Briggs & Stratton Corp. and Metal Technologies Holding Company, Inc. (MTHC) entered into a Class B Preferred Share Redemption Agreement that provides for MTHC to pay all dividends on 45,000 MTHC Class B preferred shares held by Briggs and redeem the shares in exchange for a payment to Briggs no later than Jan. 31, 2008. The shares were received as part of the payment from MTHC when they acquired certain foundry operations of Briggs in 1999.
Briggs estimates it will receive US$66.5 million from MTHC with respect to the Class B preferred shares on the projected redemption date, resulting in income of $37.4 million. Only $10 million of related dividend income was projected in Briggs' 2008 earnings forecast. Briggs expects that it will use the proceeds from the share redemption for general corporate purposes.
In another matter, Briggs said that a recall in June of this year will cost more than anticipated. Briggs recalled 480,000 snow thrower engines due to a potential fire hazard and estimated the total cost of the recall to be $5 million. However, Briggs now believes that the total cost of the recall could be approximately $20 to $25 million, which will negatively impact overall expenses in second quarter of fiscal year 2008