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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
For the fiscal year ended JULY 1, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-1370
BRIGGS & STRATTON CORPORATION
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(Exact name of registrant as specified in its charter)
A Wisconsin Corporation 39-0182330
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12301 WEST WIRTH STREET
WAUWATOSA, WISCONSIN 53222
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 414-259-5333
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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Common Stock (par value $0.01 per share) New York Stock Exchange
Common Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was approximately $799,176,000 based on the reported last sale price
of such securities as of August 23, 2001.
Number of Shares of Common Stock Outstanding at August 23, 2001: 21,598,983.
DOCUMENTS INCORPORATED BY REFERENCE
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Part of Form 10-K Into Which Portions
Document of Document are Incorporated
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Proxy Statement for Annual Meeting
on October 17, 2001 Part III
The Exhibit Index is located on page 40.
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BRIGGS & STRATTON CORPORATION
2001 FORM 10-K - TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business 1
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
Executive Officers of the Registrant 6
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 7
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 14
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 36
PART III
Item 10. Directors and Executive Officers of the Registrant 36
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial Owners and Management 36
Item 13. Certain Relationships and Related Transactions 36
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 36
Signatures 39
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements in Item 1. Business, Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations, and the Letter to
Shareholders 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", "intend", "may", "objective", "plan", "seek", "think",
"will" and similar expressions are intended to identify forward-looking
statements. The forward-looking statements are based on the Company's current
views and assumptions and involve risks and uncertainties that include, among
other things, our ability to successfully forecast demand for our products and
appropriately adjust our manufacturing and inventory levels; changes in our
operating expenses; our ability to successfully integrate the acquisition of
Generac Portable Products, Inc. into our operations; changes in interest rates;
the effects of weather on the purchasing patterns of consumers and original
equipment manufacturers (OEMs); actions of engine manufacturers and OEMs with
whom we compete; the seasonal nature of our business; changes in laws and
regulations, including environmental and accounting standards; work stoppages or
other consequences of any deterioration in our employee relations; changes in
consumer and OEM demand; changes in prices of raw materials and parts that we
purchase; changes in domestic economic conditions, including housing starts and
changes in consumer disposable income; changes in foreign economic conditions,
including currency rate fluctuations; and other factors that may be disclosed
from time to time in our SEC filings or otherwise. Some or all of the factors
may be beyond our control. We caution you that any forward-looking statement
reflects only our belief at the time the statement is made. We undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made.
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PART I
ITEM 1. BUSINESS
Briggs & Stratton Corporation (the Company) 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 primarily aluminum alloy
gasoline engines ranging from 3 through 25 horsepower.
Additionally, through the Company's wholly-owned subsidiary, Generac Portable
Products, Inc. (Generac), acquired on May 15, 2001, the Company is a leading
designer, manufacturer and marketer of portable generators, pressure washers and
related accessories.
Since its acquisition of Generac, the Company conducts its operations in two
reportable segments: engines and Generac Portable Products. Further information
about the Company's business segments is contained in Note 5 of the Notes to
Consolidated Financial Statements in Item 8 of this report.
ENGINES
GENERAL
The Company's engines are used primarily by the lawn and garden equipment
industry, which accounted for 84% of fiscal 2001 OEM engine sales. Major lawn
and garden equipment applications include walk-behind lawn mowers, riding lawn
mowers and garden tillers. The remaining 16% of OEM sales in fiscal 2001 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
the 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), Industrial Plus(TM) and Vanguard(TM).
In fiscal 2001, approximately 25% 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 engines 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
in the United States 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 34,000 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 engine sales are made primarily to original equipment
manufacturers. The Company's three largest engine customers in each of the last
three fiscal years were AB Electrolux (principally its Electrolux Home Products
group), MTD Products Inc. and the Murray Group (owned by Summersong Investments,
Inc.). Sales to each of these customers were more than 10% of net sales in
fiscal 2001, 2000, and 1999. Sales to all three combined were 46% of net sales
in fiscal 2001, 44% of net sales in fiscal 2000 and 42% of net sales in fiscal
1999. Under purchasing plans available
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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.
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
fiscal 2001 more than 75% of all lawn and garden equipment sold in the United
States was sold through mass merchandisers such as Sears, The Home Depot, Inc.
(The Home Depot), Wal*Mart Stores, Inc. and Lowe's Home Centers, Inc. (Lowe's).
Given the buying power of the mass merchandisers, the Company, through its
customers, has continued to experience pricing pressure. The Company expects
that this pricing trend will continue in the foreseeable future. The Company
believes that a similar trend has developed for engine products for industrial
and consumer applications outside of the lawn and garden market.
COMPETITION
The small gasoline engine industry is highly competitive. The Company's major
domestic competitors in engine manufacturing are Tecumseh Products Company
(Tecumseh), Honda Motor Co., Ltd. (Honda), Kohler Co. and Kawasaki Heavy
Industries, Ltd. (Kawasaki). Also, a domestic lawn mower manufacturer, Toro Co.
under its Lawn-Boy brand, manufactures some of 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 to other OEMs
and indirectly through their sale of end products. 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.
In order to efficiently use its capital investments and meet seasonal demand for
engines, the Company pursues a relatively 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. This seasonal pattern, which results in
high inventories and low cash flow for the Company in the second and the
beginning of the third fiscal quarters, shifts ultimately to higher cash flow in
the latter portion of the third fiscal quarter and in the fourth fiscal quarter
as inventories are liquidated and receivables are collected.
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.
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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 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 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 a joint venture
in India with Hero Motors, part of the Hero Group, for the manufacture of
engines and transmissions for use in two wheel transportation vehicles.
The Company has a strategic relationship with Mitsubishi Heavy Industries (MHI)
for the global distribution of air cooled gasoline engines manufactured by MHI
in Japan under the Company's Vanguard(TM) brand.
GENERAC PORTABLE PRODUCTS
GENERAL
In May 2001, Briggs & Stratton Corporation acquired Generac (the company).
Generac's two principal product lines are portable generators and pressure
washers. The company sells its products through multiple channels of retail
distribution, including the leading home center chains, mass merchants and
warehouse clubs as well as independent dealers. Generac or its predecessor has
been a major supplier of portable generators to Sears since 1961 and is a major
supplier to Sears of pressure washers, both marketed under the Craftsman(TM)
label. The company is also a core supplier of portable generators and pressure
washers, both marketed under the Generac Portable Products label, to The Home
Depot and Lowe's. In addition, the company is a core supplier for many of the
leading retail home centers and do-it-yourself retailers throughout the United
States, Canada and Europe.
The company sells its products to mass merchants, home centers and independent
dealers who sell to consumers. Generac has assembled a comprehensive after-sales
service network in North America for portable generators and pressure washers
comprised of approximately 3,000 authorized independent dealers. Although most
independent dealers do not generate the traffic to be competitive with mass
merchants, home centers or warehouse clubs, Generac continues to maintain its
independent dealer network for the express purpose of providing the after sales
service capability that supports its products.
To support the company's European power generator business, local sales offices
have been established in the United Kingdom, Germany and Spain.
CUSTOMERS
The company sells to consumer home centers and warehouse clubs, as well as mass
merchants, hardware stores and outdoor power equipment dealers. Historically,
the major customers have been Costco, The Home Depot and Sears. Other U.S.
retail customers include B.J.'s Wholesale Club, Lowe's, Sam's Club and Tru-Serv
Incorporated.
COMPETITION
The U.S. engine powered tools industry has experienced significant consolidation
over the last 10 to 15 years. The number of competitors in its product
categories has decreased from approximately 20 in 1985 to approximately 10
today, of which only four companies have national distribution capabilities. The
principal competitive factors in the engine powered tools industry include
price, service, product performance, technical innovation and delivery. In the
manufacture and sale of
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portable generators, Generac competes primarily with Coleman Powermate (a
division of The Coleman Company, Inc.) and Honda. In the manufacture and sale of
pressure washers, Generac competes primarily with DeVilbiss Air Power Company
(an affiliate of Pentair, Inc.) and to a lesser extent, with The Coleman
Company, Inc., Alfred Karcher GmbH & Co. and Campbell Hausfeld (an affiliate of
Berkshire Hathaway, Inc.).
The company believes it has the largest North American market share of portable
generators and a significant share of consumer pressure washers.
SEASONALITY OF DEMAND
Sales of Generac's products are subject to seasonal patterns. Due to seasonal
and regional weather factors, sales of pressure washers and related working
capital requirements are typically higher during the fiscal third and fourth
quarters than at other times of the year. Sales of generators are typically
higher during the summer storm season. The residential and commercial
construction markets are sensitive to cyclical changes in the economy.
MANUFACTURING
Generac's manufacturing location in the United States is in Jefferson,
Wisconsin. In this facility the company primarily produces portable generators
and pressure washers. Generac manufactures core components for portable
generators and pressure washers, including alternators and pressure washer
pumps, where such integration improves operating profitability by providing
lower costs.
Generac purchases engines from its parent, Briggs & Stratton Corporation, as
well as from Generac Power Systems, Inc., Tecumseh and Honda. The company has
not experienced any difficulty obtaining necessary purchased components.
To service Generac's European customer base more effectively, the company
designs and assembles its European products in its Cheshire, England facility.
This facility imports alternators, engines and other components and assembles
portable generators to meet European product requirements.
CONSOLIDATED
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 July 1, 2001, July 2, 2000 and June 27, 1999, the Company
spent approximately $21.5 million, $24.3 million and $17.9 million,
respectively, on Company sponsored research activities relating to the
development of new products or the improvement of existing products.
The average number of persons employed by the Company during the fiscal year was
7,160. Employment ranged from a low of 6,447 in May 2001 to a high of 7,489 in
October 2000.
EXPORT SALES
Export sales for fiscal 2001 were $325.6 million (25% of total sales), for
fiscal 2000 were $358.1 million (23% of total sales) and for fiscal 1999 were
$316.1 million (21% of total sales). These sales were principally to customers
in European countries. See Note 5 of Notes to Consolidated Financial Statements
for financial information about geographic areas. Also, see Item 7A and Note 12
of Notes to Consolidated Financial Statements for information about the
Company's foreign exchange risk management.
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ITEM 2. PROPERTIES
The corporate offices and one of the Company's engine manufacturing facilities
are located in a suburb of Milwaukee, Wisconsin. The Company also has engine
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 engine component manufacturing space in the Milwaukee
area.
Generac's offices and one of its manufacturing facilities are located in
Jefferson, Wisconsin. Generac also has a manufacturing facility in Cheshire,
England. These are owned facilities containing 295,000 square feet of office and
production area. Generac leases warehouse space totalling 270,000 square feet in
5 communities in Wisconsin.
The engine business with the OEMs 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 fewer shifts 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 leases approximately 207,000 square feet of space to house its
foreign sales and service operations in Australia, Austria, Canada, China, the
Czech Republic, France, Germany, Mexico, the Netherlands, New Zealand, Russia,
South Africa, Spain, Sweden, Switzerland, United Arab Emirates and the United
Kingdom.
The Company's owned properties are well maintained. The Company believes that
its owned and leased facilities are adequate to perform its operations in a
reasonable manner.
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 July 1,
2001.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Name, Age, Position Business Experience for Past Five Years
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FREDERICK P. STRATTON, JR., 62 Mr. Stratton was elected to the position of Chairman in
Chairman (1)(2) November 1986. Mr. Stratton also held the position of
Chief Executive Officer from May 1977 through June
2001.
JOHN S. SHIELY, 49 Mr. Shiely was elected to his current position
President and Chief Executive Officer effective July 2001, after serving as President and
(1)(2) Chief Operating Officer since August 1994.
MICHAEL D. HAMILTON, 59 Mr. Hamilton was elected to his current position
Executive Vice President and effective July 2001, after serving as Executive Vice
President - Briggs & Stratton Asia President - Sales and Service since June 1989.
JAMES E. BRENN, 53 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. He also served as
Treasurer from November 1999 until January 2000.
RICHARD J. FOTSCH, 46 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.
HUGO A. KELTZ, 53 Mr. Keltz was elected to his current position effective
Vice President and Managing July 2001, after serving as Vice President -
Director - Briggs & Stratton Europe International since May 1992.
CURTIS E. LARSON, JR., 53 Mr. Larson was elected to his current position in
Vice President - Distribution October 1995.
Sales and Customer Support
PAUL M. NEYLON, 54 Mr. Neylon was elected to his current position in
Senior Vice President - Production August 2000, after serving as Vice President - Production
since May 1999. He previously served as Vice President -
Operations Support since January 1999 and prior
to that held the position of Vice President; General
Manager - Spectrum Division.
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DORRANCE J. NOONAN, JR., 48 Mr. Noonan was elected to his current position
Senior Vice President and effective upon completion of the Company's acquisition
President - Briggs & Stratton of Generac Portable Products, Inc. in May 2001. Prior
Home Power Products to the acquisition, he held the position of President,
Chief Executive Officer and Director of Generac Portable
Products, LLC and Director of Generac Portable Products,
Inc. since July 1998 and was Vice President of Generac
Portable Products, Inc. since September 1999. He served in
various management positions with Generac Corporation from
1990 to 1998, most recently as Chief Operating Officer of the
Portable Products Division from 1997 to 1998.
KASANDRA K. PRESTON, 57 Ms. Preston was elected to her current position in July
Vice President and Secretary 2000, after serving as Director of Corporate Compliance
and Shareholder Relations since June 1995.
WILLIAM H. REITMAN, 45 Mr. Reitman was elected an executive officer effective
Vice President - Marketing April 1998. He has served as Vice President - Marketing
since November 1995.
STEPHEN H. RUGG, 54 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.
THOMAS R. SAVAGE, 53 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 also served as Secretary from November 1999 to June
2000.
MICHAEL D. SCHOEN, 41 Mr. Schoen was elected to his current position
Vice President - International effective July 2001. He was elected an executive
officer in August 2000, after serving as Vice President -
Operations Support since July 1999. He previously held the
position of Vice President - International Operations since
July 1996.
TODD J. TESKE, 36 Mr. Teske was elected to his current position effective
Vice President - Corporate Development March 2001 after serving as Controller since October
1998. He previously served as Assistant Controller.
CARITA R. TWINEM, 46 Ms. Twinem was elected to her current position in
Treasurer February 2000, after serving as Tax Director since July 1994.
(1) Officer is also a Director of the Company. (2) Member of Executive
Committee.
Officers are elected annually and serve until they resign, die, are removed, or
a different person is appointed to the office.
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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 35.
Private Offering of Convertible Senior Notes. On May 14, 2001, Briggs & Stratton
Corporation issued and sold, in a private placement, $140 million aggregate
principal amount of its 5.00% Convertible Senior Notes due May 15, 2006. The
convertible notes are convertible at the option of the holders into shares of
Briggs & Stratton common stock, at any time prior to their maturity or
redemption, at the conversion rate of 20.1846 shares of common stock per $1,000
principal amount of convertible notes, subject to adjustment in certain
circumstances. This is equivalent to a conversion price of approximately $49.54
per share.
The convertible notes were sold to Goldman, Sachs & Co. and Banc of America
Securities LLC, as "accredited investors" within the meaning of Rule 501 under
the Securities Act of 1933, in reliance on the exemption from registration
afforded by Section 4(2) of the Securities Act for transactions by an issuer not
involving any public offering, and were offered and sold by the initial
purchasers to "qualified institutional buyers" in reliance on Rule 144A under
the Securities Act. Pursuant to a registration rights agreement entered into in
connection with the private offering, Briggs & Stratton has filed a shelf
registration statement to permit the registered resale of the convertible notes
and the common stock issuable upon conversion of the convertible notes.
The aggregate offering price of the convertible notes was $140 million, 100% of
the principal amount thereof. The purchase price paid to the Company by the
initial purchasers was the initial offering price less an underwriting discount
of $3.675 million, 2.625% of the principal amount of the convertible notes.
Concurrently with the offering of the convertible notes, the Company offered and
sold $275 million aggregate principal amount of our 8.875% Senior Notes due
March 15, 2011, which are not convertible, in a private placement to the same
initial purchasers for offering to qualified institutional buyers in reliance on
Rule 144A, with exchange and registration rights.
The net proceeds from the sale of the senior notes and convertible senior notes
were used to fund the acquisition of Generac, including the replacement of
Generac's outstanding debt, and to repay a portion of our unrated commercial
paper and short-term borrowings under our credit facilities. The senior notes
and the convertible senior notes are guaranteed by Generac and its subsidiaries.
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ITEM 6. SELECTED FINANCIAL DATA
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Fiscal Year 2001 2000 1999 1998 1997
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(dollars in thousands, except per share data)
SUMMARY OF OPERATIONS (1)
NET SALES (2) $ 1,312,446 $ 1,592,564 $ 1,503,964 $ 1,329,457 $ 1,318,337
GROSS PROFIT ON SALES 239,063 339,454 305,355 254,674 221,216
PROVISION FOR INCOME TAXES 23,860 80,150 63,670 42,500 37,740
NET INCOME 48,013 136,473 106,101 70,645 61,565
PER SHARE OF COMMON STOCK:
Basic Earnings 2.22 5.99 4.55 2.86 2.16
Diluted Earnings 2.21 5.97 4.52 2.85 2.15
Cash Dividends 1.24 1.20 1.16 1.12 1.09
Shareholders' Investment $ 19.57 $ 18.83 $ 15.77 $ 13.28 $ 13.82
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING (in 000's) 21,598 22,788 23,344 24,666 28,551
DILUTED NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING (in 000's) 21,966 22,842 23,459 24,775 28,678
OTHER DATA (1)
SHAREHOLDERS' INVESTMENT $ 422,752 $ 409,465 $ 365,910 $ 316,488 $ 351,097
LONG-TERM DEBT 508,134 98,512 113,307 128,102 142,897
TOTAL ASSETS 1,296,195 930,245 875,885 793,409 842,189
PLANT AND EQUIPMENT 890,191 838,655 859,848 812,428 796,714
PLANT AND EQUIPMENT, NET OF RESERVES 416,361 395,580 404,454 391,927 396,266
PROVISION FOR DEPRECIATION 56,117 51,097 49,346 47,511 43,345
EXPENDITURES FOR PLANT AND EQUIPMENT 61,322 71,441 65,998 45,893 71,262
WORKING CAPITAL $ 371,248 $ 158,516 $ 160,350 $ 149,846 $ 199,039
Current Ratio 2.5 TO 1 1.5 to 1 1.6 to 1 1.7 to 1 1.9 to 1
NUMBER OF EMPLOYEES AT YEAR END 6,974 7,233 7,994 7,265 7,661
NUMBER OF SHAREHOLDERS AT YEAR END 4,129 4,385 4,628 4,911 5,336
QUOTED MARKET PRICE:
High $ 48.38 $ 63.63 $ 70.94 $ 53.38 $ 53.63
Low $ 30.38 $ 31.00 $ 33.69 $ 36.88 $ 36.50
(1) The above amounts include the acquisition of Generac Portable Products
since May 15, 2001. See Notes to Consolidated Financial Statements.
(2) Reflects the adoption of EITF No. 00-10 for all fiscal years presented. See
Notes to Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Acquisition
On May 15, 2001, the Company acquired Generac Portable Products for net cash of
$267 million. See Note 3 to the Consolidated Financial Statements for additional
information on the acquisition.
RESULTS OF OPERATIONS
FISCAL 2001 COMPARED TO FISCAL 2000
Sales
Net sales for fiscal 2001 totaled $1,312 million, a decrease of $280 million or
18% compared to the preceding year. The primary factors were a 10% decline in
engine unit volume, 15% lower sales of service components due to the Company's
distributors having adequate stocks of parts, and an unfavorable sales mix as
the entire 10% engine unit decline was made up of larger horsepower engines.
Inventories of riding equipment at the OEMs and retail were more than adequate
to address soft demand for riding lawn and garden equipment.
The other major factor adversely affecting the fiscal year was the weak Euro
which lowered revenues by $24 million. These revenues decreased because the
Company's pricing reflected the need to remain competitive in the European
market.
The acquisition of Generac added $30 million in sales.
Gross Profit
The gross profit rate decreased to 18% from 21% in fiscal 2000. The major
reasons for the decrease were lower plant utilization having a $32 million
impact and the weak Euro of $24 million. Offsetting these factors was the
favorable pension income impact of $12 million. Pension income included in gross
profit totaled $24 million in fiscal 2001.
Engineering, Selling, General and Administrative Expenses
Engineering, selling, general and administrative expenses increased $6 million
or 4% compared to fiscal 2000. Expenses in this category increased almost $20
million. The majority of the increase was due to the following factors: a $16
million planned expansion of staff and expenditures for business development and
introduction of new product, a $3 million bad debt write-off, and $3 million of
Generac's operating costs incurred since the acquisition. The increased costs
were offset by $14 million of lower employee benefit costs for profit sharing
and increased pension income. Pension income in this category was $4 million in
fiscal 2001.
Interest Expense
Interest expense increased $9 million or 44% in fiscal 2001 compared to fiscal
2000 because the level of borrowings was greater in fiscal 2001. The increased
level of borrowings resulted from increased seasonal working capital needs and
the funding of the Generac acquisition.
Other Income
Other income decreased $13 million in fiscal 2001 compared to fiscal 2000. This
decrease is attributed primarily to an $8 million reduction in equity income
from joint ventures and investments and $5 million in translation losses.
Provision for Income Taxes
The effective tax rate decreased to 33.2% in fiscal 2001 from 37.0% in the
previous year. The majority of the decrease was the result of the finalization
and approval by the Congressional Joint Committee on Taxation of a refund on our
Federal taxes related to Foreign Sales Corporation tax benefits.
FISCAL 2000 COMPARED TO FISCAL 1999
Sales
Net sales for fiscal 2000 totaled $1,593 million, an increase of $89 million or
6% compared to the preceding year. The primary factors were a $104 million
increase in sales dollars related to a 6% increase in engine unit shipments, a
favorable mix of engines sold amounting to $24 million and $9 million from
increased prices. Offsetting these factors was a $48 million decrease of
castings sales resulting from the disposition of the Company's ductile iron
foundries in the first quarter of fiscal 2000.
Gross Profit
The gross profit rate increased to 21% in fiscal 2000 from 20% in fiscal 1999.
Favorable factors to the gross profit were $18 million attributed to the benefit
of higher production during the year and $9 million of price increases.
Offsetting these improvements were $6 million of higher costs for purchased
items including increased costs for imported engines due to currency exchange
rates.
10
13
Engineering, Selling, General and Administrative Expenses
Engineering, selling, general and administrative expenses increased $9 million
or 7% compared to fiscal 1999. This increase was primarily from a $6 million
increase in research and development costs and a $3 million increase in profit
sharing expenses due to improved results. These increases were offset by a $2
million decrease in costs related to the Company's POWERCOM software business
that was sold in the first quarter of the preceding year.
Interest Expense
Interest expense increased $4 million or 25% in fiscal 2000 compared to fiscal
1999. These increases were the result of the Company's higher level of
short-term borrowings during the year to fund working capital needs.
Gain on Disposition of Foundry Assets
At the end of August 1999, the Company contributed its two ductile iron
foundries to Metal Technologies Holding Company, Inc. (MTHC) in exchange for $24
million in cash and $45 million aggregate par value convertible preferred stock.
The provisions of the preferred stock include a 15% cumulative dividend and
conversion rights into a minimum of 31% of MTHC common stock. Pursuant to
Emerging Issues Task Force Abstract No. 86-29, the Company considered this
contribution to be a monetary transaction, given the significant amount of cash
received and recorded the consideration received at fair value. The preferred
stock received was determined to have a fair value of $22 million based on
provisions of the stock and the prevailing market returns for similar
investments, estimated to be 30%, as of the date of the transaction.
Other Income
Other income increased $9 million in fiscal 2000 compared to fiscal 1999. This
increase is primarily attributed to increased equity income from joint ventures.
Provision for Income Taxes
The effective tax rate used in fiscal 2000 was 37.0% compared with 37.5% in
fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
FISCAL YEARS 2001, 2000 AND 1999
Cash flow from operating activities was $68 million, $77 million and $116
million, in fiscal 2001, 2000 and 1999, respectively.
The fiscal 2001 cash flow from operating activities decreased $10 million, which
reflects lower gains on the disposition of plant and equipment of $16 million.
The lower gains from disposition of plant and equipment were because fiscal 2000
contained the disposition of the foundry assets. The increase in inventories was
$114 million less in fiscal 2001 compared to the fiscal 2000 increase. This
decrease was the result of planned inventory increases in fiscal 2000 to
replenish abnormally low inventories to more normal levels. The change in
accounts payable and accrued liabilities was $48 million less in fiscal 2001 due
to timing of payments and lack of accruals for profit sharing due to lower
performance. The $18 million increase in pension income is attributable to the
Company's over funded pension plan.
The fiscal 2000 cash flow from operating activities decreased $38 million. This
reflects increased net income of $30 million offset by the gain on disposition
of foundry assets of $17 million and an increased requirement for operating
capital of $41 million caused by increases in inventories at the end of fiscal
2000 offset by lower accounts receivable. The increase in inventories was
planned as inventories at the end of fiscal 1999 were unusually low. Lower
accounts receivable was caused by lower sales in June 2000 compared to June
1999.
The fiscal 1999 cash flow from operating activities declined $20 million. This
reflects improved net income of $35 million, offset by an increased requirement
for operating capital of $49 million, caused primarily by strong fourth quarter
business which increased year-end receivables and a restoration of inventories
to higher year-end levels.
Net cash used in investing activities amounted to $318 million, $43 million and
$67 million in fiscal 2001, 2000 and 1999, respectively. These cash flows
included additions to plant and equipment of $61 million, $71 million and $66
million in fiscal 2001, 2000 and 1999, respectively. Fiscal 2001 and 1999
capital expenditures relate primarily to reinvestment in equipment and new
products. The fiscal 2000 capital expenditures related primarily to reinvestment
in equipment, capacity additions and new products. The fiscal 2001 cash used in
investing activities includes $267 million of cash paid for the Generac
acquisition net of cash acquired. The fiscal 2000 cash used in investing
activities is net of $24 million of proceeds received on the disposition of
plant and equipment.
11
14
Net cash provided by financing activities amounted to $324 million in fiscal
2001. In fiscal 2000 and 1999 cash used by financing activities was $77 million
and $73 million, respectively. Fiscal 2001 included $399 million of proceeds
received from issuing the 5.00% Convertible Senior Notes due 2006 and the 8.875%
Senior Notes due 2011 to fund the acquisition of Generac and payment of short
term-borrowings. During fiscal 2000, the Company repaid the remaining $30
million on the 9.21% Senior Notes due 2001. There was no gain or loss associated
with this repayment. In fiscal 1999 the Company paid $15 million on these notes.
Proceeds from the exercise of stock options amounted to $45 million in fiscal
1999, substantially higher than in fiscal 2001 and 2000. Also, the Company
repurchased fewer common shares in fiscal 2001 compared to fiscal 2000 and 1999.
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. While this
credit facility expires in April 2002, the Company is currently negotiating its
replacement and expects to be completed during the second quarter of fiscal
2002. This facility and the Company's other indebtedness contain certain
restrictive covenants, see Note 6 to the Consolidated Financial Statements.
The Company expects capital expenditures to be $67 million for fiscal 2002.
These anticipated expenditures are for continued investments in equipment and
new products.
Management believes that available cash, the credit facility, cash generated
from operations, existing lines of credit and access to 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 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 years 1998 through 2001. 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 Company has remaining authorization to buy up to 1.8 million shares of
company stock in open market or private transactions under the June 2000 Board
of Directors' authorization to repurchase up to 2.0 million shares. The Company
does not anticipate repurchasing shares in fiscal 2002.
Also as a part of its financial strategy, subject to the discretion of its Board
of Directors and the requirements of applicable law and debt covenants, the
Company currently intends to increase future cash dividends per share at a rate
approximating the inflation rate.
OUTLOOK
The Company projects sales to increase by almost 30% in fiscal 2002. A majority
of the increase is because Generac's sales will be in the numbers for a full
year at approximately $310 million. Engine sales are anticipated to increase 7%
due to engine volume, sales mix and some new products and services.
The gross profit percentage is projected to be approximately 17.5% for the
year. This is down from fiscal 2001, because of the weighting of Generac sales
which are projected to have lower gross margins than the Company's engine
business. The other negative impact on gross margins is the anticipated lower
engine production between years and the new product and service introductions
that are projected to have negative margins during startup.
Engineering, selling, general and administrative expenses are projected to
increase from $140 million to $165 million. Generac's expenses in this category
are $24 million of the anticipated $25 million increase.
Interest expense is anticipated to be $45 million, depreciation $60 million and
capital expenditures $67 million. The Company currently expects to have an
effective tax rate of 35.0%.
The Company anticipates the first quarter operating results to be significantly
lower than the prior years, due to slower sales and significantly lower
production levels. The Company expects both sales and production levels to peak
in a more historical pattern in fiscal 2002, which is basically late in the
second fiscal quarter and then during the full third fiscal quarter.
12
15
OTHER MATTERS
General
On October 5, 2000, it was announced that one of the Company's largest
customers, the Murray Group, was acquired by Summersong Investments, Inc. The
Company does not expect this acquisition to adversely impact its annual supply
arrangement with the Murray Group for the fiscal 2002 outdoor power equipment
selling season, as there was no adverse impact in fiscal 2001.
In July 2001, the Company extended its collective bargaining agreement with one
of its unions. This agreement expires in 2006, and contains provisions for
future wage increases, medical cost sharing and increased pension benefits.
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 implemented a supplemental compliance plan for model years 2000 and
2001 with 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 plans is to achieve additional reductions in extreme
non-attainment areas. While CARB's aggressive program resulted in a reduced
product offering by the Company in California, the California program did not
have a material effect on the financial condition or results of operations of
the Company.
New Accounting Pronouncements
The Emerging Issues Task Force (EITF) issued EITF Abstract No. 00-10,
"Accounting for Shipping and Handling Fees and Costs", and EITF Abstract No.
00-22, "Accounting for Points and Certain Time-Based and Volume-Based Sales
Incentive Offers and Offers for Free Products or Services to be Delivered in the
Future". These were adopted during fiscal 2001. The impact of adopting of EITF
No. 00-10 was to reclassify approximately $2 million of shipping revenue from
cost of sales into revenue in each of fiscal 2001, 2000 and 1999. There was no
impact of adopting EITF No. 00-22.
EITF Abstract No. 00-25, "Vendor Income Statements Characterization of
Consideration Paid to a Re-Seller of a Vendor's Products", is to be adopted as
of December 31, 2001. The Company will be required to reclassify co-op
advertising expense from selling expense to sales as a reduction of gross sales.
The reclassification will not have a material adverse effect on the Company's
results of operations.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 provides for the
elimination of the pooling-of-interests method of accounting for business
combinations with an acquisition date of July 1, 2001 or later. SFAS No. 142
prohibits the amortization of goodwill and other intangible assets with
indefinite lives and requires periodic reassessment of the underlying value of
such assets for impairment. SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001. An early adoption provision exists for companies with
fiscal years beginning after March 15, 2001. On July 2, 2001, the Company
adopted SFAS No. 142. Application of the nonamortization provision of SFAS No.
142 is expected to result in an increase in net income of approximately $.7
million in fiscal 2002.
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16
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 the Japanese Yen and Euro. The Yen is used to purchase engines
from the Company's joint venture, while the Company receives Euros for certain
products sold to European customers. 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 July 1, 2001, the Company had the
following forward foreign exchange contracts outstanding with the Fair Value
Gains (Losses) shown (in thousands):
Currency
Notional -------------- Fair
Currency Value Amount Type Value $
- -------- ----------- ------ ---- -------
Japanese Yen 1,330,024 11,375 U.S. (622)
Euro 36,000 33,569 U.S. 3,056
Japanese Yen 27,638 443 Australian (4)
U.S. Dollars 5,242 9,733 Australian 275
U.S. Dollars 3,290 5,021 Canadian (25)
British Pounds 682 1,921 Australian (15)
All of the above contracts expire within twelve months.
Fluctuations in currency exchange rates may also impact the shareholders'
investment in 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 shareholders'
investment as cumulative translation adjustments. The cumulative translation
adjustments component of shareholders' investment decreased $2.5 million during
the year. Using the year-end exchange rates, the total amount invested in
non-U.S. subsidiaries at July 1, 2001 was approximately $21.7 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 July 1, 2001, the Company had the following short-term loans outstanding
(amounts in thousands):
Weighted Average
Currency Amount Interest Rate
- -------- ------ -------------
German Mark 33,062 5.85%
Dutch Guilder 1,277 6.32%
Canadian Dollars 2,120 5.10%
U.S. Dollars 3,300 5.18%
French Franc 208 4.54%
All of the above loans carry variable interest rates.
Long-term loans, net of unamortized discount, consisted of the following
(amounts in thousands):
Description Amount Maturity
- ----------- ------ --------
5.00% Convertible Notes $ 140,000 2006
7.25% Notes $ 98,718 2007
8.875% Notes $ 269,416 2011
The above loans carry fixed rates of interest.
14
17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE FISCAL YEARS ENDED JULY 1, 2001, JULY 2, 2000 AND JUNE 27, 1999
(in thousands, except per share data)
2001 2000 1999
---- ---- ----
NET SALES ................................... $ 1,312,446 $ 1,592,564 $ 1,503,964
COST OF GOODS SOLD .......................... 1,073,383 1,253,110 1,198,609
----------- ----------- -----------
Gross Profit on Sales... ................. 239,063 339,454 305,355
ENGINEERING, SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ................... 139,957 134,225 125,219
----------- ----------- -----------
Income from Operations ................... 99,106 205,229 180,136
INTEREST EXPENSE ............................ (30,665) (21,267) (17,024)
GAIN ON DISPOSITION OF FOUNDRY ASSETS ....... -- 16,545 --
OTHER INCOME, Net ........................... 3,432 16,116 6,659
----------- ----------- -----------
Income Before Provision for Income Taxes 71,873 216,623 169,771
PROVISION FOR INCOME TAXES .................. 23,860 80,150 63,670
----------- ----------- -----------
NET INCOME .................................. $ 48,013 $ 136,473 $ 106,101
=========== =========== ===========
Weighted Average Shares Outstanding ...... 21,598 22,788 23,344
BASIC EARNINGS PER SHARE .................... $ 2.22 $ 5.99 $ 4.55
=========== =========== ===========
Diluted Average Shares Outstanding ....... 21,966 22,842 23,459
DILUTED EARNINGS PER SHARE .................. $ 2.21 $ 5.97 $ 4.52
=========== =========== ===========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
15
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CONSOLIDATED BALANCE SHEETS
AS OF JULY 1, 2001 AND JULY 2, 2000
(in thousands)
ASSETS 2001 2000
---- ----
CURRENT ASSETS:
Cash and Cash Equivalents .................................................... $ 88,743 $ 16,989
Receivables, Less Reserves of $1,599 and $1,544, Respectively ................ 145,138 140,097
Inventories -
Finished Products and Parts .............................................. 218,671 181,800
Work in Process .......................................................... 99,247 70,908
Raw Materials ............................................................ 3,782 5,066
---------- ----------
Total Inventories ................................................... 321,700 257,774
Future Income Tax Benefits ................................................... 38,434 39,138
Prepaid Expenses and Other Current Assets .................................... 19,415 17,296
---------- ----------
Total Current Assets ................................................ 613,430 471,294
INVESTMENTS .................................................................... 46,071 50,228
PREPAID PENSION ................................................................ 36,275 5,506
DEFERRED LOAN COSTS ............................................................ 10,429 703
CAPITALIZED SOFTWARE ........................................................... 6,552 6,934
INTANGIBLE ASSETS .............................................................. 167,077 -
PLANT AND EQUIPMENT:
Land and Land Improvements ................................................... 16,308 15,087
Buildings .................................................................... 150,396 139,588
Machinery and Equipment ...................................................... 694,416 651,740
Construction in Progress ..................................................... 29,071 32,240
---------- ----------
890,191 838,655
Less - Accumulated Depreciation .............................................. 473,830 443,075
---------- ----------
Total Plant and Equipment, Net ...................................... 416,361 395,580
---------- ----------
$1,296,195 $ 930,245
========== ==========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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19
AS OF JULY 1, 2001 AND JULY 2, 2000
(in thousands)
LIABILITIES AND SHAREHOLDERS' INVESTMENT 2001 2000
---- ----
CURRENT LIABILITIES:
Accounts Payable .............................................................. $ 102,559 $ 117,556
Domestic Notes Payable ........................................................ 3,300 48,809
Foreign Loans ................................................................. 16,291 13,356
Accrued Liabilities -
Wages and Salaries ......................................................... 21,084 39,464
Warranty ................................................................... 47,480 46,352
Other ...................................................................... 47,161 42,622
----------- ---------
Total Accrued Liabilities ............................................... 115,725 128,438
Federal and State Income Taxes ................................................ 4,307 4,619
----------- ---------
Total Current Liabilities ............................................... 242,182 312,778
DEFERRED REVENUE ON SALE OF PLANT AND EQUIPMENT .................................. 15,536 15,679
DEFERRED INCOME TAX LIABILITY .................................................... 18,351 4,011
ACCRUED PENSION COST ............................................................. 14,494 11,428
ACCRUED EMPLOYEE BENEFITS ........................................................ 12,979 12,607
ACCRUED POSTRETIREMENT HEALTH CARE OBLIGATION .................................... 61,767 65,765
LONG-TERM DEBT ................................................................... 508,134 98,512
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT:
Common Stock -
Authorized 60,000 Shares $.01 Par Value,
Issued 28,927 in 2001 and 2000 .......................................... 289 289
Additional Paid-In Capital .................................................... 36,043 36,478
Retained Earnings ............................................................. 743,230 721,980
Accumulated Other Comprehensive Loss .......................................... (6,182) (3,931)
Unearned Compensation on Restricted Stock ..................................... (305) (226)
Treasury Stock at cost,
7,328 Shares in 2001 and 7,181 Shares in 2000 .............................. (350,323) (345,125)
----------- ---------
Total Shareholders' Investment .......................................... 422,752 409,465
----------- ---------
$ 1,296,195 $ 930,245
=========== =========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE FISCAL YEARS ENDED JULY 1, 2001, JULY 2, 2000 AND JUNE 27, 1999
(in thousands)
Accumulated Unearned
Additional Other Com- Compensation
Common Paid-in Retained prehensive on Restricted Treasury Comprehensive
Stock Capital Earnings Income (Loss) Stock Stock Income
------ ---------- -------- ------------- ------------- -------- -------------
BALANCES, JUNE 28, 1998 ............... $289 $ 37,776 $ 533,805 $(2,110) $-- $(253,272)
Comprehensive Income -
Net Income .......................... -- -- 106,101 -- -- -- $ 106,101
Foreign Currency Translation
Adjustments ....................... -- -- -- (199) -- -- (199)
Unrealized Gain on Marketable
Securities, net of tax of $368 .... -- -- -- 577 -- -- 577
---------
Total Comprehensive Income .......... -- -- -- -- -- -- $ 106,479
=========
Cash Dividends Paid
($1.16 per share) ................... -- -- (27,099) -- -- --
Purchase of Common Stock
for Treasury ........................ -- -- -- -- -- (75,141)
Exercise of Stock Options ............. -- (13) -- -- -- 45,143
Restricted Stock Issued ............... -- (106) -- -- (288) 394
Amortization of Unearned
Compensation ........................ -- -- -- -- 53 --
---- -------- --------- ------- ----- ---------
BALANCES, JUNE 27, 1999 ............... $289 $ 37,657 $ 612,807 $(1,732) $(235) $(282,876)
Comprehensive Income -
Net Income .......................... -- -- 136,473 -- -- -- $ 136,473
Foreign Currency Translation
Adjustments ....................... -- -- -- (1,816) -- -- (1,816)
Unrealized Loss on Marketable
Securities, net of tax of $247 .... -- -- -- (383) -- -- (383)
---------
Total Comprehensive Income .......... -- -- -- -- -- -- $ 134,274
=========
Cash Dividends Paid
($1.20 per share) ................... -- -- (27,300) -- -- --
Purchase of Common Stock
for Treasury ........................ -- -- -- -- -- (69,083)
Exercise of Stock Options ............. -- (1,194) -- -- -- 6,755
Restricted Stock Issued ............... -- 10 -- -- (60) 50
Amortization of Unearned
Compensation ........................ -- -- -- -- 69 --
Shares Issued to Directors ............ -- 5 -- -- -- 29
---- -------- --------- ------- ----- ---------
BALANCES, JULY 2, 2000 ................ $289 $ 36,478 $ 721,980 $(3,931) $(226) $(345,125)
Comprehensive Income -
Net Income .......................... -- -- 48,013 -- -- -- $ 48,013
Foreign Currency Translation
Adjustments ....................... -- -- -- (2,530) -- -- (2,530)
Unrealized Loss on Marketable
Securities, net of tax of $607 .... -- -- -- (947) -- -- (947)
Unrealized Gain on Derivatives ...... -- -- -- 1,226 -- -- 1,226
---------
Total Comprehensive Income .......... -- -- -- -- -- -- $ 45,762
=========
Cash Dividends Paid
($1.24 per share) ................... -- -- (26,763) -- -- --
Purchase of Common Stock
for Treasury ........................ -- -- -- -- -- (6,118)
Exercise of Stock Options ............. -- (368) -- -- -- 643
Restricted Stock Issued ............... -- (58) -- -- (181) 239
Amortization of Unearned
Compensation ........................ -- -- -- -- 102 --
Shares Issued to Directors ............ -- (9) -- -- -- 38
---- -------- --------- ------- ----- ---------
BALANCES, JULY 1, 2001 ................ $289 $ 36,043 $ 743,230 $(6,182) $(305) $(350,323)
==== ======== ========= ======= ===== =========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE FISCAL YEARS ENDED JULY 1, 2001, JULY 2, 2000 AND JUNE 27, 1999
(in thousands)
2001 2000 1999
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income .............................................................. $ 48,013 $ 136,473 $ 106,101
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities -
Depreciation and Amortization ......................................... 59,711 53,277 51,687
Equity in Earnings of Unconsolidated Affiliates ....................... (5,041) (13,333) (5,275)
(Gain) Loss on Disposition of Plant and Equipment ..................... 1,493 (14,167) 2,355
Provision for Deferred Income Taxes ................................... 17,973 1,542 4,052
Pension Income, Net ................................................... (28,378) (10,509) (8,389)
Change in Operating Assets and Liabilities, Net of Effects
of Acquisition -
(Increase) Decrease in Receivables .................................... 34,686 51,837 (58,738)
Increase in Inventories ............................................... (7,307) (121,685) (29,570)
Increase in Prepaid Expenses and
Other Current Assets ................................................ (50) (2,488) (3,863)
Increase (Decrease) in Accounts Payable,
Accrued Liabilities and Income Taxes ................................ (46,740) 1,519 61,890
Other, Net ............................................................ (6,392) (4,984) (4,538)
--------- --------- ---------
Net Cash Provided by Operating Activities ........................... 67,968 77,482 115,712
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Plant and Equipment ........................................ (61,322) (71,441) (65,998)
Proceeds Received on Disposition of Plant and Equipment ................. 4,152 23,511 1,142
Cash Paid for Acquisition, Net of Cash Acquired ......................... (267,174) -- --
Other, Net .............................................................. 6,296 5,142 (1,764)
--------- --------- ---------
Net Cash Used in Investing Activities ............................... (318,048) (42,788) (66,620)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) on Loans and Notes Payable .................. (42,574) 44,005 (401)
Proceeds from Issuance of Long-Term Debt ................................ 399,415 -- --
Repayment on 9.21% Senior Notes Due 2001 ................................ -- (30,000) (15,000)
Cash Dividends Paid ..................................................... (26,763) (27,300) (27,099)
Purchase of Common Stock for Treasury ................................... (6,118) (69,083) (75,141)
Proceeds from Exercise of Stock Options ................................. 275 5,561 45,130
--------- --------- ---------
Net Cash Provided by (Used in) Financing Activities ................. 324,235 (76,817) (72,511)
--------- --------- ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS .................................... (2,401) (1,694) (302)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ........................................................ 71,754 (43,817) (23,721)
CASH AND CASH EQUIVALENTS:
Beginning of Year ....................................................... 16,989 60,806 84,527
--------- --------- ---------
End of Year ............................................................. $ 88,743 $ 16,989 $ 60,806
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest Paid ........................................................... $ 26,339 $ 21,202 $ 16,820
========= ========= =========
Income Taxes Paid ....................................................... $ 7,831 $ 84,535 $ 54,491
========= ========= =========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
19
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED JULY 1, 2001, JULY 2, 2000 AND JUNE 27, 1999
(1) NATURE OF OPERATIONS:
Briggs & Stratton Corporation (the Company) is a U.S. based producer of air
cooled gasoline engines. These engines are sold worldwide, primarily to original
equipment manufacturers of lawn and garden equipment and other gasoline engine
powered equipment. Additionally, through the Company's wholly-owned subsidiary,
Generac Portable Products, Inc., the company is a designer, manufacturer and
marketer of portable generators, pressure washers and related accessories.
(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 2001 fiscal
year was 52 weeks long, the 2000 fiscal year was 53 weeks long and the 1999
fiscal year was 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
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results 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 77% of total inventories at July 1, 2001, 91% of total inventories
at July 2, 2000 and 89% at June 27, 1999. 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 $51.2 million, $45.2 million and $43.9 million higher in the
respective years. The LIFO inventory adjustment was determined on an overall
basis, and accordingly, each class of inventory reflects an allocation based on
the FIFO amounts.
Investments: This caption represents the Company's investments in four 50%-owned
foreign joint ventures, preferred stock in a privately-held iron castings
business and common stock in a publicly traded software company. The common
stock in the publicly traded company is being classified as available-for-sale
and is reported at a fair market value of $.5 million as of July 1, 2001, $2.1
million as of July 2, 2000 and $2.7 million as of June 27, 1999. The unrealized
loss incurred on this stock is recorded as Accumulated Other Comprehensive Loss
in the Shareholders' Investment section of the balance sheet. The investments in
the joint ventures and the privately held business are accounted for under the
equity method.
Deferred Loan Costs: Expenses associated with the issuance of debt instruments
are capitalized and are being amortized over the terms of the respective
financing arrangement using the effective interest rate method over periods
ranging from five to ten years.
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 $7.4
million as of July 1, 2001, $6.2 million as of July 2, 2000 and $5.7 million as
of June 27, 1999.
Intangible Assets: This caption represents primarily goodwill, the recognized
portion of the cost of an acquisition in excess of the fair values assigned to
identifiable net assets acquired which is amortized on a straight-line basis
over twenty years and other identifiable intangible assets, which are amortized
20
23
NOTES...
on a straight-line basis over periods of six to seven years. As of July 1, 2001,
accumulated amortization was $1.1 million. The Company assesses the carrying
value of goodwill and other intangibles for possible impairment at each balance
sheet date.
Plant and Equipment and Depreciation: Plant and equipment are stated at cost and
depreciation is computed using the straight-line method at rates based upon the
estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense as incurred.
Expenditures for major renewals and betterments, which significantly extend the
useful lives of existing plant and equipment, are capitalized and depreciated.
Upon retirement or disposition of plant and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in other income.
Impairment of Long-Lived Assets: Property, plant and equipment and other
long-term assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected undiscounted cash flows is less than the carrying value of
the related asset or group of assets, a loss is recognized for the difference
between the fair value and carrying value of the asset or group of assets. There
were no adjustments to the carrying value of long-lived assets in fiscal 2001.
Revenue Recognition: Revenue is recognized when title to the products being sold
transfers to the customer, which is generally upon shipment. The impact of Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements", did
not have an impact on the results of operations.
Deferred Revenue on Sale of Plant & Equipment: In fiscal 1997, the Company sold
its Menomonee Falls, Wisconsin facility for approximately $16.0 million. The
provisions of the contract state that the Company will continue to own and
occupy the warehouse portion of the facility for a period of up to ten years
(the Reservation Period). The contract also contains a buyout clause, at the
buyer's option and under certain circumstances, of the remaining Reservation
Period. Under the provisions of SFAS No. 66, "Accounting for Sales of Real
Estate," the Company is required to account for this as a financing transaction
as 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.
Income Taxes: The Provision for Income Taxes includes Federal, state and foreign
income taxes currently payable and those deferred or prepaid because of
temporary differences between the financial statement and tax basis of assets
and liabilities. The Future Income Tax Benefits represent temporary differences
relating to current assets and current liabilities and the Deferred Income Tax
Assets/Liabilities represent temporary differences relating to noncurrent assets
and liabilities.
Research and Development Costs: Expenditures relating to the development of new
products and processes, including significant improvements and refinements to
existing products, are expensed as incurred. The amounts charged against income
were $21.5 million in 2001, $24.3 million in 2000 and $17.9 million in 1999.
Advertising Costs: Advertising costs, included in Engineering, Selling, General
and Administrative Expenses on the accompanying Consolidated Statements of
Earnings, are expensed as incurred. These expenses totaled $10.1 million in
2001, $8.1 million in 2000 and $7.7 million in 1999.
21
24
NOTES...
EITF Abstract No. 00-25, "Vendor Income Statements Characterization of
Consideration Paid to a Re-Seller of a Vendor's Products", is to be adopted as
of December 31, 2001. The Company will be required to reclassify co-op
advertising expense from selling expense to sales as a reduction of gross sales.
The reclassification will not have a material adverse effect on results of
operations.
Shipping and Handling Fees and Costs: During the fourth quarter of 2001, the
company adopted the provisions of the EITF Abstract No. 00-10, "Accounting for
Shipping and Handling Fees and Costs." In accordance with EITF No. 00-10,
revenue received from shipping and handling fees is reflected in net sales. The
reclassification of shipping fee revenue out of cost of sales for the years
ended July 1, 2001, July 2, 2000 and June 27, 1999 was $1.7 million, $2.0
million and $2.2 million respectively.
Foreign Currency Translation: Foreign currency balance sheet accounts are
translated into United States dollars at the rates of exchange in effect at
fiscal year end. Income and expenses are translated at the average rates of
exchange in effect during the year. The related translation adjustments are made
directly to a separate component of Shareholders' Investment.
Earnings Per Share: The Company's earnings per share were computed by dividing
net income by the weighted average number of shares of common stock outstanding
during the period. Diluted earnings per share, for each period presented, were
computed on the assumption that stock options were exercised at the beginning of
the periods reported. The difference between weighted average shares outstanding
and diluted average shares outstanding reflects the dilutive effects of stock
options and the convertible senior notes. The Company's share repurchase program
may affect the year-to-date comparisons.
The shares outstanding used to compute diluted earnings per share for fiscal
2001, 2000 and 1999 excluded outstanding options to purchase 1,679,564,
1,079,564 and 348,530 shares of common stock, respectively, with
weighted-average exercise prices of $56.33, $61.95 and $61.90, respectively. The
options were excluded because their exercise prices were greater than the
average market price of the common shares and their inclusion in the computation
would have been antidulitive.
Comprehensive Income: 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 (Loss) which encompasses net income, unrealized gain (loss)
on marketable securities, foreign currency translation, and unrealized gain on
derivatives in the Consolidated Statements of Shareholders' Investment.
Information on accumulated other comprehensive income (loss) is as follows (in
thousands of dollars):
Unrealized Accumulated
Gain (Loss) Cumulative Unrealized Other
on Marketable Translation Gain on Comprehensive
Securities Adjustments Derivatives Income (Loss)
---------- ----------- ----------- -------------
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)
Current year change ....................... (383) (1,816) - (2,199)
------- ------- ------- -------
BALANCE AT JULY 2, 2000 ................... 194 (4,125) - (3,931)
CURRENT YEAR CHANGE ....................... (947) (2,530) 1,226 (2,251)
------- ------- ------- -------
BALANCE AT JULY 1, 2001 ................... $ (753) $(6,655) $ 1,226 $(6,182)
======= ======= ======= =======
22
25
NOTES...
Derivatives: On July 2, 2000, the Company adopted SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities". This statement requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Any changes in fair value of these instruments are
recorded in the income statement or other comprehensive income. The impact of
adopting SFAS No. 133 on Accumulated Other Comprehensive Loss resulted in a loss
of $15 thousand. The Company reclassified derivative gains of $1.8 million to
the income statement during the fiscal year. The cumulative effect of adopting
SFAS No. 133 on the results of operations was immaterial.
The Company enters into derivative contracts designated as cash flow hedges to
manage its foreign currency exposures. These instruments generally do not have a
maturity of more than twelve months. During the fiscal year, there were no
derivative instruments that were deemed to be ineffective. The amounts included
in Accumulated Other Comprehensive Loss will be reclassified into income when
the forecasted transaction occurs, generally within the next twelve months.
These forecasted transactions represent the exporting of products for which the
Company will receive foreign currency and the importing of products for which
the Company will be required to pay in a foreign currency.
Sales Incentives: In January 2001, EITF Abstract No. 00-22 "Accounting for
'Points' and Certain Other Time-Based or Volume-Based Sales Incentive Offers and
Offers for Free Products or Services to be Delivered in the Future" was issued.
EITF No. 00-22 prescribes guidance requiring certain rebate offers and free
products that are delivered subsequent to a single exchange transaction to be
recognized when incurred and reported as a reduction of revenue. The Company
adopted EITF No. 00-22 in the fourth quarter of fiscal 2001. It did not impact
the results of operations because the Company's past and current accounting
policy is to report such costs as reductions of revenue.
Reclassification: Certain amounts in prior year financial statements have been
reclassified to conform to current year presentation.
Business Combinations: In June 2001, the Financial Accounting Standards Board
issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and
Other Intangible Assets" having a required effective date for fiscal years
beginning after December 31, 2001. Under certain circumstances companies are
permitted to adopt these statements before the required date. Under the new
rules, goodwill and other intangible assets deemed to have indefinite lives will
no longer be amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives.
The Company adopted the new rules on accounting for goodwill and other
intangible assets in the first quarter of fiscal 2002. Application of the
nonamortization provisions of the SFAS No. 142 is expected to result in an
increase in net income of approximately $.7 million in fiscal 2002. The Company
will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets during fiscal 2002.
(3) ACQUISITION:
On May 15, 2001, the Company acquired Generac, a designer, manufacturer and
marketer of portable generators, pressure washers and related accessories. The
aggregate purchase price of $288.1 million included $267.6 million of cash and
$20.5 million of liabilities assumed. The cash paid included $.5 million of cash
acquired and $4.5 million of direct acquisition costs, and was funded through
the issuance of the 8.875% senior notes as more fully described in Footnote 6.
The provisions of the acquisition include a contingent purchase price based on
the operating results of Generac. The Company does not expect to pay any
additional purchase price pursuant to these provisions.
23
26
NOTES...
The acquisition has been accounted for using the purchase method of accounting
and accordingly, the purchase price was allocated on a preliminary basis to
identifiable assets acquired and liabilities assumed based upon their estimated
fair values, with the excess purchase price recorded as goodwill. Final
adjustments to the purchase price allocation are not expected to be material to
the consolidated financial statements. Goodwill of approximately $167.7 million
has been recorded as a result of the acquisition and has been amortized on a
straight-line basis over twenty years. The following table sets forth the
unaudited pro forma information for the Company as if the acquisition of Generac
had occurred on June 28, 1999 (in millions, except per share data):
2001 2000
---- ----
Net Sales .............................. $1,465.3 $1,911.2
Net Income ............................. $ 26.6 $ 136.0
Basic Earnings Per Share ............... $ 1.23 $ 5.96
Diluted Earnings Per Share ............. $ 1.21 $ 5.96
In the first quarter of fiscal 2002, the Company adopted SFAS No. 142. Under the
new rules, goodwill and other intangible assets with indefinite lives will no
longer be amortized but will be subject to annual impairment tests.
(4) INCOME TAXES:
The provision for income taxes consists of the following (in thousands of
dollars):
Current 2001 2000 1999
---- ---- ----
Federal .................. $ 4,042 $66,169 $51,344
State .................... 594 10,425 7,014
Foreign .................. 1,251 2,014 1,260
------- ------- -------
5,887 78,608 59,618
Deferred .................... 17,973 1,542 4,052
------- ------- -------
$23,860 $80,150 $63,670
======= ======= =======
A reconciliation of the U.S. statutory tax rates to the
effective tax rates follows:
2001 2000 1999
---- ---- ----
U.S. statutory rate .................. 35.0% 35.0% 35.0%
State taxes, net of
Federal tax benefit ............... 2.5% 3.2% 2.9%
Foreign Sales Corporation
tax benefit ....................... (3.5%) (.5%) (.5%)
Other ................................ (.8%) (.7%) .1%
---- ---- ----
Effective tax rate ................... 33.2% 37.0% 37.5%
==== ==== ====
The increase in the Foreign Sales Corporation tax benefit was attributable to a
significant refund recorded by the Company. The components of deferred income
taxes at the end of the fiscal year were (in thousands of dollars):
2001 2000
---- ----
Future Income Tax Benefits:
Inventory ................................. $ 3,424 $ 4,152
Payroll related accruals .................. 3,846 4,539
Warranty reserves ......................... 18,311 18,077
Other accrued liabilities ................. 10,769 11,011
Miscellaneous ............................. 2,084 1,359
-------- --------
$ 38,434 $ 39,138
======== ========
Deferred Income Taxes:
Difference between book and
tax methods applied to
maintenance and supply
inventories .............................. $ 10,723 $ 11,429
Pension cost .............................. (13,187) (1,338)
Accumulated depreciation .................. (55,163) (53,719)
Accrued employee benefits ................. 10,060 9,405
Postretirement
health care obligation ................... 24,089 25,649
Deferred revenue on sale
of plant & equipment ..................... 6,059 6,115
Miscellaneous ............................. (932) (1,552)
-------- --------
$(18,351) $ (4,011)
======== ========
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 $8.4 million
at July 1, 2001. 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.
24
27
NOTES...
(5) SEGMENT AND GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS:
In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" and subsequent to the May 15, 2001 acquisition
described in Footnote 3, the Company has concluded that it operates two
reportable business segments which are managed separately based on fundamental
differences in their operations. Certain information concerning the Company's
business segments is presented below (in thousands of dollars):
2001 2000 1999
---- ---- ----
NET SALES -
Engines ........................ $ 1,291,649 $ 1,592,564 $ 1,503,964
Generac Portable
Products ..................... 30,069 - -
Eliminations ................... (9,272) - -
----------- ----------- -----------
$ 1,312,446 $ 1,592,564 $ 1,503,964
=========== =========== ===========
INCOME FROM OPERATIONS -
Engines ........................ $ 99,156 $ 205,229 $ 180,136
Generac Portable
Products ..................... 1,118 - -
Eliminations ................... (1,168) - -
----------- ----------- -----------
$ 99,106 $ 205,229 $ 180,136
=========== =========== ===========
ASSETS -
Engines ........................ $ 1,012,438 $ 930,245 $ 875,885
Generac Portable
Products ..................... 287,058 - -
Eliminations ................... (3,301) - -
----------- ----------- -----------
$ 1,296,195 $ 930,245 $ 875,885
=========== =========== ===========
CAPITAL EXPENDITURES -
Engines ........................ $ 60,841 $ 71,441 $ 65,998
Generac Portable
Products ..................... 481 - -
----------- ----------- -----------
$ 61,322 $ 71,441 $ 65,998
=========== =========== ===========
DEPRECIATION & AMORTIZATION -
Engines ........................ $ 58,362 $ 53,277 $ 51,687
Generac Portable
Products ..................... 1,349 - -
----------- ----------- -----------
$ 59,711 $ 53,277 $ 51,687
=========== =========== ===========
Information regarding the Company's geographic sales by the location in which
the sale originated is as follows (in thousands of dollars):
2001 2000 1999
---- ---- ----
United States ...................... $1,228,307 $1,503,730 $1,425,226
All Other Countries ................ 84,139 88,834 78,738
---------- ---------- ----------
Total .............................. $1,312,446 $1,592,564 $1,503,964
========== ========== ==========
The Company has no material long lived assets in an individual foreign country.
In the fiscal years 2001, 2000 and 1999, 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):
2001 2000 1999
---- ---- ----
Customer SALES % Sales % Sales %
----- -- ----- -- ----- --
A $267,516 20% $287,769 18% $250,755 17%
B $187,001 14% $229,873 14% $219,209 14%
C $150,682 12% $190,659 12% $161,857 11%
-------- -- -------- -- -------- --
$605,199 46% $708,301 44% $631,821 42%
======== == ======== == ======== ==
(6) INDEBTEDNESS:
The Company has access to a $250.0 million revolving credit facility (the Credit
Facility) which expires in April 2002. The Company also has access to additional
domestic lines of credit totaling $18.0 million 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. There were no borrowings at July 1, 2001 using these lines
or the Credit Facility. On July 2, 2000, there were $45 million of borrowings
that were included in the domestic notes payable.
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 following data relates to domestic notes payable (in thousands
of dollars):
2001 2000
---- ----
Balance at
Fiscal Year End $ 3,300 $ 48,809
Weighted Average
Interest Rate at
Fiscal Year End 5.18% 6.91%
25
28
NOTES...
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 $5.9 million, expire at various times
through April, 2002 and are renewable. There were borrowings of $1.4 million at
July 1, 2001 using these lines of credit and are included in foreign loans. None
of these arrangements had material commitment fees or compensating balance
requirements.
The following information relates to foreign loans (in thousands of dollars):
2001 2000
---- ----
Balance at
Fiscal Year End .................... $16,291 $13,356
Weighted Average
Interest Rate at
Fiscal Year End .................... 5.80% 5.40%
The Long-Term Debt caption consists of the following (in thousands of dollars):
2001 2000
---- ----
8.875% Senior Notes Due 2011,
Net of Unamortized Discount of
$5,584 in 2001 ............................... $269,416 $ -
5.00% Convertible Senior Notes
Due 2006 ..................................... 140,000 -
7.25% Senior Notes Due 2007,
Net of Unamortized Discount of
$1,282 in 2001 and
$1,488 in 2000 ............................... 98,718 98,512
-------- --------
Total Long-Term Debt ......................... $508,134 $ 98,512
======== ========
In May 2001 the Company issued $275.0 million of 8.875% Senior Notes due March
15, 2011 and $140.0 million of 5.00% Convertible Senior Notes due May 15, 2006.
The convertible senior notes are convertible at the option of the holders into
the Company's common stock at the conversion rate of 20.1846 shares per each
$1,000 of convertible notes. Interest is paid semi-annually on both series of
notes. No principal payments are due before the maturity dates.
The net proceeds from the sale of the 8.875% senior notes and 5.00% convertible
senior notes were used to fund the Company's acquisition of Generac including
the replacement of Generac's outstanding debt and to repay a portion of the
Company's unrated commercial paper and short-term borrowings under its credit
facilities.
The 7.25% senior notes are due September 15, 2007. No principal payments are due
before that date.
The separate indentures providing for the 7.25% senior notes, the 8.875% senior
notes and the 5.00% convertible senior notes and the Company's revolving credit
agreement (collectively, the Domestic Indebtedness) each include a number of
financial and operating restrictions. These covenants include, among other
things, restrictions on the Company's ability to: pay dividends; incur
indebtedness; create liens; enter into sale and leaseback transactions;
consolidate, merge, sell or lease all or substantially all of its assets; and
dispose of assets or the proceeds of sales of its assets. In addition, the
revolving credit facility contains financial covenants that, among other things,
require the Company to maintain a minimum interest coverage ratio and that
impose a maximum leverage ratio. As of July 1, 2001, the Company was in
compliance with these covenants.
Additionally, under the terms of the indentures governing the Domestic
Indebtedness, Generac and its subsidiaries became joint and several guarantors
of amounts outstanding under the Domestic Indebtedness.
26
29
NOTES...
(7) SEPARATE FINANCIAL INFORMATION OF SUBSIDIARY GUARANTORS OF INDEBTEDNESS
Under the terms of the Company's Domestic Indebtedness as described in Footnote
6, Generac and its subsidiaries became joint and several guarantors of the
Domestic Indebtedness. Additionally, if at any time a domestic subsidiary of the
Company constitutes a significant domestic subsidiary, then such domestic
subsidiary will also become a guarantor of the Domestic Indebtedness. Each
guarantee of the Domestic Indebtedness is the obligation of the guarantor and
ranks equally and ratably with the existing and future senior unsecured
obligations of that guarantor accordingly, Generac has provided a full and
unconditional guarantee of the Domestic Indebtedness. The following condensed
supplemental consolidating financial information reflects the operations of
Generac since the acquisition date of May 15, 2001 (in thousands of dollars):
BALANCE SHEET: BRIGGS & STRATTON GUARANTOR NON-GUARANTOR
AS OF JULY 1, 2001 CORPORATION SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
- ------------------ ----------- ------------ ------------ ------------ ------------
Current Assets ..................................... $ 482,158 $ 98,523 $ 52,182 $ (19,433) $ 613,430
Investment in Subsidiary ........................... 292,543 - - (292,543) -
Noncurrent Assets .................................. 491,624 188,535 2,606 - 682,765
----------- ----------- ----------- ----------- -----------
$ 1,266,325 $ 287,058 $ 54,788 $ (311,976) $ 1,296,195
=========== =========== =========== =========== ===========
Current Liabilities ................................ $ 207,336 $ 18,737 $ 29,731 $ (13,622) $ 242,182
Long-Term Debt ..................................... 508,134 - - - 508,134
Other Long-Term Obligations ........................ 122,292 835 - - 123,127
Stockholders' Equity ............................... 428,563 267,486 25,057 (298,354) 422,752
----------- ----------- ----------- ----------- -----------
$ 1,266,325 $ 287,058 $ 54,788 $ (311,976) $ 1,296,195
=========== =========== =========== =========== ===========
STATEMENT OF EARNINGS:
FOR THE FISCAL YEAR ENDED JULY 1, 2001
- --------------------------------------
Net Sales .......................................... $ 1,253,253 $ 30,069 $ 80,701 $ (51,577) $ 1,312,446
Cost of Goods Sold ................................. 1,037,817 25,814 61,159 (51,407) 1,073,383
----------- ----------- ----------- ----------- -----------
Gross Profit ..................................... 215,436 4,255 19,542 (170) 239,063
Engineering, Selling, General and
Administrative Expenses .......................... 125,937 3,138 10,882 - 139,957
----------- ----------- ----------- ----------- -----------
Income from Operations ............................. 89,499 1,117 8,660 (170) 99,106
Interest Expense ................................... (28,024) (23) (2,642) 24 (30,665)
Other (Expense) Income, Net ........................ 8,574 (1,073) 8,841 (12,910) 3,432
----------- ----------- ----------- ----------- -----------
Income Before Provision for Income Taxes ......... 70,049 21 14,859 (13,056) 71,873
Provision for Income Taxes ......................... 22,036 7 1,817 - 23,860
----------- ----------- ----------- ----------- -----------
Net Income ......................................... $ 48,013 $ 14 $ 13,042 $ (13,056) $ 48,013
=========== =========== =========== =========== ===========
27
30
NOTES...
STATEMENT OF CASH FLOWS: BRIGGS & STRATTON GUARANTOR NON-GUARANTOR
FOR THE FISCAL YEAR ENDED JULY 1, 2001 CORPORATION SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
- -------------------------------------- ----------- ------------ ------------ ------------ ------------
Cash Flows from Operating Activities:
Net Income ....................................... $ 48,013 $ 14 $ 13,042 $ (13,056) $ 48,013
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities-
Depreciation and Amortization .................. 57,724 1,349 638 - 59,711
Equity (Earnings) Loss of Affiliates and
Subsidiaries ................................. (5,762) - 159 562 (5,041)
(Gain) Loss on Disposition of Plant and
Equipment .................................... 1,499 - (6) - 1,493
Pension (Income) Expense, Net .................. (28,646) 268 - - (28,378)
Provision for Deferred Taxes ................... 17,691 282 - - 17,973
Change in Operating Assets and Liabilities-
Decrease in Receivables ........................ 35,479 1,868 5,375 (8,036) 34,686
(Increase) Decrease in Inventories ............. (6,325) (2,811) 1,659 170 (7,307)
(Increase) Decrease in Other Current Assets .... 22 89 (161) - (50)
Increase (Decrease) in Accounts Payable
and Accrued Liabilities ...................... (47,372) 4,349 (11,753) 8,036 (46,740)
Other, Net ....................................... (6,183) (209) - - (6,392)
--------- --------- --------- --------- ---------
Net Cash Provided by (Used in)
Operating Activities ....................... $ 66,140 $ 5,199 $ 8,953 $ (12,324) $ 67,968
--------- --------- --------- --------- ---------
Cash Flows from Investing Activities:
Additions to Plant and Equipment ............... $ (60,262) $ (481) $ (579) $ - $ (61,322)
Proceeds Received on Disposition of
Plant and Equipment .......................... 4,113 - 39 - 4,152
Investments in Subsidiaries, Net of
Cash Acquired ................................ (270,632) 456 3,002 - (267,174)
Other, Net ..................................... 6,434 - (138) - 6,296
--------- --------- --------- --------- ---------
Net Cash Provided by (Used in)
Investing Activities ....................... $(320,347) $ (25) $ 2,324 $ - $(318,048)
--------- --------- --------- --------- ---------
Cash Flows from Financing Activities:
Net Borrowings (Repayments) on Loans and
Notes Payable ................................ $ (41,175) $ (4,334) $ 2,935 $ - $ (42,574)
Net Proceeds from Issuance of
Long-Term Debt ............................... 399,415 - - - 399,415
Dividends ...................................... (26,763) - (12,324) 12,324 (26,763)
Net Common and Treasury Stock Activities ....... (5,843) - - - (5,843)
--------- --------- --------- --------- ---------
Net Cash Provided by (Used in)
Financing Activities ....................... $ 325,634 $ (4,334) $ (9,389) $ 12,324 $ 324,235
--------- --------- --------- --------- ---------
Effect of Exchange Rate Changes .................. $ - $ (157) $ (2,244) $ - $ (2,401)
--------- --------- --------- --------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents ............................... $ 71,427 $ 683 $ (356) $ - $ 71,754
Cash and Cash Equivalents, Beginning ............. 13,855 - 3,134 - 16,989
--------- --------- --------- --------- ---------
Cash and Cash Equivalents, Ending ................ $ 85,282 $ 683 $ 2,778 $ - $ 88,743
========= ========= ========= ========= =========
28
31
NOTES...
(8) OTHER INCOME:
The components of other income (expense) are (in thousands of dollars):
2001 2000 1999
---- ---- ----
Interest income ................... $ 2,069 $ 1,589 $ 1,993
Loss on the
disposition of
plant and equipment ............. (1,493) (2,378) (2,355)
Income from joint
ventures ........................ 5,485 14,364 5,442
Translation gain (loss) ........... (4,973) 206 (364)
Amortization of intangibles ....... (1,052) - -
Other items ....................... 3,396 2,335 1,943
-------- -------- --------
Total ............................. $ 3,432 $ 16,116 $ 6,659
======== ======== ========
(9) COMMITMENTS AND CONTINGENCIES
Product and general liability claims arise against the Company from time to time
in the ordinary course of business. The Company is generally self-insured for
claims up to $1 million per claim. Accordingly, a reserve is maintained for the
estimated costs of such claims. At July 1, 2001 and July 2, 2000 the reserve for
product and general liability claims was $3.6 million and $4.0 million,
respectively, based on available information. No reasonable range of possible
losses can be determined, because there is inherent uncertainty as to the
eventual resolution of unsettled claims. Management does not expect that the
likely outcome of these claims, excluding the impact of insurance proceeds and
reserves, will have a material adverse effect on the financial condition or
results of operations of the Company.
The Company has no material commitments for materials or capital expenditures at
July 1, 2001.
(10) STOCK OPTIONS:
The Company has a Stock Incentive Plan under which 5,361,935 shares of common
stock have been reserved for issuance. The Company accounts for the plan under
Accounting Principles Board Opinion No. 25, under which no compensation cost has
been recognized. Had compensation cost for these plans been determined
consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's net income and earnings per share would have been reduced to the
following pro forma amounts:
2001 2000 1999
---- ---- ----
Net Income (in thousands):
As Reported .................. $ 48,013 $ 136,473 $ 106,101
Pro Forma .................... $ 44,814 $ 134,600 $ 105,283
Basic Earnings Per Share:
As Reported .................. $ 2.22 $ 5.99 $ 4.55
Pro Forma .................... $ 2.07 $ 5.91 $ 4.51
Diluted Earnings Per Share:
As Reported .................. $ 2.21 $ 5.97 $ 4.52
Pro Forma .................... $ 2.04 $ 5.89 $ 4.49
Because the SFAS 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 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
Granted during the year ..................... 471,020 $ 74.53
Exercised during the year ................... (151,033) 38.49
Expired during the year ..................... (58,970) 67.55
---------
BALANCE, JULY 2, 2000 ....................... 1,303,028 $ 58.83
GRANTED DURING THE YEAR ..................... 600,000 $ 46.22
EXERCISED DURING THE YEAR ................... (13,449) 20.45
EXPIRED DURING THE YEAR ..................... (180,738) 49.08
---------
BALANCE, JULY 1, 2001 ....................... 1,708,841 $ 55.73
=========
Grant Summary
- --------------------------------------------------------------------------------
Fiscal Grant Exercise Date Options Expiration
Year Date Price Exercisable Outstanding Date
- ---- ---- ----- ----------- ----------- ----------
1992 5-18-92 21.525 50%, 1-1-96; 29,277 5-17-02
50%, 1-1-97
1997 8-6-96 53.300 8-6-99 86,584 8-6-01
1998 8-5-97 65.690 8-5-00 233,480 8-5-02
1999 8-5-98 44.980 8-5-01 327,560 8-5-03
2000 8-4-99 74.530 8-4-02 431,940 8-4-04
2001 8-3-00 46.220 8-3-03 600,000 8-3-07
29
32
NOTES...
The exercise price of the 1992 grant has 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 2001 2000 1999
---- ---- ----
Grant date fair value ............... $ 11.47 $ 13.07 $ 5.04
Assumptions:
Risk-free interest rate .......... 6.0% 6.0% 5.4%
Expected volatility .............. 37.6% 30.1% 22.3%
Expected dividend yield .......... 2.6% 2.5% 2.5%
Expected term (in years) ......... 7.0 5.0 5.0
(11) 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.
(12) 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 twelve months and the purpose is to protect the Company from the risk
that the eventual dollars being transferred will be adversely affected by
changes in exchange rates.
The Company has forward foreign currency exchange contracts to purchase 1.3
billion Japanese yen for $11.4 million through December, 2001. These contracts
are used to hedge the commitments to purchase engines from the Company's
Japanese joint venture. At July 1, 2001 the loss on these contracts at fair
value totaled $.6 million.
The Company also has forward contracts to sell 36 million Euros for $33.6
million through October, 2001. The gain on these contracts on July 1, 2001 at
fair market value totaled $3.1 million.
The Company's foreign subsidiaries have the following forward currency contracts
outstanding at the end of fiscal 2001:
In Millions
----------------
Local Latest
Currency Currency Amount Dollars Expiration Date
- -------- -------- ------ ------- ---------------
Japanese Yen 27.6 .4 Australian July 2001
U.S. Dollars 5.2 9.7 Australian January 2001
British Pounds .7 1.9 Australian January 2001
U.S. Dollars 3.3 5.0 Canadian June 2002
At July 1, 2001 the gain on these contracts at fair value
totaled $.2 million.
The Company continuously evaluates the effectiveness of its hedging program by
evaluating its foreign exchange contracts compared to the anticipated underlying
transactions.
30
33
NOTES...
(13) EMPLOYEE BENEFIT COSTS:
Retirement Plan and Postretirement Benefits
The Company has noncontributory, defined benefit retirement plans and
postretirement benefit plans covering most Wisconsin employees. The following
provides a reconcilation of obligations, plan assets and funded status of the
plans for the two years indicated, (dollars in thousands):
Pension Benefits Other Postretirement Benefits
-------------------------- -----------------------------
2001 2000 2001 2000
---- ---- ---- ----
Actuarial Assumptions:
- ----------------------
Discounted Rate Used to Determine Present
Value of Projected Benefit Obligation ............... 7.5% 7.5% 7.5% 7.5%
Expected Rate of Future Compensation
Level Increases ..................................... 4.0-5.0% 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 ................................ $ 666,392 $ 689,397 $ 99,793 $ 109,485
Service Cost .......................................... 9,482 10,622 1,215 1,307
Interest Cost ......................................... 48,079 47,475 7,091 7,343
Plan Amendments ....................................... 29,190 - - -
Acquisition ........................................... 2,671 - - -
Actuarial (Gain) Loss ................................. (10,478) (37,124) 13,035 (6,657)
Benefits Paid ......................................... (42,061) (43,978) (12,577) (11,685)
--------- --------- --------- ---------
Actuarial Present Value of Benefit Obligation
at End of Year ...................................... $ 703,275 $ 666,392 $ 108,557 $ 99,793
--------- --------- --------- ---------
Change in Plan Assets:
- ----------------------
Plan Assets at Fair Value at Beginning of Year ........ $ 951,757 $ 886,422 $ - $ -
Actual Return on Plan Assets .......................... 29,084 108,544 - -
Acquisition ........................................... 1,018 - - -
Employer Contributions ................................ 784 769 12,577 11,685
Benefits Paid ......................................... (42,061) (43,978) (12,577) (11,685)
--------- --------- --------- ---------
Plan Assets at Fair Value at End of Year .............. $ 940,582 $ 951,757 $ - $ -
--------- --------- --------- ---------
Plan Assets in Excess of (Less Than) Projected
Benefit Obligation .................................. $ 237,307 $ 285,365 $(108,557) $ (99,793)
Remaining Unrecognized Net Obligation (Asset) ......... (4,517) (9,995) 321 368
Unrecognized Net Loss (Gain) .......................... (244,579) (285,144) 29,673 17,221
Unrecognized Prior Service Cost ....................... 32,739 3,024 103 134
--------- --------- --------- ---------
Net Amount Recognized at End of Year .................. $ 20,950 $ (6,750) $ (78,460) $ (82,070)
========= ========= ========= =========
Amounts Recognized on the Balance Sheets:
- -----------------------------------------
Prepaid Pension ....................................... $ 36,275 $ 5,506 $ - $ -
Accrued Pension Cost .................................. (14,494) (11,428) - -
Accrued Wages and Salaries ............................ (831) (828) - -
Accrued Post Retirement Health Care Obligation ........ - - (61,767) (65,765)
Other Accruals ........................................ - - (4,800) (4,800)
Accrued Employee Benefits ............................. - - (11,893) (11,505)
--------- --------- --------- ---------
Net Amount Recognized at End of Year .................. $ 20,950 $ (6,750) $ (78,460) $ (82,070)
========= ========= ========= =========
31
34
NOTES...
The following table summarizes the plans' income and expense for the three years
indicated (dollars in thousands):
Pension Benefits Other Postretirement Benefits
---------------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
---- ---- ---- ---- ---- ----
Components of Net Periodic Benefit Cost:
- ----------------------------------------
Service Cost-Benefits Earned During the Year ....... $ 9,482 $ 10,622 $ 10,073 $ 1,215 $ 1,307 $ 1,437
Interest Cost on Projected Benefit Obligation ...... 48,079 47,475 44,911 7,091 7,343 6,466
Expected Return on Plan Assets ..................... (73,053) (63,845) (58,252) - - -
Amoritization of:
Transition Obligation (Asset) ................... (5,306) (5,306) (5,306) 47 46 47
Prior Service Cost .............................. 242 186 (106) 31 31 71
Actuarial (Gain) Loss ........................... (7,822) 359 291 583 1,111 41
-------- -------- -------- -------- -------- --------
Net Periodic Benefit Expense (Income) .............. $(28,378) $(10,509) $ (8,389) $ 8,967 $ 9,838 $ 8,062
======== ======== ======== ======== ======== ========
In July 2001, the Company extended its collective bargaining agreement with one
of its unions. As part of this contract extension, the Company agreed to pay
certain amounts to employees who were hired prior to January 1, 1980 upon their
retirement. The impact of this plan amendment is included in the above tables.
As described in Note 15, the Company contributed its two ductile iron foundries
to MTHC. In connection with the contribution, MTHC agreed to assume pension and
postretirement benefit obligations related to employees working at the foundries
at the time of the transaction. The Company transferred to MTHC pension assets
amounting to $11.3 million in fiscal 2001. The assumption of obligations by MTHC
and transfer of pension assets did not result in a gain or loss to the Company.
The Company's supplemental pension plan has benefit obligations in excess of
plan assets. The benefit obligation, accumulated benefit obligation and fair
value of plan assets were $19.0 million, $14.9 million and $0 respectively for
the 2001 fiscal year and $17.7 million, $14.9 million and $0 respectively for
the 2000 fiscal year. The postretirement benefit plans are unfunded.
For measurement purposes a 10% annual rate of increase in the per capita cost of
covered health care claims was assumed for the year 2002 decreasing gradually to
5% for the year 2008. The health care cost trend rate assumption has a
significant effect on the amounts reported. An increase of one percentage point,
would increase the accumulated postretirement benefit by $6.7 million and would
increase the service and interest cost by $.7 million for the year. A
corresponding decrease of one percentage point, would decrease the accumulated
postretirement benefit by $6.4 million and decrease the service and interest
cost by $.6 million 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 an annual contribution
on behalf of covered employees equal to 2% of each participant's gross income,
as defined. For the fiscal years 2001, 2000 and 1999, the net expense related to
these plans was $.2 million, $2.1 million and $1.9 million, respectively.
Wisconsin employees of the Company may participate in a salary reduction
deferred compensation retirement plan. A maximum of 1-1/2% or 3% of each
participant's salary, depending upon the participant's group is matched by the
Company. Company contributions totaled $4.7 million in 2001, $4.6 million in
2000 and $4.2 million in 1999.
Postemployment Benefits
The Company accrues the expected cost of postemployment benefits over the years
that the employees render service. These benefits are substantially smaller
amounts because they apply only to employees who permanently terminate
employment prior to retirement. The items include disability payments, life
insurance and medical benefits. These amounts are also discounted using a
32
35
NOTES...
7.5% interest rate. Amounts are included in Accrued Employee Benefits in
the balance sheet.
(14) 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 amounts approximate fair value because of the short maturity of these
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):
2001
-------------------------
CARRYING FAIR
AMOUNT VALUE
------ -----
CASH AND CASH EQUIVALENTS ............ $ 88,743 $ 88,743
DOMESTIC NOTES PAYABLE ............... $ 3,300 $ 3,300
FOREIGN LOANS ........................ $ 16,291 $ 16,291
LONG-TERM DEBT -
7.25% NOTES DUE 2007 .............. $ 98,718 $ 96,237
5.00% CONVERTIBLE NOTES
DUE 2006 ........................ $140,000 $150,066
8.875% NOTES DUE 2011 ............. $269,416 $277,608
2000
------------------------
Carrying Fair
Amount Value
------ -----
Cash and cash equivalents ............. $16,989 $16,989
Domestic notes payable ................ $48,809 $48,809
Foreign loans ......................... $13,356 $13,356
Long-term debt -
7.25% Notes due 2007 ................ $98,512 $98,633
(15) DISPOSITION OF BUSINESS:
At the end of August 1999, the Company contributed its two ductile iron
foundries to MTHC in exchange for $23.6 million in cash and $45.0 million
aggregate par value convertible preferred stock. The provisions of the preferred
stock include a 15% cumulative dividend and conversion rights into a minimum of
31% of MTHC common stock. Pursuant to EITF Abstract No. 86-29, the Company
considered this contribution to be a monetary transaction, given the significant
amount of cash received and recorded the consideration received at fair value.
The preferred stock received was determined to have a fair value of $21.6
million based on provisions of the stock and the prevailing market returns for
similar investments, estimated to be 30%, as of the date of the transaction.
MTHC is the primary supplier to the Company for iron castings. There are no
other material arrangements between the Company and MTHC.
Based on the above and the fair value of all consideration received, the
transaction resulted in a $16.5 million gain.
33
36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Briggs & Stratton Corporation:
We have audited the accompanying consolidated balance sheets of Briggs &
Stratton Corporation (a Wisconsin Corporation) and subsidiaries as of July 1,
2001 and July 2, 2000 and the related consolidated statements of earnings,
shareholders' investment and cash flow for each of the three years in the period
ended July 1, 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Briggs & Stratton Corporation
and subsidiaries as of July 1, 2001 and July 2, 2000 and the results of their
operations and their cash flows for each of the three years in the period ended
July 1, 2001, in conformity with accounting principles generally accepted in the
United States.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
July 26, 2001
34
37
QUARTERLY FINANCIAL DATA, DIVIDEND AND MARKET INFORMATION (UNAUDITED)
In Thousands Per Share of Common Stock
------------------------------------------- -----------------------------------------------
Market Price Range
on New York
Net Net Stock Exchange
Quarter Net Gross Income Income Dividends -------------------
Ended Sales Profit (Loss) (Loss) Declared High Low
----- ----- ------ ------ ------ -------- ---- ---
FISCAL 2001
SEPTEMBER $ 181,251 $ 25,798 $ (6,304) $ (.29) $ .31 $ 44.56 $ 32.13
DECEMBER 368,207 69,606 19,928 .92 .31 46.00 30.38
MARCH 430,683 86,395 29,889 1.38 .31 48.38 36.50
JUNE 332,305 57,264 4,500 .21 .31 45.90 35.00
---------- -------- --------- -------- --------
TOTAL $1,312,446 $239,063 $ 48,013 $ 2.21 * $ 1.24
========== ======== ========= ======== ========
Fiscal 2000
September $ 299,404 $ 55,382 $ 25,703 $ 1.10 $ .30 $ 63.63 $ 55.88
December 422,879 99,723 41,144 1.77 .30 59.63 49.75
March 469,289 101,840 42,056 1.84 .30 53.88 31.00
June 400,992 82,509 27,570 1.24 .30 44.63 34.25
---------- -------- --------- -------- --------
Total $1,592,564 $339,454 $ 136,473 $ 5.97 * $ 1.20
========== ======== ========= ======== ========
The number of record holders of Briggs & Stratton Corporation Common Stock on
August 23, 2001 was 4,101.
Net Income per share of Common Stock represents Diluted Earnings per Share.
* See Note 2 to Consolidated Financial Statements, for information about
earnings per share. Amounts do not total because of differing numbers of shares
outstanding at the end of each quarter.
35
38
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 2001 Annual Meeting of Shareholders, under the captions "Election of
Directors" and "Security Ownership of Management - Section 16(a) Beneficial
Ownership Reporting Compliance", 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.
ITEM 11. EXECUTIVE COMPENSATION
The information in the Corporation's definitive Proxy Statement, prepared for
the 2001 Annual Meeting of Shareholders, concerning this item, in the subsection
titled "Director Compensation" under the caption "Election of Directors" 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 2001 Annual Meeting of Shareholders, concerning this item, under the
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, July 1, 2001 and July 2, 2000
For the Years Ended July 1, 2001, July 2, 2000 and June 27, 1999:
Consolidated Statements of Earnings
Consolidated Statements of Shareholders' Investment
Consolidated Statements of Cash Flow
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts
Report of Independent Public Accountants
All other 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.
36
39
(b) Reports on Form 8-K
On April 30, 2001, the Company filed a report on Form 8-K dated April 27,
2001, to report its intent to offer $275,000,000 of senior notes due 2011
and $125,000,000 of convertible senior notes due 2006, to be convertible
into the Company's common stock, in separate private placements.
On May 15, 2001, the Company filed a report on Form 8-K dated May 14, 2001,
to report it had completed the previously announced proposed offerings of
$275,000,000 of 8.875% senior notes due 2011 and $140,000,000 of 5.00%
convertible senior notes due 2006 in separate private placements.
On May 29, 2001, the Company filed a report on Form 8-K dated May 15, 2001,
to report that the previously reported pending acquisition of Generac was
completed on May 15, 2001 and Generac was now a wholly owned subsidiary of
the Company.
On June 19, 2001, the Company filed a report on Form 8-K dated June 14,
2001, to report that on June 14, 2001, the Board of Directors of the
Company had adopted amended and restated Bylaws of the Company.
On June 28, 2001, the Company filed Amendment No. 1 on Form 8-K/A to amend
and restate its Form 8-K dated May 15, 2001, reporting the Company's
acquisition of Generac Portable Products, Inc. to include the historical
financial statements and pro forma financial information required to be
filed in connection with the acquisition.
37
40
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED JULY 1, 2001, JULY 2, 2000 AND JUNE 27, 1999
Reserve for Balance Additions Balance
Doubtful Accounts Beginning Charged Charges to End of
Receivable of Year to Earnings Reserve, Net Other Year
---------- ------- ----------- ------------ ----- ----
2001 $ 1,544,000 3,631,000 (3,667,000) 91,000* $ 1,599,000
2000 $ 1,516,000 52,000 (24,000) - $ 1,544,000
1999 $ 1,537,000 (277,000) 256,000 - $ 1,516,000
*Consists of additions to the reserve related to the acquisition of Generac.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements included in the Briggs &
Stratton Corporation annual report to shareholders on Form 10-K, and have issued
our report thereon dated July 26, 2001. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed in
the index in item 14(a)(2) is the responsibility of the Corporation's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. The
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
July 26, 2001
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BRIGGS & STRATTON CORPORATION
By /s/ James E. Brenn
-------------------------------------------
James E. Brenn
September 11 , 2001 Senior Vice President and
- ------------------------ Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.*
/s/ John S. Shiely /s/ David L. Burner
- ----------------------------------------- -----------------------------------------
John S. Shiely David L. Burner
President and Chief Executive Officer and Director
Director (Principal Executive Officer)
/s/ James E. Brenn /s/ E. Margie Filter
- ----------------------------------------- -----------------------------------------
James E. Brenn E. Margie Filter
Senior Vice President and Chief Financial Director
Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/ F.P. Stratton, Jr. /s/ Peter A. Georgescu
- ----------------------------------------- -----------------------------------------
F.P. Stratton, Jr. Peter A. Georgescu
Chairman and Director Director
/s/ Jay H. Baker /s/ Robert J. O'Toole
- ----------------------------------------- -----------------------------------------
Jay H. Baker Robert J. O'Toole
Director Director
/s/ Michael E. Batten /s/ Charles I. Story
- ----------------------------------------- -----------------------------------------
Michael E. Batten Charles I. Story
Director Director
*Each signature affixed as of
September 11 , 2001.
-----------------
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BRIGGS & STRATTON CORPORATION
(Commission File No. 1-1370)
EXHIBIT INDEX
2001 ANNUAL REPORT ON FORM 10-K
Exhibit
Number Document Description
2 Agreement and Plan of Merger, dated as of March 21, 2001, by
and among Briggs & Stratton Corporation, GPP Merger
Corporation, Generac Portable Products, Inc. and The Beacon
Group III - Focus Value Fund, L.P.
(Filed as Exhibit 2 to the Company's Report on Form 8-K
dated March 21, 2001 and incorporated by reference herein.)
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, as amended and restated June 14, 2001.
(Filed as Exhibit 99 to the Company's Report on Form 8-K
dated June 14, 2001 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.)
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Exhibit
Number Document Description
4.6 Indenture dated as of May 14, 2001 between Briggs & Stratton
Corporation, the Guarantors listed on Schedule I thereto and
Bank One, N.A., as Trustee, providing for 5.00% Convertible
Senior Notes due May 15, 2006 (including form of Note, form of
Notation of Guarantee and other exhibits).
(Filed as Exhibit 4.6 to the Company's Registration
Statement on Form S-3 filed on July 3, 2001, Registration
No. 333-64490 and incorporated herein by reference.)
4.7 Form of Supplemental Indenture dated as of May 15, 2001
between Subsequent Guarantors (Generac Portable Products,
Inc., GPPD, Inc., GPPW, Inc. and Generac Portable Products,
LLC), Briggs & Stratton Corporation, and Bank One, N.A., as
Trustee.
(Filed as Exhibit 4.7 to the Company's Registration
Statement on Form S-3 filed on July 3, 2001, Registration
No. 333-64490 and incorporated herein by reference.)
4.8 Registration Rights Agreement dated as of May 8, 2001 between
Briggs & Stratton Corporation and Goldman, Sachs & Co. and
Banc of America Securities LLC, as Representatives of the
Several Purchasers, providing for the registration of the
5.00% Convertible Senior Notes due May 15, 2006.
(Filed as Exhibit 4.8 to the Company's Registration
Statement on Form S-3 filed on July 3, 2001, Registration
No. 333-64490 and incorporated herein by reference.)
4.9 Indenture dated as of May 14, 2001 between Briggs & Stratton
Corporation, the Guarantors listed on Schedule I thereto and
Bank One, N.A., as Trustee, providing for 8.875% Senior Notes
due March 15, 2011 (including form of Note, form of Notation
of Guarantee and other exhibits).
(Filed as Exhibit 4.9 to the Company's Registration
Statement on Form S-3 filed on July 3, 2001, Registration
No. 333-64490 and incorporated herein by reference.)
4.10 Form of Supplemental Indenture dated as of May 15, 2001
between Subsequent Guarantors (Generac Portable Products,
Inc., GPPD, Inc., GPPW, Inc. and Generac Portable Products,
LLC), Briggs & Stratton Corporation, and Bank One, N.A., as
Trustee.
(Filed as Exhibit 4.10 to the Company's Registration
Statement on Form S-3 filed on July 3, 2001, Registration
No. 333-64490 and incorporated herein by reference.)
4.11 Exchange and Registration Rights Agreement dated as of May 9,
2001 between Briggs & Stratton Corporation and Goldman, Sachs
& Co. and Banc of America Securities LLC, as Representatives
of the Several Purchasers, providing for the registration or
exchange of the 8.875% Senior Notes due March 15, 2011.
(Filed as Exhibit 4.11 to the Company's Registration
Statement on Form S-3 filed on July 3, 2001, Registration
No. 333-64490 and incorporated herein by reference.)
4.12 First Supplemental Indenture dated as of May
14, 2001 between Briggs & Stratton Corporation and Bank One,
N.A., as Trustee under the Indenture dated as of June 4, 1997.
(Filed as Exhibit 4.12 to the Company's Registration
Statement on Form S-3 filed on July 3, 2001, Registration
No. 333-64490 and incorporated herein by reference.)
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44
Exhibit Document Description
Number
4.13 Form of Indenture Supplement to Add a Subsidiary Guarantor
dated as of May 15, 2001 among each Subsidiary Guarantor
(Generac Portable Products, Inc., GPPD, Inc., GPPW, Inc. and
Generac Portable Products, LLC), Briggs & Stratton
Corporation, and Bank One, N.A., as Trustee.
(Filed as Exhibit 4.13 to the Company's Registration
Statement on Form S-3 filed on July 3, 2001, Registration
No. 333-64490 and incorporated herein by reference.)
10.0* Form of Officer Employment Agreement.
(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* Executive Supplemental Retirement Plan.
(Filed as Exhibit 10.0 to the Company's Report on Form 10-Q
for the quarter ended March 26, 2000 and incorporated by
reference herein.)
10.2 (a)* Economic Value Added Incentive Compensation Plan, as amended
and restated.
(Filed as Exhibit 10.3 to the Company's Annual Report on
Form 10-K for fiscal year ended June 27, 1999 and
incorporated by reference herein.)
10.2 (b)* Amendment to Amended and Restated Economic Value Added
Incentive Compensation Plan.
(Filed as Exhibit 10.0 to the Company's Report on Form
10-Q for the quarter ended December 31, 2000.)
10.2 (c)* Amendment to Amended and Restated Economic Value Added
Incentive Compensation Plan.
(Filed herewith.)
10.3* 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.)
10.4 (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.)
10.4 (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.)
10.5 (a)* 1999 Amended and Restated Stock Incentive Plan.
(Filed as Exhibit A to the Company's 1999 Annual Meeting
Proxy Statement and incorporated by reference herein.)
10.5 (b)* Amendment to Amended and Restated Stock Incentive Plan.
(Filed as Exhibit 10.0(b) to the Company's Report on Form
10-Q for the quarter ended September 26, 1999 and
incorporated by reference herein.)
10.6 (a)* Amended and Restated Leveraged Stock Option Program.
(Filed as Exhibit 10.7(c) to the Company's Annual Report on
Form 10-K for fiscal year ended June 27, 1999 and
incorporated by reference herein.)
10.6 (b)* Amendment to Amended and Restated Leveraged Stock Option
Program.
(Filed herewith.)
10.7* 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.)
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Exhibit Document Description
Number
10.8* 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.)
10.9* 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.)
10.10* Deferred Compensation Agreement for Fiscal 2000.
(Filed as Exhibit 10.12 to the Company's Annual Report on
Form 10-K for fiscal year ended June 27, 1999 and
incorporated by reference herein.)
10.11* Amended and Restated Deferred Compensation Plan for Directors.
(Filed as Exhibit 10.00 to the Company's Report on Form 10-Q
for the quarter ended December 26, 1999 and incorporated by
reference herein.)
10.12 (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.)
10.12 (b)* Amendment to Director's Leveraged Stock Option Plan.
(Filed as Exhibit 10.14(b) to the Company's Annual Report on
Form 10-K for fiscal year ended June 27, 1999 and
incorporated by reference herein.)
10.13* 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.)
10.14* Executive Life Insurance Plan.
(Filed as Exhibit 10.17 to the Company's Annual Report on
Form 10-K for fiscal year ended June 27, 1999 and
incorporated by reference herein.)
10.15 (a)* Key Employees Savings and Investment Plan.
(Filed as Exhibit 10.18 to the Company's Annual Report on
Form 10-K for fiscal year ended June 27, 1999 and
incorporated by reference herein.)
10.15 (b)* Amendment to Key Employees Savings and Investment Plan.
(Filed as Exhibit 10.1 to the Company's Report on Form 10-Q
for the quarter ended December 31, 2000 and incorporated by
reference herein.)
10.16* Consultant Reimbursement Arrangement.
(Filed as Exhibit 10.19 to the Company's Annual Report on
Form 10-K for fiscal year ended June 27, 1999 and
incorporated by reference herein.)
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.)
* Management contracts and executive compensation plans and arrangements
required to be filed as exhibits pursuant to Item 14 (c) of Form 10-K.
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