Briggs & Stratton Corporation

Transcription

1 Briggs & Stratton Corporation Mark Schwertfeger - SVP & CFO February 2016 Investor Presentation

2 Safe Harbor Disclosure This presentation contains certain forward-looking statements that involve risk and uncertainties that could cause actual results and/or timing to differ materially from those in any forward-looking statements. Briggs & Stratton provides additional information on risk factors within the Company s quarterly and annual reports filed with the Securities and Exchange Commission. 2

3 Company Overview NYSE (BGG); Founded in 1908 $1.9 billion sales; approximately 6,000 employees globally FY 2015 Net Sales $1.9B World s largest producer of gasoline engines for outdoor power equipment #1 brand in consumer engines North America s #1 marketer of pressure washers Engines 61% Products 39% U.S. 69% Int'l 31% Leading designer, manufacturer and marketer of power generation, lawn and garden, turf care and job site products through our Simplicity, Snapper, Snapper Pro, Ferris, PowerBoss, Allmand, Billy Goat, Murray, Branco and Victa brands Select Brands Entered job site and rental markets with 2014 acquisition of Allmand Bros., manufacturer of commercial light towers and industrial heaters Products are designed, manufactured, marketed and serviced in over 100 countries on six continents Over 20,000 dealers globally for product service, parts and customer support Source: Company filings. 3

4 Company Overview Mission We will provide power and global support to make work easier and improve lives. By doing so, we will expand our leadership position, increase the value of our brands and grow our shareholders investment. Goals Positive Economic Value Added (EVA) Accelerated Revenue Growth More Diverse, Predictable and Profitable Business Strategy 4

5 Engines Segment Source: Company filings. Segment Overview Primarily used by the lawn and garden equipment industry 84% of FY 2015 engine segment sales Applications include walk-behind lawn mowers, riding lawn mowers, garden tillers and snow throwers Remaining sales for industrial, construction, agricultural and other consumer applications 16% of FY 2015 engine segment sales Applications include generators, pumps and pressure washers International reach ~33% of FY 2015 engines segment net sales derived from international markets, primarily in Europe Top customers include: AL-KO Sales ($ in millions) $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 Financial Summary 9.0% $1,400 $1, % 6.5% 6.7% $1,220 $1,209 $1,190 $1,196 % Adjusted Segment Margin 7.8% 7.8% FY2011 FY2012 FY2013 FY2014 FY2015 LTM 12/ 27/ % 8.0% 6.0% 4.0% 2.0% Engine Value Proposition Consumers prefer the Briggs & Stratton brand over any other engine Industry leading consumer research Customer driven product innovation Timely delivery in days, not 4-6 weeks Low cost discipline Quality & performance Proven emissions compliance Service solutions through thousands of dealers 5

6 The U.S Housing Market & Mower Sales The mower market is strongly tied to the housing market, and in particular, the new housing market; as housing moves, so do mowers. Walk + Ride Shipments (left axis) Single-Family Starts (right axis) Existing Home Sales (left axis) R=.86 R=.96 New Home Sales (right axis) R= s of Units 000 s of Units Source: U.S. Census Bureau; NAR, Existing Single-Family Homes; OPEI 6

7 The U.S. Housing Market New and Existing Home Sales Remain at pre Y2K levels and Significantly Below the 2005 Market Existing Home Sales (right axis) 70% of peak sales (2005) Single-Family Starts (left axis) 000 s of Units New Home Sales (left axis) Multi-Family Starts (left axis) 38% of peak sales 30%% of peak sales 101% of peak sales 000 s of Units Source: U.S. Census Bureau; NAR, Existing Single-Family Homes 7

8 Engine Demand Trends U.S. Mower Sales Mowers in millions U.S. Recessionary Periods 9.0 Key demand drivers: Existing single family home sales Single family housing starts Displacement rate (i.e. Those who bought last year less likely to buy this year; pool of buyers) Source: OPEI U.S. Mower Market Remains Below the Last Several Decades 8

9 Driving Demand Through Innovation For Operational replacement issues, buyers operational not improvements, drive repeat issues, buyers not purchases. improvements, drove their purchases Wanted newer / better Rides: 35% Gas PW: 26% Snow: 27% Product innovation key to driving demand beyond break & replace. Source: 2013 PowerPulse:, Recent Gas Walk Buyers 9

10 HIGHER MARGIN PRODUCTS THROUGH INNOVATION New Products Deliver Key Improvements All Based on User Feedback Storage Space Sound Starting Maintenance Efficiency Mow N Stow QPT Quiet Power Technology InStart Lithium-Ion Electric Start EXi Engine Series Vanguard BIG BLOCK EFI Engine Series 70% less storage space without engine fluid leakage Easy access - cleaning & service Up to 60% quieter ReadyStart - no prime, no choke just pull for power Lithium-ion starting battery: up to 75 starts from a full charge Gas-powered engine delivers the power and range Never change the oil ReadyStart - no choke, no prime, just pull for power JUST CHECK & ADD NEVER CHANGE THE OIL Electronic fuel injection delivering up to 25% fuel savings Chokeless starting, increased horsepower, and increased stale fuel resistance Comprehensive EFI service solution reduces downtime 10

11 Higher Margin Products Through Innovation Briggs & Stratton Innovation has been recognized in the market Vanguard Big Block EFI wins GIE+EXPO 2015 Dealers Choice Award for Industrial Products and Engines Recognized as one of the top innovative products by nearly 600 dealers Vanguard BIG BLOCK features electronic fuel injection and delivers up to 25% fuel savings, chokeless starting, increased horsepower, increased stale fuel resistance, and reduced downtime EXi Series Engine named among Popular Science Top 100: Best of What s New Popular Science recognizes 100 new products that show significant innovation EXi Series Engine is the first gas powered walk-behind mower engine that never needs an oil change. Second year in a row that a Briggs & Stratton new product was named to the Top 100 list Vanguard BIG BLOCK EFI EXi Series Engine 11

12 HIGHER MARGIN PRODUCTS THROUGH INNOVATION 2016 Is Focused on Expanding Upon New Product Launches Maintenance Sound Global Innovation Expansion EXi Engine Series with Quiet Power Technology Australia EXi Series Engines InStart Lithium Ion Starting Engines Never change the oil Up to 60% quieter ReadyStart - no choke, no prime, just pull for power Mow N Stow Quiet Power Technology Europe JUST CHECK & ADD NEVER CHANGE THE OIL EXi Series Engines InStart Lithium Ion Starting Engines 12

13 Products Segment Segment Overview Principal product lines include: portable and standby generators, pressure washers, snow throwers, lawn & garden powered equipment, portable light towers and industrial heaters Generator demand impacted by severe weather events (landed hurricanes and ice storms) Products sells its products through multiple channels of retail distribution including home centers, warehouse clubs and independent dealers Products segment s major customers include: Plus Over 4,000 independent U.S. lawn and garden dealers Sales ($ in millions) $1,200 $1,000 $800 $600 $400 Financial Summary -2.4% $879 Exit from Mass retail L&G business 0.6% -0.6% Key Business Objectives Expand Lawn & Garden Dealer network Grow Commercial Cutting -2.2% Grow Commercial products; higher value and higher margins Positive Returns on Capital Employed % Adjusted Segment Margin No storms 0.9% 1.1% $952 $789 $805 $758 $736 FY2011 FY2012 FY2013 FY2014 FY2015 LTM 12/27/15 Optimize Operations to Support Growth Initiatives Cost reductions, low cost provider, Asian sourcing strategy Grow Standby Generators New product introductions, new dealers, brand promotion, progress on larger kw models for residential, commercial markets 7.0% 5.0% 3.0% 1.0% -1.0% -3.0% -5.0% -7.0% 13 Source: Company filings.

14 HIGHER MARGIN PRODUCTS THROUGH INNOVATION Products That Save Time, Perform Better and Provide Improved Comfort and Interaction Simplicity / Snapper Residential Zero-Turn Mower SnowShredder Ferris Soft Ride Stand-on Mover Ferris Clears 30% faster compared to our traditional single-stage units Welded steel frame gives the unit the look and feel of a commercial grade unit; optional integrated rear cargo bed for versatility Commercial mower that delivers speed and maneuverability with an adjustable operator platform that uses suspension 14

15 Higher Margin Products Through Innovation Australian Market LI Products 18 Lawn Mower 16 Lawn Mower 40V Lithium-Ion Battery Blower Hedge Trimmer Chainsaw Line Trimmer 15

16 Strategy Diversification & Growth International markets provide foundation for further diversification 2010 Revenue $2.0 B 2015 Revenue $1.9 B International 27% United States 73% International 31% United States 69% 16

17 Acquisition Strategy Accelerate our abilities to become the de facto industry standard in providing best in class powered solutions and global support to make work easier and improve lives Deals are designed to advance the strategy Sound acquisition philosophy EPS accretive EVA positive in 3 years Reasonable multiples Growth Enablers Acquisition Strategy Distinct and differentiated technologies Channel, domain expertise, and application knowledge Beach heads in emerging markets Local market, application, and service expertise Well established channels Operational infrastructure 17

18 Growth Enablers Customer Facing Execution End user - Sales & Market Application Expertise End user Aftermarket Service & Support Expertise Lawn Care Commercial Cleaning Power Generation Jobsite/Light Construction Core Power Capabilities Small Gas Engines Industrial Gas Engines <100 HP Diesel Engines Batteries Electric Motors 18

19 Recent Deals Commercial Equipment Focus Transaction closed August 2014 Accelerates our growth in an adjacency that has higher revenue growth and more attractive EBITDA margins Diversifies our vertical focus beyond outdoor power to include infrastructure construction, roadway, mining, and O&G Expands our channel access to include Rental and larger, Commercial distributors and dealers Cost synergies through product redesign and improved sourcing utilizing our engineering, operational, and supply chain capabilities Transaction closed May 2015 Expands our Commercial L&G business into Commercial Lawn Care Solutions, and immediately increases Commercial sales while improving margins. Broader product portfolio enables us to be more relevant to Commercial Cutters, Distributors & Dealers Strengthens our core ZTR business via Ferris brand expansion and bundling programs to create stronger dealer relationships Potential to bolt-on complementary product offerings used by same contractors to increase share of wallet 19

20 Billy Goat Commercial Equipment Focus Turf Renovation Overseeders Aerators Power Rakes Sod Cutters Support Trailers/Carries Specialty Mowing Field & Meadow Mowers Brush Cutters Debris Management Lawn & Litter Vacuums Debris Loaders Walk Behind Blowers Self Propelled Push Three seasons of Lawn Care: Spring, Summer & Fall

21 Financials Historical Summary Net Sales Adjusted Operating Income (1) $ in millions $ in millions (% Margin) Source: Company filings. (1) Please refer to page 31 for a reconciliation of Adjusted Operating Income 21

22 Financials Engines Historical Summary Net Sales Adjusted Segment Income (1) $ in millions $ in millions (% Margin) Source: Company filings. (1) Adjusted segment income is adjusted for restructuring charges and certain litigation charges. 22

23 Financials Products Historical Summary Net Sales Adjusted Segment Income (1) $ in millions $ in millions (% Margin) Source: Company filings. (1) Adjusted segment income is adjusted for restructuring charges and acquisition-related charges. 23

24 Restructuring Actions Update FY2012 Announced Programs - COMPLETED Capacity Reduced - Normal production reduced from 13MM to 10MM engines Closed Ostrava, Czech Rep. plant and downsized Poplar Bluff, Mo. Plant Moved production of horizontal shaft engines from Auburn, AL plant to Chongqing, China plant Exited sale of mass retail lawn & garden end products Closed Newbern, TN plant Moved production and/or outsourcing portable generator manufacturing 10% salaried headcount reduction during Q4 FY12 Total Company Restructuring Impacts Total Costs: $79MM; $7MM in FY14 ($4MM non-cash) Total annualized savings of $42MM by FY14 FY2015 Announced Programs IN PROCESS Narrowing assortment of lower priced Snapper lawn and garden equipment; Will continue to focus on premium residential products and commercial products Closed McDonough, GA plant (Q4 FY15) Moved production of pressure washers, snow throwers, and lawn tractors to Wauwatosa, WI and production of zero-turn lawnmowers to Munnsville, NY FY2016 Announced Programs COMPLETED Headcount reduction at Chongqing, China plant to offset lower production of engines used on snow throwers Total Company Restructuring Impacts (FY2015 Announced Programs) Total Costs: $33 to $35 million; $15--$20 non cash Total annual savings $15-17MM; Savings of $10 million achieved in FY 15; Incremental savings of $4.1M achieved in FY16 24

25 CAPITAL STRUCTURE Capital Structure $ in millions FY FY FY LTM % of /27/2015 Book Cap xebitda Cash and Cash Equivalents $188.4 $194.7 $118.4 $60.4 Short-Term Debt $ % 0.00x $500MM Revolver % 0.62x 6.875% Senior Notes Due % 1.48x Total Debt % 2.10x Total Book equity % 3.50x Total Book Capitalization x Adjusted EBITDA (1) $134.1 $121.1 $155.7 $151.5 Total Debt/Total Capital 26.5% 25.1% 28.2% 37.5% (1) Excludes non-cash pretax goodwill impairment charges, pre-tax organizational charges, pre-tax debt refinancing charges, pre-tax restructuring charges, pre-tax acquistion related charges, and litigation settlements. 25

26 CAPITAL STRUCTURE Cash Deployment (In millions) Capital Deployment Balance Invest in Core Business to Fund Organic Growth Fund Mandatory Retirement Liabilities Acquire New Business Opportunities Return Cash to Shareholders Return to Shareholders $s in millions Q Dividend Open Market Repurchases Acquire New Business $s in millions Q Acquisition Invest in Core Business $s in millions Q Capital Expenditure Pension 26

27 Financials Historical Summary Average Net Debt $ in millions $ in millions Average Capital Employed (1) Source: Management. (1) Capital employed defined as Accounts Receivable + Cash + FIFO Inventory + Other Assets + Net PP&E Accounts Payable Accrued Liabilities. 27

28 Financials Historical Summary Capital Expenditures Free Cash Flow (1) $ in millions $ in millions Source: Company filings. (1) Free Cash Flow is defined as Cash Flows from Operating Activities less Capital Expenditures. 28

29 Seasonality Quarterly Performance Engines: Highly seasonal due to majority of lawn and garden equipment sold during fiscal Q2 and Q3 Power Products: Sales of pressure washers and lawn and garden equipment are typically higher during fiscal Q3 and Q4 Sales of portable generators and snow throwers are typically higher during fiscal Q1 and Q2 Commentary Q1 July - September Q2 October - December Q3 January - March Q4 April - June Begin maintenance / repair period, prepare for next season Maintain and prepare for next season Beginning of high season Heavy capital expenditure for upcoming season Revenue 15% to 20% of annual total 20% to 25% of annual total 30% to 35% of annual total Up to 30% of annual total EBITDA ~5% of annual total 15% to 20% of annual total 50% to 60% of annual total 25% to 30% of annual total Revolver Usage Building for next season Heavy draws on Revolver to build for upcoming sales season Pay down on seasonal peak draw begins as receivables are collected Pay down on seasonal peak draw continues 29

30 Fiscal 2016 Outlook FY 2015 FY 2016 Guidance Sales $1.90B $1.90B to $1.96B Op Income % 5.0% 5.0% 5.3% Comments Guidance includes a full year of sales from the Allmand and Billy Goat acquisitions Foreign exchange headwinds and reduction of lower margin Snapper SKU s to reduce net sales by approximately 2% Interest Expense $19.5 $21.0 Higher seasonal borrowing levels Other Income $10.3 $8.5 Tax Rate Ex. Charges 25.0% 31% - 33% More normalized tax rate anticipated to reduce FY16 earnings per share by $0.12 Diluted EPS GAAP $1.00 $1.13 $1.35 Diluted EPS Ex. Charges $1.42 $ $1.41 FY15 includes pre-tax charges of $27.3 million related to previously announced restructuring actions and $2.1 million for acquisition-related charges. Guidance includes pretax $6 to $8 million related to restructuring actions. Excludes impact of restructuring activities, acquisition purchase accounting charges and deal costs, and certain litigation charges FY 16 prior to prospective share repurchases Source: Management estimates. Note: Figures in millions, except per share data. 30

31 Adjusted Operating Income Reconciliation ($ in millions) LTM FY 2011 FY 2012 FY 2013 FY 2014 FY /27/2015 Net Income $24.4 $29.0 ($33.7) $28.3 $45.7 $48.4 Income Tax (Credit) (18.5) $13.6 Interest Expense $19.7 Less: Other Income (7.2) (7.2) (6.9) (9.3) (10.3) ($9.7) Operating Income (Loss) $48.2 $41.2 ($40.6) $46.3 $66.2 $72.0 Jefferson Plant Closure Jefferson Curtailment Loss Litigation Settlement Goodwill Impairment Restructuring Actions Acquisition Related Charges Litigation Charges Adjusted Operating Income $101.3 $91.1 $73.6 $61.3 $95.6 $