MILWAUKEE – Small engine manufacturer Briggs & Stratton Corp., founded in Milwaukee in 1908 by an inventor and an investor, on Monday filed for bankruptcy protection.
Briggs filed for Chapter 11 in the U.S. Bankruptcy Court for the Eastern District of Missouri. Under Chapter 11, a company and its creditors work out a reorganization plan that enables the business to continue to operate.
Briggs was the world’s largest manufacturer of small gasoline engines. It has sold more than 125 million of the engines. At one point, it employed about 11,000 people in the Milwaukee area.
As part of the bankruptcy filing, KPS Capital Partners LP, a private equity firm, through a newly formed affiliate has entered into an asset purchase agreement with Briggs to buy all of the company’s assets for approximately $550 million.
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The so-called stalking horse bid sets a minimum price for the company’s assets.
Briggs expects to sell its assets under the supervision of the bankruptcy courts, according to a news release from KPS Capital.
The first has agreed to provide $265 million to finance Briggs’ operations during the bankruptcy proceeding.
KPS also said that it has entered into an agreement in principle with the United Steelworkers of America for a new collective bargaining agreement for Briggs hourly employees represented by the union at the company’s plant in Wauwatosa. The agreement would become effective upon completion of the acquisition and reorganization.
“KPS is committed to the expeditious acquisition of Briggs & Stratton to provide certainty of outcome and confidence in the new company’s future for all of its stakeholders, including customers, employees and suppliers,” Michael Psaros, co-founder and co-managing partner of KPS, said in statement.
“The Company and its stakeholders will benefit from KPS’ demonstrated commitment to manufacturing excellence, continuous improvement, global network, access to capital and significant financial resources,” the statement said. “The new Briggs & Stratton will be conservatively capitalized and not encumbered by its predecessor’s significant liabilities.
“We thank the United Steelworkers of America for its support of our acquisition of the company,” Psaros said in the statement.
Briggs & Stratton joins other large companies – many of them in the retail and energy sectors – that have filed for bankruptcy in recent months.
The company, based in Wauwatosa, had revenue of $1.8 billion and employed an average of 5,251 people companywide in its fiscal year ended June 30, 2019. It has 1,363 employees in the Milwaukee area as well as several hundred contract employees who work in production.
Briggs was losing money and burdened by large debts when the economic downturn caused by the coronavirus pandemic hit.
Its sales fell by $107 million, or 18%, to $474 million in its third quarter ended March 29 compared with the same period last year. And the sales decline is almost certain to be much worse in the quarter that ended June. 30.
Briggs also reported a net loss of $145 million for the quarter -- though roughly $134 million of that was non-cash charges to reflected the lower value of assets on its balance sheet.
The company also warned that its losses, the coronavirus crisis and pending debt payments raised substantial doubt about its ability to continue as a going concern.
The company lost $54.1 million in its 2019 fiscal year and $11.3 million in its 2018 fiscal year.
Briggs makes small engines, residential and commercial lawn and garden equipment, portable generators, pressure washers, snow throwers and other outdoor power equipment. The company’s products are sold in more than 100 countries under such brands as Briggs & Stratton, Victa, Simplicity, Ferris, Billy Goat, Vanguard, Branco and Allmand.
It also sells engines to other manufacturers, including Deere & Co., the Toro Co. and Viking.
Briggs has plants in Wauwatosa, Alabama, Georgia, Missouri and New York as well as Australia and China.
The company had short-term debt of $597.5 million and long-term debt of $7 million as of March 31.
Its short-term debt includes $195.5 million in bonds due in December. That debt had to be refinanced by Sept. 15 or the company would be in violation of its loan agreements with a consortium of banks, enabling them to demand immediate repayment.
The company had planned to do that by selling some businesses.
“They kind of boxed themselves in a corner,” said Tom Hayes, an analyst with Northcoast Research.
In March, Briggs announced plans to sell its commercial turf products business, sold under brand names such as Ferris, Billy Goat, Simplicity and Snapper, and its pressure washer and portable generator product lines.
The smaller company would focus on engines for residential outdoor power equipment, commercial engines, standby power generation and commercial battery systems.
In June, after missing a $6.7 million interest payment, the company’s board voted to give executives and other key employees $5 million in cash retention awards, including $1.2 million for Todd Teske, chairman, president and CEO, and $600,000 for Mark Schwertfeger, senior vice president and chief financial officer.
The awards were in lieu of annual bonus and long-term incentive compensation for the 2020 fiscal year, the company said in a filing with the U.S. Securities and Exchange Commission.
Such awards are often given before a company files for bankruptcy.
Briggs has more than half of the engine market for residential outdoor power equipment and established brands. It also has large distribution network and profitable business in selling parts.
But the company also has faced a flat market for residential outdoor power equipment, excess manufacturing capacity, pressure from large retailers to limit price increases and a growing preference for battery-powered outdoor equipment.
The company was founded in 1908 by Stephen Briggs, an inventor, and Harold Stratton, an investor, and incorporated in 1910. It initially grew by making parts for the booming automobile industry – starter switches were an early core product – small engines for such revolutionary products as washing machines as well as garden tractors, cultivators and generators.
In 1953, it introduced the first lightweight aluminum engine that found a ready market in lawn mowers just as Americans were flocking to the suburbs. The company produced more than 2 million engines a year on average throughout the 1950s.
Briggs had four manufacturing plants in the Milwaukee area at one time. But the company, which was hurt by an increase in foreign competition in the 1980s, also had a history of conflict with labor unions and over the decades moved much of its manufacturing to other states.
The company also has a history of opening and then closing plants in Wisconsin, Missouri, Kentucky, Tennessee, Alabama and other locations.
Briggs closed its plant in Port Washington in 2008 and its plants in Jefferson and Watertown in 2009.
In 2007, it closed its engine plant in Rolla, Mo., that once employed up to 800 people – moving much of that production to China. In 2012, it announced the closing of a plant in Newbern, Tenn., resulting in the loss of almost 700 jobs. It also closed its plant in the Czech Republic that year.
And in August it announced that it would close its plant in Murray, Ky.
The company hasn’t had a consistent path in recent years, said Hayes, the analyst with Northcoast Research.
“It’s been, ‘Let me turn this dial and turn that dial,’” he said.
This article originally appeared on Milwaukee Journal Sentinel: Briggs & Stratton, small engine maker, files for bankruptcy protection