Stock Incentives:

The Company previously adopted an Incentive Compensation Plan, effective October 20, 2004, under which 4,000,000 shares of common stock (8,000,000 shares as a result of the fiscal 2005 2-for-1 stock split) were reserved for future issuance. An amendment to the Incentive Compensation Plan approved by shareholders on October 21, 2009, added 2,481,494 shares to the shares available for grant under the plan. Prior to October 20, 2004, the Company had a Stock Incentive Plan under which 5,361,935 shares of common stock were reserved for issuance. The adoption of the Incentive Compensation Plan reduced the number of shares available for future issuance under the Stock Incentive Plan to zero. However, as of June 30, 2013, there were 1,590,120 outstanding option awards granted under the Stock Incentive Plan that are or may become exercisable in the future. In accordance with the plans, the Company can issue eligible employees stock options, stock appreciation rights, restricted stock, deferred stock, performance shares and cash bonus awards subject to certain annual limitations. The plans also allow the Company to issue directors non-qualified stock options and directors’ fees in stock. Stock based compensation vests in accordance with the Plan but can become immediately exercisable upon eligible recipients' departure from the Company or upon reaching retirement age, subject to approval of the Compensation Committee.

Stock based compensation expense is calculated by estimating the fair value of incentive stock awards granted and amortizing the estimated value over the awards’ vesting periods. During fiscal 2013, 2012 and 2011, the Company recognized stock based compensation expense of approximately $6.5 million, $5.6 million and $9.6 million, respectively. Included in stock based compensation expense for fiscal 2011 was an expense of $1.3 million due to the modification of certain vesting conditions for the Company’s stock incentive awards. The modification of the awards was made in connection with the Company’s previously announced organization changes that involved a planned reduction of salaried employees during the second quarter of fiscal 2011.

On the grant date, the exercise price of each stock option issued exceeds the market value of the stock by 10%. The fair value of each option is estimated using the Black-Scholes option pricing model, and the assumptions are based on historical data and standard industry valuation practices and methodology. The assumptions used to determine fair value are as follows:



Options Granted During	2013			2012			2011
Grant Date Fair Value	$	4.83		$	3.96		$	5.24
(Since options are only granted once per year, the grant date fair value equals the weighted average grant date fair value.)
Assumptions:
Risk-free Interest Rate	0.7		%	1.0		%	1.5		%
Expected Volatility	43.9		%	43.2		%	43.2		%
Expected Dividend Yield	2.6		%	3.0		%	2.4		%
Expected Term (in Years)	5.0			5.0			5.0

Information on the options outstanding is as follows:



	Options		Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Balance, June 27, 2010	4,467,877		$	28.29
Granted During the Year	785,250		19.88
Exercised During the Year	(103,290	)	14.83
Expired During the Year	(428,647	)	37.22
Balance, July 3, 2011	4,721,190		$	26.38
Granted During the Year	465,350		16.20
Exercised During the Year	(15,870	)	14.83
Expired During the Year	(474,240	)	29.87
Balance, July 1, 2012	4,696,430		$	25.06
Granted During the Year	399,850		18.85
Exercised During the Year	(1,151,882	)	17.37
Expired During the Year	(573,130	)	30.81
Balance, June 30, 2013	3,371,268		$	25.97	1.73	$	2,040
Exercisable, June 30, 2013	1,979,718		$	31.28	0.80	$	59

The total intrinsic value of options exercised during fiscal year 2013 was $4.4 million. The exercise of options resulted in cash receipts of $20.0 million in fiscal 2013. The total intrinsic value of options exercised during fiscal 2012 was $0.1 million. The exercise of options resulted in cash receipts of $0.3 million in fiscal 2012. The total intrinsic value of options exercised during fiscal 2011 was $0.7 million. The exercise of options resulted in cash receipts of $1.8 million in fiscal 2011.



Options Outstanding (as of June 30, 2013)
Fiscal Year	Grant Date	Date Exercisable	Expiration Date	Exercise Price		Options Outstanding
2004	8/15/2003	8/15/2006	8/15/2013	$	30.44	650,280
2005	8/13/2004	8/13/2007	8/13/2014	$	36.68	939,840
2009	8/19/2008	8/19/2011	8/31/2013	$	14.83	6,508
2010	8/18/2009	8/18/2012	8/31/2014	$	19.73	383,090
2011	8/17/2010	8/17/2013	8/31/2015	$	19.88	547,060
2012	8/16/2011	8/16/2014	8/31/2016	$	16.20	444,640
2013	8/14/2012	8/14/2015	8/31/2017	$	18.85	399,850

Below is a summary of the status of the Company’s nonvested shares as of June 30, 2013, and changes during the year then ended:



	Deferred Stock				Restricted Stock				Stock Options				Performance Shares
	Shares		Wtd. Avg. Grant Date Fair Value		Shares		Wtd. Avg. Grant Date Fair Value		Shares		Wtd. Avg. Grant Date Fair Value		Shares	Wtd. Avg. Grant Date Fair Value
Nonvested shares, July 1, 2012	526,164		$	16.95	715,265		$	17.26	1,980,600		$	4.88	127,940	$	17.11
Granted	82,387		17.89		134,830		18.55		399,850		4.83		121,230	20.15
Cancelled	—		—		(3,500	)	23.72		—		—		—	—
Exercised	—		—		—		—		—		—		—	—
Vested	(40,608	)	17.47		(25,998	)	27.42		(988,900	)	5.09		—	—
Nonvested shares, June 30, 2013	567,943		$	17.05	820,597		$	17.12	1,391,550		$	3.97	249,170	$	18.59

As of June 30, 2013, there was $8.0 million of total unrecognized compensation cost related to nonvested share-based compensation. That cost is expected to be recognized over a weighted average period of 1.8 years. The total fair value of shares vested during fiscal 2013 and 2012 was $5.8 million and $1.4 million, respectively.

Under the plans, the Company has issued restricted stock to certain employees. During fiscal years 2013, 2012 and 2011, the Company issued 134,830, 111,890 and 269,290 shares, respectively. The restricted stock vests on the fifth anniversary date of the grant provided the recipient is still employed by the Company. The aggregate market value on the date of issue was approximately $2.5 million, $1.7 million and $4.9 million in fiscal 2013, 2012 and 2011, respectively, and has been recorded within the Shareholders’ Investment section of the Consolidated Balance Sheets, and is being amortized over the five-year vesting period.

Under the plans, the Company may also issue deferred stock to its directors in lieu of directors fees. The Company issued 38,888, 44,127 and 28,727 shares in fiscal 2013, 2012 and 2011, respectively, under this provision of the plans.

Under the plans, the Company may also issue deferred stock to its officers and key employees. The Company issued 43,499, 38,250 and 155,603 shares in fiscal 2013, 2012 and 2011, respectively, under this provision. The aggregate market value on the date of grant was approximately $0.8 million, $0.6 million and $2.8 million, respectively. Expense is recognized ratably over the five-year vesting period.

Beginning in fiscal 2012, under the plans, the Company issued performance shares to its officers and key employees. The Company issued 121,230 and 127,940 performance shares under this provision in fiscal 2013 and fiscal 2012, respectively. A maximum of two shares of Briggs & Stratton Common Stock per Performance Share may be awarded to recipients if certain performance targets are met at the end of the vesting period. The aggregate market value on the date of issue was approximately $2.4 million and $2.2 million using the Monte Carlo simulation methodology of valuation in fiscal 2013 and fiscal 2012, respectively. Expense is recognized ratably over the three-year vesting period. The Monte-Carlo valuation model simulates a range of possible future stock prices for the Company and the components of a peer group to estimate the probability that a vesting condition will be achieved. In determining valuation assumptions for the Monte Carlo model, we consider historic and observable market data. Assumptions used in the Monte Carlo valuation model include the following:



Performance Shares Granted During	2013		2012
Assumptions:
Risk-free Interest Rate	0.4	%	0.3	%
Expected Volatility	35.5	%	46.0	%
Expected Dividend Yield (Dividends are Assumed Reinvested)	—	%	—	%
Expected Term (in Years)	2.87		2.87

The following table summarizes the components of the Company’s stock-based compensation programs recorded as expense:



	2013			2012			2011
Stock Options:
Pretax compensation expense	$	1,964		$	1,760		$	3,397
Tax benefit	(766		)	(686		)	(1,325		)
Stock option expense, net of tax	$	1,198		$	1,074		$	2,072
Restricted Stock:
Pretax compensation expense	$	2,375		$	2,102		$	3,512
Tax benefit	(926		)	(820		)	(1,370		)
Restricted stock expense, net of tax	$	1,449		$	1,282		$	2,142
Deferred Stock:
Pretax compensation expense	$	475		$	534		$	2,686
Tax benefit	(185		)	(208		)	(1,048		)
Deferred stock expense, net of tax	$	290		$	326		$	1,638
Performance Shares:
Pretax compensation expense	$	1,700		$	1,159		$	—
Tax benefit	(664		)	(452		)	—
Performance Share expense, net of tax	$	1,036		$	707		$	—
Total Stock-Based Compensation:
Pretax compensation expense	$	6,514		$	5,555		$	9,595
Tax benefit	(2,541		)	(2,166		)	(3,743		)
Total stock-based compensation, net of tax	$	3,973		$	3,389		$	5,852