company accounts for the plan under Accounting Principles Board Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with FAS 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:
1999 1998 1997
---- ---- ----
Net Income (in thousands):
As Reported............. $106,101 $70,645 $61,565
Pro Forma............... $105,283 $69,574 $60,777
Basic Earnings Per Share:
As Reported............. $4.55 $2.86 $2.16
Pro Forma............... $4.51 $2.82 $2.13
Diluted Earnings Per Share:
As Reported............. $4.52 $2.85 $2.15
Pro Forma............... $4.49 $2.81 $2.12
|
Because the FAS No. 123 method of accounting has not been applied to options granted prior to July 2, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years.
Information on the options outstanding is as follows:
Wtd. Avg.
Shares Ex. Price
------ ---------
Balance, June 30, 1996........... 1,704,531 $ 42.98
Granted during the year.......... 106,550 53.30
Exercised during the year........ (24,369) 17.26
---------
Balance, June 29, 1997........... 1,786,712 $ 43.95
Granted during the year.......... 241,980 65.69
Exercised during the year........ (236,873) 35.65
---------
Balance, June 28, 1998........... 1,791,819 $ 47.98
Granted during the year.......... 354,020 44.98
Exercised during the year........ (926,000) 45.30
Expired during the year.......... (177,828) 48.37
---------
Balance, June 27, 1999........... 1,042,011 $ 49.28
=========
|
Grant Summary
--------------------------------------------------------------------------------
Fiscal Grant Exercise Date Options Expiration
Year Date Price (a) Exercisable Outstanding Date
------ ----- --------- ----------- ----------- ----------
1990 2-20-90 $13.014 50%, 1-1-94; 1,076 2-19-00
50%, 1-1-95
1991 2-19-91 14.524 50%, 1-1-95; 20,345 2-18-01
50%, 1-1-96
1992 5-18-92 21.525 50%, 1-1-96; 71,514 5-17-02
50%, 1-1-97
1995 8-12-94 45.854 8-12-97 31,514 8-12-99
1996 8-7-95 49.080 8-7-98 215,012 8-7-00
1997 8-6-96 53.300 8-6-99 106,550 8-6-01
1998 8-5-97 65.690 8-5-00 241,980 8-5-02
1999 8-5-98 44.980 8-5-01 354,020 8-5-03
|
There were no options granted in fiscal 1993. Options granted in fiscal 1994 expired in fiscal 1999.
(a) Exercise prices of earlier grants have been adjusted as appropriate to reflect a two-for-one stock split in October 1994 and the spin-off of the Company's lock business in February 1995.
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 as follows:
Options granted during 1999 1998 1997
---- ---- ----
Grant date fair value......... $5.04 $5.98 $5.42
Assumptions:
Risk-free interest rates.... 5.4% 6.1% 6.3%
Expected volatility......... 22.3% 20.4% 20.6%
Expected dividend yield..... 2.5% 2.6% 2.5%
Expected term (in years).... 5.0 5.0 5.0
|
(9) 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 certain
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.
(10) FOREIGN EXCHANGE RISK MANAGEMENT:
The Company enters into forward exchange contracts to hedge purchase commitments
denominated in foreign currencies. The term of these currency derivatives does
not exceed one year 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 2.4 billion Japanese yen for $20 million through September, 1999. These contracts are used to hedge the commitments to purchase engines from the Company's Japanese joint venture and accordingly any gain or loss has been deferred at the end of the 1999 fiscal year. There are no significant gains or losses included in the above amounts.
The Company's foreign subsidiaries have the following forward currency contracts outstanding at the end of fiscal 1999:
In Millions
-------------
Local U.S. Latest
Currency Currency Dollars Expiration Date
-------- -------- ------- ---------------
Australian Dollars......... 10.0 6.4 June, 2000
Canadian Dollars........... 2.0 1.3 January, 2000
|
There are no significant gains or losses included in the above amounts.
(11) EMPLOYEE BENEFIT COSTS:
Retirement Plan and Postretirement Benefits The Company has noncontributory, defined benefit retirement plans and postretirement benefit plans covering most Wisconsin employees. Effective the last quarter of fiscal 1999, the Company adopted FAS 132 "Disclosures about Pensions and Other Postretirement Benefits". The following provides a reconcilation of obligations, plan assets and funded status of the plans for the two years indicated, (dollars in thousands):
Pension Benefits Other Postretirement Benefits
----------------------------- ---------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
Actuarial Assumptions:
----------------------
Discounted Rate Used to Determine Present
Value of Projected Benefit Obligation............... 7.0% 7.0% 7.0% 7.0%
Expected Rate of Future Compensation
Level Increases..................................... 5.0% 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................................ $ 649,083 $ 610,485 $ 96,580 $ 91,202
Service Cost......................................... 10,073 9,491 1,437 1,206
Interest Cost........................................ 44,911 44,531 6,466 6,773
Actuarial (Gain) Loss................................ 27,865 24,830 15,924 8,390
Benefits Paid........................................ (42,535) (40,254) (10,922) (10,991)
--------- --------- --------- ---------
Actuarial Present Value of Benefit Obligation
at End of Year...................................... $ 689,397 $ 649,083 $ 109,485 $ 96,580
--------- --------- --------- ---------
Change in Plan Assets:
----------------------
Plan Assets at Fair Value at Beginning of Year....... $ 845,955 $ 767,235 $ - $ -
Actual Return on Plan Assets......................... 82,474 118,445 - -
Employer Contributions............................... 528 529 10,922 10,991
Benefits Paid........................................ (42,535) (40,254) (10,922) (10,991)
--------- --------- --------- ---------
Plan Assets at Fair Value at End of Year............. $ 886,422 $ 845,955 $ - $ -
--------- --------- --------- ---------
Plan Assets in Excess of (Less Than) Projected
Benefit Obligation.................................. $ 197,025 $ 196,872 $(109,485) $ (96,580)
Remaining Unrecognized Net Obligation (Asset)........ (15,301) (20,739) 414 460
Unrecognized Net Loss(Gain).......................... (201,227) (202,625) 24,989 8,587
Unrecognized Prior Service Cost...................... 1,475 (513) 165 756
--------- --------- --------- ---------
Net Amount Recognized at End of Year................. $ (18,028) $ (27,005) $ (83,917) $ (86,777)
========= ========= ========= =========
Amounts Recognized on the Balance Sheets:
-----------------------------------------
Accrued Pension...................................... $ (17,306) $ (26,477) $ - $ -
Accrued Salaries..................................... (722) (528) - -
Accrued Post Retirement Health Care.................. - - (67,877) (70,933)
Other Accruals....................................... - - (4,800) (4,800)
Accrued Employee Benefits............................ - - (11,240) (11,044)
--------- --------- --------- ---------
Net Amount Recognized at End of Year................. $ (18,028) $ (27,005) $ (83,917) $ (86,777)
========= ========= ========= =========
|
The following table summarizes the plans' income and expense for the three years indicated (dollars in thousands):
Pension Benefits Other Postretirement Benefits
--------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
Components of Net Periodic Benefit Cost:
Service Cost-Benefits Earned During the Year. . . . . . . . $ 10,073 $ 9,491 $ 11,687 $ 1,437 $ 1,206 $ 1,359
Interest Cost on Projected Benefit Obligation . . . . . . . 44,911 44,531 41,850 6,466 6,773 6,190
Expected Return on Plan Assets. . . . . . . . . . . . . . . (58,252) (53,881) (50,230) - - -
Amortization of:
Transition Obligation (Asset) . . . . . . . . . . . . . . (5,306) (5,236) (5,118) 47 47 47
Prior Service Cost. . . . . . . . . . . . . . . . . . . . (106) (106) (160) 71 71 71
Actuarial (Gain) Loss . . . . . . . . . . . . . . . . . . 291 273 114 41 - -
-------- -------- -------- -------- -------- --------
Net Periodic Benefit Expense (Income) . . . . . . . . . . . $ (8,389) $ (4,928) $ (1,857) $ 8,062 $ 8,097 $ 7,667
======== ======== ======== ======== ======== ========
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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 $16,555,000, $13,975,000 and $0, respectively for the 1999 fiscal year, and $15,392,000, $12,763,000 and $0, respectively for the 1998 fiscal year. The postretirement benefit plans are unfunded.
The Company offered an early retirement window to certain of its Milwaukee union members during the 1997 fiscal year. As a result, $33,457,000 was added to pension expense and $3,644,000 was added to postretirement health care expense in the fourth quarter of the 1997 fiscal year.
For the other postretirement benefit plans, the assumed early retirement rates were adjusted for participants with over 30 years of service in fiscal 1999. In addition, the postretirement medical coverage was limited to 10 years for coverage prior to age 65.
For measurement purposes a 9% annual rate of increase in the per capita cost of covered health care claims was assumed for the years 1999 through 2000, decreasing gradually to 6% for the 2007. 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 $6,803,000, and would increase the service and interest cost by $836,000 for the year. A corresponding decrease of one percentage point, would decrease the accumulated postretirement benefit by $6,403,000 and decrease the service and interest cost by $788,000 for the 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 a contribution on
behalf of covered employees equal to 2% of each participant's gross income, as
defined. For the fiscal years 1999, 1998 and 1997, the cost to the Company was
$1,919,000, $1,641,000 and $1,352,000, respectively.
Most U.S. employees of the Company may participate in a salary reduction deferred compensation retirement plan. The Company makes matching contributions of $.50 for every $1.00 deferred by a participant to a maximum of 1-1/2% or 3% of each participant's salary, depending upon the participant's group. Company contributions totaled $4,213,000 in 1999, $3,918,000 in 1998 and $3,944,000 in 1997.
Postemployment Benefits
The balance in this reserve at the end of fiscal 1999 was $1,946,000 and at the
end of fiscal 1998 was $1,527,000. Both were included in the caption Accrued
Employee Benefits in the accompanying balance sheets.
The Company also 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 included in this amount are disability payments, life insurance and medical benefits, and these amounts are also discounted using a 7.0% interest rate.
(12) 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, Domestic Notes Payable and Foreign Loans: The carrying amount approximates fair value because of the short maturity of those instruments.
Long-Term Debt: The fair value of the Company's long-term debt is estimated based on quotations made on similar issues.
The estimated fair values of the Company's financial instruments are as follows (in thousands of dollars):
1999
-------------------------
Carrying Fair
Amount Value
-------- -----
Cash and cash equivalents............. $ 60,806 $ 60,806
Domestic notes payable................ $ 4,335 $ 4,335
Foreign loans......................... $ 13,824 $ 13,824
Long-term debt--
9.21% Senior Notes due 2001,
including current maturities...... $ 30,000 $ 30,678
7.25% Notes due 2007................ $ 98,307 $ 97,545
1998
-------------------------
Carrying Fair
Amount Value
-------- -----
Cash and cash equivalents............. $ 84,527 $ 84,527
Domestic notes payable................ $ 4,700 $ 4,700
Foreign loans......................... $ 14,336 $ 14,336
Long-term debt--
9.21% Senior Notes due 2001,
including current maturities...... $ 45,000 $ 47,012
7.25% Notes due 2007................ $ 98,102 $105,071
|
(13) SALE OF SOFTWARE BUSINESS:
In September 1998, the Company completed the sale of its POWERCOM software
business. The proceeds on the sale were in the form of marketable securities,
and are shown as such on the balance sheet. This sale did not result in any
material gains or losses, but did result in the loss of $2 million of gross
profit and the elimination of $12 million in selling expenses in fiscal 1999.
(14) SUBSEQUENT EVENT - DISPOSITION OF FOUNDRY ASSETS:
Effective August 23, 1999, the Company contributed certain assets related to its
foundry operations to a third party. In exchange for this contribution, the
Company received $23.6 million of cash and preferred stock with a face value of
$45 million. The provisions of the preferred stock include a 15% cumulative
dividend and is convertible into at least 31% of the common stock of the third
party. The disposition will result in a gain.
We have audited the accompanying consolidated balance sheets of Briggs & Stratton Corporation (a Wisconsin Corporation) and subsidiaries as of June 27, 1999 and June 28, 1998, and the related consolidated statements of income, shareholders' investment and cash flows for each of the three years in the period ended June 27, 1999. 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 generally accepted auditing standards. 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 June 27, 1999 and June 28, 1998, and the results of their operations and their cash flows for each of the three years in the period ended June 27, 1999, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
July 29, 1999, (except with respect to Note 14, as to
which the date is August 23, 1999.)
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 1999
-----------
SEPTEMBER $ 223,981 $ 37,612 $ 4,441 $ .19 $ .29 43-1/2 33-11/16
DECEMBER 359,943 71,471 24,637 1.05 .29 52-7/16 38-7/16
MARCH 476,259 102,831 41,813 1.79 .29 56-3/8 46-11/16
JUNE 441,543 93,441 35,210 1.51 .29 70-15/16 49-1/4
---------- -------- -------- ----- ------
TOTAL $1,501,726 $305,355 $106,101 $4.52* $ 1.16
========== ======== ======== ===== ======
Fiscal 1998
-----------
September $ 170,557 $ 26,411 $ (2,632) $(.10) $ .28 51-3/8 47-1/8
December 308,481 50,897 10,294 .41 .28 53-3/8 47-1/4
March 469,055 94,773 35,778 1.45 .28 49 43-1/8
June 379,517 82,593 27,205 1.13 .28 46-1/4 36-7/8
---------- -------- -------- ----- ------
Total $1,327,610 $254,674 $ 70,645 $2.85* $ 1.12
========== ======== ======== ===== ======
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The number of record holders of Briggs & Stratton Corporation Common Stock on August 12, 1999 was 4,598.
Net Income (Loss) per share of Common Stock represents Diluted Earnings per Share.
* See Footnote No. 2 "Summary of Accounting Policies-Earnings per Share" to the Consolidated Financial Statements. Amounts do not total because of differing numbers of shares outstanding at the end of each quarter.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not changed independent accountants in the last two years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information in the Corporation's definitive Proxy Statement, prepared for the 1999 Annual Meeting of Shareholders, concerning directors of the Corporation under the caption "Election of Directors", is incorporated herein by reference. The information concerning "Executive Officers of the Registrant" as a separate item, appears in Part I of this Form 10-K. There is no information required by Item 405 of Regulation S-K to be reported.
ITEM 11. EXECUTIVE COMPENSATION
The information in the Corporation's definitive Proxy Statement, prepared for the 1999 Annual Meeting of Shareholders, concerning this item, in paragraphs two and three under the caption "Election of Directors", in the final two paragraphs of the "Nominating, Compensation and Governance Committee Report on Executive Compensation" and the "Executive Compensation" section, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information in the Corporation's definitive Proxy Statement, prepared for the 1999 Annual Meeting of Shareholders, concerning this item, under captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management", is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has no relationships or related transactions to report pursuant to Item 13.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements The following financial statements are included under the caption "Financial Statements and Supplementary Data" in Part II, Item 8 hereof and are incorporated herein by reference:
Consolidated Balance Sheets, June 27, 1999 and June 28, 1998 For the Years Ended June 27, 1999, June 28, 1998 and June 29, 1997:
Consolidated Statements of Earnings and Shareholders' Investment Consolidated Statements of Cash Flow Notes to Consolidated Financial Statements
Report of Independent Public Accountants
2. Financial Statement Schedules All financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions.
3. Exhibits
See Exhibit Index following the Signature Page, which is incorporated
herein by reference. Each management contract or compensatory plan or
arrangement required to be filed as an exhibit to this report is
identified in the Exhibit Index by an asterisk following the Exhibit
Number.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
BRIGGS & STRATTON CORPORATION
By /s/ James E. Brenn
------------------------------------
James E. Brenn
September 3 , 1999 Senior Vice President and
--------------------------- Chief Financial Officer
|
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Frederick P. Stratton, Jr. and John S. Shiely, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue thereof.
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 date indicated.*
/s/ F.P. Stratton, Jr. /s/ Peter A. Georgescu
----------------------------------------- -----------------------------------------
F. P. Stratton, Jr. Peter A. Georgescu
Chairman and Chief Executive Officer and Director
Director (Principal Executive Officer)
/s/ James E. Brenn /s/ Robert J. O'Toole
----------------------------------------- -----------------------------------------
James E. Brenn Robert J. O'Toole
Senior Vice President and Chief Financial Director
Officer (Principal Financial Officer)
/s/ Todd J. Teske /s/ C.B. Rogers, Jr.
----------------------------------------- -----------------------------------------
Todd J. Teske C. B. Rogers, Jr.
Controller (Principal Accounting Officer) Director
/s/ John S. Shiely
/s/ Michael E. Batten -----------------------------------------
----------------------------------------- John S. Shiely
Michael E. Batten President and Chief Operating Officer and
Director Director
/s/ Robert H. Eldridge /s/ Charles I. Story
----------------------------------------- -----------------------------------------
Robert H. Eldridge Charles I. Story
Executive Vice President and Director
Secretary-Treasurer and Director
*Each signature affixed as of
/s/ E. Margie Filter September 3 , 1999.
----------------------------------------- ------------------------
E. Margie Filter
Director
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BRIGGS & STRATTON CORPORATION
(Commission File No. 1-1370)
EXHIBIT INDEX
1999 ANNUAL REPORT ON FORM 10-K
Exhibit
Number Document Description
------ --------------------
3.1 Articles of Incorporation.
(Filed as Exhibit 3.2 to the Company's Report on Form 10-Q for the
quarter ended October 2, 1994, and incorporated by reference herein.)
3.2 Bylaws.
(Filed as Exhibit 3.2 to the Company's Registration Statement on Form
8-B dated October 12, 1992 and incorporated by reference herein.)
4.0 Rights Agreement dated as of August 7, 1996, between Briggs & Stratton
Corporation and Firstar Trust Company which includes the form of Right
Certificate as Exhibit A and the Summary of Rights to Purchase Common
Shares as Exhibit B.
(Filed as Exhibit 4.1 to the Company's Registration Statement on Form
8-A, dated as of August 7, 1996 and incorporated by reference
herein.)
4.1 Indenture dated as of June 4, 1997 between Briggs & Stratton Corporation
and Bank One, N.A., as Trustee.
(Filed as Exhibit 4.1 to the Company's Report on Form 8-K dated May
30, 1997 and incorporated by reference herein.)
4.2 Form of 7-1/4% Note due September 15, 2007 of Briggs & Stratton
Corporation issued pursuant to the Indenture dated as of June 4, 1997
between Briggs & Stratton Corporation and Bank One, N.A., as Trustee.
(Filed as Exhibit 4.2 to the Company's Report on Form 8-K dated May
30, 1997 and incorporated by reference herein.)
4.3 Resolutions of the Board of Directors of Briggs & Stratton Corporation
authorizing the public offering of debt securities of Briggs & Stratton
Corporation in an aggregate principal amount of up to $175,000,000.
(Filed as Exhibit 4.3 to the Company's Report on Form 8-K dated May
30, 1997 and incorporated by reference herein.)
4.4 Actions of the Authorized Officers of Briggs & Stratton Corporation
authorizing the issuance of $100,000,000 aggregate principal amount of
7-1/4% Notes due September 15, 2007.
(Filed as Exhibit 4.4 to the Company's Report on Form 8-K dated May
30, 1997 and incorporated by reference herein.)
4.5 Officers' Certificate and Company Order of Briggs & Stratton Corporation
executed in conjunction with the issuance of $100,000,000 aggregate
principal amount of 7-1/4% Notes due September 15, 2007.
(Filed as Exhibit 4.5 to the Company's Report on Form 8-K dated May
30, 1997 and incorporated by reference herein.)
10.0* Forms of Officer Employment Agreements.
(Filed as Exhibit 10.0 to the Company's Report on Form 10-Q for the
quarter ended March 29, 1998 and incorporated by reference herein.)
10.1* Survivor Annuity Plan.
(Filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K
for fiscal year ended June 30, 1986 and incorporated by reference
herein.)
10.2* Supplemental Retirement Program.
(Filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K
for fiscal year ended June 30, 1990 and incorporated by reference
herein.)
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Exhibit
Number Document Description
------ --------------------
10.3* Economic Value Added Incentive Compensation Plan, as amended and
restated.
(Filed herewith.)
10.4* Form of Change of Control Employment Agreements.
(Filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K
for fiscal year ended June 27, 1993 and incorporated by reference
herein.)
10.5(a)* Trust Agreement with an independent trustee to provide payments under
various compensation agreements with company employees upon the
occurrence of a change in control.
(Filed as Exhibit 10.5 (a) to the Company's Annual Report on Form
10-K for fiscal year ended July 2, 1995 and incorporated by
reference herein.)
10.5(b)* Amendment to Trust Agreement with an independent trustee to provide
payments under various compensation agreements with company employees.
(Filed as Exhibit 10.5 (b) to the Company's Annual Report on Form
10-K for fiscal year ended July 2, 1995 and incorporated by
reference herein.)
10.6(a)* Stock Incentive Plan.
(Filed as Exhibit A to the Company's 1993 Annual Meeting Proxy
Statement, which was filed as Exhibit 100A to the Company's Annual
Report on Form 10-K for fiscal year ended June 27, 1993 and
incorporated by reference herein.)
10.6(b)* Amended and Restated Stock Incentive Plan.
(Filed as Exhibit A to the Company's 1999 Annual Meeting Proxy
Statement and incorporated by reference herein.)
10.7(a)* Leveraged Stock Option Program.
(Filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K
for fiscal year ended June 27, 1993 and incorporated by reference
herein.)
10.7(b)* Amendment to Leveraged Stock Option Program.
(Filed as Exhibit 10.7 (b) to the Company's Annual Report on Form
10-K for fiscal year ended July 2, 1995 and incorporated by
reference herein.)
10.7(c)* Amended and Restated Leveraged Stock Option Program.
(Filed herewith.)
10.8* Amended and Restated Deferred Compensation Agreement for Fiscal 1995.
(Filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K
for fiscal year ended July 2, 1995 and incorporated by reference
herein.)
10.9* Deferred Compensation Agreement for Fiscal 1997.
(Filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K
for fiscal year ended June 30, 1996 and incorporated by reference
herein.)
10.10* Deferred Compensation Agreement for Fiscal 1998.
(Filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K
for fiscal year ended June 29, 1997 and incorporated by reference
herein.)
10.11* Deferred Compensation Agreement for Fiscal 1999.
(Filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K
for fiscal year ended June 28, 1998 and incorporated by reference
herein.)
10.12* Deferred Compensation Agreement for Fiscal 2000.
(Filed herewith.)
10.13* Deferred Compensation Plan for Directors.
(Filed as Exhibit 10.12 to the Company's Report on Form 10-Q for
the quarter ended December 31, 1995 and incorporated by reference
herein.)
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Exhibit
Number Document Description
------ --------------------
10.14(a)* Director's Leveraged Stock Option Plan.
(Filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K
for fiscal year ended June 29, 1997 and incorporated by reference
herein.)
10.14(b)* Amendment to Director's Leveraged Stock Option Plan.
(Filed herewith.)
10.15* Officer Separation Agreement.
(Filed as Exhibit 10.1 to the Company's Report on Form 10-Q for the
quarter ended December 27, 1998 and incorporated by reference
herein.)
10.16* Agreement with Executive Officer.
(Filed as Exhibit 10.2 to the Company's Report on Form 10-Q for the
quarter ended December 27, 1998 and incorporated by reference
herein.)
10.17* Executive Life Insurance Plan.
(Filed herewith.)
10.18* Key Employees Savings and Investment Plan.
(Filed herewith.)
10.19* Consultant Reimbursement Arrangement.
(Filed herewith.)
11 Computation of Earnings Per Share of Common Stock.
(Filed herewith.)
12 Computation of Ratio of Earnings to Fixed Charges.
(Filed herewith.)
21 Subsidiaries of the Registrant.
(Filed herewith.)
23 Consent of Independent Public Accountants.
(Filed herewith.)
24 Power of Attorney.
(Included in the Signatures Page of this report.)
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
1999 Annual Report on Form 10-K
EXHIBIT NO. 10.3
BRIGGS & STRATTON CORPORATION
ECONOMIC VALUE ADDED
INCENTIVE COMPENSATION PLAN
As Amended and Restated
Effective July 1, 1999
As adopted by the Board of Directors on November 12, 1990, and amended and restated by resolution of the Board of Directors effective as of April 18, 1995, further amended by resolutions effective October 17, 1995 and April 16, 1997 and further amended and restated by resolution of the Board of Directors on April 21, 1999
BRIGGS & STRATTON CORPORATION
ECONOMIC VALUE ADDED INCENTIVE COMPENSATION PLAN
A. To promote the maximization of shareholder value over the long term by providing incentive compensation to key employees of Briggs & Stratton Corporation (the "Company") in a form which is designed to financially reward participants for an increase in the value of the Company to its shareholders.
B. To provide competitive levels of compensation to enable the Company to attract and retain employees who are able to exert a significant impact on the value of the Company to its shareholders.
C. To encourage teamwork and cooperation in the achievement of Company goals.
D. To recognize differences in the performance of individual participants.
II. Plan Administration
The Nominating, Compensation and Governance Committee of the Board of Directors (the "Committee") shall be responsible for the design, administration, and interpretation of the Plan.
III. Definitions
A. "Accrued Bonus" means the bonus, which may be negative or positive, which is calculated in the manner set forth in Section V.A.
B. "Actual EVA" means the EVA as calculated for the relevant Plan Year.
C. "Base Salary" means the amount of a Participant's base compensation earned during the Plan Year without adjustment for bonuses, salary deferrals, value of benefits, imputed income, special payments, amounts contributed to a savings plan or similar items.
D. "Capital" means the Company's weighted average monthly operating capital for the Plan Year, calculated as follows:
Current Assets
- Non-operating Investments
+ Bad Debt Reserve
+ LIFO Reserve
- Future Income Tax Benefits
- Current Noninterest-Bearing Liabilities
+ Warranty Reserve
+ Environmental Reserve
+ Property, Plant, Equipment, Net
- Construction in Progress
+ Other Assets (not including prepaid Pension Costs)
(+/-) Unusual Capital Items
E. "Capital Charge" means the deemed opportunity cost of employing Capital in the Company's businesses, determined as follows:
Capital Charge = Capital X Cost of Capital
F. "Cost of Capital" means the weighted average of the cost of equity and the after tax cost of debt for the relevant Plan Year on a market value basis. The Cost of Capital will be determined (to the nearest tenth of a percent) by the Committee prior to each Plan Year, consistent with the following methodology:
a) Cost of Equity = Risk Free Rate + (Business Risk Index X Average Equity Risk Premium)
b) Debt Cost of Capital = Debt Yield X (1 - Tax Rate)
c) The weighted average of the Cost of Equity and the Debt Cost of Capital is determined by reference to the actual debt-to-capital ratio
where the Risk Free Rate is the average daily closing yield rate
on 30 year U.S. Treasury Bonds for the month of March immediately
preceding the relevant Plan Year, the Business Risk Index is
determined by using an average of the Beta available in the four
(4) most recent Value Line reports on the Company. The Average
Equity Risk Premium is 6%, the Debt Yield is the weighted average
yield of all borrowing included in the Company's permanent
capital, and the tax rate is the combination of the relevant
federal and state income tax rates.
G. "Designated Key Contributor" means those Participants named by the Chief Executive Office as a Designated Key Contributor under the Plan.
H. "Divisional EVA Performance Factor" means an Individual Performance Factor calculated in the same manner as the Company Performance Factor as set forth in Section VI.A., except that EVA, Actual EVA, Target EVA, EVA Leverage Factor, NOPAT, Capital, Capital Charge, Cost of Capital and other relevant terms shall be defined by reference to the particular division, not by reference to the entire Company.
EVA may be positive or negative.
J. "EVA Leverage Factor" means the expected deviation in EVA from the average EVA, generally reflected as a percentage of capital employed. For purposes of this Plan, the Company's EVA Leverage Factor is determined to be $34 million.
K. "NOPAT" means cash adjusted net operating profits after taxes for the Plan Year, calculated as follows:
Net Sales
- Cost of Goods Sold
(+/-) Change in LIFO Reserve
- Engineering/Selling & Administration
- Normal Pension Costs
(+/-) Change in Bad Debt Reserve
(+/-) Change in the Prepaid Pension Asset or Liability
(+/-) Change in Warranty Reserve
(+/-) Change in Environmental Reserve
(+/-) Other Income & Expense on Non-Operating Investments
(+/-) Other Unusual Income or Expense Items
(+/-) Amortization of Unusual Income or Expense Items
- Cash Taxes on the Above (+/- change in deferred tax
liability)
L. "Plan Year" means the one year period coincident with the Company's fiscal year.
M. "Senior Executives" means those Participants designated as Senior Executives by the Committee with respect to any Plan Year.
N. "Target EVA" means the target level of EVA for the Plan Year, determined as follows:
a) For Plan Year ending July 3, 1994 The Actual EVA for 1993 plus Expected Improvement.
b) For subsequent Plan Years:
Prior Year Prior Year Target EVA + Actual EVA Current Plan = ---------------------------- + Expected Year Target EVA 2 Improvement
For Plan Years through 1999, Expected Improvement will be $4 million, except that it shall not be added to the current Plan Year Target EVA to the extent it would make such Target EVA exceed $25 million. For Plan Years after 1999, Expected Improvement will be $2 million, except that it shall not be added to the current Plan Year Target EVA to the extent it would make such Target EVA exceed $32 million.
IV. Eligibility
A. Eligible Positions. In general, all Company Officers, Division General Managers, and members of the corporate operations group, and certain direct reports of such individuals may be eligible for participation in the Plan. However, actual participation will depend upon the contribution and impact each eligible employee may have on the Company's value to its shareholders, as determined by the Chairman and CEO and President and COO of the Company, and approved by the Committee.
B. Nomination and Approval. Each Plan year, the Chairman and CEO and the President and COO of the Company will nominate eligible employees to participate in the Plan for the next Plan Year. The Committee will have the final authority to select Plan participants (the "Participants") among the eligible employees nominated by the Chairman and CEO and the President and COO of the Company. Continued participation in the Plan is contingent on approval of the Committee. Selection normally will take place, and will be communicated to each Participant, prior to the beginning of the pertinent Plan Year.
V. Individual Participation Levels
A. Calculation of Accrued Bonus. Each Participant's Accrued Bonus will be determined as a function of the Participant's Base Salary, the Participant's Target Incentive Award (provided in paragraph V.B., below), Company Performance Factor (provided in Section VI.A.) and the Individual Performance Factor (provided in Section VI.B.) for the Plan Year. Each Participant's Accrued Bonus will be calculated as follows:
Target Company Target Individual
Participant's x Incentive x Performance Participant's x Incentive x Performance
Base Salary Award Factor + Base Salary Award Factor
-------------------------------------------------- -------------------------------------------------
2 2
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B. Target Incentive Awards. The Target Incentive Awards will be determined according to the following schedule:
Target Incentive Award
Executive Position (% of Base Salary)
------------------ ------------------
Chairman and CEO 100%
President and COO 75%
Executive Vice President
& Senior Vice President 60%
Other Elected Officers 40%
Division General Manager 40%
Designated Key Contributors 25%
All Others 20%
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VI. Performance Factors
A. Company Performance Factor Calculation. For any Plan Year, the Company Performance Factor will be calculated as follows:
B. Individual Performance Factor Calculation. Determination of the Individual Performance Factor will be the responsibility of the individual to whom the participant reports. This determination will be subject to approval by the Committee and should be in conformance with the process set forth below:
(1) Quantifiable Supporting Performance Factors. The Individual Performance Factor of the Accrued Bonus calculation will be based on the accomplishment of individual, financial and/or other goals ("Supporting Performance Factors"). Whenever possible, individual performance will be evaluated according to quantifiable benchmarks of success. These Supporting Performance Factors will represent an achievement percentage continuum that ranges from 50% to 150% of the individual target award opportunity, and will be enumerated from .5 to 1.5 based on such continuum except in the case of the quantifiable benchmark of Aggregate Gross Margin where the achievement percentage continuum could be 50% to 200% and be enumerated by a .5 to 2.0 continuum. Provided, however, that if the quantifiable Supporting Performance Factor is based on divisional EVA and is calculated in the same manner as the Company Performance Factor as set forth in Section VI.A. with respect to such division (such Supporting Performance Factor referred to herein as a Divisional EVA Performance Factor), then the Supporting Performance Factor may be unlimited, if so approved by the Committee. A quantifiable Supporting Performance Factor may also be unlimited if the quantifiable Supporting Performance Factor as approved by the Committee for such individual is the same as the Company Performance Factor determined in accordance with Section VI.A.
(2) Non-Quantifiable Supporting Performance Factors. When performance cannot be measured according to a quantifiable monitoring system, an assessment of the Participant's overall performance may be made based on a non-quantifiable Supporting Performance Factor (or Factors). The person to whom the Participant reports will evaluate the Participant's performance, and this evaluation will determine the Participant's Supporting Performance Factor (or Factors) according to the following schedule:
Individual Supporting
Performance Rating Performance Factor
------------------ ------------------
Outstanding 1.3 - 1.5
Excellent 1.1 - 1.3
Good .9 - 1.1
Satisfactory .5 - .9
Unsatisfactory 0
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(3) Aggregate Individual Performance Factor. The Individual Performance Factor to be used in the calculation of the Accrued Bonus shall be equal to the sum of the quantifiable and/or non-quantifiable Supporting Performance Factor(s), divided by the number of Supporting Performance Factors. To illustrate, assume a Participant with two Supporting Performance Factors:
Quantifiable Non-Quantifiable
Individual Supporting + Supporting
Performance Performance Performance
Factor = Factor A Factor B
----------------------------------
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Notwithstanding the foregoing and subject to the approval of the Committee, the individual to whom the Participant reports shall have the authority to weight the Supporting Performance Factors, according to relative importance. The weighting of each Supporting Performance Factor shall be expressed as a percentage, and the sum of the percentages applied to all of the Supporting Performance Factors shall be 100%. The Individual Performance Factor, if weighted factors are used, will then be equal to the weighted average of such Supporting Performance Factors.
VII. Change in Status During the Plan Year
A. New Hire, Transfer, Promotion, Demotion
A newly hired employee or an employee transferred, promoted, or demoted during the Plan Year to a position qualifying for participation (or leaving the participating class) may accrue (subject to discretion of the Committee) a pro rata Accrued Bonus based on the percentage of the Plan Year (actual weeks/full year times a full year award amount for that position) the employee is in each participating position.
B. Discharge
An employee discharged during the Plan Year shall not be eligible for an Accrued Bonus, even though his or her service arrangement or contract extends past year-end, unless the Committee determines that the conditions of the termination indicate that a prorated Accrued Bonus is appropriate. The Committee shall have full and final authority in making such a determination.
C. Resignation
An employee who resigns during the Plan Year to accept employment elsewhere (including self-employment) will not be eligible for an Accrued Bonus.
D. Death, Disability, Retirement
If a Participant's employment is terminated during a Plan Year by reason of death, disability, or normal or early retirement under the Company's retirement plan, a tentative Accrued Bonus will be calculated as if the Participant had remained employed as of the end of the Plan Year. The final Accrued Bonus will be calculated by multiplying the tentative Accrued Bonus by a proration factor. The proration factor will be equal to the number of full weeks of employment during the Plan Year divided by fifty-two.
Each employee may name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in case of the employee's death.
Each such designation shall revoke all prior designations by the employee, shall be in the form prescribed by the Committee, and shall be effective only when filed by the employee in writing with the Committee during his or her lifetime.
In the absence of any such designation, benefits remaining unpaid at the employee's death shall be paid to the employee's estate.
E. Leave of Absence
An employee whose status as an active employee is changed during a Plan Year as a result of a leave of absence may, at the discretion of the Committee, be eligible for a pro rata Accrued Bonus determined in the same way as in paragraph D. of this Section.
VIII. Bonus Paid and Bonus Bank
All or a portion of the Accrued Bonus will be either paid to the Participant or credited to or charged against the Bonus Bank as provided in this Article.
A. Participants Who Are Not Senior Executives. All positive Accrued Bonuses of Participants who are not Senior Executives for the Plan Year shall be paid in cash, less amounts required by law to be withheld for income and employment tax purposes, on or before the end of the second month following the end of the Plan Year in which the Accrued Bonus was earned. Participants who are not Senior Executives shall not be charged or otherwise assessed for negative Accrued Bonuses nor shall such Participants have any portion of their Accrued Bonuses banked.
B. Participants Who Are Senior Executives. The Total Bonus Payout to Participants who are Senior Executives for the Plan Year shall be as follows:
Accrued Bonus
Less: Extraordinary Bonus Accrual
Plus: Bank Payout
---------------
Equals: Total Bonus Payout
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The Total Bonus Payout for each Plan Year, less amounts required by law to be withheld for income tax and employment tax purposes, shall be paid on or before the end of the second month following the end of the Plan Year in which it was earned.
C. Establishment of a Bonus Bank. To encourage a long term commitment to the enhancement of shareholder value by Senior Executives, "Extraordinary Bonus Accruals" shall be credited to an "at risk" deferred account ("Bonus Bank") for each such Participant, and all negative Accrued Bonuses shall be charged against the Bonus Bank, as determined in accordance with the following:
1. "Bonus Bank" means, with respect to each Senior Executive, a bookkeeping record of an account to which Extraordinary Bonus Accruals are credited, and negative Accrued Bonuses debited as the case may be, for each Plan Year, and from which bonus payments to such Senior Executive are debited.
2. "Bank Balance" means, with respect to each Senior Executive, a bookkeeping record of the net balance of the amounts credited to and debited against such Senior Executive's Bonus Bank. The Bank Balance shall initially be equal to zero.
3. "Extraordinary Bonus Accrual" shall mean the amount of the Accrued Bonus for any year that exceeds 1.25 times the portion of the Senior Executive's Base Salary which is represented by the Target Incentive Award in the event that the beginning Bank Balance is positive or zero, and .75 times the portion of the Senior Executive's Base Salary which is represented by the Target Incentive Award in the event that the beginning Bank Balance is negative.
4. Annual Allocation. Each Senior Executive's Extraordinary Bonus Accrual or negative Accrued Bonus is credited or debited to the Bonus Bank maintained for that Senior Executive. Such Annual Allocation will occur as soon as possible after the conclusion of each Plan Year. Although a Bonus Bank may, as a result of negative Accrual Bonuses have a deficit, no Senior Executive shall be required, at any time, to reimburse his/her Bonus Bank.
5. "Available Balance" means that the Bank Balance at the point in time immediately after the Annual Allocation has been made.
6. "Payout Percentage" means the percentage of the Available Balance that may be paid out in cash to the Participant. The Payout Percentage will equal 33%.
7. "Bank Payout" means the amount of the Available Balance that may be paid out in cash to the Senior Executive for each Plan Year. The Bank Payout is calculated as follows:
Bank Payout = Available Balance X Payout Percentage
The Bank Payout is subtracted from the Bank Balance.
8. Treatment of Available Balance Upon Termination
a) Resignation or Termination With Cause. Senior Executives leaving voluntarily to accept employment elsewhere (including self-employment) or who are terminated with cause will forfeit their Available Balance.
b) Retirement, Death, Disability or Termination Without Cause. In the event of a Senior Executive's normal or early retirement under the Company's retirement plan, death, disability, or termination without cause, the Available Balance, less amounts required by law to be withheld for income tax and employment tax purposes, shall be paid to the Senior Executive on or before the end of the second month following the end of the Plan Year in which the termination for one of such events occurred.
c) For purposes of this Plan "cause" shall mean:
(i) any act or acts of the Participant constituting a felony under the laws of the United States, any state thereof or any foreign jurisdiction;
(ii) any material breach by the Participant of any employment agreement with the Company or the policies of the Company or the willful and persistent (after written notice to the Participant) failure or refusal of the Participant to comply with any lawful directives of the Board;
(iii) a course of conduct amounting to gross neglect, willful misconduct or dishonesty; or
(iv) any misappropriation of material property of the Company by the Participant or any misappropriation of a corporate or business opportunity of the Company by the Participant.
IX. Administrative Provisions
A. Amendments. The Board of Directors of the Company shall have the right to modify or amend this Plan from time to time, or suspend it or terminate it entirely; provided that no such modification, amendment, suspension, or termination may, without the consent of any affected participants (or beneficiaries of such participants in the event of death), reduce the rights of any such participants (or beneficiaries, as applicable) to a payment or distribution already earned under Plan terms in effect prior to such change.
B. Interpretation of Plan. Any decision of the Committee with respect to any issues concerning individual selected for awards, the amount, terms, form and time of payment of awards, and interpretation of any Plan guideline, definition, or requirement shall be final and binding.
C. Effect of Award on Other Employee Benefits. By acceptance of a bonus award, each recipient agrees that such award is special additional compensation and that it will not affect any employee benefit, e.g., life insurance, etc., in which the recipient participates, except as provided in paragraph D. below.
D. Retirement Programs. Awards made under this Plan shall be included in the employee's compensation for purposes of the Company Retirement Plans and Savings Plan.
E. Right to Continued Employment; Additional Awards. The receipt of a bonus award shall not give the recipient any right to continued employment, and the right and power to dismiss any employee is specifically reserved to the Company. In addition, the receipt of a bonus award with respect to any Plan Year shall not entitle the recipient to an award with respect to any subsequent Plan Year.
F. Adjustments to Performance Goals. When a performance goal is based on Economic Value Added or other quantifiable financial or accounting measure, it may be necessary to exclude significant nonbudgeted or noncontrollable gains or losses from actual financial results in order to properly measure performance. The Committee will decide those items that shall be considered in adjusting actual results. For example, some types of items that may be considered for exclusion are:
(1) Any gains or losses which will be treated as extraordinary in the Company's financial statements.
(2) Profits or losses of any entities acquired by the Company during the Plan Year, assuming they were not included in the budget and/or the goal.
(3) Material gains or losses not in the budget and/or the goal which are of a nonrecurring nature and are not considered to be in the ordinary course of business. Some of these would be as follows:
(a) Gains or losses from the sale or disposal of real estate or property.
(b) Gains resulting from insurance recoveries when such gains relate to claims filed in prior years.
(c) Losses resulting from natural catastrophes, when the cause of the catastrophe is beyond the control of the Company and did not result from any failure or negligence on the Company's part.
G. Vesting. All amounts due but unpaid to any Participant under this plan shall vest, subject to the terms of this EVA Plan, upon actual termination of employment of the Participant.
X. Miscellaneous
A. Indemnification. Each person who is or who shall have been a member of the Committee or of the Board, or who is or shall have been an employee of the Company, shall not be liable for, and shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with any claim, action, suit, or proceeding to which he or she may be a party by reason of any action taken or failure to act under this Plan. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
B. Expenses of the Plan. The expenses of administering this Plan shall be borne by the Company.
C. Withholding Taxes. The Company shall have the right to deduct from all payments under this Plan any Federal or state taxes required by law to be withheld with respect to such payments.
D. Governing Law. This Plan shall be construed in accordance with and governed by the laws of the State of Wisconsin.
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
1999 Annual Report on Form 10-K
EXHIBIT NO. 10.7(c)
BRIGGS & STRATTON CORPORATION
LEVERAGED STOCK OPTION PROGRAM
As adopted by the Nominating and Salaried Committee of the Board of Directors on August 16, 1993 and amended by resolutions effective July 31, 1995 and July 1, 1999
BRIGGS & STRATTON CORPORATION
LEVERAGED STOCK OPTION PROGRAM
1.0 Objectives.
The Leveraged Stock Option Program ("LSO Program") is designed to build upon the Company's Economic Value Added Incentive Compensation Plan ("EVA Plan") by tying the interests of all Senior Executives to the long term consolidated results of the Company. In this way, the objectives of Senior Executives throughout the Company will be more closely aligned with the Company's Shareholders. Whereas the EVA Plan provides for near and intermediate term rewards, the LSO Program provides a longer term focus by allowing Senior Executives to participate in the long-term appreciation in the equity value of the Company. In general, the LSO Program is structured such that each year an amount equivalent to the Total Bonus Payout under the EVA Plan is invested on behalf of Senior Executives in options on the Company's Stock ("LSOs"). These LSOs become exercisable after they have been held for three years, and they expire at the end of seven years. The LSO Program is also structured so that a fair return must be provided to the Company's Shareholders before the options become valuable.
2.0 Leveraged Stock Option Grant.
For fiscal 1994 and subsequent years, the dollar amount to be invested in LSOs for each Senior Executive shall be equal to the amount of each Participant's Total Bonus Payout determined under the EVA Plan as amended effective for fiscal year 1994. The number of LSOs awarded shall be determined by dividing (a) the dollar amount of such LSO award by (b) 10% of the Fair Market Value of Company stock on the date of the grant, as determined by the Committee, rounded (up or down) to the nearest 10 shares. Fair Market Value is defined in the Company's Stock Incentive Plan ("SIP Plan").
3.0 Term.
All LSOs shall be exercisable beginning on the third anniversary of the date of grant. All LSOs granted for fiscal years through June 30, 1999 shall terminate on the fifth anniversary of the date of grant unless sooner exercised, unless the Committee determines other dates. All LSOs granted thereafter shall terminate on the seventh anniversary of the date of grant unless sooner exercised, unless the Committee determines other dates.
4.0 Exercise Price.
The exercise price for LSOs shall be the product of 90% of the Fair Market Value
per share as determined above, times the sum taken to the fifth (5th) power of
(a) 1, plus (b) the Estimated Annual Growth Rate, but in no event may the
exercise price be less than Fair Market Value on the date of grant.
The Estimated Annual Growth Rate (intended to represent annual percentage stock appreciation at least in the amount of the Company's cost of capital, with due consideration for dividends paid, risk and illiquidity) is the average daily closing 30 year U.S. Treasury bond yield rate for the month of March immediately preceding the relevant Plan Year, plus 1%. So,
Exercise Price = (.9 x FMV) x (1 + Estimated Annual Growth Rate)(5)
Example: $75 share price; 7.85% Estimated Annual Growth Rate (6.85% 30 year U.S. Treasury bond rate, plus 1%):
$67.50 (90% FMV x (1.0785)(5) = $98.49
5.0 Limitations on LSO Grants and Carryover.
Notwithstanding Section 2, the maximum number of LSOs that may be granted to all Senior Executives for any Plan Year of this LSO Program, shall be 600,000, and the maximum number of LSOs that may be granted cumulatively under this LSO Program shall be 2,539,986. In the event that the 600,000 limitation shall be in effect for any Plan Year, the dollar amount to be invested for each Senior Executive shall be reduced by proration based on the aggregate Total Bonus Payouts of all Senior Executives so that the limitation is not exceeded. The amount of any such reduction shall be carried forward to subsequent years and invested in LSOs to the extent the annual limitation is not exceeded in such years.
6.0 The Stock Incentive Plan.
Except as modified herein, LSOs are Incentive Stock Options under the Company's SIP Plan as amended from time to time to the extent they are eligible for treatment as such under Section 422 of the Internal Revenue Code. If not eligible for ISO Treatment, the LSOs shall constitute nonqualified stock options. Except as specifically modified herein, LSOs shall be governed by the terms of the Company's Stock Incentive Plan, and shall be granted as described in this LSO Program annually unless the Committee modifies or terminates either the EVA Plan or the SIP Plan. As provided in the SIP Plan, all grants of LSOs to Participants who are subject to Section 16(b) of the Securities Exchange Act of 1934 are subject to approval of the Company Shareholders. In the event such approval is not obtained, this Program shall terminate.
7.0 Definitions.
All capitalized terms used herein that are not otherwise defined shall have the same meaning given to them in the Company's Economic Value Added Incentive Compensation Plan.
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
1999 Annual Report on Form 10-K
EXHIBIT NO. 10.12
DEFERRED COMPENSATION AGREEMENT
AGREEMENT made this 18th day of June, 1999, between Briggs & Stratton Corporation (the "Company") and Frederick P. Stratton, Jr. (the "Executive").
1. Deferral of Compensation. This Agreement shall operate to defer, on an unfunded basis, compensation earned by the Executive as an employee of the Company for the Company's fiscal year ending in 2000, to the extent that such compensation would otherwise be non-deductible under Section 162(m) of the Internal Revenue Code, as amended from time to time. The amount deferred hereunder shall be paid to the Executive as soon as practicable following the Company fiscal year in which the Executive terminates employment with the Company, such payment to be made in one lump sum, or in such other manner as may be agreed upon between the Executive and the Company's Nominating, Compensation and Governance Committee of the Board. Such agreement, if any, must occur before the termination of employment by the Executive, or such payment shall be in a lump sum.
2. Death of Executive. If the Executive dies prior to receiving all funds payable hereunder, the entire unpaid balance shall be paid in the same manner as provided for the Executive under the Company's Economic Value Added Incentive Compensation Plan.
3. Binding Effect. This Agreement has been approved by the Company's Board of Directors and its Nominating, Compensation and Governance Committee, and shall be binding and inure to the benefit of the Company, its successors and assigns and the Executive and his heirs, executors, administrators, and legal representatives.
4. Earnings on Deferrals. On or before June 30, 2000, the Executive shall
elect to have any deferrals hereunder credited with earnings in accordance with
(a) or (b) below:
(a) Earnings on a book (unfunded) basis beginning on the date the deferred amount would otherwise have been paid, and continuing thereafter at a rate equal to 80% of the prime rate made available to the best customers of Firstar Bank Milwaukee, N.A., and adjusted and compounded annually as of the last day of each subsequent Company fiscal year until paid;
(b) Earnings at a rate designed to reflect the performance of Company stock. Under this alternative, the amount deferred shall be converted into shares of phantom Company stock as soon as practicable following the determination of the amount deferred under this Agreement. Each year, the Committee shall determine the amount of dividends that would have been paid on the phantom stock and convert such dividends into additional shares of phantom stock. Following the conversions described above, the Company shall promptly advise Executive of the number of phantom shares acquired. If Executive chooses this investment alternative, Executive may elect
to receive distributions in cash or stock; provided that any stock distributions shall be subject to any necessary approvals under securities laws or exchange requirements.
5. Section 16 Consequences. Executive acknowledges that an election under
Section 4(b) above will have implications under Section 16 of the Securities
Exchange Act of 1934, including potential Section 16(b) liability if Executive
or an affiliate has a matching transaction. Executive acknowledges that he will
be responsible for reporting transactions under this Agreement on the applicable
Form 4 or Form 5.
6. Unfunded Status of Agreement. It is intended that this Agreement constitute an "unfunded" arrangement for deferred compensation. The Committee may authorize the creation of a trust or other arrangement to meet the obligations created under this Agreement provided, however, that unless the Committee otherwise determines, the existence of such trust or other arrangement is consistent with the "unfunded" status of the Agreement.
7. Miscellaneous. Payment of deferrals hereunder shall be subject to tax or other withholding requirements as may be required by law. The Company's Board, or its Nominating, Compensation and Governance Committee, shall have the power to modify or terminate this Agreement, but only with consent of the Executive.
IN WITNESS WHEREOF, Briggs & Stratton Corporation has caused this Deferred Compensation Agreement to be executed by its duly authorized Director and Frederick P. Stratton, Jr., together with his spouse, Anne Y. Stratton, hereunto have set their hands as of the date first above written.
BRIGGS & STRATTON CORPORATION
By: /s/ C. B. Rogers, Jr.
-----------------------------------------
Clarence B. Rogers, Jr.
Chairman, Nominating, Compensation
and Governance Committee
/s/ F. P. Stratton, Jr.
-----------------------------------------
Frederick P. Stratton, Jr.
/s/ Anne Y. Stratton
-----------------------------------------
Anne Y. Stratton
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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
1999 Annual Report of Form 10-K
EXHIBIT NO. 10.14(b)
AMENDMENT TO DIRECTOR'S LEVERAGED STOCK OPTION PLAN
Adopted Effective July 1, 1999
NOW THEREFORE, BE IT RESOLVED, that the following amendments are hereby adopted effective for LSOs granted for Fiscal 2000 Company performance:
(a) Section 1.0 Objectives is amended by deleting the second to last
Sentence and replacing it with the following:
"These LSOs become exercisable after they have been held for
three years, and they expire at the end of seven years."
(b) Section 6.0 Term is replaced in its entirety with the following:
"All LSOs shall be exercisable beginning on the third anniversary
of the date of grant, and shall terminate on the seventh
anniversary of the date of grant, unless sooner exercised or the
Board determines other dates of grant."
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
1999 Annual Report on Form 10-K
EXHIBIT NO. 10.17
BRIGGS & STRATTON CORPORATION
EXECUTIVE LIFE INSURANCE PLAN
Adopted effective July 1, 1999
Executive Officers and certain Key Employees are eligible to participate in the Plan. The Plan provides each eligible Plan participant with an individual, assignable life insurance benefit based on the following benefit formula for his/her respective status as an Executive Officer or Key Employee of the Company.
- Each Executive Officer will receive a life insurance benefit equal to two (2) times his/her projected base salary (to a maximum of $500,000) less $50,000, during the anticipated period of active employment. Following the anticipated retirement date, each officer's projected life insurance benefit will be reduced to $200,000.
- Each Key Employee will receive a life insurance benefit equal to two
(2) times his/her projected base salary (to a maximum of $500,000)
less $50,000, during the anticipated period of active employment.
Following the anticipated retirement date, each executive's projected
life insurance benefit will be reduced to $100,000.
Briggs & Stratton Corporation enters into a "collateral assignment split dollar" insurance arrangement with each Plan participant to provide such individual with the assignable life insurance benefits under the Plan.
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
1999 Annual Report on Form 10-K
EXHIBIT NO. 10.18
BRIGGS & STRATTON CORPORATION
KEY EMPLOYEE SAVINGS AND INVESTMENT PLAN
Effective July 1, 1999
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
1.1 Account 1
1.2 Beneficiary 1
1.3 Board 1
1.4 Committee 1
1.5 Effective Date 1
1.6 Employer 2
1.7 Participant 2
1.8 Plan 2
1.9 Plan Year 2
1.10 Regular Compensation 2
1.11 Total Bonus Payout 2
1.12 Valuation Date 2
ARTICLE II PARTICIPATION IN THE PLAN 3
2.1 Eligibility 3
ARTICLE III DEFERRAL CONTRIBUTIONS 4
3.1 Manner of Electing Deferral Contributions With
Respect to Regular Compensation 4
3.2 Manner of Electing Deferral Contributions With
Respect to Total Bonus Payout 4
3.3 Discontinuance of Offset 5
3.4 Crediting to Deferral Contributions Account 5
ARTICLE IV EMPLOYER MATCHING CONTRIBUTIONS 6
4.1 Amount 6
4.2 Crediting to Employer Matching Contribution
Account 6
ARTICLE V INTEREST 7
5.1 Crediting of Interest 7
5.2 Reports to Participants 7
5.3 Grantor Trust only 7
ARTICLE VI DISTRIBUTION 9
6.1 Distribution 9
6.2 Committee Discretion to Accelerate 9
6.3 Change in Law 10
|
ARTICLE VII ADMINISTRATION 11
7.1 In General 11
7.2 Committee Discretion 11
7.3 Committee Members' Conflict of Interest 12
7.4 Governing Law 12
7.5 Expenses 12
7.6 Minor or Incompetent Payees 12
7.7 Withholding 12
7.8 Indemnification 13
ARTICLE VIII BENEFITS UNFUNDED 14
ARTICLE IX NONALIENATION OF BENEFITS 15
ARTICLE X CLAIMS PROCEDURE 16
10.1 Claims 16
10.2 Review Procedure 16
ARTICLE XI AMENDMENT AND TERMINATION 17
ARTICLE XII MISCELLANOUS 18
12.1 No Right to Continued Employment 18
12.2 Impact on Other Plans 18
12.3 Severability 18
12.4 Gender and Number 18
12.5 Evidence Conclusive 18
12.6 Status of Plan Under ERISA 19
12.7 Name and Address Changes 19
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ARTICLE I
Definitions
1.1 "Account" means the records of the interests of a Participant in the Plan.
(a) "Matching Contributions Account" means the record of a Participant's interest in the Plan attributable to Employer Matching Contributions described in Article IV.
(b) "Deferral Contributions Account" means the record of a Participant's interest in the Plan attributable to his Deferral Contributions described in Article III.
1.2 "Beneficiary" means the person designated by a Participant to receive any payments due hereunder upon the death of the Participant. All Beneficiary designations shall be made in writing in such form and manner as may from time to time be prescribed by the Committee. The designation on file with the Committee at the time of the Participant's death shall be controlling. In the event the deceased Participant has not designated a Beneficiary, or should such Participant have no designated Beneficiary surviving, his undistributed Account balance shall be paid to:
(a) his surviving spouse, if any;
(b) if no surviving spouse, then his surviving children, including legally adopted children, in equal shares; or
(c) if no surviving spouse or children, then to the Participant's estate.
1.3 "Board" means the Board of Directors of the Employer.
1.4 "Committee" means the Nominating, Compensation and Governance Committee of the Board.
1.5 "Effective Date" means the effective date of this Briggs & Stratton Corporation Key Employee Savings and Investment Plan and shall be July 1, 1999.
1.6 "Employer" means Briggs & Stratton Corporation.
1.7 "Participant" shall mean an employee of the Employer designated as eligible under Section 2.1 and any person who previously participated in the Plan and is entitled to benefits hereunder.
1.8 "Plan" means the Briggs & Stratton Corporation Key Employee Savings and Investment Plan as set forth in this document and all subsequent amendments hereto.
1.9 "Plan Year" means the twelve-month period on which the records of the Plan are maintained, currently the Employer's fiscal year, which is the period beginning July 1 and ending June 30.
1.10 "Regular Compensation" means the total compensation payable to a Participant by the Employer for any period (prior to elective deferrals under any deferral agreement) which would be taken into account as Annual Pay, as defined in Section 1.05 of the Briggs & Stratton Corporation Employee Savings and Investment Plan; provided, however, that the maximum limit on Annual Pay in that Section 1.05 shall be ignored and, also, the portion of Annual Pay consisting of a Participant's bonus under the Briggs & Stratton Corporation Economic Value Added Incentive Compensation Plan shall be excluded.
1.11 "Total Bonus Payout" means the amount of bonus that would be paid to a Participant in cash in any Plan Year (prior to elective deferrals under any deferral agreement) under the Briggs & Stratton Corporation Economic Value Added Incentive Compensation Plan.
1.12 "Valuation Date" means the last day of each calendar month.
ARTICLE II
Participation In The Plan
2.1 Eligibility.
Employees eligible to participate in the Plan are all Board elected officers and such other key employees as are recommended by management and approved by the Committee. Each person who is a Board elected officer on July 1, 1999 shall become a Participant as of that date. Each other person who becomes a Board elected officer shall become a Participant in the Plan effective with the beginning of the next calendar quarter following the date such person becomes a Board elected officer. Such other key employees who are approved by the Committee for participation shall become Participants on the date specified by the Committee.
ARTICLE III
Deferral Contributions
3.1 Manner of Electing Deferral Contributions With Respect To Regular Compensation.
(a) A Participant in the Plan may (on a form provided by the Employer) elect to defer a whole percentage amount (not exceeding 12%) of the Participant's Regular Compensation earned during periods subsequent to such election. For an individual who becomes a Participant on July 1, 1999, the individual's initial deferral election shall be made by June 15, 1999 but shall not become effective until July 1, 1999. Similarly, an individual who becomes a Participant on a later date who desires that deferrals commence on the date he becomes a Participant shall make an initial election at least 15 days before actually becoming a Participant but the election shall not become effective until the date the individual becomes a Participant. A Participant's deferral election shall continue in effect for the remainder of the Plan Year in which it becomes effective and for all subsequent Plan Years until prospectively modified or revoked by filing a new election. Any such election (or modification or revocation of an election) shall be filed by the 15th day of the month preceding the beginning of any calendar quarter and shall be effective prospectively effective with the first day of that calendar quarter so that the election is made before the period of service for which compensation is earned.
(b) Notwithstanding any other provision of this Plan to the contrary, the amount of a Participant's Regular Compensation which shall be deferred each payroll period shall be reduced and offset by an amount so that (i) plus (ii) equals the deferral which would have been made in the absence of the offset where (i) equals the actual deferral after the offset and (ii) equals (A) 6% times (B) the Participant's Regular Compensation minus the actual deferral made after the offset.
3.2 Manner of Electing Deferral Contributions With Respect To Total Bonus Payout.
(a) A Participant may elect to defer a whole percentage amount (not exceeding 12%) of the Participant's Total Bonus Payout paid during any Plan Year beginning after June 30, 2000. A Total Bonus Payout, if any, is made in August of each year. An election to defer a Total Bonus Payout must be made no later than March 15 preceding the date the Total Bonus Payout is made. The Participant must file a separate Total Bonus Payout election with respect to each Plan Year in which the Participant desires to defer a portion of the Total Bonus Payout.
(b) Notwithstanding any other provision of this Plan to the contrary, the amount of a Participant's Total Bonus Payout which shall be deferred shall be reduced and offset by an amount so that (i) plus (ii) equals the deferral which would have been made in the absence of the offset where (i) equals the actual deferral made after the offset and (ii) equals (A) 6%
times (B) the Participant's Total Bonus Payment minus the actual deferral made after the offset.
3.3 Discontinuance of Offset.
The offsets to a Participant's deferral under Sections 3.1(b) and 3.2(b) shall be discontinued during a Plan Year after the total amount of the offsets made under Sections 3.1(b) and 3.2(b) in the aggregate for the Plan Year equals 6% of the dollar limit described in Internal Revenue Code Section 401(a)(17) (adjusted for cost of living increases). If the Section 401(a)(17) limit is adjusted during the middle of a Plan Year, the offsets shall be resumed if necessary so that the total amount of the offsets for the Plan Year equals 6% of the dollar limit under Code Section 401(a)(17) as in effect at the end of the Plan Year.
3.4 Crediting to Deferral Contributions Account.
Amounts equal to the amounts of compensation deferred under Section 3.1 and/or Section 3.2 will be credited to the Participant's Deferral Contributions Account under the Plan as of the last day of the calendar quarter in which such amounts would have been paid to the Participant but for the Participant's deferral election.
ARTICLE IV
Employer Matching Contributions
4.1 Amount.
For each pay period the Employer shall credit to each Participant's
Employer Matching Contribution Account an amount equal to 50% of the
Participant's Deferral Contributions under Sections 3.1 and 3.2 above;
provided, however, that the total Employer Matching Contributions for any
pay period shall be limited so that they do not exceed (i) 3% of the
Regular Compensation and Total Bonus Payout of the Participant for such pay
period minus (ii) an amount equal to (A) times (B) where (A) is 3% and (B)
is the Participant's Regular Compensation and Total Bonus Payout for such
pay period minus the amount of his Deferral Contributions under Article III
for such pay period. The offset under clause (ii) of the preceding sentence
shall cease to be applied in pay periods after the cumulative amount of the
Participant's Regular Compensation and Total Bonus Payout minus the amount
of his Deferral Contribution under Article III for the Plan Year equals the
dollar amount described in Internal Revenue Code Section 401(a)(17), as
adjusted for cost of living increases. If the dollar limitation under
Section 401(a)(17) is adjusted during the Plan Year, the offsets under
clause (ii) above shall be resumed if necessary so that the total amount of
the offsets under clause (ii) above equal 3% of the limitation under Code
Section 401(a)(17) as in effect at the end of the Plan Year or, if less, 3%
of the Participant's Regular Compensation and Total Bonus Payout for the
Plan Year minus the amount of his Deferral Contributions under Article III
for the Plan Year.
4.2 Crediting to Employer Matching Contribution Account.
Matching Contributions under Section 4.1 shall be credited to the Participant's Matching Contribution Account under the Plan as of the last day of the calendar quarter in which the Deferral Contributions which are being matched would have been paid to the Participant but for the Participant's deferral election.
ARTICLE V
Interest
5.1 Crediting of Interest.
A Participant's Account shall be credited with interest each quarter at a rate equal to 80% of the Prime Rate at the Firstar Bank, Milwaukee, N.A. on the last day of the quarter divided by four (4). Interest for a quarter shall be credited on the last day of the quarter and shall be calculated with respect to the Participant's beginning Account balance for the quarter. A Participant's Account shall be credited with interest until the date payment of the Participant's Account is completed.
5.2 Reports to Participants.
The Employer shall provide annual reports to each Participant showing (a) the value of the Account as of the most recent June 30 Valuation Date; (b) the amount of contributions credited by the Employer for the year ending on such Valuation Date, (c) the amount of interest credited to the Participant's Account and (d) the amount of distributions from the Participant's Account.
5.3 Grantor Trust Only.
Benefits under this Plan are payable solely from the general assets of the Employer. Participants' Accounts shall be utilized solely as a device for the measurement and determination of the amounts to be paid to Participants under the Plan. Participant Accounts shall not constitute or be treated as a trust fund of any kind. Title to and beneficial ownership of any assets which the Employer may earmark to pay deferred compensation hereunder shall at all times remain in the Employer and Participants shall have no interest in any specific assets of the Employer by virtue of this Plan. Notwithstanding the foregoing, the Employer intends to finance its obligation hereunder via the Trust Agreement dated January 31, 1995 between the Employer and Johnson Heritage Trust Company (the "Trust"), which is intended to be a grantor trust, in the event of a Change of Control Event as defined in such Trust.
It is the intention of all parties involved that the arrangements be unfunded for tax purposes and for purposes of Title I of ERISA. The Trust and any assets held by the Trust to assist it in meeting its obligations under the Plan are intended to conform to the terms of the model trust requirements set forth in Revenue Procedure 92-64 issued by the Internal Revenue Service.
ARTICLE VI
Distribution
6.1 Distribution.
Except as otherwise may be provided in this Article VI, distributions of a Participant's Account shall be made to the Participant (or the Participant's Beneficiary in the event of the Participant's death before all amounts are paid) in ten (10) annual installments, with the first installment to be paid in January of the year following the Calendar Year in which the Participant retires or attains age 62 and with subsequent installments to be paid in each succeeding January until the Participant's Account shall be distributed in full. The first installment shall be equal to one tenth (1/10th) of the total amount credited to the Participant's Account as of the preceding Valuation Date and in each subsequent year the Participant (or the Participant's Beneficiary, in the event of the Participant's death) shall receive that fraction of the Participant's Account, valued as of the preceding Valuation Date, of which the numerator is 1 and the denominator is the total number of remaining installments to be made to the Participant.
6.2 Committee Discretion to Accelerate.
Notwithstanding the above, a Participant or Beneficiary, as applicable, may
request, at least 6 months prior to the date commencement of distributions under
Section 6.1 is scheduled to begin, to have the Participant's interest in the
Participant's Account paid at an earlier date, over a shorter period or in a
single lump sum. The Committee retains the power and discretion to grant or
deny any request or to otherwise determine, absent any request, to accelerate
payments hereunder or make payment of the remainder of a Participant's Account
in a single sum (i) at any time after the Participant's termination of
employment with the Employer or (ii) following Plan termination, at any time,
whether before or after the Participant's termination of employment with the
Employer.
6.3 Change in Law.
Notwithstanding any of the above, the Committee may direct payment of a Participant's Account before it otherwise would be payable under this Article VI if, based on notification from the Internal Revenue Service or a review by the Committee in light of Internal Revenue Service guidance, the Committee determines that a Participant has or will recognize income for federal income tax purposes with respect to amounts that are or will be payable under the Plan before they are to be paid. Further, the Committee may direct payment of a Participant's Account before it otherwise would be payable and may terminate a Participant's participation in the Plan if, based on notification from the Department of Labor or a review by the Committee in light of Department of Labor guidance, the Committee determines that an individual's participation in the Plan jeopardizes the Plan's status as a plan described in Section 12.6 hereof.
ARTICLE VII
Administration
7.1 In General.
The Committee has such powers as may be necessary to direct the general administration of the Plan, including the powers given to it elsewhere in this document and including (but not by way of limitation) the following powers:
(a) to construe and interpret the Plan and to make equitable adjustments for any mistakes or errors made in the administration thereof;
(b) To prescribe such procedures, rules and regulations as it shall deem necessary or proper for the efficient administration of the Plan or any of its duties hereunder;
(c) to decide questions of eligibility and determine the amount, manner and time of payment of any benefits and to direct the payment of the same by the Employer;
(d) to prescribe the form and manner of application for any benefits hereunder and forms to be used in the general administration hereof; and
(e) to receive from the Employer and Participants or their Beneficiaries such information as shall be necessary for the proper administration of the Plan.
7.2 Committee Discretion.
The Committee has full and complete discretionary authority to determine eligibility for benefits, to construe the terms of the Plan and to decide any matter presented through the claims review procedure. Any final determination by the Committee shall be binding on all parties and afforded the maximum deference allowed by law. If challenged in court, such determination shall not be subject to de novo review and shall not be overturned unless proven to be arbitrary and capricious upon the evidence considered by the Committee at the time of such determination.
7.3 Committee Members' Conflict of Interest.
A member of the Committee who is covered hereunder may not vote or decide upon any matter relating solely to himself or vote in any case in which his individual right to any benefit under the Plan is particularly involved nor may a member of the Board who is covered hereunder vote to amend the Plan regarding the timing of distributions or vote with respect to direct or indirect termination of the Plan. Decisions shall be made by remaining Committee or Board members even if there is no quorum under normal Committee or Board rules.
7.4 Governing Law.
This Plan shall be construed in accordance with the laws of the State of Wisconsin to the extent not preempted by the provisions of the Employee Retirement Income Security Act of 1974 or other federal law.
7.5 Expenses.
All expenses and costs incurred in connection with the administration and operation of the Plan shall be borne by the Employer and/or the Trust.
7.6 Minor or Incompetent Payees.
If a person to whom a benefit is payable is a minor or is otherwise incompetent by reason of a physical or mental disability, the Committee may cause the payments due to such person to be made to another person for the first person's benefit without any responsibility to see to the application of such payment. Such payments shall operate as a complete discharge of the obligations to such person under the Plan.
7.7 Withholding.
To the extent required by law, the Employer shall withhold any taxes required to be withheld by the federal or any state or local government from payments made hereunder or from other amounts paid to the Participant by the Employer. To the extent that FICA taxes are required to be withheld from the Participant with respect to
amounts credited under this Plan and no amounts are to be paid to the Participant hereunder or otherwise from the Employer from which such FICA taxes may be withheld, then the Employer shall pay such FICA taxes and the Participant's Account hereunder shall be reduced by the amount of the FICA tax paid.
7.8 Indemnification.
Except as otherwise provided by law, neither the Board or the Committee nor any individual member of the Board or the Committee, nor the Employer, nor any officer, shareholder or employee of the Employer shall be liable for any error of judgment, action or failure to act hereunder or for any good faith exercise of discretion, excepting only liability for gross negligence or willful misconduct. Such individuals and entities shall be indemnified and held harmless by the Employer against any and all claims, damages, liabilities, costs and expenses (including attorneys' fees) arising by reason of any good faith error of omission or commission with respect to any responsibility, duty or action hereunder. Nothing herein contained shall preclude the Employer from purchasing insurance to cover potential liability of one or more persons who serve in an administrative capacity with respect to the Plan.
ARTICLE VIII
Benefits Unfunded
The right of any individual to receive payment under the provisions of this Plan shall be an unsecured claim against the general assets of the Employer, and no provisions contained in this Plan, nor any action taken pursuant to this Plan, shall be construed to give any individual at any time a security interest in any asset of the Employer, of any affiliated company, or of the stockholders of the Employer. The liabilities of the Employer to any individual pursuant to this Plan shall be those of a debtor pursuant to such contractual obligations as are created by this Plan and to the extent any person acquires a right to receive payment from the Employer under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Employer.
ARTICLE IX
Nonalienation of Benefits
All benefits payable hereunder are for the sole use and benefit of the Participants and their Beneficiaries and, to the extent permitted by law, shall be free, clear and discharged of and from, and are not to be in any way liable for, debts, contracts or agreements, now contracted or which may hereafter be contracted and from all claims and liabilities now or hereafter incurred by any Participant or Beneficiary covered by this Plan. No Participant or Beneficiary covered by this Plan shall have the right to anticipate, surrender, encumber, alienate or assign, whether voluntarily or involuntarily, any of the benefits to become due hereunder unto any person or person upon any terms whatsoever, and any attempt to do so shall be void.
ARTICLE X
Claims Procedure
10.1 Claims.
If the Participant or the Participant's Beneficiary (hereinafter refereed to as "claimant") believes he is being denied any benefit to which he is entitled under this Plan for any reason, he may file a written claim with the member of the Committee designated as the claims administrator. The claims administrator shall review the claim and notify the claimant of his decision within 90 days of receipt of such claim, unless the claimant receives written notice prior to the end of the 90 day period stating that special circumstances require an extension of the time for decision. The claim administrator's decision shall be in writing, sent by first class mail to the claimant's last known address, and if a denial of the claim, shall contain the specific reasons for the denial, reference to pertinent provisions of the Plan on which the denial is based, a description of any additional information or material necessary to perfect the claim, and an explanation of the claims review procedure.
10.2 Review Procedure.
A claimant is entitled to request the entire Committee to review any denial by written request to the Committee within 60 days of receipt of the denial. Absent a request for review within the 60-day period, the claim will be deemed to be conclusively denied. The Committee shall afford the claimant or his authorized representative the opportunity to review all pertinent documents and submit issues and comments in writing and shall render a review decision in writing, all within 60 days after receipt of a request for review (provided that in special circumstances the Committee may extend the time for decision by not more than 60 days upon written notice to the claimant). The Committee's review decision shall contain specific reasons for the decision and reference to the pertinent provisions of the Plan.
ARTICLE XI
Amendment and Termination
The Board of Directors may amend or terminate this Plan at any time;
provided, however, that no such amendment or termination shall deprive any
Participant or Beneficiary of any amounts accrued to him under this Plan prior
to the date of such amendment or termination. If this Plan is terminated, a
Participant's Account hereunder as of the date of termination shall continue to
be credited with interest under Article V and be paid in accordance with the
terms of the Plan as in effect on such date of termination (subject to the
Committee's discretion with respect to distributions, as described in Article
VI); provided, however, that no additional contributions shall be credited after
such termination. Notwithstanding any other provision of the Plan to the
contrary, the Employer shall always have the right to prospectively amend the
manner of crediting interest under the Plan.
ARTICLE XII
Miscellaneous
12.1 No Right to Continued Employment.
Neither participation in this Plan, nor the payment of any benefit hereunder, shall be construed as giving to the Participant any right to be retained in the service of the Employer, or limiting in any way the right of the Employer to terminate the Participant's employment at any time. Nor does the participation in this Plan guarantee the Participant the right to receive any specific amount of compensation or bonus, such amount being determined solely under such applicable compensation or bonus arrangement as established by the Employer.
12.2 Impact on Other Plans.
No amounts credited to any Participant under this Plan and no amounts paid from this Plan will be taken into account as "wages", "salary", "base pay" or any other type of compensation when determining the amount of any payment or allocation, or for any other purpose, under any other qualified or nonqualified pension or profit sharing plan of the Employer, except as otherwise may be specifically provided by such plan.
12.3 Severability.
If any provisions of the Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts of the Plan, but this Plan shall be construed and enforced as if said illegal and invalid provisions had never been included herein.
12.4 Gender and Number.
Masculine gender shall include the feminine, and the singular shall include the plural, unless the context clearly indicates otherwise.
12.5 Evidence Conclusive.
The Employer, the Committee and any person or persons involved
in the administration of the Plan shall be entitled to rely upon any certification, statement, or representation made or evidence furnished by any person with respect to any facts required to be determined under any of the provisions of the Plan, and shall not be liable on account of the payment of any monies or the doing of any act or failure to act in reliance thereon. Any such certification, statement, representation, or evidence, upon being duly made or furnished, shall be conclusively binding upon the person furnishing it but not upon the Employer, the Committee or any other person involved in the administration of the Plan. Nothing herein contained shall be construed to prevent any of such parties from contesting any such certification, statement, representation, or evidence or to relieve any person from the duty of submitting satisfactory proof of any fact.
12.6 Status of Plan Under ERISA.
The Plan is intended to be an unfunded plan maintained by an Employer
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees, as described in Section 201(2),
Section 301(a) (3), Section 401(a) (1) and Section 4021(b) (6) of the Employee
Retirement Income Security Act of 1974, as amended.
12.7 Name and Address Changes.
Each Participant shall keep his name and address on file with the Employer and shall promptly notify the Employer of any changes in his name or address. All notices required or contemplated by this Plan shall be deemed to have been given to a Participant if mailed with adequate postage prepaid thereon addressed to him at his last address on file with the Employer. If any check in payment of a benefit hereunder (which was mailed to the last address of the payee as shown on the Employer's records) is returned unclaimed, further payments shall be discontinued unless evidence is furnished that the recipient is still alive.
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
1999 Annual Report on Form 10-K
EXHIBIT NO. 10.19
CONSULTANT REIMBURSEMENT ARRANGEMENT
Adopted Effective July 1, 1999
RESOLVED, that Executive Officers of the Company may be reimbursed for up to $5,000 of expenditures incurred for personal Financial Counseling, Estate Planning or Tax Preparation.
BRIGGS & STRATTON CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXHIBIT NO. 11
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
Fiscal Year Ended
-------------------------------------------
June 27, 1999 June 28, 1998 June 29, 1997
------------- ------------- -------------
COMPUTATIONS FOR STATEMENTS OF INCOME
Net income $ 106,101 $ 70,645 $ 61,565
============= ============= =============
Basic earnings per share of common stock:
Average shares of common stock outstanding 23,344 24,666 28,551
============= ============= =============
Basic earnings per share of common stock $ 4.55 $ 2.86 $ 2.16
============= ============= =============
Diluted earnings per share of common stock:
Average shares of common stock outstanding 23,344 24,666 28,551
Incremental common shares applicable to common
stock options based on the common stock average
market price during the period 114 109 127
Incremental common shares applicable to restricted
common stock based on average market price during
the period -- -- 1
------------- ------------- -------------
Average common shares assuming dilution 23,459 24,775 28,678
============= ============= =============
Fully diluted earnings per average share of common
stock, assuming conversion of all applicable securities $ 4.52 $ 2.85 $ 2.15
============= ============= =============
|
BRIGGS & STRATTON CORPORATION
EXHIBIT NO. 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
Fiscal Year Ended
--------------------------------------------
June 27, 1999 June 28, 1998 June 29, 1997
------------- ------------- -------------
Net income $ 106,101 $ 70,645 $ 61,565
Add:
Interest 17,024 19,352 9,880
Income tax expense and other taxes on income 63,670 42,500 37,740
Fixed charges of unconsolidated subsidiaries 279 510 668
------------- ------------- -------------
Earnings as defined $ 187,074 $ 133,007 $ 109,853
============= ============= =============
Interest $ 17,024 $ 19,352 $ 9,880
Fixed charges of unconsolidated subsidiaries 279 510 668
------------- ------------- -------------
Fixed Charges as defined $ 17,303 $ 19,862 $ 10,548
============= ============= =============
Ratio of earnings to fixed charges 10.8x 6.7x 10.4x
============= ============= =============
|
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
EXHIBIT NO. 21
SUBSIDIARIES OF THE REGISTRANT
State or Country Percent Voting
Subsidiary of Incorporation Stock Owned
---------- ---------------- --------------
Briggs & Stratton AG Switzerland 100%
Briggs & Stratton Australia Pty. Limited Australia 100%
Briggs & Stratton Austria GmbH Austria 100%
Briggs & Stratton Canada Inc. Canada 100%
Briggs & Stratton Czech Republic s.r.o. Czech Republic 100%
Briggs & Stratton France, S.A.R.L. France 100%
Briggs & Stratton Germany GmbH Germany 100%
Briggs & Stratton International, Inc. Wisconsin 100%
Briggs & Stratton International Sales Corp. Virgin Islands 100%
Briggs & Stratton Mexico S.A. de C.V. Mexico 100%
Briggs & Stratton Netherlands B.V. Netherlands 100%
Briggs & Stratton New Zealand Limited New Zealand 100%
Briggs & Stratton South Africa Pty. South Africa 100%
Briggs & Stratton Sweden AB Sweden 100%
Briggs & Stratton U.K. Limited United Kingdom 100%
Briggs & Stratton Daihatsu, Inc. Wisconsin 100%
Future Parkland Development, Inc. Wisconsin 100%
|
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
EXHIBIT NO. 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our reports included (or incorporated by reference) in this Form 10-K, into the Company's previously filed Registration Statements, File No. 33-39113, File No. 333-25271 and File No. 33-54357.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
September 3, 1999.
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF BRIGGS & STRATTON CORPORATION FOR THE FISCAL YEAR ENDED JUNE 27, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | JUN 27 1999 |
| PERIOD START | JUN 29 1998 |
| PERIOD END | JUN 27 1999 |
| CASH | 60,806 |
| SECURITIES | 0 |
| RECEIVABLES | 194,096 |
| ALLOWANCES | 0 |
| INVENTORY | 137,448 |
| CURRENT ASSETS | 459,146 |
| PP&E | 859,848 |
| DEPRECIATION | 455,394 |
| TOTAL ASSETS | 875,885 |
| CURRENT LIABILITIES | 282,502 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 289 |
| OTHER SE | 365,910 |
| TOTAL LIABILITY AND EQUITY | 875,885 |
| SALES | 1,501,726 |
| TOTAL REVENUES | 1,501,726 |
| CGS | 1,196,371 |
| TOTAL COSTS | 1,196,371 |
| OTHER EXPENSES | 118,560 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 17,024 |
| INCOME PRETAX | 169,771 |
| INCOME TAX | 63,670 |
| INCOME CONTINUING | 106,101 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 106,101 |
| EPS BASIC | 4.55 |
| EPS DILUTED | 4.52 |