Item 1. Business
Basic Business
Briggs & Stratton Corporation is the world's largest producer of air cooled gasoline engines for outdoor power equipment. The Company designs, manufactures, markets and services these products for original equipment manufacturers worldwide. These engines are air cooled aluminum alloy gasoline engines ranging from 3 through 20 horsepower.
Engines
In fiscal 1996, approximately 83% of original equipment gasoline engine sales were to manufacturers of lawn and garden equipment; approximately 17% were to manufacturers of other powered equipment, primarily for commercial applications in the construction industry and for agriculture. In the United States and Canada, where the majority of the Company's engines are sold, engine sales are primarily made directly to original equipment manufacturers.
Sales to the Company's largest engine customer, MTD Products Inc., were 21% of total sales in fiscal 1996. Sales to its second largest customer, A B Electrolux, were 14% of sales and sales to its third largest customer, Tomkins PLC, were 13% of sales. Under purchasing plans available to all gasoline engine customers, the Company normally enters into annual engine supply agreements with these producers of end products powered by the Company's gasoline engines. Company management has no reason to anticipate a change from the continuation of this practice or in its historical business relationships with these companies.
The major domestic competitors of the Company in engine manufacturing are Tecumseh Products Company, Kohler Co., Kawasaki Heavy Industries, Ltd., Honda Motor Co., Ltd. and Onan Corporation. Also, two domestic lawn mower manufacturers, Toro Co. under its Lawn-Boy brand and Honda, manufacture their own engines. Eight Japanese small engine manufacturers, of which Honda and Kawasaki are the largest, are worldwide competitors not only in the sale of engines, but end products as well. Tecumseh Europa S.p.A., located in Italy, is a major competitor in Europe. Major areas of competition from all engine manufacturers are product quality, price, timely delivery and service. The Company believes its product quality and service reputation have given it the strong brand name identification it enjoys.
Servicing of all the Company's gasoline engine products is done primarily by a network of over 30,000 independent service parts distribution and repair outlets in the United States and Canada and most foreign countries.
Manufacturing activity in the lawn and garden industry is driven by the need to deliver new lawn mowers, garden tractors and tillers for retail sales in the spring and early summer. Thus, demand from customers is at its peak in their winter and spring manufacturing season. Most engines are manufactured to individual customer specifications. The Company's production capacities are not sufficient to meet customer peak season needs. Therefore, many engines manufactured during the first half of the fiscal year are for shipments in the second half of the year. Thus, sales generally are highest in the March quarter and weakest in the September quarter. Customer orders in the last three months of the fiscal year depend on spring retail sales, so the June quarter is the least predictable.
General
The Company manufactures a majority of the components used in its products and purchases the balance of its requirements. The Company manufactures its own ductile and grey iron castings, aluminum die castings and a high percentage of other major components, such as carburetors and ignition systems. The Company also purchases certain finished standard commercial parts such as piston rings, spark plugs, valves, zinc die castings and plastic components, some stampings and screw machine parts and smaller quantities of other components. Raw material purchases are for aluminum, steel, and brass. The Company believes its sources of supply are adequate.
The Company holds certain patents on features incorporated in its products; however, the success of the Company's business is not considered to be primarily dependent upon patent protection. Licenses, franchises and concessions are not a material factor in the Company's business.
For the years ending June 30, 1996, July 2, 1995 and July 3, 1994, the Company spent approximately $12,737,000, $13,112,000 and $12,520,000, 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 7,507. Employment ranged from a low of 7,011 in July 1995 to a high of 7,823 in December 1995.
Financial Information About Industry Segments
Financial information about industry segments prior to the spin-off of the automotive lock division in February 1995 appears in Note 4 of the Notes to Consolidated Financial Statements in the 1996 Annual Report to Shareholders and is incorporated herein by reference.
Export Sales
Export sales for fiscal 1996 were $323,747,000 (25% of total sales), for fiscal 1995 were $312,234,000 (23% of total sales) and for fiscal 1994 were $264,866,000 (21% of total sales). These sales were principally to customers in European countries.
Item 2.
Item 2. Properties
The corporate offices and four of the Company's manufacturing facilities are located in suburbs of Milwaukee, Wisconsin. Subsequent to year-end, the Company entered into a contract to sell one of these facilities. The Company will vacate the manufacturing portion of the facility (approximately 444,000 square feet) by December 31, 1996 but will have the right to occupy the warehouse portion (approximately 414,000 square feet) for up to 10 years. The Company also has facilities in Murray, Kentucky; Poplar Bluff and Rolla, Missouri; Auburn, Alabama; Statesboro, Georgia; and Ravenna, Michigan. These are owned facilities containing over 4.9 million square feet of office, warehouse and production area, including the facility under contract.
The engine business is seasonal, with demand for engines at its height in the winter and early spring. Engine manufacturing operations run at capacity levels during the peak season, with many operations running three shifts. Engine operations generally run one shift in the summer, when demand is weakest and production is considerably under capacity. During the winter, when finished goods inventories reach their highest levels, owned warehouse space may be insufficient and capacity may be expanded through rented space. Excess warehouse space exists in the spring and summer seasons. The Company's owned properties are well maintained.
The Company leases 177,000 square feet of space to house its European warehouse in the Netherlands and its foreign sales and service operations in Australia, Canada, France, Germany, Ireland, New Zealand, Sweden, Switzerland and the United Kingdom.
Item 3.
Item 3. Legal Proceedings
There are no pending legal proceedings that are required to be reported under this item.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the three months ended June 30, 1996.
Executive Officers of the Registrant
Name, Age, Position Business Experience for Past Five Years ------------------- ---------------------------------------
FREDERICK P. STRATTON, JR., 57 Mr. Stratton was elected to the Chairman and Chief Executive Officer position of Chief Executive Officer in (1) (2) (3) May 1977 and Chairman in November 1986. He also served in the position of President from January 1992 to August 1994.
JOHN S. SHIELY, 44 Mr. Shiely was elected to his current President and Chief Operating Officer position in August 1994 after serving (1) (2) as Executive Vice President - Administration since November 1991. He served as Vice President and General Counsel from November 1990 to November 1991.
ROBERT H. ELDRIDGE, 58 Mr. Eldridge was elected to his current Executive Vice President and position effective April 1995. He has Chief Financial Officer, served as Secretary-Treasurer since Secretary-Treasurer (1) January 1984.
MICHAEL D. HAMILTON, 54 Mr. Hamilton was elected to his present Executive Vice President - position effective June 1989. Sales and Service
JAMES A. WIER, 53 Mr. Wier was elected to his current Executive Vice President - Operations position in April 1989.
ERIK ASPELIN, 55 Mr. Aspelin assumed his current Vice President - POWERCOM-2000 position in October 1995, after serving as Vice President - Distribution Sales and Service since July 1989.
JAMES E. BRENN, 48 Mr. Brenn was elected to his current Vice President and Controller position in November 1988.
RICHARD J. FOTSCH, 41 Mr. Fotsch was elected an executive Vice President; General Manager - officer in May 1993 after serving the Small Engine Division Small Engine Division as Vice President and General Manager from July 1990 to May 1993.
HUGO A. KELTZ, 48 Mr. Keltz was elected an executive Vice President - International officer in May 1992 after serving as Vice President - International since June 1991.
CURTIS E. LARSON, JR., 48 Mr. Larson was elected to this Vice President - Distribution executive officer position in October Sales and Service 1995 after serving as Vice President - Industrial Engine Division since January 1993. He held the position of Vice President - Sales and Marketing of the Company's automotive lock division from December 1988 to January 1993.
PAUL M. NEYLON, 49 Mr. Neylon was elected an executive Vice President; General Manager - officer in May 1993, after serving the Specialty Products Division Vanguard Division as Vice President and General Manager since November 1991. This division has since been renamed the Specialty Products Division. He previously served the Castings Division as Vice President and General Manager from July 1989 to November 1991.
STEPHEN H. RUGG, 49 Mr. Rugg was elected to his current Vice President - Sales position in November 1995, after serving as Vice President - Sales and Marketing since November 1988.
THOMAS R. SAVAGE, 48 Mr. Savage was elected to this Vice President - Administration executive officer position in November and General Counsel 1994 after serving as General Counsel since joining the Company in April 1992. He held the position of Vice President, Secretary and General Counsel at Sta-Rite Industries, Inc., a manufacturer of pumps and other fluids-handling equipment and controls, from 1984 to 1992.
GREGORY D. SOCKS, 47 Mr. Socks was elected an executive Vice President; General Manager - officer in May 1993 after serving the Large Engine Division Large Engine Division as Vice President and General Manager from July 1990 to May 1993.
GERALD E. ZITZER, 49 Mr. Zitzer was elected to his current Vice President - Human Resources position in November 1988.
(1) Officer is also a Director of the Company.
(2) Member of Executive Committee.
(3) Member of Planning Committee.
Officers are elected annually and serve until their successors are elected and qualify.
PART II
Item 5.
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 31 of the 1996 Annual Report to Shareholders.
Item 6.
Item 6. Selected Financial Data
Information required by this Item appears under the heading "Ten Year Comparisons" on pages 32 and 33 of the 1996 Annual Report to Shareholders and is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's discussion and analysis of results of operations and financial condition of the Company appears on pages 27 through 30 of the 1996 Annual Report to Shareholders and is incorporated by reference in this Form 10-K.
Item 8.
Item 8. Financial Statements and Supplementary Data
The information required by Item 8 is incorporated by reference from the Consolidated Financial Statements and Notes to Consolidated Financial Statements appearing on pages 12 through 24 and page 31 of the 1996 Annual Report to Shareholders.
Item 9.
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.
Item 10. Directors and Executive Officers of the Registrant
Information pertaining to directors is incorporated herein by reference from pages 2 and 3 of the Company's 1996 Annual Meeting Proxy Statement dated September 9, 1996. Information regarding executive officers required by Item 401 of Regulation S-K is furnished in Part I of this Form 10-K. Information required by Item 405 of Regulation S-K is incorporated by reference from page 6 of the Company's 1996 Annual Meeting Proxy Statement.
Item 11.
Item 11. Executive Compensation
The information required by Item 11 is incorporated by reference from the section entitled Election of Directors on page 2, the final two paragraphs of the Nominating and Salaried Personnel Committee Report on Executive Compensation found on page 11 and the Executive Compensation section found on pages 12-16 of the Company's 1996 Annual Meeting Proxy Statement.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is incorporated by reference from pages 5 and 6 of the Company's 1996 Annual Meeting Proxy Statement.
Item 13.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 is incorporated by reference from page 4 of the Company's 1996 Annual Meeting Proxy Statement.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
*Incorporated herein by reference to the Registrant's 1996 Annual Report to Shareholders for the fiscal year ended June 30, 1996.
2. Financial Statement Schedules
All financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions.
3. Exhibits
See Exhibit Index on page 9 of this report, 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 identififed in the Exhibit Index by an asterisk following the Exhibit Number.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period covered by this report.
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/ R. H. Eldridge ----------------------------- R. H. Eldridge September 19, 1996 Executive Vice President and Chief Financial Officer, Secretary-Treasurer
- --------------------------------------------------------------------------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Frederick P. Stratton, Jr. and Robert H. Eldridge, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue thereof.
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
BRIGGS & STRATTON CORPORATION (Commission File No. 1-1370)
EXHIBIT INDEX 1996 ANNUAL REPORT ON FORM 10-K
Exhibit Number Description ------- -----------
3.1 Articles of Incorporation. (Filed as Exhibit 3.2 to the Company's Report on Form 10-Q for the quarter ended October 2, 1994, and incorporated by reference herein.)
3.2 Bylaws. (Filed as Exhibit 3.2 to the Company's Registration Statement on Form 8-B dated October 12, 1992 and incorporated by reference herein.)
4.0 Rights Agreement dated as of August 7, 1996, between Briggs & Stratton Corporation and Firstar Trust Company which includes the form of Right Certificate as Exhibit A and the Summary of Rights to Purchase Common shares as Exhibit B. (Filed as Exhibit 4.1 to the Company's Registration Statement on Form 8-A, dated as of August 7, 1996 and incorporated by reference herein.)
10.0* Forms of Officer Employment Agreements. (Filed as Exhibit 10.0 to the Company's Annual Report on Form 10-K for fiscal year ended June 27, 1993 and incorporated by reference herein.)
10.1* Survivor Annuity Plan. (Filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for fiscal year ended June 30, 1986 and incorporated by reference herein.)
10.2* Supplemental Retirement Program. (Filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for fiscal year ended June 30, 1990 and incorporated by reference herein.)
10.3(a)* Economic Value Added Incentive Compensation Plan, as amended and restated effective April 18, 1995. (Filed as Exhibit 10.3 (b) to the Company's Annual Report on Form 10-K for fiscal year ended July 2, 1995 and incorporated by reference herein.)
10.3(b)* Amendment to Economic Value Added Incentive Compensation Plan. (Filed as Exhibit 10.3 (c) to the Company's Report on Form 10-Q for the quarter ended December 31, 1995 and incorporated by reference herein.)
10.4* Form of Change of Control Employment Agreements. (Filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for fiscal year ended June 27, 1993 and incorporated by reference herein.)
10.5(a)* Trust Agreement with an independent trustee to provide payments under various compensation agreements with company employees upon the occurrence of a change in control. (Filed as Exhibit 10.5 (a) to the Company's Annual Report on Form 10-K for fiscal year ended July 2, 1995 and incorporated by reference herein.)
10.5(b)* Amendment to Trust Agreement with an independent trustee to provide payments under various compensation agreements with company employees. (Filed as Exhibit 10.5 (b) to the Company's Annual Report on Form 10-K for fiscal year ended July 2, 1995 and incorporated by reference herein.)
10.6* Stock Incentive Plan. (Filed as Exhibit A to the Company's 1993 Annual Meeting Proxy Statement, which was filed as Exhibit 100A to the Company's Annual Report on Form 10-K for fiscal year ended June 27, 1993 and incorporated by reference herein.)
Exhibit Number Description ------- -----------
10.7(a)* Leveraged Stock Option Program. (Filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for fiscal year ended June 27, 1993 and incorporated by reference herein.)
10.7(b)* Amendment to Leveraged Stock Option Program. (Filed as Exhibit 10.7 (b) to the Company's Annual Report on Form 10-K for fiscal year ended July 2, 1995 and incorporated by reference herein.)
10.8* Amended and Restated Deferred Compensation Agreement for Fiscal 1995. (Filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for fiscal year ended July 2, 1995 and incorporated by reference herein.)
10.9* Deferred Compensation Agreement for Fiscal 1996. (Filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for fiscal year ended July 2, 1995 and incorporated by reference herein.)
10.10* Deferred Compensation Agreement for Fiscal 1997. (Filed herewith.)
10.11* Officer Employment Agreement. (Filed as Exhibit 10.11 to the Company's Report on Form 10-Q for the quarter ended December 31, 1995 and incorporated by reference herein.)
10.12* Deferred Compensation Plan for Directors. (Filed as Exhibit 10.12 to the Company's Report on Form 10-Q for the quarter ended December 31, 1995 and incorporated by reference herein.)
11 Computation of Earnings Per Share of Common Stock. (Filed herewith.)
13 Annual Report to Shareholders for Year Ended June 30, 1996. (Filed herewith solely to the extent specific portions thereof are incorporated herein by reference.)
21 Subsidiaries of the Registrant. (Filed as Exhibit 21 to the Company's Annual Report on Form 10-K for fiscal year ended July 2, 1995 and incorporated by reference herein.)
23 Consent of Independent Public Accountants. (Filed herewith.)
24 Power of Attorney (Included in the Signatures Page of this report.)
27 Financial Data Schedule (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.