| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| Wisconsin | 39-0182330 | |
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Yes x No | 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. | |
| Large accelerated filer | x | Accelerated filer | ¨ | |||
| Non-accelerated filer | o | Smaller reporting company | ¨ | |||
Yes | Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | |
Class | Outstanding at | |
| COMMON STOCK, par value $0.01 per share | ||
CURRENT ASSETS: Cash and Cash Equivalents Accounts Receivable, Net Inventories - Finished Products and Parts Work in Process Raw Materials Total Inventories Deferred Income Tax Asset Assets Held for Sale Prepaid Expenses and Other Current Assets Total Current Assets OTHER ASSETS: Goodwill Investments Deferred Loan Costs, Net Other Intangible Assets, Net Long-Term Deferred Income Tax Asset Other Long-Term Assets, Net Total Other Assets PLANT AND EQUIPMENT: Cost Less - Accumulated Depreciation Total Plant and Equipment, Net TOTAL ASSETS CURRENT LIABILITIES: Accounts Payable Short-Term Debt Current Maturity on Long-Term Debt Accrued Liabilities Total Current Liabilities OTHER LIABILITIES: Accrued Pension Cost Accrued Employee Benefits Accrued Postretirement Health Care Obligation Other Long-Term Liabilities Long-Term Debt Total Other Liabilities SHAREHOLDERS’ INVESTMENT: Common Stock - Authorized 120,000 shares, $.01 par value, issued 57,854 shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock at cost, 7,467 and 7,793 shares, respectively Total Shareholders’ Investment TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT NET SALES COST OF GOODS SOLD Gross Profit ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES LITIGATION SETTLEMENT Income from Operations INTEREST EXPENSE OTHER INCOME, Net Income Before Income Taxes PROVISION FOR INCOME TAXES NET INCOME EARNINGS PER SHARE DATA Average Shares Outstanding Basic Earnings Per Share Diluted Average Shares Outstanding Diluted Earnings Per Share CASH DIVIDENDS PER SHARE CASH FLOWS FROM OPERATING ACTIVITIES: Net Income Adjustments to reconcile net income to net cash used by operating activities: Depreciation and Amortization Stock Compensation Expense Loss on Disposition of Plant and Equipment Benefit for Deferred Income Taxes Earnings of Unconsolidated Affiliates Dividends Received from Unconsolidated Affiliates Change in Operating Assets and Liabilities: Increase in Accounts Receivable (Increase) Decrease in Inventories Decrease in Other Current Assets Increase in Accounts Payable and Accrued Liabilities Other, Net Net Cash Used by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Plant and Equipment Proceeds Received on Sale of Plant and Equipment Other, Net Net Cash Used by Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES: Net Borrowings on Revolver Proceeds from Long-Term Debt Financing Deferred Loan Costs Repayments on Long-Term Debt Dividends Paid Stock Option Exercise Proceeds and Tax Benefits Net Cash Provided by Financing Activities EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,994 ) 265 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, Beginning CASH AND CASH EQUIVALENTS, Ending Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used today, and the second statement would include components of other comprehensive income (“OCI”). The ASU does not change the items that must be reported in OCI. ASU 2011-05 will be effective for public companies for fiscal years, and interim periods within those years, beginning after December 15, 2011 with early adoption permitted. Management does not expect adoption of this ASU to have a material impact on the Company’s results of operations, financial position or cash flow. Net Income Less: Dividends Attributable to Unvested Shares Net Income available to Common Shareholders Average Shares of Common Stock Outstanding Diluted Average Shares of Common Stock Outstanding Basic Earnings Per Share Diluted Earnings Per Share Options to Purchase Shares of Common Stock (in thousands) Weighted Average Exercise Price of Options Excluded Loss Net Income Cumulative Translation Adjustments Unrealized Gain (Loss) on Derivative Instruments, Net of tax Unrecognized Pension & Postretirement Obligation, Net of tax Total Comprehensive Income Cumulative Translation Adjustments Unrealized Gain (Loss) on Derivative Instruments Unrecognized Pension & Postretirement Obligation Accumulated Other Comprehensive Loss Components of Net Periodic (Income) Expense: Service Cost Interest Cost on Projected Benefit Obligation Expected Return on Plan Assets Amortization of: Transition Obligation Prior Service Cost (Credit) Actuarial Loss Net Periodic (Income) Expense Components of Net Periodic (Income) Expense: Service Cost Interest Cost on Projected Benefit Obligation Expected Return on Plan Assets Amortization of: Transition Obligation Prior Service Cost (Credit) Actuarial Loss Net Periodic (Income) Expense earnings. Contract Foreign Currency: Australian Dollar Australian Dollar Canadian Dollar Euro Japanese Yen Commodity: Copper (Pounds) Natural Gas (Therms) Balance Sheet Location Foreign currency contracts Other Current Assets Other Long-Term Assets, Net Accrued Liabilities Other Long-Term Liabilities Commodity contracts Other Current Assets Other Long-Term Assets, Net Accrued Liabilities Other Long-Term Liabilities Classification of Gain (Loss) Foreign currency contracts - sell Foreign currency contracts - buy Commodity contracts Classification of Gain (Loss) Foreign currency contracts - sell Foreign currency contracts - buy Commodity contracts Classification of Gain (Loss) Foreign currency contracts - sell Foreign currency contracts - buy Commodity contracts Classification of Gain (Loss) Foreign currency contracts - sell Foreign currency contracts - buy Commodity contracts Assets: Derivatives Liabilities: Derivatives Assets: Derivatives Liabilities: Derivatives Beginning Balance Payments Provision for Current Year Warranties Changes in Estimates Ending Balance certain foreign jurisdictions. foreign jurisdictions and related audits occur on a regular basis. In the U.S., the Company is no longer subject to U.S. federal income tax examinations before fiscal 2009 and is currently under audit by various state and foreign jurisdictions. With respect to the 2001. Briggs & Stratton. the plans offered to both hourly and salaried retirees. On August 16, 2010, a putative class of retirees who retired prior to August 1, 2006 and the United Steel Workers filed a complaint in the U.S. District Court for the Eastern District of Wisconsin (Merrill, Weber, Carpenter, et al; United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO/CLC v. Briggs & Stratton Corporation; Group Insurance Plan of Briggs & Stratton Corporation; and Does 1 through 20, Docket No. 10-C-0700), contesting the NET SALES: Engines Power Products Inter-Segment Eliminations Total * * International sales included in net sales based on product shipment destination GROSS PROFIT: Engines Power Products Inter-Segment Eliminations Total INCOME FROM OPERATIONS: Engines Power Products Inter-Segment Eliminations Total Revolving Credit Facility 6.875% Senior Notes 8.875% Senior Notes 2020 Subsequent to the end of the first quarter of fiscal 2012, the Company entered into a new 5-year 6.875% Senior Notes, due December 15, 2020 Revolving Credit Facility, expiring July 12, 2012 Current Assets Investment in Subsidiaries Non-Current Assets Current Liabilities Long-Term Debt Other Long-Term Obligations Shareholders’ Investment Current Assets Investment in Subsidiaries Noncurrent Assets Current Liabilities Other Long-Term Obligations Shareholders’ Investment Net Sales Cost of Goods Sold Gross Profit Engineering, Selling, General and Administrative Expenses Equity in Earnings from Subsidiaries Income (Loss) from Operations Interest Expense Other Income, Net Income (Loss) before Income Taxes Provision (Credit) for Income Taxes Net Income (Loss) Net Sales Cost of Goods Sold Gross Profit Engineering, Selling, General and Administrative Expenses Litigation Settlement Equity in Earnings from Subsidiaries Income (Loss) from Operations Interest Expense Other Income (Expense), Net Income (Loss) before Income Taxes Provision (Credit) for Income Taxes Net Income (Loss) CASH FLOWS Net Sales Cost of Goods Sold Gross Profit Engineering, Selling, General and Administrative Expenses Equity in Earnings from Subsidiaries Income (Loss) from Operations Interest Expense Other Income, Net Income (Loss) before Income Taxes Provision (Credit) for Income Taxes Net Income (Loss) Net Sales Cost of Goods Sold Gross Profit Engineering, Selling, General and Administrative Expenses Litigation Settlement Equity in Earnings from Subsidiaries Income (Loss) from Operations Interest Expense Other Income, Net Income (Loss) before Income Taxes Provision (Credit) for Income Taxes Net Income (Loss) Net Cash Provided (Used) by Operating Activities Cash Flows from Investing Activities: Additions to Plant and Equipment Proceeds Received on Sale of Plant and Equipment Cash Investment in Subsidiary Net Cash Used by Investing Activities Cash Flows from Financing Activities: Net Borrowings (Repayments) on Loans, Notes Payable and Long-Term Debt Deferred Loan Costs Dividends Paid Stock Option Exercise Proceeds and Tax Benefits Capital Contributions Received Net Cash Provided (Used) by Financing Activities Effect of Foreign Currency Exchange Rate Changes on Cash and Cash Equivalents Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning Cash and Cash Equivalents, Ending Net Cash Provided (Used) by Operating Activities Cash Flows from Investing Activities: Additions to Plant and Equipment Proceeds Received on Sale of Plant and Equipment Cash Investment in Subsidiary Other, Net Net Cash Used by Investing Activities Cash Flows from Financing Activities: Net Borrowings on Loans, Notes Payable and Long-Term Debt Dividends Paid Capital Contributions Received Net Cash Provided by Financing Activities Effect of Foreign Currency Exchange Rate Changes on Cash and Cash Equivalents Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning Cash and Cash Equivalents, Ending Company and Briggs & Stratton AG, as borrowers, entered into a The Power Products Segment gross profit percentage costs. 2011, partially offset by higher average borrowings outstanding. quarter. long-term debt. open market at an average price 2012. expire on Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act. Description (Registrant) /s/ David J. Rodgers DescriptionBRIGGS & STRATTON CORPORATION AND SUBSIDIARIESINDEX Page No. Page No.PART I – FINANCIAL INFORMATION Item 1. 3 5 6 7Item 2. 22Item 3. 26Item 4. 26PART II – OTHER INFORMATION Item 1. 27Item 1. Item 1A. 27Item 2. Item 6. 27 Signatures28 292BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESPART I - FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSCONSOLIDATED CONDENSED BALANCE SHEETS(In thousands)ASSETS (Unaudited)
March 27,
2011 June 27,
2010 $ 42,816 $ 116,554 478,004 286,426 334,178 278,922 123,996 114,483 7,388 6,941 465,562 400,346 48,485 41,138 4,000 4,000 15,382 57,179 1,054,249 905,643 253,681 252,975 18,368 19,706 5,156 525 89,561 90,345 63,969 72,492 9,293 10,608 440,028 446,651 1,005,088 979,898 677,676 642,135 327,412 337,763 $ 1,821,689 $ 1,690,057 (Unaudited) October 2,
2011 July 3,
2011CURRENT ASSETS: Cash and Cash Equivalents $ 138,244 $ 209,639 Accounts Receivable, Net 232,370 249,358 Inventories - Finished Products and Parts 351,350 292,527 Work in Process 131,658 127,358 Raw Materials 9,120 7,206 Total Inventories 492,128 427,091 Deferred Income Tax Asset 42,858 42,163 Assets Held for Sale 4,000 4,000 Prepaid Expenses and Other Current Assets 25,173 36,413 Total Current Assets 934,773 968,664 OTHER ASSETS: Goodwill 201,901 202,940 Investments 21,203 21,017 Debt Issuance Costs, Net 4,685 4,919 Other Intangible Assets, Net 88,372 89,275 Long-Term Deferred Income Tax Asset 24,874 31,001 Other Long-Term Assets, Net 9,380 9,102 Total Other Assets 350,415 358,254 PLANT AND EQUIPMENT: Cost 1,032,073 1,026,967 Less - Accumulated Depreciation 698,969 687,667 Total Plant and Equipment, Net 333,104 339,300 TOTAL ASSETS $ 1,618,292 $ 1,666,218 The accompanying notes are an integral part of these statements.3BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESCONSOLIDATED CONDENSED BALANCE SHEETS (Continued)(In thousands, except per share data)LIABILITIES & SHAREHOLDERS’ INVESTMENT (Unaudited)
March 27,
2011 June 27,
2010 $ 223,912 $ 171,495 3,000 3,000 — 203,460 171,683 185,556 398,595 563,511 267,761 274,737 23,178 23,006 122,481 135,978 26,855 42,248 280,000 — 720,275 475,969 579 579 79,039 80,353 1,116,303 1,090,843 (299,302 ) (318,709 ) (193,800 ) (202,489 ) 702,819 650,577 $ 1,821,689 $ 1,690,057 (Unaudited) October 2,
2011 July 3,
2011CURRENT LIABILITIES: Accounts Payable $ 172,710 $ 183,733 Short-Term Debt 3,000 3,000 Accrued Liabilities 143,966 157,650 Total Current Liabilities 319,676 344,383 OTHER LIABILITIES: Accrued Pension Cost 189,117 191,417 Accrued Employee Benefits 24,173 24,100 Accrued Postretirement Health Care Obligation 113,067 116,092 Other Long-Term Liabilities 26,734 27,283 Long-Term Debt 225,000 225,000 Total Other Liabilities 578,091 583,892 SHAREHOLDERS’ INVESTMENT: Common Stock - Authorized 120,000 shares, $.01 par value, issued 57,854 shares 579 579 Additional Paid-In Capital 78,973 79,354 Retained Earnings 1,082,079 1,092,864 Accumulated Other Comprehensive Loss (249,445 ) (243,498 ) Treasury Stock at cost, 7,467 and 7,793 shares, respectively (191,661 ) (191,356 ) Total Shareholders’ Investment 720,525 737,943 TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT $ 1,618,292 $ 1,666,218 The accompanying notes are an integral part of these statements.4BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited) Three Months Ended Nine Months Ended March 27,
2011 March 28,
2010 March 27,
2011 March 28,
2010 $ 720,333 $ 694,575 $ 1,504,773 $ 1,412,231 570,784 554,093 1,214,910 1,148,709 149,549 140,482 289,863 263,522 70,997 71,394 216,012 192,526 — 30,600 — 30,600 78,552 38,488 73,851 40,396 (4,513 ) (7,323 ) (18,679 ) (20,979 ) 2,207 1,860 5,280 4,287 76,246 33,025 60,452 23,704 24,725 8,952 18,298 5,293 $ 51,521 $ 24,073 $ 42,154 $ 18,411 49,726 49,597 49,672 49,595 $ 1.03 $ 0.48 $ 0.85 $ 0.37 50,465 50,060 50,243 49,987 $ 1.02 $ 0.48 $ 0.84 $ 0.36 $ 0.11 $ 0.11 $ 0.33 $ 0.33 Three Months Ended October 2,
2011 September 26,
2010NET SALES $ 397,297 $ 334,116 COST OF GOODS SOLD 331,243 272,122 Gross Profit 66,054 61,994 ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 67,677 70,456 Loss from Operations (1,623 ) (8,462 ) INTEREST EXPENSE (4,338 ) (5,157 ) OTHER INCOME, Net 1,794 1,435 Loss Before Income Taxes (4,167 ) (12,184 ) PROVISION (CREDIT) FOR INCOME TAXES 1,053 (4,070 ) NET LOSS $ (5,220 ) $ (8,114 ) EARNINGS (LOSS) PER SHARE DATA Weighted Average Shares Outstanding 49,818 49,665 Basic Earnings (Loss) Per Share $ (0.10 ) $ (0.16 ) Diluted Average Shares Outstanding 49,818 49,665 Diluted Earnings (Loss) Per Share $ (0.10 ) $ (0.16 ) DIVIDENDS PER SHARE $ 0.11 $ 0.11 The accompanying notes are an integral part of these statements.5BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited) Nine Months Ended March 27, March 28, 2011 2010 $ 42,154 $ 18,411 46,550 48,629 8,773 6,155 1,353 1,656 (690 ) (4,195 ) (3,879 ) (2,466 ) 6,980 4,005 (187,030 ) (175,159 ) (63,030 ) 20,474 12,970 12,363 43,165 56,631 (7,659 ) (3,014 ) (100,343 ) (16,510 ) (32,507 ) (24,816 ) 82 209 — (144 ) (32,425 ) (24,751 ) 55,000 105,355 225,000 — (4,994 ) — (203,698 ) (41,483 ) (11,074 ) (11,001 ) 790 — 61,024 52,871 (73,738 ) 11,875 116,554 15,992 $ 42,816 $ 27,867 Three Months Ended October 2,
2011 September 26,
2010CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (5,220 ) $ (8,114 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and Amortization 16,119 15,501 Stock Compensation Expense 2,548 5,498 (Gain) Loss on Disposition of Plant and Equipment (14 ) 360 Provision (Benefit) for Deferred Income Taxes 3,507 (3,011 ) Earnings of Unconsolidated Affiliates (1,356 ) (890 ) Dividends Received from Unconsolidated Affiliates 1,500 3,250 Change in Operating Assets and Liabilities: Decrease in Accounts Receivable 13,503 93,877 Increase in Inventories (65,287 ) (107,887 ) Decrease in Other Current Assets 20,870 10,465 Decrease in Accounts Payable and Accrued Liabilities (39,057 ) (60,210 ) Other, Net (3,384 ) (4,326 ) Net Cash Used in Operating Activities (56,271 ) (55,487 ) CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Plant and Equipment (10,230 ) (9,391 ) Proceeds Received on Disposition of Plant and Equipment 80 33 Net Cash Used in Investing Activities (10,150 ) (9,358 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net Repayments on Notes Payable and Long-Term Debt — (2,500 ) Treasury Stock Purchases (3,118 ) — Net Cash Used in Financing Activities (3,118 ) (2,500 ) EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,856 ) (1,516 ) NET DECREASE IN CASH AND CASH EQUIVALENTS (71,395 ) (68,861 ) CASH AND CASH EQUIVALENTS, Beginning 209,639 116,554 CASH AND CASH EQUIVALENTS, Ending $ 138,244 $ 47,693 The accompanying notes are an integral part of these statements.6NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS(Unaudited)1. General InformationThe accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and therefore do not include all information and footnotes necessary for a fair statement of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. The year-end condensed balance sheet data was derived from audited financial statements, but also does not include all disclosures required by accounting principles generally accepted in the United States. However, in the opinion of Briggs & Stratton Corporation (the Company), adequate disclosures have been presented to prevent the information from being misleading, and all adjustments necessary to present fair statements of the results of operations and financial position have been included. All of these adjustments are of a normal recurring nature.Interim results are not necessarily indicative of results for a full year. The information included in these consolidated condensed financial statements should be read in conjunction with the financial statements and the notes thereto which were included in our latest Annual Report on Form 10-K.2. New Accounting PronouncementsIn June 2009,September 2011, the FASBFinancial Accounting Standards Board (“FASB”) issued new guidanceAccounting Standards Update (“ASU”) No. 2011-08, “Intangibles - Goodwill and Other (Topic 350), Testing Goodwill for Impairment,” which permits an entity to make a qualitative assessment of whether it is more likely than not that changesa reporting unit's fair value is less than its carrying value before applying the approach to determiningtwo-step goodwill impairment model that is currently in place. If it is determined through the primary beneficiary ofqualitative assessment that a variable interest entity (VIE) and requiresreporting unit's fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to more frequently assess whether they must consolidate VIEs.go directly to the quantitative assessment. This standard wasupdate is effective for the Company’s first quarter ofannual and interim goodwill impairment tests performed in fiscal 2011. As of June 28, 2010 and subsequently, the Company evaluated all entities that fall within the scope of this new guidance, including the Company’s investments in joint ventures, to determine whether consolidation of these entities was required. Theyears beginning after December 15, 2011 with early adoption permitted. Management does not expect adoption of this guidance did notASU to have a material impact on the Company’s consolidatedresults of operations, financial position or cash flow.In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income: Presentation of Comprehensive Income,” which amends current comprehensive income guidance. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, it requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements.In May 2011, the FASB issued ASU 2011-04 “Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” The ASU is the result of joint efforts by the FASB and the International Accounting Standards Board (“IASB”) to develop a single, converged fair value framework. While the ASU is largely consistent with existing fair value measurement principles in U.S. GAAP, it expands existing disclosure requirements for fair value measurements and makes other amendments. Key additional disclosures include quantitative disclosures about unobservable inputs in Level 3 measures, qualitative information about sensitivity of Level 3 measures and valuation process, and classification within the fair value hierarchy for instruments where fair value is only disclosed in the footnotes but carrying amount is on some other basis. For public companies, the ASU is effective for interim and annual periods beginning after December 15, 2011. Management does not expect adoption of this ASU to have a material impact on the Company’s results of operations, financial position or cash flow.3. Assets Held for SaleOn July 1, 2009 the Company announced a plan to close its Jefferson and Watertown, WI manufacturing facilities in fiscal 2010. At March 27,October 2, 2011 and at June 27, 2010,July 3, 2011, the Company had $4.0$4.0 million included in Assets Held for Sale in its Consolidated Balance Sheets consisting of certain assets related to the Jefferson, WI production facility. Prior to the closure, the facility manufactured all portable generator and pressure washer products marketed and sold by the Company within its Power Products Segment.74. Earnings (Loss) Per ShareThe Company computes earnings (loss) per share using the two-class method, an earnings allocation formula that determines earnings (loss) per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. The Company’s unvested grants of restricted stock and deferred stock awards contain non-forfeitable rights to dividends (whether paid or unpaid), which are required to be treated as participating securities and included in the computation of basic earnings (loss) per share.BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESInformation on earnings (loss) per share is as follows (in thousands except per share data): Three Months Ended Nine Months Ended March 27, March 28, March 27, March 28, 2011 2010 2011 2010 $ 51,521 $ 24,073 $ 42,154 $ 18,411 (69 ) (74 ) (181 ) (222 ) $ 51,452 $ 23,999 $ 41,973 $ 18,189 49,726 49,597 49,672 49,595 50,465 50,060 50,243 49,987 $ 1.03 $ 0.48 $ 0.85 $ 0.37 $ 1.02 $ 0.48 $ 0.84 $ 0.36 Three Months Ended October 2,
2011 September 26,
2010 Net Loss $ (5,220 ) $ (8,114 ) Less: Dividends Attributable to Unvested Shares (80 ) (70 ) Net Loss Available to Common Shareholders $ (5,300 ) $ (8,184 ) Weighted Average Shares Outstanding 49,818 49,665 Diluted Average Shares Outstanding 49,818 49,665 Basic Earnings (Loss) Per Share $ (0.10 ) $ (0.16 ) Diluted Earnings (Loss) Per Share $ (0.10 ) $ (0.16 ) The dilutive effect of the potential exercise of outstanding stock-based awards to acquire common shares is calculated using the treasury stock method. TheAs a result of the Company incurring a loss from continuing operations for the three months ended October 2, 2011 and September 26, 2010, potential incremental common shares of 826,000 and 273,000, respectively, were excluded from the calculation of diluted EPS for each period because the effect would have been anti-dilutive. In addition, the following options to purchase shares of common stock were excluded from the calculation of diluted earnings per share as the exercise prices were greater than the average market price of the common shares: Three Months Ended Nine Months Ended March 27, March 28, March 27, March 28, 2011 2010 2011 2010 2,637 3,796 3,960 3,666 $ 32.64 $ 30.68 $ 28.35 $ 31.06 Three Months Ended October 2,
2011 September 26,
2010 Options to Purchase Shares of Common Stock (in thousands) 4,040 3,826 Weighted Average Exercise Price of Options Excluded $ 26.59 $ 28.08 On August 10, 2011, the Board of Directors of the Company authorized up to $50 million in funds for use in a common share repurchase program with an expiration of June 30, 2013. The common share repurchase program authorizes the purchase of shares of the Company's common stock on the open market or in private transactions from time to time, depending on market conditions and certain governing loan covenants. As of the end of the first quarter of fiscal 2012, the Company repurchased 219,200 shares on the open market at an average price $14.23 per share. There were no shares repurchased in fiscal 2011.85. Comprehensive IncomeComprehensive incomeloss is a more inclusive financial reporting method that includes certain financial information that has not been recognized in the calculation of net income. Comprehensive incomeloss is defined as net incomeloss and other changes in shareholders’ investment from transactions and events other than with shareholders. Total comprehensive incomeloss is as follows (in thousands): Three Months Ended Nine Months Ended March 27, March 28, March 27, March 28, 2011 2010 2011 2010 $ 51,521 $ 24,073 $ 42,154 $ 18,411 6,331 (3,735 ) 16,839 1,241 (1,757 ) 3,801 (10,069 ) 6,817 4,221 2,463 12,637 7,389 $ 60,316 $ 26,602 $ 61,561 $ 33,858 Three Months Ended October 2,
2011 September 26,
2010 Net Loss $ (5,220 ) $ (8,114 ) Cumulative Translation Adjustments (10,013 ) 9,224 Unrealized Loss on Derivative Instruments, Net of tax (10 ) (6,838 ) Unrecognized Pension & Postretirement Obligation, Net of tax 4,076 4,472 Total Comprehensive Loss $ (11,167 ) $ (1,256 ) The components of Accumulated Other Comprehensive Loss, net of tax, are as follows (in thousands): March 27, June 27, 2011 2010 $ 20,811 $ 3,972 (1,570 ) 8,499 (318,543 ) (331,180 ) $ (299,302 ) $ (318,709 ) BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES October 2,
2011 July 3,
2011Cumulative Translation Adjustments $ 15,976 $ 25,989 Unrealized Loss on Derivative Instruments (2,253 ) (2,243 ) Unrecognized Pension & Postretirement Obligation (263,168 ) (267,244 ) Accumulated Other Comprehensive Loss $ (249,445 ) $ (243,498 ) 6. InvestmentsInvestments representThis caption represents the Company’s unconsolidated investments in unconsolidated affiliated companies consisting of its 30% and 50% owned joint ventures. Such investments are accounted for under the equity method of accounting. As of March 27,October 2, 2011 and June 27, 2010,July 3, 2011, the Company’s investment in these joint ventures totaled $18.4$21.2 million and $19.7$21.0 million, respectively.Combined financial information of the unconsolidated affiliated companies accounted for by the equity method, generally on a lag of 3 months or less, was as follows (in thousands):Unaudited results of operations of unconsolidated affiliated companies for the three months ended October 2, 2011 and September 26, 2010: Three Months Ended October 2,
2011 September 26,
2010 Results of Operations: Sales $ 32,315 $ 28,851 Cost of Goods Sold 25,631 23,822 Gross Profit $ 6,684 $ 5,029 Net Income $ 2,769 $ 2,092 9Unaudited balance sheets of unconsolidated affiliated companies as of October 2, 2011 and July 3, 2011: October 2,
2011 July 3,
2011 Financial Position: Assets: Current Assets $ 54,234 $ 51,838 Non-Current Assets 18,504 18,292 $ 72,738 $ 70,130 Liabilities: Current Liabilities $ 19,088 $ 15,809 Non-Current Liabilities 4,845 5,749 $ 23,933 $ 21,558 Equity $ 48,805 $ 48,572 Net sales to equity method investees were approximately $0.5 million and $3.2 million for the three months ended October 2, 2011 and September 26, 2010, respectively. Purchases of finished products from equity method investees were approximately $28.9 million and $23.2 million for the three months ended October 2, 2011 and September 26, 2010.7. Pension and Postretirement BenefitsThe Company has noncontributory defined benefit retirement plans and postretirement plans covering certain employees. The following tables summarize the plans’ income and expense for the periods indicated (in thousands): Pension Benefits Other Postretirement Benefits Three Months Ended Three Months Ended March 27, March 28, March 27, March 28, 2011 2010 2011 2010 $ 3,367 $ 2,815 $ 121 $ 157 14,172 15,186 1,787 2,816 (19,244 ) (20,255 ) — — 2 2 — — 765 767 (872 ) (230 ) 4,443 793 2,566 2,551 $ 3,505 $ (692 ) $ 3,602 $ 5,294 Pension Benefits Other Postretirement Benefits Nine Months Ended Nine Months Ended March 27, March 28, March 27, March 28, 2011 2010 2011 2010 $ 10,143 $ 8,452 $ 364 $ 471 42,517 45,558 5,333 8,448 (57,731 ) (60,766 ) — — 6 6 — — 2,294 2,301 (2,611 ) (690 ) 13,328 2,378 7,707 7,654 $ 10,557 $ (2,071 ) $ 10,793 $ 15,883 Pension Benefits Other Postretirement Benefits Three Months Ended Three Months Ended October 2,
2011 September 26,
2010 October 2,
2011 September 26,
2010Components of Net Periodic Expense: Service Cost $ 3,397 $ 3,665 $ 103 $ 126 Interest Cost on Projected Benefit Obligation 14,351 14,202 1,680 1,839 Expected Return on Plan Assets (19,224 ) (19,285 ) — — Amortization of: Transition Obligation 2 2 — — Prior Service Cost (Credit) 725 765 (959 ) (982 ) Actuarial Loss 4,676 4,477 2,236 2,782 Net Periodic Expense $ 3,927 $ 3,826 $ 3,060 $ 3,765 The Company expects to make benefit payments of approximately $2.8$2.7 million attributable to its non-qualified pension plans during fiscal 2011.2012. During the first nine monthsquarter of fiscal 2011,2012, the Company made payments of approximately $2.0$0.9 million for its non-qualified pension plans. The Company anticipates making benefit payments of approximately $25.9$24.1 million for its other postretirement benefit plans during fiscal 2011.2012. During the first nine monthsquarter of fiscal 2011,2012, the Company made payments of $20.3$4.7 million for its other postretirement benefit plans.BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESThe Company is not required to make anyminimum contributions to the qualified pension plan of approximately $30.2 millionduring fiscal 2011, but2012. The Company may be required to make further contributions in future years depending upon the actual return on plan assets and the funded status of the plan in future periods.8. Stock IncentivesStock based compensation expense is calculated by estimating the fair value of incentive stock awards granted and amortizing the estimated value over the awards’awards' vesting periods.period. Stock based compensation expense was $0.8$2.5 million and $8.8$5.5 million for the quarterquarters ended October 2, 2011 and nine months ended March 27, 2011, respectively. Stock based compensation expense was $0.8 million and $6.2 million for the three and nine months ended March 28,September 26, 2010, respectively. Included in stock based compensation expense for the nine months ended March 27, 2011 was an expense109. Derivative Instruments & Hedging ActivityDerivatives are recorded on the Condensed Consolidated Balance Sheets as assets or liabilities, measured at fair value. ActivitiesThe Company enters into derivative contracts designated as cash flow hedges to manage certain interest rate, foreign currency and commodity exposures.Changes Company policy allows derivatives to be used only for identifiable exposures and, therefore, the Company does not enter into hedges for trading purposes where the sole objective is to generate profits.The Company formally designates the financial instrument as a hedge of a specific underlying exposure and documents both the risk management objectives and strategies for undertaking the hedge. The Company formally assesses, both at the inception and at least quarterly thereafter, whether the financial instruments that are used in hedging transactions are effective at offsetting changes in the fairforecasted cash flows of the related underlying exposure. Because of the high degree of effectiveness between the hedging instrument and the underlying exposure being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the forecasted cash flow hedges to manageflows of the Company’s foreign currency exposureunderlying exposures being hedged. Derivative financial instruments are recorded on the Consolidated Condensed StatementsBalance Sheets as assets or liabilities, measured at fair value. The effective portion of Operationsgains or losses on the derivative designated as cash flow hedges are reported as a component of Accumulated Other Comprehensive Loss (AOCI). The amounts included in Accumulated Other Comprehensive Loss are and reclassified into income whenearnings in the forecasted transactions occur. These forecasted transactions represent the exporting of products forsame period or periods during which the Company will receive foreign currency and the importinghedged transaction affects earnings. Any ineffective portion of products for which it will be required to paya financial instrument's change in a foreign currency. Changes in the fair value of all derivatives deemed to be ineffective are recorded as either income or expenseis immediately recognized in the accompanying Consolidated Condensed Statements of Operations. These instruments generally do not have a maturity of more than twenty-four months.The Company managesentered into an interest rate swap to manage a portion of its exposure to fluctuation in the cost of natural gas used by its operating facilitiesinterest rate risk from financing certain dealer and distributor inventories through participation in a third party managed dollar cost averaging program linkedfinancing source. The swap is designated as a cash flow hedge and is used to NYMEX futures. Aseffectively fix the interest payments to a participant in the program, the Company hedges up to 100%third party financing source, exclusive of its anticipated monthly natural gas usage along withlender spreads, at 1.6% for a poolnotional principal amount of other companies. $30.0 million through July 2017.The Company does not hold any actual futuresperiodically enters into forward foreign currency contracts and actual delivery of natural gas is not required ofto hedge the participants in the program. Cash settlements occur on a monthly basis based on the difference between the average dollar price of the underlying NYMEX futures held by therisk from forecasted third party and the actual price of natural gas paid byintercompany sales or payments denominated in foreign currencies. These obligations generally require the Company in the period. The fair value of the underlying NYMEX futures is reflected as an assetto exchange foreign currencies for U.S. Dollars, Euros, Australian Dollars or liability on the accompanying Consolidated Condensed Balance Sheets. Changes in fair value are reflected as a Component of Accumulated Other Comprehensive Loss, which are reclassified into the Consolidated Condensed Statements of Operations as the actual natural gas is consumed.Canadian Dollars. These contracts generally do not have a maturity of more than twenty-four months.The Company managesuses raw materials that are subject to price volatility. The Company hedges a portion of its exposure to fluctuationsthe variability of cash flows associated with commodities used in the cost of copper to be used in manufacturing process by entering into forward purchase contracts or commodity swaps. Derivative contracts designated as cash flow hedges. Thehedges are used by the Company hedges up to 100%reduce exposure to variability in cash flows associated with future purchases of its anticipated copper usage,natural gas, aluminum and the fair value of outstanding futuresteel. These contracts is reflected as an asset or liability on the accompanying Consolidated Condensed Balance Sheet based on NYMEX prices. Changes in fair value are reflected as a Component of Accumulated Other Comprehensive Loss if the forward purchase contracts are deemed to be effective and are reclassified into the Consolidated Condensed Statements of Operations as the sales of the underlying inventory are made. Changes in the fair value of all derivatives deemed to be ineffective are recorded as either income or expense in the accompanying Consolidated Condensed Statements of Operations. These instruments generally do not have a maturity of more than twenty-four months.BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESThe Company has considered the counterparty credit risk related to all its foreign currency and commodity derivative contracts and does not deem any counterparty credit risk material at this time.The notional amount of derivative contracts outstanding at the end of the period is indicative of the level of the Company’s derivative activity during the period. As of March 27,October 2, 2011 and June 27, 2010,July 3, 2011, the Company had the following outstanding derivative contracts (in thousands): Notional Amount March 27, June 27, 2011 2010 Sell 6,266 4,500 Buy 18,892 19,636 Sell 8,300 12,100 Sell 56,500 91,609 Buy 750,000 650,000 Buy 50 350 Buy 12,604 16,547 Contract Notional Amount October 2,
2011 July 3,
2011Interest Rate: LIBOR Interest Rate (U.S. Dollars) Fixed 30,000 — Foreign Currency: Australian Dollar Sell 32,835 34,295 Canadian Dollar Sell 6,500 10,700 Euro Sell 54,500 41,500 Commodity: Natural Gas (Therms) Buy 9,953 11,187 Aluminum (Metric Tons) Buy 19 8 Steel (Metric Tons) Buy 3 1 11The location and fair value of derivative instruments reported in the Consolidated Condensed Balance Sheets are as follows (in thousands): Asset (Liability) Fair Value March 27, June 27, 2011 2010 $ 1,520 $ 16,440 18 1,478 (2,922 ) (296 ) (212 ) — 71 34 — — (1,576 ) (1,377 ) (168 ) (728 ) $ (3,269 ) $ 15,551 Balance Sheet Location Asset (Liability) Fair Value October 2,
2011 July 3,
2011Interest rate contract Other Long-Term Liabilities (342 ) — Foreign currency contracts Other Current Assets 5,258 108 Accrued Liabilities (472 ) (3,550 ) Other Long-Term Liabilities — (280 ) Commodity contracts Other Current Assets — 26 Accrued Liabilities (6,414 ) (1,937 ) Other Long-Term Liabilities (205 ) (91 ) $ (2,175 ) $ (5,724 ) The effect of derivatives designated as hedging instruments on the Consolidated Condensed Statements of Operations is as follows: Three months ended March 27, 2011 Recognized in Earnings Amount of Gain (Loss)
Recognized in Other
Comprehensive Income
on Derivatives, Net of
Taxes (Effective
Portion) Amount of Gain
(Loss) Reclassified
from AOCI into
Income
(Effective Portion) Recognized in
Earnings
(Ineffective Portion) $ (2,726 ) Net Sales $ 2,863 $ — 147 Cost of Goods Sold (1,653 ) — 830 Cost of Goods Sold (1,088 ) 18 $ (1,749 ) $ 122 $ 18 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES Three months ended March 28, 2010 Recognized in Earnings Amount of Gain (Loss)
Recognized in Other
Comprehensive Income
on Derivatives, Net of
Taxes (Effective
Portion) Amount of Gain (Loss)
Reclassified from
AOCI into Income
(Effective Portion) Recognized in
Earnings
(Ineffective Portion) $ 4,754 Net Sales $ 48 $ — 44 Cost of Goods Sold (59 ) — (993 ) Cost of Goods Sold (653 ) (33 ) $ 3,805 $ (664 ) $ (33 ) Nine months ended March 27, 2011 Recognized in Earnings Amount of Gain (Loss)
Recognized in Other
Comprehensive Income
on Derivatives, Net of
Taxes (Effective
Portion) Amount of Gain (Loss)
Reclassified from
AOCI into Income
(Effective Portion) Recognized in
Earnings
(Ineffective Portion) $ (9,923 ) Net Sales $ 4,360 $ — (340 ) Cost of Goods Sold (1,841 ) — 215 Cost of Goods Sold (2,217 ) 50 $ (10,048 ) $ 302 $ 50 Nine months ended March 28, 2010 Recognized in Earnings Amount of Gain (Loss)
Recognized in Other
Comprehensive Income
on Derivatives, Net of
Taxes (Effective
Portion) Amount of Gain (Loss)
Reclassified from
AOCI into Income
(Effective Portion) Recognized in
Earnings
(Ineffective Portion) $ 6,838 Net Sales $ (3,626 ) $ — (185 ) Cost of Goods Sold 304 — 164 Cost of Goods Sold (2,430 ) 144 $ 6,817 $ (5,752 ) $ 144 Three months ended October 2, 2011 Recognized in Earnings Amount of Gain (Loss)Recognized in OtherComprehensive Incomeon Derivatives, Net ofTaxes (EffectivePortion) Classification ofGain (Loss) Amount of Gain (Loss)Reclassified fromAOCI into Income(Effective Portion) Recognized inEarnings(Ineffective Portion)Interest rate contract $ (209 ) Net Sales $ — $ — Foreign currency contracts - sell 2,128 Net Sales (1,494 ) — Foreign currency contracts - buy — Cost of Goods Sold 250 — Commodity contracts (4,172 ) Cost of Goods Sold (337 ) (30 ) $ (2,253 ) $ (1,581 ) $ (30 ) Three months ended September 26, 2010 Recognized in Earnings Amount of Gain (Loss)Recognized in OtherComprehensive Incomeon Derivatives, Net ofTaxes (EffectivePortion) Classification ofGain (Loss) Amount of Gain (Loss)Reclassified fromAOCI into Income(Effective Portion) Recognized inEarnings(Ineffective Portion)Foreign currency contracts - sell $ 3,701 Net Sales $ 1,297 $ — Foreign currency contracts - buy (5 ) Cost of Goods Sold (331 ) — Commodity contracts (2,035 ) Cost of Goods Sold (313 ) 44 $ 1,661 $ 653 $ 44 During the next twelve months, the amount of the March 27,October 2, 2011 Accumulated Other Comprehensive Loss balance that is expected to be reclassified into earnings is expected to be $1.3 million.$1.8 million.1210. Fair Value MeasurementsThe following guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:Level 1: Quoted prices for identical instruments in active markets.Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable.BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESLevel 3: Significant inputs to the valuation model are unobservable.The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 27,October 2, 2011 and June 27, 2010July 3, 2011 (in thousands): Fair Value Measurement Using March 27, 2011 Level 1 Level 2 Level 3 $ 1,609 $ 1,538 $ 71 $ — $ 4,878 $ 3,134 $ 1,744 $ — Fair Value Measurement Using June 27, 2010 Level 1 Level 2 Level 3 $ 17,952 $ 17,918 $ 34 $ — $ 2,401 $ 296 $ 2,105 $ — Fair Value Measurement Using October 2, 2011 Level 1 Level 2 Level 3 Assets: Derivatives $ 5,258 $ 5,258 $ — $ — Liabilities: Derivatives $ 7,433 $ 472 $ 6,961 $ — Fair Value Measurement Using July 3, 2011 Level 1 Level 2 Level 3 Assets: Derivatives $ 134 $ 108 $ 26 $ — Liabilities: Derivatives $ 5,858 $ 3,830 $ 2,028 $ — 11. WarrantyThe Company recognizes the cost associated with its standard warranty on Engines and Power Products at the time of sale. The amount recognized is based on historical failure rates and current claim cost experience. The following is a reconciliation of the changes in accrued warranty costs for the reporting period (in thousands): Nine Months Ended March 27, March 28, 2011 2010 $ 41,945 $ 42,044 (21,860 ) (24,702 ) 25,977 22,963 724 (2,715 ) $ 46,786 $ 37,590 Three Months Ended October 2,
2011 September 26,
2010Beginning Balance $ 45,995 $ 41,945 Payments (7,816 ) (7,737 ) Provision for Current Year Warranties 6,674 6,979 Changes in Estimates (126 ) 14 Ending Balance $ 44,727 $ 41,201 12. Income TaxesAs of June 27, 2010,July 3, 2011, the Company had $19.1$12.0 million of gross unrecognized tax benefits. Of this amount, $11.1$9.9 million represents the portion that, if recognized, would impact the effective tax rate. As of June 27, 2010,July 3, 2011, the Company had $5.9$5.7 million accrued for the payment of interest and penalties. For the first ninethree months ended March 27,October 2, 2011, the Company recorded an increase in to the tax reserve of $0.7 million. The increase relates to legislative law changes,$0.1 million. There is a reasonable possibility that approximately $4.7 million of the current remaining unrecognized tax benefits may be recognized by the end of fiscal year 2012 as a result of a lapse of applicablein the statute of limitations and interest rate adjustments year to date. Over the next twelve months it is possible that we will settle global tax examinations, which could decrease the amount of unrecognized tax benefits. Due to the various jurisdictions in which the Company files tax returns and the uncertainty regarding the timing of the settlements, the amount of the unrecognized tax benefits that are expected to decrease over the next twelve months cannot be reasonably estimated at this time.The Company’sCompany's annual effective tax rate reflects its best estimate of financial operating results and the estimated impact of foreign currency exchange rates. Changes in the mix of pretax income from all tax jurisdictions in which the Company13operates will have an impact on the Company’sCompany's effective tax rate. The fiscal 20112012 estimated annual tax rate is based on the latest tax law changes and includes the US R&D Tax Credit that has been extended.For the third quarter and first nine months of fiscal 2011 there are discrete items impacting the effective tax rate that include state tax law changes, the resolution of prior period tax matters and the expiration of the statute of limitations for prior tax years. changes.Income tax returns are filed in the U.S., state, andBRIGGS & STRATTON CORPORATION AND SUBSIDIARIESCompany’sCompany's major foreign jurisdictions, it is no longer subject to tax examinations before fiscal 2000.13. Commitments and ContingenciesThe Company is subject to various unresolved legal actions that arise in the normal course of its business. These actions typically relate to product liability (including asbestos-related liability), patent and trademark matters, and disputes with customers, suppliers, distributors and dealers, competitors and employees.Starting with the first complaint in June 2004, various plaintiff groups filed complaints in state and federal courts across the country against the Company and other engine and lawnmower manufacturers alleging that the horsepower labels on the products they purchased were inaccurate and that the Company conspired with other engine and lawnmower manufacturers to conceal the true horsepower of these engines (“("Horsepower Class Actions”Actions"). On December 5, 2008, the Multidistrict Litigation Panel coordinated and transferred the cases to Judge Adelman of the United StatesU. S. District Court for the Eastern District of Wisconsin (In Re: Lawnmower Engine Horsepower Marketing and Sales Practices Litigation, Case No. 2:08-md-01999).On February 24, 2010, the Company entered into a Stipulation of Settlement (“Settlement”("Settlement") that resolves all of the Horsepower Class Actions. The Settlement resolves all horsepower-labeling claims brought by all persons or entities in the United States who, beginning January 1, 1994 through the date notice of the Settlement is first given, purchased, for use and not for resale, a lawn mower containing a gas combustible engine up to 30 horsepower provided that either the lawn mower or the engine of the lawn mower was manufactured or sold by a Defendant.defendant. On August 16, 2010, Judge Adelman issued a final order approving the Settlement as well as the settlements of all other defendants. In August and September 2010, several class members filed a Notice of Appeal of Judge Adelman’sAdelman's final approval order to the United StatesU.S. Court of Appeals for the Seventh Circuit. All of those appeals were settled as of February 16, 2011 with no additional contribution from the Company.As part of the Settlement, the Company denies any and all liability and seeks resolution to avoid further protracted and expensive litigation. The settling defendants as a group agreed to pay an aggregate amount of $51 million.$51.0 million. However, the monetary contribution of the amount of each of the settling defendants is confidential. In addition, the Company, along with the other settling defendants, agreed to injunctive relief regarding their future horsepower labeling, as well as procedures that will allow purchasers of lawnmower engines to seek a one-year extended warranty free of charge. Under the terms of the Settlement, the balance of settlement funds were paid, and the one-year warranty extension program began to run, on March 1, 2011. As a result of the Settlement, the Company recorded a total charge of $30.6$30.6 million in the third quarter of fiscal year 2010 representing the total of the Company’sCompany's monetary portion of the Settlement and the estimated costs of extending the warranty period for one year.On March 19, 2010, new plaintiffs filed a complaint in the Ontario Superior Court of Justice in Canada (Robert Foster et al. v. Sears Canada, Inc. et al., Docket No. 766-2010). On May 3, 2010, other plaintiffs filed a complaint in the Montreal Superior Court in Canada (Eric Liverman, et al. v. Deere & Company, et al., Docket No. 500-06-000507-109). Both Canadian complaints contain allegations and seek relief under Canadian law that are similar to the Horsepower Class Actions. The Company is evaluating the complaints and has not yet filed an answer or other responsive pleading to either one.On May 14, 2010, the Company notified retirees and certain retirement eligible employees of various changes to the Company-sponsored retiree medical plans. The purpose of the amendments was to better alignBRIGGS & STRATTON CORPORATION AND SUBSIDIARIESCompany’sCompany's right to make these changes. In addition to a request for class certification, the complaint seeks an injunction preventing the alleged unilateral termination or reduction in insurance coverage to the class of retirees, a permanent injunction preventing defendants from ever making changes to the retirees’retirees' insurance coverage, restitution with interest (if applicable) and attorneys’attorneys' fees and costs. The Company moved to dismiss the complaint and believes the changes are within its rights. On April 21, 2011, the district court issued an order granting the Company’sCompany's motion to dismiss the complaint. The plaintiffs have until May 19, 2011 to filefiled a motion with the district court to reconsider its order on May 17, 2011. On14August 24, 2011, the court granted the plaintiffs' motion and vacated the dismissal order or until May 23, 2011of the case. The Company is seeking leave to appeal the ordercourt's decision directly to the U.S. Court of Appeals for the Seventh Circuit.Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss, the Company believes the unresolved legal actions will not have a material adverse effect on its results of operations, financial position or cash flows.14. Segment InformationThe Company operates two reportable business segments that are managed separately based on fundamental differences in their operations. Summarized segment data is as follows (in thousands): Three Months Ended Nine Months Ended March 27, March 28, March 27, March 28, 2011 20101 2011 20101 $ 503,809 $ 483,006 $ 1,007,250 $ 949,001 267,535 255,393 621,484 586,126 (51,011 ) (43,824 ) (123,961 ) (122,896 ) $ 720,333 $ 694,575 $ 1,504,773 $ 1,412,231 $ 217,228 $ 184,498 $ 543,687 $ 444,791 $ 124,362 $ 119,836 $ 235,567 $ 212,361 25,828 18,337 55,219 57,625 (641 ) 2,309 (923 ) (6,464 ) $ 149,549 $ 140,482 $ 289,863 $ 263,522 $ 77,463 $ 43,396 $ 92,312 $ 55,475 1,730 (7,217 ) (17,538 ) (8,615 ) (641 ) 2,309 (923 ) (6,464 ) $ 78,552 $ 38,488 $ 73,851 $ 40,396 1Prior year amounts have been reclassified to conform to current year presentation. These adjustments relate to the sale of certain products through our foreign subsidiaries that had been reported within the Engines Segment, but are now reported in the Power Products Segment. These adjustments align our segment reporting with current management responsibilities.BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES Three Months Ended October 2,
2011 September 26,
2010 NET SALES: Engines $ 203,378 $ 205,048 Power Products 235,282 168,154 Inter-Segment Eliminations (41,363 ) (39,086 ) Total * $ 397,297 $ 334,116 * International sales included in net sales based on product shipment destination $ 147,803 $ 117,849 GROSS PROFIT: Engines $ 36,882 $ 42,464 Power Products 27,611 17,502 Inter-Segment Eliminations 1,561 2,028 Total $ 66,054 $ 61,994 INCOME (LOSS) FROM OPERATIONS: Engines $ (5,477 ) $ (5,533 ) Power Products 2,293 (4,957 ) Inter-Segment Eliminations 1,561 2,028 Total $ (1,623 ) $ (8,462 ) 15. DebtThe following is a summary of the Company’s long-term indebtedness (in thousands): March 27,
2011 June 27,
2010 $ 55,000 $ — 225,000 — — 203,460 $ 280,000 $ 203,460 October 2,
2011 July 3,
2011Revolving Credit Facility $ — $ — 6.875% Senior Notes 225,000 225,000 $ 225,000 $ 225,000 In December 2010, the Company issued $225$225 million of 6.875% Senior Notes ("Senior Notes") due December 15, 2020. The net proceeds of the offering were primarily used to redeem the outstanding principal of the 8.875% Senior Notes due March 15, 2011. In connection with the refinancing and the issuance of the new Senior Notes, the Company incurred approximately $5.0 million in new deferred financing costs, which are being amortized over the life of the new Senior Notes using the effective interest method. In addition, at the time of the refinancing the Company expensed approximately $3.7 million associated with the make-whole terms of the 8.875% Senior Notes, $0.1 million in remaining deferred financing costs and $0.1 million of original issue discount. These amounts are included in interest expense in the Consolidated Statements of Operations.On July 12, 2007, the Company entered into a $500$500 million amended and restated multicurrency credit agreement. The Amended Credit Agreement (“Revolver”) provides a revolving credit facility for up to $500$500 million in revolving loans, including up to $25$25 million in swing-line loans. The Revolver has a term of five years and all outstanding borrowings on the Revolver are due and payable on July 12, 2012. The Revolver contains covenants that the Company considers usual and customary for an agreement of this type, including a maximum total leverage ratio and minimum interest coverage ratio. Certain of the Company’s subsidiaries are required to be guarantors of the Company’s obligations under the Revolver.The Senior Notes, Revolver and the 6.875% Senior NotesNew Revolver contain restrictive covenants. These covenants include restrictions on the Company’s ability to: pay dividends; repurchase shares; incur indebtedness; create liens; enter into sale and leaseback15transactions; consolidate or merge with other entities; sell or lease all or substantially all of its assets; and dispose of assets or the proceeds of sales of its assets. The Revolver containsand New Revolver contain financial covenants that require the Company to maintain a minimum interest coverage ratio and impose a maximum leverage ratio. As of March 27,October 2, 2011, the Company was in compliance with these covenants.16. Separate Financial Information of Subsidiary Guarantor of IndebtednessUnder the terms of the Company’s 6.875% Senior Notes and the Revolver (collectively, the “Domestic Indebtedness”), Briggs & Stratton Power Products Group, LLC, a 100% owned subsidiary of the Company, is the joint and several guarantor of the Domestic Indebtedness (the “Guarantor”). The guarantees are full and unconditional guarantees.guarantees, except for certain customary limitations. 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. Currently, all of the Domestic Indebtedness is unsecured. If the Company were to fail to make a payment of interest or principal on its due date, the Guarantor is obligated to pay the outstanding Domestic Indebtedness. The Company had the following outstanding amounts related to the guaranteed debt (in thousands): March 27, 2011
Carrying Amount Maximum
Guarantee $ 225,000 $ 225,000 $ 55,000 $ 500,000 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES October 2, 2011Carrying Amount MaximumGuarantee6.875% Senior Notes $ 225,000 $ 225,000 Revolving Credit Facility $ — $ 500,000 The following condensed supplemental consolidating financial information reflects the summarized financial information of the Company, its Guarantor and Non-Guarantor Subsidiaries (in thousands):BALANCE SHEETAs of March 27,October 2, 2011(Unaudited) Briggs &
Stratton
Corporation Guarantor
Subsidiary Non-
Guarantor
Subsidiaries Eliminations Consolidated $ 554,598 $ 416,804 $ 265,749 $ (182,902 ) $ 1,054,249 676,164 — — (676,164 ) — 472,059 282,286 50,012 (36,917 ) 767,440 $ 1,702,821 $ 699,090 $ 315,761 $ (895,983 ) $ 1,821,689 $ 356,236 $ 104,731 $ 101,506 $ (163,878 ) $ 398,595 283,186 (440 ) 16,278 (19,024 ) 280,000 360,580 78,793 37,819 (36,917 ) 440,275 702,819 516,006 160,158 (676,164 ) 702,819 $ 1,702,821 $ 699,090 $ 315,761 $ (895,983 ) $ 1,821,689 Briggs &StrattonCorporation GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Consolidated Current Assets $ 493,613 $ 349,468 $ 242,124 $ (150,432 ) $ 934,773 Investment in Subsidiaries 612,066 — — (612,066 ) — Non-Current Assets 445,944 225,495 46,814 (34,734 ) 683,519 $ 1,551,623 $ 574,963 $ 288,938 $ (797,232 ) $ 1,618,292 Current Liabilities $ 284,254 $ 78,033 $ 92,618 $ (135,229 ) $ 319,676 Other Long-Term Obligations 546,844 30,066 51,118 (49,937 ) 578,091 Shareholders’ Investment 720,525 466,864 145,202 (612,066 ) 720,525 $ 1,551,623 $ 574,963 $ 288,938 $ (797,232 ) $ 1,618,292 BALANCE SHEETAs of June 27, 2010 Briggs &
Stratton
Corporation Guarantor
Subsidiary Non-
Guarantor
Subsidiaries Eliminations Consolidated $ 495,891 $ 369,714 $ 210,764 $ (170,726 ) $ 905,643 677,242 — — (677,242 ) — 484,868 284,749 47,399 (32,602 ) 784,414 $ 1,658,001 $ 654,463 $ 258,163 $ (880,570 ) $ 1,690,057 $ 607,295 $ 37,530 $ 89,412 $ (170,726 ) $ 563,511 400,129 74,868 33,573 (32,602 ) 475,969 650,577 542,065 135,177 (677,242 ) 650,577 $ 1,658,001 $ 654,463 $ 258,163 $ (880,570 ) $ 1,690,057 Briggs &StrattonCorporation GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Consolidated Current Assets $ 519,783 $ 343,266 $ 244,473 $ (138,858 ) $ 968,664 Investment in Subsidiaries 617,553 — — (617,553 ) — Non-Current Assets 455,876 229,054 50,692 (38,068 ) 697,554 $ 1,593,212 $ 572,320 $ 295,165 $ (794,479 ) $ 1,666,218 Current Liabilities $ 292,908 $ 88,888 $ 95,044 $ (132,457 ) $ 344,383 Other Long-Term Obligations 562,361 20,988 45,012 (44,469 ) 583,892 Shareholders’ Investment 737,943 462,444 155,109 (617,553 ) 737,943 $ 1,593,212 $ 572,320 $ 295,165 $ (794,479 ) $ 1,666,218 16STATEMENT OF OPERATIONSFor the Three Months Ended As of March 27,October 2, 2011(Unaudited) Briggs &
Stratton
Corporation Guarantor
Subsidiary Non-
Guarantor
Subsidiaries Eliminations Consolidated $ 475,609 $ 230,744 $ 96,985 $ (83,005 ) $ 720,333 364,609 216,465 72,715 (83,005 ) 570,784 111,000 14,279 24,270 — 149,549 39,225 18,466 13,306 — 70,997 (7,840 ) — — 7,840 — 79,615 (4,187 ) 10,964 (7,840 ) 78,552 (4,452 ) (16 ) (45 ) — (4,513 ) 1,294 (15 ) 928 — 2,207 76,457 (4,218 ) 11,847 (7,840 ) 76,246 24,936 (2,273 ) 2,062 — 24,725 $ 51,521 $ (1,945 ) $ 9,785 $ (7,840 ) $ 51,521 Briggs &StrattonCorporation GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Consolidated Net Sales $ 194,082 $ 210,567 $ 71,480 $ (78,832 ) $ 397,297 Cost of Goods Sold 160,882 188,010 61,183 (78,832 ) 331,243 Gross Profit 33,200 22,557 10,297 — 66,054 Engineering, Selling, General and Administrative Expenses 37,113 18,152 12,412 — 67,677 Equity in Loss from Subsidiaries 2,187 — — (2,187 ) — Income (Loss) from Operations (6,100 ) 4,405 (2,115 ) 2,187 (1,623 ) Interest Expense (4,303 ) (12 ) (23 ) — (4,338 ) Other Income, Net 1,478 92 224 — 1,794 Income (Loss) before Income Taxes (8,925 ) 4,485 (1,914 ) 2,187 (4,167 ) Provision (Credit) for Income Taxes (3,705 ) 3,601 1,157 — 1,053 Net Income (Loss) $ (5,220 ) $ 884 $ (3,071 ) $ 2,187 $ (5,220 ) STATEMENT OF OPERATIONSFor the Three Months Ended March 28,September 26, 2010(Unaudited) Briggs &
Stratton
Corporation Guarantor
Subsidiary Non-
Guarantor
Subsidiaries Eliminations Consolidated $ 457,641 $ 225,366 $ 82,092 $ (70,524 ) $ 694,575 347,015 212,773 64,829 (70,524 ) 554,093 110,626 12,593 17,263 — 140,482 42,877 21,460 7,057 — 71,394 30,600 — — — 30,600 (3,715 ) — — 3,715 — 40,864 (8,867 ) 10,206 (3,715 ) 38,488 (7,279 ) (23 ) (21 ) — (7,323 ) 1,193 (5 ) 672 — 1,860 34,778 (8,895 ) 10,857 (3,715 ) 33,025 10,705 (3,525 ) 1,772 — 8,952 $ 24,073 $ (5,370 ) $ 9,085 $ (3,715 ) $ 24,073 Briggs &StrattonCorporation GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Consolidated Net Sales $ 192,692 $ 150,472 $ 70,109 $ (79,157 ) $ 334,116 Cost of Goods Sold 156,572 137,958 56,749 (79,157 ) 272,122 Gross Profit 36,120 12,514 13,360 — 61,994 Engineering, Selling, General and Administrative Expenses 42,456 17,345 10,655 — 70,456 Equity in Loss from Subsidiaries 802 — — (802 ) — Income (Loss) from Operations (7,138 ) (4,831 ) 2,705 802 (8,462 ) Interest Expense (5,104 ) (20 ) (33 ) — (5,157 ) Other Income (Expense), Net 1,044 138 253 — 1,435 Income (Loss) before Income Taxes (11,198 ) (4,713 ) 2,925 802 (12,184 ) Provision (Credit) for Income Taxes (3,084 ) (1,645 ) 659 (4,070 ) Net Income (Loss) $ (8,114 ) $ (3,068 ) $ 2,266 $ 802 $ (8,114 ) 17STATEMENT OF OPERATIONSFor the NineThree Months Ended March 27,October 2, 2011(Unaudited) Briggs &
Stratton
Corporation Guarantor
Subsidiary Non-
Guarantor
Subsidiaries Eliminations Consolidated $ 953,379 $ 526,106 $ 257,130 $ (231,842 ) $ 1,504,773 749,351 497,147 200,254 (231,842 ) 1,214,910 204,028 28,959 56,876 — 289,863 124,181 55,042 36,789 — 216,012 (1,351 ) — — 1,351 — 81,198 (26,083 ) 20,087 (1,351 ) 73,851 (18,510 ) (53 ) (116 ) — (18,679 ) 3,112 298 1,870 — 5,280 65,800 (25,838 ) 21,841 (1,351 ) 60,452 23,646 (9,917 ) 4,569 — 18,298 $ 42,154 $ (15,921 ) $ 17,272 $ (1,351 ) $ 42,154 STATEMENT OF OPERATIONSFor the Nine Months Ended March 28, 2010(Unaudited) Briggs &
Stratton
Corporation Guarantor
Subsidiary Non-
Guarantor
Subsidiaries Eliminations Consolidated $ 903,497 $ 504,197 $ 211,386 $ (206,849 ) $ 1,412,231 721,990 471,002 162,566 (206,849 ) 1,148,709 181,507 33,195 48,820 — 263,522 112,091 53,754 26,681 — 192,526 30,600 — — — 30,600 (6,059 ) — — 6,059 — 44,875 (20,559 ) 22,139 (6,059 ) 40,396 (20,783 ) (75 ) (121 ) — (20,979 ) 3,496 112 679 — 4,287 27,588 (20,522 ) 22,697 (6,059 ) 23,704 9,177 (7,702 ) 3,818 — 5,293 $ 18,411 $ (12,820 ) $ 18,879 $ (6,059 ) $ 18,411 Briggs &StrattonCorporation GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Consolidated Net Cash Used in Operating Activities $ (39,797 ) $ (6,197 ) $ (19,080 ) $ 8,803 $ (56,271 ) Cash Flows from Investing Activities: Additions to Plant and Equipment (9,044 ) (505 ) (681 ) — (10,230 ) Proceeds Received from Disposition of Plant and Equipment 33 44 3 — 80 Cash Investment in Subsidiary — — 213 (213 ) — Net Cash Used in Investing Activities (9,011 ) (461 ) (465 ) (213 ) (10,150 ) Cash Flows from Financing Activities: Net Borrowings (Repayments) on Loans, Notes Payable and Long-Term Debt (7,610 ) 7,592 8,821 (8,803 ) — Capital Contributions — — (213 ) 213 — Treasury Stock Purchases (3,118 ) — — — (3,118 ) Net Cash Provided by (Used in) Financing Activities (10,728 ) 7,592 8,608 (8,590 ) (3,118 ) Effect of Foreign Currency Exchange Rate Changes on Cash and Cash Equivalents — — (1,856 ) — (1,856 ) Net Increase (Decrease) in Cash and Cash Equivalents (59,536 ) 934 (12,793 ) — (71,395 ) Cash and Cash Equivalents, Beginning 158,672 1,372 49,595 — 209,639 Cash and Cash Equivalents, Ending $ 99,136 $ 2,306 $ 36,802 $ — $ 138,244 18STATEMENT OF CASH FLOWSFor the NineThree Months Ended March 27, 2011September 26, 2010(Unaudited) Briggs &
Stratton
Corporation Guarantor
Subsidiary Non-
Guarantor
Subsidiaries Eliminations Consolidated $ (44,952 ) $ (57,984 ) $ 16,138 $ (13,545 ) $ (100,343 ) (24,479 ) (6,293 ) (1,735 ) — (32,507 ) 17 39 26 — 82 2,708 — (2,800 ) 92 — (21,754 ) (6,254 ) (4,509 ) 92 (32,425 ) (6,445 ) 63,256 5,946 13,545 76,302 (4,994 ) — — — (4,994 ) (11,074 ) — — — (11,074 ) 790 — — — 790 — — 92 (92 ) — (21,723 ) 63,256 6,038 13,453 61,024 — — (1,994 ) — (1,994 ) (88,429 ) (982 ) 15,673 — (73,738 ) 100,880 3,675 11,999 — 116,554 $ 12,451 $ 2,693 $ 27,672 $ — $ 42,816 Briggs &StrattonCorporation GuarantorSubsidiary Non-GuarantorSubsidiaries Eliminations Consolidated Net Cash Provided by (Used in) Operating Activities $ (44,152 ) $ (20,984 ) $ 18,662 $ (9,013 ) $ (55,487 ) Cash Flows from Investing Activities: Additions to Plant and Equipment (7,078 ) (2,049 ) (264 ) — (9,391 ) Proceeds Received from Disposition of Plant and Equipment 8 25 — — 33 Cash Investment in Subsidiary (92 ) — — 92 — Net Cash Used in Investing Activities (7,162 ) (2,024 ) (264 ) 92 (9,358 ) Cash Flows from Financing Activities: Net Borrowings (Repayments) on Loans, Notes Payable and Long-Term Debt (36,218 ) 23,141 1,564 9,013 (2,500 ) Capital Contributions — — 92 (92 ) — Net Cash Provided by (Used in) Financing Activities (36,218 ) 23,141 1,656 8,921 (2,500 ) Effect of Foreign Currency Exchange Rate Changes on Cash and Cash Equivalents — — (1,516 ) — (1,516 ) Net Increase (Decrease) in Cash and Cash Equivalents (87,532 ) 133 18,538 — (68,861 ) Cash and Cash Equivalents, Beginning 100,880 3,675 11,999 — 116,554 Cash and Cash Equivalents, Ending $ 13,348 $ 3,808 $ 30,537 $ — $ 47,693 1917. Subsequent EventsOn October 13, 2011, the Nine Months Ended March 28, 2010(Unaudited) Briggs &
Stratton
Corporation Guarantor
Subsidiary Non-
Guarantor
Subsidiaries Eliminations Consolidated $ (1,455 ) $ (20,587 ) $ 8,086 $ (2,554 ) $ (16,510 ) (14,663 ) (7,602 ) (2,551 ) — (24,816 ) 180 13 16 — 209 (1,920 ) — 613 1,307 — (144 ) — — — (144 ) (16,547 ) (7,589 ) (1,922 ) 1,307 (24,751 ) 31,072 28,036 2,210 2,554 63,872 (11,001 ) — — — (11,001 ) — — 1,307 (1,307 ) — 20,071 28,036 3,517 1,247 52,871 — — 265 — 265 2,069 (140 ) 9,946 — 11,875 1,541 1,301 13,150 — 15,992 $ 3,610 $ 1,161 $ 23,096 $ — $ 27,867 20ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following is management’s discussion and analysis of the Company’s financial condition and results of operations for the periods included in the accompanying consolidated condensed financial statements:RESULTS OF OPERATIONSNET SALESConsolidated net sales for the thirdfirst quarter of fiscal 20112012 were $720.3$397.3 million, an increase of $25.8$63.2 million or 3.7%18.9% when compared to the same period a year ago.Engines Segment fiscal 2011 third2012 first quarter net sales were $503.8$203.4 million, which was $20.8$1.7 million or 4.3% higher0.8% lower than the priorsame period a year period.ago. This increase from the same quarter last year is primarilydecrease in net sales was driven by lower shipment volumes of engines due to higher shipment volumesreduced consumer demand for lawn and garden products in North America, offset by slightly increasedimproved engine pricing partially offset by an unfavorableand a favorable mix of product shipped that reflected proportionally larger volumes of units used on snow throwers and riding lawn and garden equipment.Power Products Segment fiscal 2012 first quarter net sales were $235.3 million, an increase of $67.1 million or 39.9% from the same period a year ago. The increase in net sales was primarily due to increased sales of portable and standby generators due to widespread power outages in the U.S. as a result of a landed hurricane on the East Coast, as well as increased shipments of snow equipment after channel inventories were depleted from the prior selling season. There were no landed hurricanes in the first quarter of fiscal 2011. GROSS PROFIT PERCENTAGEThe consolidated gross profit percentage was 16.6% in the first quarter of fiscal 2012, down from 18.6% in the same period last year.The Engines Segment gross profit percentage was 18.1% in the first quarter of fiscal 2012, lower from 20.7% in the first quarter of fiscal 2011. The change was primarily attributable to higher manufacturing spending associated with rising commodity costs, partially offset by slightly improved engine pricing and a favorable mix of product shipped that reflected proportionally larger volumes of units used on riding lawn and garden equipment.Power Products Segment fiscal 2011 third quarter net sales were $267.5 million, which was $12.1 million or 4.8% greater than the prior year period. This improvement was due primarily to increased unit shipment volumes of snow throwers and ZTRs, partially offset by reduced shipment volumes of portable generators as a result of fewer wide spread power outages caused by ice storms.Consolidated net sales for the first nine months of fiscal 2011 were approximately $1.5 billion, an increase of $92.5 million or 6.6% when compared to the same period a year ago.Engines Segment net sales for the first nine months of fiscal 2011 were approximately $1.0 billion, which was $58.2 million or 6.1% higher than the prior year period. This increase from the same period last year is primarily due to higher international engine unit shipments to European and Asian OEMs as well as slightly increased engine pricing.Power Products Segment net sales for the first nine months of fiscal 2011 were $621.5 million, which was $35.4 million or 6.0% greater than the prior year period. This improvement was due primarily to increased unit shipment volumes of snow throwers and ZTRs, partially offset by reduced shipment volumes of pressure washers and portable generators as a result of lower consumer demand and retailers and dealers closely managing inventories in these categories.GROSS PROFIT PERCENTAGEThe consolidated gross profit percentage was 20.8% in the third quarter of fiscal 2011, up from 20.2% in the same period last year.The Engines Segment gross profit percentage was 24.7% in the third quarter of fiscal 2011, or slightly lower from 24.8% in the third quarter of fiscal 2010. The change was attributable to higher commodity costs and increased salaries and benefits, including a $2.3 million increase in pension benefits expense, offset by slightly increased engine pricing.increased to 9.7%was 11.7% for the thirdfirst quarter of fiscal 20112012, an increase from 7.2%10.4% in the thirdfirst quarter of fiscal 2010.2011. The improvementincrease over the prior year period was primarily attributable to increased sales of higher margin products to dealers, decreased manufacturing spendingslightly improved pricing, production efficiencies, and increasedfavorable absorption on higher production volumes,improved plant utilization, partially offset by higherincreased commodity costs and warranty expense. The decrease in manufacturing spending includes the absence of $3.0 million of transition costs from the closure of our Jefferson manufacturing facility which were incurred in the third quarter of fiscal 2010.BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESThe consolidated gross profit percentage for the first nine months of fiscal 2011 improved to 19.3% from 18.7% in the first nine months of fiscal 2010.The Engines Segment gross profit percentage increased to 23.4% for the first nine months of fiscal 2011 from 22.4% in the first nine months of fiscal 2010. This improvement was primarily due to increased production volumes and slightly increased engine pricing, partially offset by higher commodity costs and increased salaries and benefits. The increase in salaries and benefits includes a $7.2 million increase in pension benefits expense and $2.2 million higher expenses attributed to temporary reductions in salaries and 401(k) match implemented in the first half of fiscal 2010.The Power Products Segment gross profit percentage decreased to 8.9% for the first nine months of fiscal 2011 from 9.8% in the first nine months of fiscal 2010. This decline between years resulted from higher manufacturing spending, lower absorption primarily related to the decreased production of portable generators, as well as increased expenses related to salaries and benefits. The increase in manufacturing spending relates to higher commodity costs, manufacturing inefficiencies in launching new products, increased warranty expense, and increased freight expense. The increase in salaries and benefits includes $0.8 million higher expenses attributable to temporary reductions in salaries and 401(k) match implemented in the first half of fiscal 2010.ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSESEngineering, selling, general and administrative expenses were $71.0$67.7 million in the thirdfirst quarter of fiscal 2011,2012, a decrease of $0.4$2.8 million or 0.6%3.9% from the thirdfirst quarter of fiscal 2010.Engineering, selling, general2011. The decrease was primarily attributable to lower stock based compensation, partially offset by higher sales and administrativemarketing and professional services expenses were $216.0associated with new product launches.INTEREST EXPENSEInterest expense was $0.8 million lower for the first nine months of fiscal 2011, an increase of $23.5 million or 12.2% from the first nine months of fiscal 2010. The increase is due to higher salaries and benefits expenses that include a $5.4 million increase in pension benefits expense, increased salaries and 401(k) company match benefits of $2.1 million, which have been fully restored since being temporarily reduced in the first half of fiscal 2010, as well as $3.3 million of severance and other related employee separation costs associated with a planned reduction of salaried employees during the second quarter of fiscal 2011.LITIGATION SETTLEMENTOn February 24, 2010, the Company entered into a Stipulation of Settlement (“Settlement”) that resolves over 65 class-action lawsuits that have been filed against Briggs & Stratton and other engine and lawnmower manufacturers alleging, among other things, misleading power labeling on its lawnmower engines. Other parties to the Settlement are Sears, Roebuck and Co., Sears Holdings Corporation, Kmart Holdings Corporation, Deere & Company, Tecumseh Products Company, The Toro Company, Electrolux Home Products, Inc. and Husqvarna Outdoor Products, Inc. (now known as Husqvarna Consumer Outdoor Products, N.A., Inc.) (Collectively with the Company referred to below as the “Settling Defendants”). All other defendants settled all claims separately. The Settlement resolves all horsepower-labeling claims brought by all persons or entities in the United States who, beginning January 1, 1994 through the date notice of the Settlement is first given, purchased, for use and not for resale, a lawn mower containing a gas combustible engine up to 30 horsepower provided that either the lawn mower or the engine of the lawn mower was manufactured or sold by a Defendant. On August 16, 2010, Judge Adelman issued a final order approving the Settlement as well as the settlements of all other defendants. In August and September 2010, several class members filed a Notice of Appeal of Judge Adelman’s final approval order to the United States Court of Appeals for the Seventh Circuit. All of those appeals were settled as of February 16, 2011 with no additional contribution from Briggs & Stratton.BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESAs part of the Settlement, the Company denies any and all liability and seeks resolution to avoid further protracted and expensive litigation. The Settling Defendants as a group agreed to pay an aggregate amount of $51 million. However, the monetary contribution of the amount of each of the Settling Defendants is confidential. In addition, the Company, along with the other Settling Defendants, agreed to injunctive relief regarding their future horsepower labeling, as well as procedures that will allow purchasers of lawnmower engines to seek a one-year extended warranty free of charge. Under the terms of the Settlement, the balance of settlement funds were paid, and the one-year warranty extension program began to run, on March 1, 2011. As a result of the Settlement, the Company recorded a total charge of $30.6 million in the third quarter of fiscal year 2010 representing the total of the Company’s monetary portion of the Settlement and the estimated costs of extending the warranty period for one year.INTEREST EXPENSEInterest expense was lower for the third quarter of fiscal 20112012 compared to the priorsame period one year periodago due to lower average outstanding borrowings as well as the reducedreduction in interest rate associated with the refinanced Senior Notes. Interest expense was lower for the first nine months of fiscal 2011 compared to the prior year period due to lower average outstanding borrowings, partially offset by $3.9 million of charges related to the redemption premium on the 8.875% Senior Notes and the write-off of related deferred financing costs.PROVISION FOR INCOME TAXESThe third quarter and first nine months effective tax rate for fiscal 2011 was 32.4% and 30.3%, respectively, versus a 27.1% and 22.3% effective tax rate in the same respective periods last year. The variation between years was due to the required recognitionrefinancing of the tax effect on certain events as discrete items that reduced our effective tax rate in fiscal 2010. These discrete items included the tax effect of the horsepower litigation settlement expense recognized in the third quarter of fiscal 2010 as well as the settlement of a federal auditSenior Notes in the second quarter of fiscal 2010.PROVISION FOR INCOME TAXESThe effective tax rate for the first quarter of fiscal 2012 was negative 25.3% or $1.1 million of tax expense compared to 33.4% or a $4.1 million tax benefit for the fiscal 2011 first quarter. Beginning with the first quarter of fiscal 2012, the Company excluded from the effective tax rate calculation net losses incurred by certain of our foreign subsidiaries which cannot be benefited. Excluding these foreign subsidiary net losses resulted in taxable income for purposes of calculating the company's21interim income tax expense for the first quarter of fiscal 2012. The net loss of these subsidiaries is typically higher in the first quarter before they enter into the lawn and garden season.LIQUIDITY AND CAPITAL RESOURCESCash flows used by operating activities for the fiscal 2012 first nine monthsquarter were $56.3 million compared to $55.5 million in the fiscal 2011 first quarter. Cash used in operating activities for the first quarter of fiscal 20112012 was $100.3 million, or $83.8 million higher comparedprimarily related to $16.5 millionseasonal build of inventory levels and reduction of accounts payable in the first nine months of fiscal 2010. The increase in cash used for operating activities is primarily due to working capital requirements to replenish inventory from lower levels at the end of fiscal 2010 and due to timing of payments associated with accounts receivable, accounts payable and accrued liabilities, offset by higher net income.Cash flows used by investing activities was $32.4$10.2 million and $24.8$9.4 million in the first nine monthsquarter of fiscal 20112012 and fiscal 2010,2011, respectively. The $7.7$0.8 million increase was primarily the result of higher purchases of plant and equipment compared to the first nine monthsquarter of last year.Cash providedflows used by financing activities was $61.0$3.1 million and $52.9$2.5 million in the first nine monthsquarter of fiscal 20112012 and fiscal 2010,2011, respectively. During the first quarter of fiscal 2012, the Company purchased $3.1 million of its common stock under a previously announced share repurchase program. The increase is primarily due to$2.5 million of cash used by financing activities in the issuance of $225 million aggregate principal amount of 6.875% Senior Notes due December 15, 2020 during the secondfirst quarter of fiscal 2011 therelated to net proceedsrepayments of which were primarily used to redeem the $203.7 million outstanding principal amount of the 8.875% Senior Notes due March 15, 2011. The Company incurred $5.0 million of deferred financing costs in connection with the issuance of the 6.875% Senior Notes.BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESFUTURE LIQUIDITY AND CAPITAL RESOURCESIn December 2010, the Company issued $225 million aggregate principal amount of 6.875% Senior Notes due December 15, 2020. Net proceeds were primarily used to redeem the remaining outstanding principal of the 8.875% Senior Notes due March 15, 2011.On July 12, 2007, the Company entered into a $500 million amended and restated multicurrency credit agreement. The Amended Credit Agreement (“Revolver”) provides a revolving credit facility for up to $500 million in revolving loans, including up to $25 million in swing-line loans. The Company used proceeds from the Revolver to pay off the remaining amounts outstanding under the Company’s variable rate term notes issued in February 2005 with various financial institutions, retire the 7.25% senior notes that were due in September 2007 and fund seasonal working capital requirements and other financing needs. Subsequent to the end of the first quarter of fiscal 2012, the Company entered into a new 5-year $500 million multicurrency credit agreement ("New Revolver"). The New Revolver hasreplaced the existing Revolver that was scheduled to expire on July 12, 2012.On August 10, 2011, the Board of Directors of the Company authorized up to $50 million in funds for use in a termcommon share repurchase program with an expiration of five years and all outstanding borrowingsJune 30, 2013. The common share repurchase program authorizes the purchase of shares of the Company's common stock on the Revolver are dueopen market or in private transactions from time to time, depending on market conditions and payable on July 12, 2012.certain governing loan covenants. As of March 27, 2011, there were borrowingsthe end of $55.0 millionthe first quarter of fiscal 2012, the Company repurchased 219,200 shares on the Revolver.Briggs & Stratton expects capital expenditures to be approximately $50$60 million to $65 million in fiscal 2011.2012. These anticipated expenditures reflect our plans to continue to reinvest in efficient equipment and innovative new products.The Company is not required to make any contributions to the qualified pension plan of approximately $30.2 millionduring fiscal 2011, but2012. The Company may be required to make further contributions in future years depending upon the actual return on plan assets and the funded status of the plan in future periods.Management believes that available cash, cash generated from operations, existing lines of credit and access to debt markets will be adequate to fund Briggs & Stratton’s operating and capital requirements for the foreseeable future.The Revolver, the New Revolver and the 6.875% Senior Notes contain restrictive covenants. These covenants include restrictions on the Company’s ability to: pay dividends; repurchase shares; incur indebtedness; create liens; enter into sale and leaseback transactions; consolidate or merge with other entities; sell or lease all or substantially all of its assets; and dispose of assets or the proceeds of sales of its assets. The Revolver containsand the New Revolver contain financial covenants that require the Company to maintain a minimum interest coverage ratio and impose a maximum leverage ratio. As of March 27,October 2, 2011, the Company was in compliance with these covenants, and expects to be in compliance with all covenants during the remainder of fiscal 2011.22OFF-BALANCE SHEET ARRANGEMENTSThere have been no material changes since the August 26, 2010September 1, 2011 filing of the Company’s Annual Report on Form 10-K.CONTRACTUAL OBLIGATIONSThere have been no material changes since the August 26, 2010September 1, 2011 filing of the Company’s Annual Report on Form 10-K, other than10-K. Subsequent to the issuanceend of $225 million aggregate principal amount of 6.875% Senior Notes due December 15, 2020 during the secondfirst quarter of fiscal 2011,2012, the net proceeds of which were primarily usedCompany entered into a new 5-year $500 million multicurrency credit agreement. The New Revolver replaced the existing Revolver that was scheduled to redeem the $203.7 million outstanding principal amount of the 8.875% Senior Notes due March 15, 2011.BRIGGS & STRATTON CORPORATION AND SUBSIDIARIESCRITICAL ACCOUNTING POLICIESThere have been no material changes in the Company’s critical accounting policies since the August 26, 2010September 1, 2011 filing of its Annual Report on Form 10-K. As discussed in our annual report, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements.The most significant accounting estimates inherent in the preparation of our financial statements include a goodwill assessment, estimates as to the realizability of accounts receivable and inventory assets, as well as estimates used in the determination of liabilities related to customer rebates, pension obligations, postretirement benefits, warranty, product liability, group health insurance, litigation and taxation. Various assumptions and other factors underlie the determination of these significant estimates. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and, in some instances, actuarial techniques. The Company re-evaluates these significant factors as facts and circumstances change.NEW ACCOUNTING PRONOUNCEMENTSA discussion of new accounting pronouncements is included in the Notes to Consolidated Condensed Financial Statements of this Form 10-Q under the heading New Accounting Pronouncements and incorporated herein by reference.CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTSThis report contains certain 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 “believe”, “estimate”, “expect”, “forecast”, “intend”, “plan”, “project”, 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, the ability to successfully forecast demand for our products; changes in interest rates and foreign exchange 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; changes in laws and regulations; changes in customer and OEM demand; changes in prices of raw materials and parts that we purchase; changes in domestic and foreign economic conditions; the ability to bring new productive capacity on line efficiently and with good quality; outcomes of legal proceedings and claims; and other factors disclosed from time to time in our SEC filings or otherwise, including the factors discussed in Item 1A, Risk Factors, of the Company’s Annual Report on Form 10-K and in its periodic reports on Form 10-Q.ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThere have been no material changes since the August 26, 2010,September 1, 2011 filing of the Company’s Annual Report on Form 10-K.23ITEM 4. CONTROLS AND PROCEDURESDISCLOSURE CONTROLS AND PROCEDURESThe Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, theBRIGGS & STRATTON CORPORATION AND SUBSIDIARIESINTERNAL CONTROL OVER FINANCIAL REPORTINGThere has not been any change in the Company’s internal control over financial reporting during the thirdfirst fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.PART II - OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSA discussion of legal proceedings is included in the Notes to Consolidated Condensed Financial Statements of this Form 10-Q under the heading Commitments and Contingencies and incorporated herein by reference.ITEM 1A. RISK FACTORSThere have been no material changes since the August 26, 2010,September 1, 2011 filing of the Company’s Annual Report on Form 10-K.ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSThe table below sets forth the information with respect to purchases made by or behalf of the Company of its common stock during the quarterly period ended October 2, 2011.2012 Fiscal Month Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) July 4, 2011 to July 31, 2011 — $ — — $ — August 1, 2011 to August 28, 2011 55,000 14.11 55,000 49,223,950 August 29, 2011 to October 2, 2011 164,200 14.27 164,200 46,880,816 Total First Quarter 219,200 $ 14.23 219,200 46,880,816 (1) On August 10, 2011, the Board of Directors of the Company authorized up to $50 million in funds for use in a common share repurchase program with an expiration of June 30, 2013.24ITEM 6. EXHIBITSExhibitNumber 10.5 Summary of Changes to Director Compensation, adopted by the Board of Directors on April 27, 2011 (Filed herewith)10.154.1 AmendedMulticurrency Credit Agreement, dated as of October 13, 2011, among Briggs & Restated Key Employee SavingsStratton Corporation, Briggs & Stratton AG, the financial institutions from time to time party thereto and Investment Plan (Filed herewith)JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated October 13, 2011 and incorporated herein by reference)31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (Filed herewith) 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (Filed herewith) 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (Furnished herewith) 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (Furnished herewith) 101 The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 27,October 2, 2011 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Condensed Balance Sheets, (ii) the Consolidated Condensed Statements of Operations, (iii) the Consolidated Condensed Statements of Cash Flows, and (iv) related notes, tagged as blocks of text.Notes to Consolidated Financial Statements25SIGNATURESPursuant to the requirements 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 Date: May 4,November 10, 2011 David J. Rodgers Senior Vice President and Chief Financial Officer andDuly Authorized Officer26EXHIBIT INDEXExhibitNumber 10.5 Summary of Changes to Director Compensation, adopted by the Board of Directors on April 27, 2011 (Filed herewith)10.154.1 AmendedMulticurrency Credit Agreement, dated as of October 13, 2011, among Briggs & Restated Key Employee SavingsStratton Corporation, Briggs & Stratton AG, the financial institutions from time to time party thereto and Investment Plan (Filed herewith)JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated October 13, 2011 and incorporated herein by reference)31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (Filed herewith) 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (Filed herewith) 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (Furnished herewith) 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (Furnished herewith) 101 The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 27,October 2, 2011 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Condensed Balance Sheets, (ii) the Consolidated Condensed Statements of Operations, (iii) the Consolidated Condensed Statements of Cash Flows, and (iv) related notes, tagged as blocks of text.Notes to Consolidated Financial Statements2927