-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KK/nFQy4suC8T4zLwB3HF2qOSc5psB/RVPPYv6AQmmZ7rAOBqwYNklDZb/rbUxSS 4S1Bv4eLCL3/fV6kbaIQug== 0000950124-02-001832.txt : 20020515 0000950124-02-001832.hdr.sgml : 20020515 20020515141357 ACCESSION NUMBER: 0000950124-02-001832 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRIGGS & STRATTON CORP CENTRAL INDEX KEY: 0000014195 STANDARD INDUSTRIAL CLASSIFICATION: ENGINES & TURBINES [3510] IRS NUMBER: 390182330 STATE OF INCORPORATION: WI FISCAL YEAR END: 0627 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01370 FILM NUMBER: 02650759 BUSINESS ADDRESS: STREET 1: 12301 W WIRTH ST CITY: WAUWATOSA STATE: WI ZIP: 53222 BUSINESS PHONE: 4142595333 MAIL ADDRESS: STREET 1: P O BOX 702 CITY: MILWAUKEE STATE: WI ZIP: 53201 10-Q 1 c69461e10-q.txt FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2002 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- --------------- Commission file number 1-1370 ------ BRIGGS & STRATTON CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-0182330 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12301 West Wirth Street, Wauwatosa, Wisconsin 53222 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) 414/259-5333 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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. Yes X No -------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class May 8, 2002 - -------------------------------------------------------------------------------- COMMON STOCK, par value $0.01 per share 21,638,984 Shares BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES INDEX Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Condensed Balance Sheets - March 31, 2002 and July 1, 2001 3 Consolidated Condensed Statements of Income - Three Months and Nine Months ended March 31, 2002 and April 1, 2001 5 Consolidated Condensed Statements of Cash Flow - Nine Months ended March 31, 2002 and April 1, 2001 6 Notes to Consolidated Condensed Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 17 Signatures 17 Exhibit Index 18 2 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands) ASSETS
March 31, July 1, 2002 2001 ----------- ----------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 65,434 $ 88,743 Accounts receivable, net 402,493 145,138 Inventories - Finished products and parts 149,237 218,671 Work in process 81,034 99,247 Raw materials 3,219 3,782 ---------- ---------- Total inventories 233,490 321,700 Future income tax benefits 46,270 38,434 Prepaid expenses and other current assets 17,979 19,415 ---------- ---------- Total current assets 765,666 613,430 ---------- ---------- OTHER ASSETS: Investments 43,674 46,071 Prepaid pension 55,385 36,275 Deferred loan costs 9,881 10,429 Capitalized software 6,383 6,552 Goodwill 155,330 166,659 Intangible Assets 301 418 ---------- ---------- Total other assets 270,954 266,404 ---------- ---------- PLANT AND EQUIPMENT: Cost 891,319 890,191 Less accumulated depreciation 485,606 473,830 ---------- ---------- Total plant and equipment, net 405,713 416,361 ---------- ---------- $1,442,333 $1,296,195 ========== ==========
The accompanying notes are an integral part of these statements. 3 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Continued) (In thousands) LIABILITIES & SHAREHOLDERS' INVESTMENT
March 31, July 1, 2002 2001 ----------- ----------- (Unaudited) CURRENT LIABILITIES: Accounts payable $ 101,785 $ 102,559 Domestic notes payable 112,778 3,300 Foreign loans 15,630 16,291 Accrued liabilities 132,230 115,725 Dividends payable 6,919 -- Federal and state income taxes 10,332 4,307 ----------- ----------- Total current liabilities 379,674 242,182 ----------- ----------- OTHER LIABILITIES: Deferred revenue on sale of plant and equipment 15,409 15,536 Deferred income tax liability 20,795 18,351 Accrued pension cost 15,920 14,494 Accrued employee benefits 13,281 12,979 Accrued postretirement health care obligation 63,300 61,767 Long-term debt 508,572 508,134 ----------- ----------- Total other liabilities 637,277 631,261 ----------- ----------- SHAREHOLDERS' INVESTMENT: Common stock - Authorized 60,000 shares, $.01 par value, issued 28,927 shares 289 289 Additional paid-in capital 35,595 36,043 Retained earnings 745,500 743,230 Accumulated other comprehensive loss (7,048) (6,182) Unearned compensation on restricted stock (225) (305) Treasury stock at cost, 7,295 and 7,328 shares, respectively (348,729) (350,323) ----------- ----------- Total shareholders' investment 425,382 422,752 ----------- ----------- $ 1,442,333 $ 1,296,195 =========== ===========
The accompanying notes are an integral part of these statements. 4 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited)
Three Months Ended Nine Months Ended -------------------------- ------------------------- March 31, April 1, March 31, April 1, 2002 2001 2002 2001 ----------- ----------- ----------- ----------- NET SALES $ 516,758 $ 430,188 $ 1,070,076 $ 978,670 COST OF GOODS SOLD 414,263 344,289 892,766 798,342 ----------- ----------- ----------- ----------- Gross profit on sales 102,495 85,899 177,310 180,328 ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 35,429 33,153 112,613 98,546 ----------- ----------- ----------- ----------- Income from operations 67,066 52,746 64,697 81,782 INTEREST EXPENSE (12,400) (8,804) (33,923) (21,689) OTHER INCOME, net 2,688 3,497 3,431 8,970 ----------- ----------- ----------- ----------- Income before provision for income taxes 57,354 47,439 34,205 69,063 PROVISION FOR INCOME TAXES 19,740 17,550 11,636 25,550 ----------- ----------- ----------- ----------- Net income $ 37,614 $ 29,889 $ 22,569 $ 43,513 =========== =========== =========== =========== EARNINGS PER SHARE DATA -- Average shares outstanding 21,620 21,599 21,608 21,600 =========== =========== =========== =========== Basic earnings per share $ 1.74 $ 1.38 $ 1.04 $ 2.01 =========== =========== =========== =========== Diluted average shares outstanding 24,456 21,612 21,620 21,614 =========== =========== =========== =========== Diluted earnings per share $ 1.58 $ 1.38 $ 1.04 $ 2.01 =========== =========== =========== =========== CASH DIVIDENDS PER SHARE $ 0.32 $ 0.31 $ 0.94 $ 0.93 =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 5 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (In thousands) (Unaudited)
Nine Months Ended ------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: March 31, 2002 April 1, 2001 -------------- ------------- Net income $ 22,569 $ 43,513 Adjustments to reconcile net income to net cash used in operating activities - Depreciation and amortization 42,417 41,685 Equity in earnings of unconsolidated affiliates (2,435) (5,092) Loss on disposition of plant and equipment 1,903 371 Pension income, net (17,286) (21,512) Provision for deferred income taxes 8,773 6,611 Change in operating assets and liabilities - Increase in accounts receivable (257,137) (249,365) Decrease (Increase) in inventories 88,210 (37,128) (Increase) Decrease in prepaid expenses and other current assets (90) 2,341 Increase in accounts payable and accrued liabilities 29,359 12,457 Other, net 399 1,571 --------- --------- Net cash used in operating activities (83,318) (204,548) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to plant and equipment (34,565) (48,645) Proceeds received on disposition of plant and equipment 620 2,770 Other, net 4,412 2,933 --------- --------- Net cash used in investing activities (29,533) (42,942) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings on loans and notes payable 108,817 288,513 Issuance cost of long-term debt (346) -- Dividends (20,299) (20,072) Purchase of common stock for treasury -- (6,118) Proceeds from exercise of stock options 943 275 --------- --------- Net cash provided by financing activities 89,115 262,598 --------- --------- EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 427 (1,971) --------- --------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (23,309) 13,137 --------- --------- CASH AND CASH EQUIVALENTS, beginning 88,743 16,989 --------- --------- CASH AND CASH EQUIVALENTS, ending $ 65,434 $ 30,126 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 35,544 $ 21,362 ========= ========= Income taxes paid $ 1,312 $ 6,574 ========= =========
The accompanying notes are an integral part of these statements. 6 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) General Information The 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 presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. However, in the opinion of Briggs & Stratton Corporation, adequate disclosures have been presented to make the information not 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. These 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. Comprehensive Income Statement of Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive Income," requires the reporting of comprehensive income in addition to net income from operations. Comprehensive income is a more inclusive financial reporting method that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Total comprehensive income is as follows (in thousands):
Three Months Ended Nine Months Ended March 31, April 1, March 31, April 1, 2002 2001 2002 2001 -------- -------- -------- -------- Net income $ 37,614 $ 29,889 $ 22,569 $ 43,513 Unrealized gain (loss) on marketable securities 52 (66) (123) (866) Gain (loss) on foreign currency translation adjustments (178) (1,092) 461 (2,082) Gain (loss) on derivative instruments 283 2,945 (1,204) 1,189 -------- -------- -------- -------- Total comprehensive income $ 37,771 $ 31,676 $ 21,703 $ 41,754 ======== ======== ======== ========
The components of Accumulated Other Comprehensive Loss are as follows (in thousands):
March 31, July 1, 2002 2001 ------- ------- Unrealized loss on marketable securities $ (876) $ (753) Cumulative translation adjustments (6,194) (6,655) Gain on derivative instruments 22 1,226 ------- ------- Accumulated other comprehensive loss $(7,048) $(6,182) ======= =======
Derivatives SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Any changes in fair value of these instruments are recorded in the income statement or other comprehensive income. During the third quarter and nine months of fiscal years 2002 and 2001, derivative amounts reclassified to the income statement were immaterial. 7 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES Briggs & Stratton enters into derivative contracts designated as cash flow hedges to manage its foreign currency exposures. These instruments generally do not have a maturity of more than twelve months. During the first nine months of fiscal years 2002 and 2001, there were no derivative instruments that were deemed to be ineffective. The amounts included in Accumulated Other Comprehensive Loss will be reclassified into income when the forecasted transactions occur, generally within the next twelve months. These forecasted transactions represent the exporting of products for which Briggs & Stratton will receive foreign currency and the importing of products for which it will be required to pay in a foreign currency. Acquisition On May 15, 2001, Briggs & Stratton acquired Generac Portable Products, Inc. (GPP), a designer, manufacturer and marketer of portable generators, pressure washers and related accessories for net cash of $267 million. The provisions of the acquisition include a contingent purchase price based on the operating results of GPP. We do not expect to pay any additional purchase price pursuant to these provisions. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price was allocated on a preliminary basis to identifiable assets acquired and liabilities assumed based upon the estimated fair values, with the excess purchase price recorded as goodwill. Final adjustments to the purchase price allocation are not expected to be material to the consolidated financial statements. Year-to-date we have recorded $11 million in net adjustments to our original GPP purchase price allocation. The most significant adjustment relates to recognizing certain deferred tax assets resulting from differences in financial reporting versus tax reporting at GPP. Goodwill of approximately $167 million was initially recorded as a result of the acquisition and was amortized on a straight-line basis over twenty years, until July 2, 2001, at which time Briggs & Stratton adopted the provisions of SFAS No. 142. Under the provisions of SFAS No. 142, goodwill is no longer amortized, but is subject to annual impairment tests. The following table sets forth the unaudited pro forma information for Briggs & Stratton as if the acquisition of GPP had occurred on July 2, 2000 (in thousands, except per share data):
Three Months Ended Nine Months Ended ------------------ ----------------- March 31, April 1, March 31, April 1, 2002 2001 2002 2001 ------------ ---------- ----------- ----------- Net Sales $ 516,758 $ 478,230 $ 1,070,076 $ 1,136,734 Net Income $ 37,614 $ 24,293 $ 22,569 $ 26,879 Basic Earnings Per Share $ 1.74 $ 1.12 $ 1.04 $ 1.24 Diluted Earnings Per Share $ 1.58 $ 1.12 $ 1.04 $ 1.24
Segment and Geographic Information In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" and subsequent to the May 15, 2001 acquisition of GPP, Briggs & Stratton has concluded that it operates two reportable business segments which are managed separately based on fundamental differences in their operations. Summarized segment data is as follows (in thousands): 8 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Three Months Ended Nine Months Ended -------------------------- -------------------------- March 31, April 1, March 31, April 1, 2002 2001 2002 2001 ----------- ----------- ----------- ----------- NET SALES: Engines $ 468,947 $ 430,188 $ 954,746 $ 978,670 Generac Portable Products 58,560 -- 151,195 -- Eliminations (10,749) -- (35,865) -- ----------- ----------- ----------- ----------- Total* $ 516,758 $ 430,188 $ 1,070,076 $ 978,670 =========== =========== =========== =========== *Includes sales to international customers $ 132,037 $ 122,405 $ 273,542 $ 258,664 =========== =========== =========== =========== GROSS PROFIT ON SALES: Engines $ 96,205 $ 85,899 $ 163,465 $ 180,328 Generac Portable Products 5,251 -- 13,997 -- Eliminations 1,039 -- (152) -- ----------- ----------- ----------- ----------- Total $ 102,495 $ 85,899 $ 177,310 $ 180,328 =========== =========== =========== =========== INCOME FROM OPERATIONS: Engines $ 65,432 $ 52,746 $ 64,534 $ 81,782 Generac Portable Products 595 -- 315 -- Eliminations 1,039 -- (152) -- ----------- ----------- ----------- ----------- Total $ 67,066 $ 52,746 $ 64,697 $ 81,782 =========== =========== =========== ===========
Sales Incentives Briggs & Stratton adopted Emerging Issues Task Force (EITF) Abstract No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer" in the third quarter of fiscal 2002. Pursuant to the EITF, we were required to reclassify certain advertising costs previously reported as selling expenses to a reduction in net sales. The impact of adopting EITF 01-09 was to reduce net sales by $2,348 and $495 in the third quarter of fiscal 2002 and 2001, respectively. The reclassification for the nine months of fiscal 2002 and 2001 was $5,674 and $1,471, respectively. Business Combinations In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets" having a required effective date for fiscal years beginning after December 31, 2001. Under certain circumstances companies are permitted to adopt these statements before the required date. Under the new rules, goodwill and other intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. Briggs & Stratton adopted the new rules on accounting for goodwill and other intangible assets in the first quarter of fiscal 2002. Application of the non-amortization provisions of the SFAS No. 142 is expected to result in an increase in net income of approximately $.7 million in fiscal 2002. We have performed the first of the required impairment tests of goodwill and indefinite lived intangible assets and found no impairment of the assets as of December 30, 2001. There was no proforma impact of adopting SFAS No. 142. No amortization of goodwill was recorded in the first nine months of fiscal years 2002 or 2001, because the acquisition of GPP did not occur until May 15, 2001. 9 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES Long-Lived Assets In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 144 also supersedes the accounting and reporting provisions of APB Opinion No. 31, related to the disposal of a segment of a business. SFAS No. 144 will be adopted on July 1, 2002. Management does not expect SFAS No. 144 to have a material impact on the consolidated financial statements. Financial Information of Subsidiary Guarantors of Indebtedness Under the terms of Briggs & Stratton's 7.25% senior notes, 8.875% senior notes and 5.00% convertible senior notes and our revolving credit agreement, (collectively, the Domestic Indebtedness), GPP and its subsidiaries became joint and several guarantors of the Domestic Indebtedness. Additionally, if at any time a domestic subsidiary of Briggs & Stratton constitutes a significant domestic subsidiary, then such domestic subsidiary will also become a guarantor of the Domestic Indebtedness. Each guarantee of the Domestic Indebtedness is the obligation of the guarantor and ranks equally and ratably with the existing and future senior unsecured obligations of that guarantor; accordingly, GPP has provided a full and unconditional guarantee of the Domestic Indebtedness. The following condensed supplemental consolidating financial information reflects the operations of GPP for the three months and nine months ended March 31, 2002 (in thousands):
BALANCE SHEET: Briggs & Stratton Guarantor Non--Guarantor As of March 31, 2002 Corporation Subsidiaries Subsidiaries Eliminations Consolidated ----------- ----------- ----------- ----------- ----------- Current Assets $ 625,799 $ 100,601 $ 73,748 $ (34,482) $ 765,666 Investment in Subsidiaries 306,351 -- -- (306,351) -- Non-current Assets 496,914 177,342 2,411 -- 676,667 ----------- ----------- ----------- ----------- ----------- $ 1,429,064 $ 277,943 $ 76,159 $ (340,833) $ 1,442,333 =========== =========== =========== =========== =========== Current Liabilities $ 355,145 $ 14,475 $ 38,005 $ (27,951) $ 379,674 Deferred Income Tax Liability (Asset) 27,230 (6,435) -- -- 20,795 Long--Term Debt 508,572 -- -- -- 508,572 Other Long--Term Obligations 105,874 2,036 -- -- 107,910 Shareholders' Equity 432,243 267,867 38,154 (312,882) 425,382 ----------- ----------- ----------- ----------- ----------- $ 1,429,064 $ 277,943 $ 76,159 $ (340,833) $ 1,442,333 =========== =========== =========== =========== ===========
10 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
STATEMENT OF EARNINGS: For the Three Months Ended - --------------------------- Briggs & Stratton Guarantor Non--Guarantor March 31, 2002 Corporation Subsidiaries Subsidiaries Eliminations Consolidated --------------- ----------- ------------ ------------------ ------------ ------------ Net Sales $ 461,458 $ 58,560 $ 23,500 $ (26,760) $ 516,758 Cost of Goods Sold 370,550 53,309 18,143 (27,739) 414,263 --------- --------- --------- --------- --------- Gross Profit 90,908 5,251 5,357 979 102,495 Engineering, Selling, General and Administrative Expenses 27,625 4,656 3,148 -- 35,429 --------- --------- --------- --------- --------- Income from Operations 63,283 595 2,209 979 67,066 Interest Expense (11,570) (10) (820) -- (12,400) Other (Expense) Income, Net 4,220 42 12,611 (14,185) 2,688 --------- --------- --------- --------- --------- Income Before Provision (Credit) for Income Taxes 55,933 627 14,000 (13,206) 57,354 Provision (Credit) for Income Taxes 18,999 241 500 -- 19,740 --------- --------- --------- --------- --------- Net Income $ 36,934 $ 386 $ 13,500 $ (13,206) $ 37,614 ========= ========= ========= ========= =========
STATEMENT OF EARNINGS: For the Nine Months Ended - -------------------------- Briggs & Stratton Guarantor Non--Guarantor March 31, 2002 Corporation Subsidiaries Subsidiaries Eliminations Consolidated --------------- ----------- ------------ ------------------ ------------ ------------ Net Sales $ 932,549 $ 151,195 $ 59,605 $ (73,273) $ 1,070,076 Cost of Goods Sold 781,695 137,198 46,426 (72,553) 892,766 ----------- ----------- ----------- ----------- ----------- Gross Profit 150,854 13,997 13,179 (720) 177,310 Engineering, Selling, General and Administrative Expenses 89,181 13,682 9,750 -- 112,613 ----------- ----------- ----------- ----------- ----------- Income from Operations 61,673 315 3,429 (720) 64,697 Interest Expense (32,712) (49) (1,246) 84 (33,923) Other (Expense) Income, Net 3,337 99 13,076 (13,081) 3,431 ----------- ----------- ----------- ----------- ----------- Income Before Provision (Credit) for Income Taxes 32,298 365 15,259 (13,717) 34,205 Provision (Credit) for Income Taxes 10,409 157 1,070 -- 11,636 ----------- ----------- ----------- ----------- ----------- Net Income $ 21,889 $ 208 $ 14,189 $ (13,717) $ 22,569 =========== =========== =========== =========== ===========
11 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOWS: For the Nine Months Ended - ------------------------- Briggs & Stratton Guarantor Non--Guarantor March 31, 2002 Corporation Subsidiaries Subsidiaries Eliminations Consolidated --------------- ----------- ------------ -------------- ------------ ------------ Cash Flows from Operating Activities: Net Income $ 21,889 $ 208 $ 14,189 $ (13,717) $ 22,569 Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities- Depreciation and Amortization 43,458 (1,469) 428 -- 42,417 Equity Earnings of Affiliates and Subsidiaries (13,303) -- (41) 10,909 (2,435) (Gain) Loss on Disposition of Plant and Equipment 1,935 (19) (13) -- 1,903 Pension Income, Net (17,286) -- -- -- (17,286) Provision for Deferred Taxes 2,233 6,540 -- -- 8,773 Change in Operating Assets and Liabilities- Increase in Receivables (249,424) (838) (21,014) 14,139 (257,137) Decrease in Inventories 84,181 2,540 581 908 88,210 (Increase) Decrease in Other Current Assets 1,162 (730) (522) -- (90) Increase (Decrease) in Accounts Payable and Accrued Liabilities 39,324 (4,574) 8,936 (14,327) 29,359 Other, Net 590 (191) -- -- 399 --------- --------- --------- --------- --------- Net Cash (Used in) Provided by Operating Activities (85,241) 1,467 2,544 (2,088) (83,318) --------- --------- --------- --------- --------- Cash Flows from Investing Activities: Additions to Plant and Equipment (32,745) (1,409) (411) -- (34,565) Proceeds Received on Disposition of Plant and Equipment 581 19 20 -- 620 Other, net 3,706 -- 706 -- 4,412 --------- --------- --------- --------- --------- Net Cash (Used in) Provided by Investing Activities (28,458) (1,390) 315 -- (29,533) --------- --------- --------- --------- --------- Cash Flows from Financing Activities: Net Borrowings (Repayments) on Loans and Notes Payable 108,657 821 (661) -- 108,817 Issuance Costs of Long--Term Debt (346) -- -- -- (346) Dividends (20,299) -- (2,088) 2,088 (20,299) Proceeds from Exercise of Stock Options 943 -- -- -- 943 --------- --------- --------- --------- --------- Net Cash Provided by (Used in) Financing Activities 88,955 821 (2,749) 2,088 89,115 --------- --------- --------- --------- --------- Effect of Exchange Rate Changes -- 146 281 -- 427 --------- --------- --------- --------- --------- Net (Decrease) Increase in Cash and Cash Equivalents (24,744) 1,044 391 -- (23,309) Cash and Cash Equivalents, Beginning 85,282 683 2,778 -- 88,743 --------- --------- --------- --------- --------- Cash and Cash Equivalents, Ending $ 60,538 $ 1,727 $ 3,169 $ -- $ 65,434 ========= ========= ========= ========= =========
12 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of Briggs & Stratton's financial condition and results of operations for the periods included in the accompanying consolidated condensed financial statements: RESULTS OF OPERATIONS GENERAL Early Retirement Incentive Program In the second quarter of fiscal 2002 Briggs & Stratton offered and finalized an early retirement incentive program. The net reduction in the global salaried workforce was approximately 7%. The third quarter results for fiscal 2002 reflect $1 million in savings from lower salary related expenditures. The nine month results for fiscal 2002 include net expenses of $4 million after taxes, representing the net cost of the early retirement incentive program. The majority of the impact on net income was the result of recognizing the cost of the special termination benefits, which reduced net periodic pension income. The impact for the full fiscal year of 2002 is projected to reduce net income on an after tax basis of approximately $2 million, after consideration of an additional $2 million in savings during the fourth quarter of fiscal 2002 for lower salary related expenditures. The anticipated net income impact of salary related savings for fiscal 2003 is projected to be approximately $6 million on an after tax basis. Acquisition On May 15, 2001, Briggs & Stratton acquired Generac Portable Products, Inc. (GPP) for net cash of $267 million. The results of GPP's operations are included in fiscal 2002's first nine months. The first nine months of fiscal 2001 did not include results of GPP. SALES Net sales for the third quarter of fiscal 2002 totaled $517 million, an increase of $87 million or 20% when compared to the same period of the preceding year. This increase was the result of a $28 million increase in Engine sales and the inclusion of $59 million in GPP sales in the third quarter for the first time. In addition, we eliminated $11 million in intercompany engine sales to GPP. Third quarter net sales for the Engine segment of the business were $469 million versus $430 million in the prior year. This 9% increase was the result of a 14% increase in unit volume, offset by a sales mix that was weighted to lower priced engines. Net sales for the GPP segment of the business totaled $59 million, an increase of $8 million from their performance a year ago when Briggs & Stratton did not own them. Generator volume increased 50% over the prior year, reflecting ice storm activity in early February and new retailer shipments. Pressure washer unit shipments were up 15% between years. The increase was the result of a shift in unit shipments between the second and third quarter, and retailer new store growth. 13 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES Net sales for the nine months ended March 31, 2002 totaled $1,070 million, an increase of $91 million or 9% compared to the first nine months of the prior year. The increase was the result of $151 million of GPP sales, offset by lower engine sales of $24 million and intercompany sales eliminations of $36 million. Nine month net sales for the Engine segment for fiscal 2002 were $955 million versus $979 million in the prior year. This decrease is attributable to a sales mix weighted more heavily to lower priced engines while volume increased only 1% year to date. GPP's net sales for the first nine months were $151 million compared to $136 million a year ago when Briggs & Stratton did not own them. Increased generator volume in first nine months of fiscal 2002 accounted for the increased sales between years. While up, the entire generator market has not recovered as much as we originally anticipated. GROSS PROFIT MARGIN The gross profit rate was 20% for the third quarters of fiscal years 2002 and 2001. The Engine segment gross margins were 21% and 20% for the third quarters of fiscal years 2002 and 2001, respectively. Engine margin was favorably impacted by reductions of manufacturing costs, including reduced salaries from the early retirement incentive program. GPP's gross profit rate was 9% in fiscal 2002 and 2001. The gross profit rate for the nine-month period decreased to 17% in the current year from 18% in the prior year. The Engine segment margin is down 1% for the nine-month period reflecting the impact of cost reductions discussed above for the quarter, offset by a $5 million pre-tax expense for the early retirement incentive program that was completed at the end of December 2001. GPP's gross profit margin decreased from 10% to 9% for the nine-month period in fiscal 2002 and 2001 respectively. Sales of generators with lower margins created an unfavorable mix, which negatively affected gross profit margin for GPP for the comparable nine-month period. ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES The engineering, selling, and administrative expenses increased $2 million or 7% between the third fiscal quarters of 2002 and 2001. GPP expenses were $5 million offset by Engine segment reductions. GPP's expenses decreased $1 million from fiscal 2001 reflecting certain integration savings. This category increased $14 million or 14% for the comparative nine-month periods. The inclusion of GPP accounted for almost all of this increase. INTEREST EXPENSE Interest expense increased $4 million or 41% in the third quarter comparison and increased $12 million or 56% in the nine-month comparison. These increases were the result of the long-term debt issued for the acquisition of GPP, offset by lower borrowings for working capital in the current fiscal year. 14 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PROVISION FOR INCOME TAXES The effective tax rate used in the third quarter of fiscal 2002 was 34%. Management estimates the effective tax rate for the entire fiscal year 2002 will remain at 34%. The effective tax rate for the third quarter and nine-month periods for fiscal 2001 was 37%. LIQUIDITY AND CAPITAL RESOURCES Cash flows used in operating activities for the nine-month periods of fiscal 2002 and fiscal 2001 were $83 million and $205 million, respectively, a $122 million decrease in the cash used in operating activities between years. This reflects reduced working capital requirements of $131 million, offset by decreased net income of $21 million. The primary reason for the decrease in the working capital requirements was the reduction in the levels of engine inventories. We executed a plan of reduced production in the first nine months to lower the finished engine inventory to more historical levels. Net cash used in investing activities totaled $30 million and $43 million in fiscal 2002 and fiscal 2001, respectively. Additions to plant and equipment were the major use of cash. The amount was lower between years because capital expenditures are being deferred to later in the fiscal year to lower borrowing requirements in the period where we have the greatest working capital buildup. Net cash provided by financing activities decreased $173 million between years. The significant decrease was due to the lower level of short-term domestic borrowings used to fund working capital needs and the greater cash balances that were on hand at the start of fiscal 2002. FUTURE LIQUIDITY AND CAPITAL RESOURCES On November 15, 2001, we replaced our $250 million revolving credit facility that would have expired in April 2002, with a three-year $300 million revolving credit facility. For a description of the terms of the new credit facility see Item 2 in Part II of our Quarterly Report on Form 10-Q for the fiscal quarter ended December 30, 2001. As of March 31, 2002, we had utilized $110 million of the revolver. As of April 30, 2002, we have paid back all borrowings under the revolving credit facility. Management expects cash flows used to fund capital expenditures will approximate $55 million in fiscal 2002. These anticipated expenditures provide for continued investments in equipment and new products. These expenditures will be funded using available cash and short-term borrowings. Briggs & Stratton currently intends to increase future cash dividends per share at a rate approximating the inflation rate, subject to the discretion of its Board of Directors and the requirements of applicable law and debt covenants. Briggs & Stratton has remaining authorization to buy up to 1.8 million shares of its stock in open market or private transactions under the June 2000 Board of Directors' authorization to repurchase up to 2.0 million shares, subject to limitations in our credit facility. We did not purchase any shares in the first nine months of fiscal 2002 and do not anticipate repurchasing additional shares for the remainder of fiscal 2002. Management believes that available cash, the credit facility, cash generated from operations, existing lines of credit and access to debt markets will be adequate to fund its capital requirements for the foreseeable future. Management projects that EBITA for fiscal 2002 will be in the range of $170 million to $175 million. 15 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES OUTLOOK We continue to believe that Engine segment shipments will be up 5% between years; however, we have lowered our fourth quarter revenue projections to $390 million, stronger than last year but down from our earlier projection. While we anticipate increased unit volume between years, we believe the unfavorable sales mix to lower priced engine units will continue through the fourth quarter. We believe gross margins for the full year will be approximately 18%. Engineering, selling, and administrative expenses for the year are currently estimated to be $149 million. The increase in this category is due to the inclusion of GPP's costs. Interest expense is anticipated to be approximately $44 million and depreciation and capital expenditures are each projected to be approximately $55 million for the year. The effective tax rate is projected to be at 34%. As a result, we project net income of approximately $45 million for fiscal year 2002. CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS Certain statements in Management's Discussion and Analysis of Financial Condition and Results of Operations may contain 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 "anticipate," "believe," "estimate," "expect," "intend," "may," "objective," "plan," "seek," "think," "will" and similar expressions are intended to identify forward-looking statements. The forward-looking statements are based on Briggs & Stratton's current views and assumptions and involve risks and uncertainties that include, among other things: our ability to successfully forecast demand for our products and appropriately adjust our manufacturing and inventory levels; changes in our operating expenses; changes in interest 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; the seasonal nature of our business; changes in laws and regulations, including environmental and accounting standards; work stoppages or other consequences of any deterioration in our employee relations; changes in customer and OEM demand; changes in prices of purchased raw materials and parts that we purchase; changes in domestic economic conditions, including housing starts and changes in consumer disposable income; changes in foreign economic conditions, including currency rate fluctuations; and other factors that may be disclosed from time to time in our SEC filings or otherwise. Some or all of the factors may be beyond our control. We caution you that any forward-looking statement reflects only our belief at the time the statement is made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes since the September 12, 2001, filing of the Company's Annual Report on Form 10-K. 16 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit Number Description 10 Notice of Election for Fixed Price Cash Pay-Out Under Deferred Compensation Agreement by Frederick P. Stratton, Jr. Dated January 3, 2002, and Approval of Compensation Committee Dated January 15, 2002* 10.1 Amended and Restated Supplemental Executive Retirement Plan* 10.2 Amended and Restated Economic Value Added Incentive Compensation Plan* 10.3 Amended and Restated Director's Leveraged Stock Option Program* 10.4 Amended and Restated Leveraged Stock Option Program* 11 Computation of Earnings Per Share of Common Stock* 12 Computation of Ratio of Earnings to Fixed Charges* *Filed herewith (b) Reports on Form 8-K. On January 31, 2002, Briggs & Stratton filed a report on Form 8-K dated January 17, 2002, to file as an exhibit the press release reporting its second quarter financial results. SIGNATURES Pursuant 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 ----------------------------- (Registrant) Date: May 13, 2002 /s/ James E. Brenn ------------------ James E. Brenn Senior Vice President and Chief Financial Officer and Duly Authorized Officer 17 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES EXHIBIT INDEX Exhibit Number Description - ------ ----------- 10 Notice of Election for Fixed Price Cash Pay-Out Under Deferred Compensation Agreement by Frederick P. Stratton, Jr. Dated January 3, 2002, and Approval of Compensation Committee Dated January 15, 2002* 10.1 Amended and Restated Supplemental Executive Retirement Plan* 10.2 Amended and Restated Economic Value Added Incentive Compensation Plan* 10.3 Amended and Restated Director's Leveraged Stock Option Program* 10.4 Amended and Restated Leveraged Stock Option Program* 11 Computation of Earnings Per Share of Common Stock* 12 Computation of Ratio of Earnings to Fixed Charges* *Filed herewith 18 EX-10 3 c69461ex10.txt NOTICE OF ELECTION FOR FIXED PRICE CASH PAY-OUT BRIGGS & STRATTON CORPORATION FORM 10-Q for Quarterly Period Ended March 31, 2002 Exhibit No. 10 NOTICE OF ELECTION FOR FIXED PRICE CASH PAY-OUT UNDER DEFERRED COMPENSATION AGREEMENT BY FREDERICK P. STRATTON, JR., DATED JANUARY 3, 2002, AND APPROVAL OF COMPENSATION COMMITTEE DATED JANUARY 15, 2002 NOTICE OF ELECTION FOR FIXED PRICE CASH PAY-OUT UNDER DEFERRED COMPENSATION AGREEMENTS January 3, 2002 Chairman Compensation Committee of the Board of Directors Briggs & Stratton Corporation 12301 West Wirth Street Wauwatosa, WI 53222 RE: DEFERRED COMPENSATION AGREEMENTS Pursuant to the provisions of the Deferred Compensation Agreements between Briggs & Stratton Corporation (the "Company") and the undersigned, Frederick P. Stratton, Jr., under each of which I have previously elected to have the amounts deferred converted into shares of phantom Company common stock, I hereby further elect to receive distributions under such Deferred Compensation Agreements in cash, rather than in Company stock, provided that, subject to the approval of the Compensation Committee of the Board of Directors, for purposes of determining the amount of cash to be distributed, my phantom stock units (including any phantom stock units acquired hereafter as a result of the crediting of dividend equivalents on my phantom stock unit balances in accordance with the terms of the Deferred Compensation Agreements) shall be valued at the mean between the highest and lowest reported sales prices of Company common stock on the New York Stock Exchange on this 3rd day of January, 2002, rather than the market price on the distribution date (regardless of whether the market price of the common stock on the distribution date is higher or lower than the fixed pay-out price hereby elected). Payment of distributions to me, which under the terms of the Deferred Compensation Agreements is to be made in a lump sum as soon as practicable following the end of the Company's 2002 fiscal year, since my employment with the Company terminated as of December 31, 2001, shall be subject to tax or other withholding requirements as may be required by law, and to all other applicable provisions of the Deferred Compensation Agreements. /s/ Frederick P. Stratton, Jr. ------------------------------- Frederick P. Stratton, Jr. /s/ Anne Y. Stratton ------------------------------- Anne Y. Stratton, his spouse APPROVAL OF COMPENSATION COMMITTEE By resolution duly adopted on January 15, 2002, the Compensation Committee of the Board of Directors of Briggs & Stratton Corporation has approved the attached "Notice of Election for Fixed Price Cash Pay-Out Under Deferred Compensation Agreements" of Frederick P. Stratton, Jr., dated January 3, 2002, with the Corporation's stock to be valued at $42.54 per share, which is the mean between the highest and lowest reported sales prices of Corporation common stock on the New York Stock Exchange on January 3, 2002. Dated January 15, 2002. /s/ Robert J. O'Toole --------------------------------------- Robert J. O'Toole, Chairman of the Compensation Committee EX-10.1 4 c69461ex10-1.txt AMENDED & RESTATED SUPPLEMENTAL EXEC. RETIREMENT BRIGGS & STRATTON CORPORATION FORM 10-Q for Quarterly Period Ended March 31, 2002 Exhibit No. 10.1 AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Effective January 1, 2000 BRIGGS & STRATTON CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Amended and Restated Effective as of January 1, 2000 TABLE OF CONTENTS
Page PREAMBLE ...........................................................................................1 ARTICLE I GENERAL....................................................................................2 1.1 Committee.........................................................................2 1.2 Deferred Compensation Plan........................................................2 1.3 Employer..........................................................................2 1.4 Plan..............................................................................2 1.5 Pension Plan......................................................................2 1.6 Service...........................................................................2 ARTICLE II ELIGIBILITY................................................................................3 2.1 Persons Eligible As Participants Under The Plan...................................3 ARTICLE III RETIREMENT BENEFITS........................................................................4 3.1 Time of Commencement and Amount...................................................4 3.2 Manner of Payment.................................................................5 3.3 Pre-retirement Spousal Survivor Annuity...........................................5 3.4 Pre-retirement Death Benefit......................................................6 3.5 Interpretation....................................................................7 3.6 Commutation of Benefit............................................................7 3.7 Committee Discretion..............................................................7 ARTICLE IV AMENDMENT AND TERMINATION..................................................................9 4.1 Amendment and Termination.........................................................9 4.2 Acceleration......................................................................9 ARTICLE V ADMINISTRATION............................................................................10 5.1 In General.......................................................................10 5.2 Committee Discretion.............................................................10 5.3 Committee Members' Conflict of Interest..........................................10 5.4 Governing Law....................................................................10 5.5 Expenses.........................................................................10 5.6 Minor or Incompetent Payees......................................................11 5.7 Withholding......................................................................11 5.8 Indemnification..................................................................11 ARTICLE VI BENEFITS UNFUNDED.........................................................................12 6.1 Unsecured Claim..................................................................12 6.2 Grantor Trust Only...............................................................12 ARTICLE VII NONALIENATION OF BENEFITS.................................................................13 ARTICLE VIII CLAIMS PROCEDURE..........................................................................14 8.1 Claims...........................................................................14 8.2 Timing of Notification of Claim Determination....................................14 8.3 Manner and Content of Notification of Claim Determination........................14 8.4 Appeal Procedure.................................................................14
i TABLE OF CONTENTS (continued)
Page 8.5 Timing of Notification of Claim Determination on Appeal..........................15 8.6 Manner and Content of Notification of Claim Determination on Appeal..............15 ARTICLE IX MISCELLANEOUS............................................................................16 9.1 No Right to Continued Employment.................................................16 9.2 Impact on Other Plans............................................................16 9.3 Severability.....................................................................16 9.4 Gender and Number................................................................16 9.5 Evidence Conclusive..............................................................16 9.6 Status of Plan Under ERISA.......................................................16 9.7 Name and Address Changes.........................................................16 9.8 Limitations on Provisions........................................................17 9.9 Identity of Payee................................................................17
ii PREAMBLE Briggs & Stratton Corporation hereby amends and restates, effective as of January 1, 2000, the Supplemental Executive Retirement Plan. 1 ARTICLE I General 1.1 Committee. The term "Committee" means the Compensation Committee of the Board of Directors of the Employer. Such Committee shall be the Plan Administrator of this Plan for purposes of the Employee Retirement Income Security Act of 1974. 1.2 Deferred Compensation Plan. The term "Deferred Compensation Plan" means the Briggs & Stratton Corporation Key Employees Savings and Investment Plan and any and all other deferred compensation agreements between the Participant and the Employer. 1.3 Employer. The term "Employer" means Briggs & Stratton Corporation. 1.4 Plan. The term "Plan" means the Briggs & Stratton Corporation Supplemental Executive Retirement Plan as set forth in this document and all subsequent amendments hereto. 1.5 Pension Plan. The term "Pension Plan" means the Briggs & Stratton Retirement Plan as amended from time to time. 1.6 Service. The term "Service" has the same meaning as defined in Section 3.02 of Part B of the Pension Plan. 2 ARTICLE II Eligibility 2.1 Persons Eligible As Participants Under The Plan. Each corporate officer who is a Participant in the Pension Plan shall be a Participant in this Plan. The Plan does not cover any person who terminated employment with the Employer prior to August 15, 1989. Each Participant in this Plan who terminates employment with the Employer on or after August 15, 1989 shall receive benefits based upon the provisions of this Plan as in effect at the time of such Participant's termination of employment. 3 ARTICLE III Retirement Benefits 3.1 Time of Commencement and Amount. (a) Normal or Late Retirement. In the case of a Participant who terminates employment with the Employer on or after his 65th birthday, his pension benefit hereunder shall commence on the first day of the month next following the date of his termination of employment. (b) Early Retirement. In the case of a Participant who terminates employment with the Employer prior to his 65th birthday but on or after his 55th birthday and after completing at least 10 but less than 30 years of Service, his pension benefit hereunder shall commence on either (i) the first day of the month following the later of (A) the date of his termination of employment or (B) his 62nd birthday or, if earlier, the date he would have completed 30 years of Service or (ii) if consented to by the Committee in its discretion, the first day of any month following the date of his termination of employment. (c) Special Early Retirement. In the case of a Participant who terminates employment with the Employer prior to his 65th birthday but after completing 30 years of Service, his pension benefit hereunder shall commence on the first day of the month following his termination of employment. (d) Disability Retirement. In the case of a Participant who terminates employment with the Employer prior to his 65th birthday but on or after incurring a Disability as defined in Section 2.03(l) of Part B of the Pension Plan and after completing 10 years of Service, his pension benefit hereunder shall commence on the first day of the month following the date of his termination of employment. (e) Amount. In the case of Normal, Late, Early, Special Early and Disability Retirement, the amount of monthly pension payable as a single life pension shall be (i) the amount of monthly pension which would have been payable to him under the Pension Plan as a single life monthly pension based on his retirement on the same date and commencement of his benefits on the same date if the provisions of Internal Revenue Code Sections 401(a)(17) and 415 did not exist, if he had made no deferrals under the Deferred Compensation Plan and if the benefit formula under Part B of the Pension Plan contained a multiplier of 2.1% (rather than 1.6%) minus (ii) the amount of pension, expressed as a single life monthly pension, actually payable to him under the Pension Plan based on his retirement on the same date and assuming benefits commence on the same date. (f) Termination of Employment. (1) In the case of a Participant who terminates employment with the Employer prior to his 65th birthday and prior to completing 10 years of Service, his pension benefit hereunder shall commence on the first day of the month next following the date he attains age 65. 4 (2) In the case of a Participant who terminates employment with the Employer prior to his 55th birthday after completing at least 10 but less than 30 years of Service, his pension benefit hereunder shall commence (i) on the first day of the month next following the date he attains age 65 or (ii) if consented to by the Committee in its discretion, the first day of any month next following his 55th birthday and prior to his 65th birthday requested by the Participant. (3) If benefits become payable under paragraphs (f)(1) or (f)(2), the amount of such monthly pension payable as a single life pension shall be (i) the amount of monthly pension which would have been payable to him under the Pension Plan as a single life monthly pension based on his termination on the same date and assuming commencement of benefits on the same date if the provisions of Internal Revenue Code Sections 401(a)(17) and 415 did not exist, if he had made no deferrals under the Deferred Compensation Plan, if the benefit formula under Part B of the Pension Plan contained a multiplier of 2.1% (rather than 1.6%) and if the Pension Plan did not require completion of 5 years of Service to be eligible for a benefit minus (ii) the amount of pension, expressed as a single life monthly pension, actually payable to him under the Pension Plan based on his termination on the same date and assuming benefits under the Pension Plan commence on the same date (or, in the case of a Participant with less than 5 years of Service, the amount which would have been payable under the Pension Plan if it had not required completion of 5 years of Service by the Participant in order for a pension to be payable). 3.2 Manner of Payment. If the Participant is unmarried at the time his pension benefit commences, his pension benefit shall be payable to him in the form of a single life monthly pension. If the Participant is married at the time his pension benefit commences, instead of receiving a single life monthly pension he shall receive a Joint and Survivor Pension. The Joint and Survivor Pension shall be a reduced monthly pension payable to the Participant for his life with a continuing pension payable after his death to his surviving spouse for her life in an amount equal to 50% of the reduced benefit payable during the life of the Participant. Such Joint and Survivor Pension shall be the actuarial equivalent of the single life monthly pension which would be payable to the Participant if he were unmarried. If so requested by the Participant and consented to by the Committee in its discretion, the Plan shall pay the benefit of a Participant for which the Participant is eligible in the form of a single life monthly pension or in one of the optional forms of benefit payable under Section 6.05 of Part B of the Pension Plan which is the actuarial equivalent of the single life monthly pension otherwise payable to the Participant hereunder. Actuarially equivalent benefits shall be determined under the factors set forth for determining actuarial equivalency in the Pension Plan. 3.3 Pre-retirement Spousal Survivor Annuity. (a) If any married Participant (including a terminated Participant) who has not met the age and service requirements to begin receiving a pension under Section 3.1(a), (b) or (c) dies before starting to receive payments hereunder, then his surviving spouse, if any, shall be entitled to a monthly benefit for life. (b) Provided that the surviving spouse survives to such commencement date, payment of such benefit will commence on (i) the first day of the month following the 5 Participant's or former Participant's date of death or, if later, 55th birthday or (ii) in the case of a Participant or former Participant who had not completed at least 10 years of Service, the first day of the month following the 65th birthday of the Participant or former Participant. (c) The amount of such monthly benefit for life shall be an amount equal to (i) what such spouse would have received as a survivor annuity under the Pension Plan, based on the Participant's Service and the benefit formula in effect under the Pension Plan on the date of his death or, if earlier, the date of his termination of employment, if the Participant had survived to and commenced to receive his pension on the later of his 55th birthday (65th birthday if the Participant had not completed at least 10 years of Service) or date of death in the Joint and Survivor Pension form, as described in Section 3.2, and died on the next day if the provisions of Internal Revenue Code Sections 401(a)(17) and 415 did not exist, if the Participant had made no deferrals under the Deferred Compensation Plan, if the benefit formula under Part B of the Pension Plan contained a multiplier of 2.1% (rather than 1.6%) and if the Pension Plan did not require completion of 5 years of Service for this benefit to apply minus (ii) the amount of any survivor annuity actually payable to the spouse under the Pension Plan based on the Participant's death on the same date and assuming the survivor annuity commenced on the same date (or, in the case of a Participant with less than 5 years of Service, the amount which would have been payable under the Pension Plan if it had not required completion of 5 years of Service by the Participant in order for the survivor annuity to be payable). (d) In addition to the payments otherwise due under paragraphs (a), (b) and (c), if the Participant had completed at least 10 years of Service and dies prior to what would have been the Participant's 55th birthday, then until the Participant's 55th birthday the Participant's spouse shall be entitled to receive a monthly amount of benefit which shall be computed as described under paragraph (c) above as though the Participant's 55th birthday coincided with the date of the Participant's death and the offset described in clause (ii) of paragraph (c) above did not exist. 3.4 Pre-retirement Death Benefit. (a) If any Participant (including any former Participant) who has met the age and service requirements for a pension under Section 3.1(a), (b) or (c) dies before starting to receive payments hereunder, then his surviving beneficiary, if any, shall be entitled to a survivor benefit. (b) Payment of such benefit will commence on the first day of the month following the Participant's or former Participant's date of death. (c) The amount of such survivor benefit shall be an amount equal to (i) what such beneficiary would have received as a survivor benefit under the Pension Plan if the Participant had terminated employment on the day before his death and commenced to receive benefits on that day under whichever of Section 3.1(a), (b) or (c) would have been applicable calculated on the assumption that the provisions of Internal Revenue Code Sections 401(a)(17) and 415 did not exist, the Participant had made no deferrals under the Deferred Compensation Plan and the benefit formula under Part B of the Pension Plan contained a multiplier of 2.1% (rather than 1.6%) minus (ii) the amount of survivor benefit actually payable to the beneficiary 6 under the Pension Plan based on the Participant's death on the same date and assuming the survivor benefit commenced on the same date. (d) The beneficiary shall be the same beneficiary as designated by the Participant for purposes of Section 6.03 of Part B of the Pension Plan (or, in the case of death after termination of employment, the beneficiary in effect under Section 6.04 of Part B of the Pension Plan) and the form of payment shall be the same form as in effect under Section 6.03 of Part B of the Pension Plan (or, in the case of death after termination of employment, the same form as in effect under Section 6.04 of Part B of the Pension Plan). 3.5 Interpretation. (a) With the exception of the fact that this Plan pays a benefit to an individual who terminates employment or dies prior to completion of 5 years of Service, it is the intention of the Employer that the benefits provided to the Participant and any beneficiary under this Plan and the Pension Plan together shall be no greater than would have been provided to the Participant and any beneficiary under the terms of the Pension Plan if the Participant had at all times been covered under the Pension Plan in accordance with its rules had the limitations of Internal Revenue Code Sections 415 and 401(a)(17) not existed and if the Participant had made no deferrals under the Deferred Compensation Plan (and if the formula in effect under Part B of the Pension Plan contained a multiplier of 2.1% rather than 1.6%). In the event that an individual's pension is increased under the Pension Plan after such individual commences to receive benefits hereunder, such increase shall be taken into account and shall reduce the remaining payments due the individual hereunder or, if the individual has received payment from this Plan in a lump sum, such individual shall be obligated to make monthly payments to the Employer equal to the monthly amounts by which the individual's payments from the Pension Plan have increased. (b) In computing the benefits which would be payable under this Plan in the absence of the offset for benefits payable under the Pension Plan, Schedule A of Part B of the Pension Plan and the first sentence of the last paragraph of Section 2.03(j) of Part B of the Pension Plan shall be ignored. However, in computing the amount of offset for amounts payable under the Pension Plan all amounts payable under the Pension Plan shall be taken into account including amounts payable under the Pension Plan as a result of Schedule A of Part B of the Pension Plan and the first sentence of the last paragraph of Section 2.03(j) of Part B of the Pension Plan. 3.6 Commutation of Benefit. The Committee, in its discretion, may determine to commute the benefits otherwise payable to a Participant or beneficiary hereunder, i.e., the Committee may direct that in lieu of the benefit otherwise payable to a Participant or a beneficiary hereunder, the Plan shall pay such individual a single lump sum cash payment which is the actuarial equivalent of the benefit otherwise payable. Actuarial equivalency shall be determined under the factors set forth in the Pension Plan. 3.7 Committee Discretion. As to the exercise of its discretion under this Plan, the Committee shall in no way be bound by past precedent in connection with other Participants, i.e., the fact that it may have directed an earlier payment commencement date or an alternative form 7 of payment for one Participant shall not in any way obligate the Committee to reach a similar decision for any subsequent Participant. Any Committee member who is also a Participant in this Plan shall not be authorized to vote or otherwise participate in the decision regarding the time or form of payment of that individual's benefit. 8 ARTICLE IV Amendment and Termination 4.1 Amendment and Termination. Briggs & Stratton Corporation may amend or terminate this Plan at any time through action of its Board of Directors. If the Plan is terminated no further benefits shall accrue hereunder. However, unless necessary to conform to any present or future federal or state law or regulation, amendment or termination may not result in a reduction of benefits of a Participant (or his surviving spouse) who is already receiving benefits, nor may amendment or termination result in a Participant who is still in active service (or his surviving spouse) receiving a benefit hereunder smaller than that to which he would have been entitled had the Participant terminated employment on the day prior to the effective date of such amendment or termination. The delegation of authority to the Committee in Section 1.1 and Article V does not extend to this Section 4.1. 4.2 Acceleration. The Committee may direct payment of a Participant's benefits in an actuarially equivalent lump sum before they otherwise would be payable hereunder at any time after the Plan is terminated or if, based on notification from the Internal Revenue Service or a review by the Committee in light of Internal Revenue Service guidance, the Committee determines that a Participant has or will recognize income for federal income tax purposes with respect to amounts that are or will be payable under the Plan before they are to be paid. Further, the Committee may direct payment of a Participant's benefits in an actuarially equivalent lump sum before they otherwise would be payable and may terminate a Participant's participation in the Plan if, based on notification from the Department of Labor or a review by the Committee in light of Department of Labor guidance, the Committee determines that an individual's participation in the Plan jeopardizes the Plan's status as a plan described in Section 9.6 hereof. 9 ARTICLE V Administration 5.1 In General. The Committee has such powers as may be necessary to direct the general administration of the Plan, including the powers given to it elsewhere in this document and including (but not by way of limitation) the following powers: (a) to construe and interpret the Plan and to make equitable adjustments for any mistakes or errors made in the administration thereof; (b) to prescribe such procedures, rules and regulations as it shall deem necessary or proper for the efficient administration of the Plan or any of its duties hereunder; (c) to decide questions of eligibility and determine the amount, manner and time of payment of any benefits and to direct the payment of the same by the Employer; (d) to prescribe the form and manner of application for any benefits hereunder and forms to be used in the general administration hereof; and (e) to receive from the Employer and Participants or their beneficiaries such information as shall be necessary for the proper administration of the Plan. 5.2 Committee Discretion. The Committee has full and complete discretionary authority to determine eligibility for benefits, to construe the terms of the Plan and to decide any matter presented through the claims review procedure. Any final determination by the Committee shall be binding on all parties and afforded the maximum deference allowed by law. If challenged in court, such determination shall not be subject to de novo review and shall not be overturned unless proven to be arbitrary and capricious upon the evidence considered by the Committee at the time of such determination. 5.3 Committee Members' Conflict of Interest. A member of the Committee who is covered hereunder may not vote or decide upon any matter relating solely to himself or vote in any case in which his individual right to any benefit under the Plan is particularly involved nor may a member of the Board who is covered hereunder vote to amend the Plan regarding the timing of distributions or vote with respect to direct or indirect termination of the Plan. Decisions shall be made by remaining Committee or Board members even if there is no quorum under normal Committee or Board rules. 5.4 Governing Law. This Plan shall be construed in accordance with the laws of the State of Wisconsin to the extent not preempted by the provisions of the Employee Retirement Income Security Act of 1974 or other federal law. 5.5 Expenses. All expenses and costs incurred in connection with the administration and operation of the Plan shall be borne by the Employer and/or the Trust. 10 5.6 Minor or Incompetent Payees. If a person to whom a benefit is payable is a minor or is otherwise incompetent by reason of a physical or mental disability, the Committee may cause the payments due to such person to be made to another person for the first person's benefit without any responsibility to see to the application of such payment. Such payments shall operate as a complete discharge of the obligations to such person under the Plan. 5.7 Withholding. To the extent required by law, the Employer shall withhold any taxes required to be withheld by the federal or any state or local government from payments made hereunder or from other amounts paid to the Participant by the Employer. To the extent that FICA taxes are required to be withheld from the Participant with respect to amounts credited under this Plan and no amounts are to be paid to the Participant hereunder or otherwise from the Employer from which such FICA taxes may be withheld, then the Employer shall pay such FICA taxes and the Participant's benefit hereunder shall be reduced by the amount of the FICA tax paid. 5.8 Indemnification. Except as otherwise provided by law, neither the Board or the Committee nor any individual member of the Board or the Committee, nor the Employer, nor any officer, shareholder or employee of the Employer shall be liable for any error of judgment, action or failure to act hereunder or for any good faith exercise of discretion, excepting only liability for gross negligence or willful misconduct. Such individuals and entities shall be indemnified and held harmless by the Employer against any and all claims, damages, liabilities, costs and expenses (including attorneys' fees) arising by reason of any good faith error of omission or commission with respect to any responsibility, duty or action hereunder. Nothing herein contained shall preclude the Employer from purchasing insurance to cover potential liability of one or more persons who serve in an administrative capacity with respect to the Plan. 11 ARTICLE VI Benefits Unfunded 6.1 Unsecured Claim. The right of any individual to receive payment under the provisions of this Plan shall be an unsecured claim against the general assets of the Employer, and no provisions contained in this Plan, nor any action taken pursuant to this Plan, shall be construed to give any individual at any time a security interest in any asset of the Employer, of any affiliated company, or of the stockholders of the Employer. The liabilities of the Employer to any individual pursuant to this Plan shall be those of a debtor pursuant to such contractual obligations as are created by this Plan and to the extent any person acquires a right to receive payment from the Employer under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Employer. 6.2 Grantor Trust Only. Benefits under this Plan are payable solely from the general assets of the Employer. The rights of Participants and beneficiaries hereunder shall not constitute or be treated as a trust fund of any kind. Title to and beneficial ownership of any assets which the Employer may earmark to pay deferred compensation hereunder shall at all times remain in the Employer and Participants and beneficiaries hereunder shall have no interest in any specific assets of the Employer by virtue of this Plan. Notwithstanding the foregoing, the Employer intends to finance its obligation hereunder via the Trust Agreement dated January 31, 1995 between the Employer and Johnson Heritage Trust Company (the "Trust"), which is intended to be a grantor trust, in the event of a Change of Control Event as defined in such Trust. It is the intention of all parties involved that the arrangements be unfunded for tax purposes and for purposes of Title I of ERISA. The Trust and any assets held by the Trust to assist it in meeting its obligations under the Plan are intended to conform to the terms of the model trust requirements set forth in Revenue Procedure 92-64 issued by the Internal Revenue Service. 12 ARTICLE VII Nonalienation of Benefits All benefits payable hereunder are for the sole use and benefit of the Participants and their beneficiaries and, to the extent permitted by law, shall be free, clear and discharged of and from, and are not to be in any way liable for, debts, contracts or agreements, now contracted or which may hereafter be contracted and from all claims and liabilities now or hereafter incurred by any Participant or beneficiary covered by this Plan. No Participant or beneficiary covered by this Plan shall have the right to anticipate, surrender, encumber, alienate or assign, whether voluntarily or involuntarily, any of the benefits to become due hereunder unto any person or person upon any terms whatsoever, and any attempt to do so shall be void. 13 ARTICLE VIII Claims Procedure 8.1 Claims. If the Participant or the Participant's beneficiary (hereinafter refereed to as "claimant") believes he is being denied any benefit to which he is entitled under this Plan for any reason, he may file a written claim with the member of the Committee designated as the claims administrator. The claimant may designate an authorized representative to act on his behalf in connection with his claim. 8.2 Timing of Notification of Claim Determination. The claims administrator shall review the claim and notify the claimant of its decision with respect to his claim within a reasonable period of time, but not later than 90 days after receipt of the claim by the claims administrator, unless the claims administrator determines that special circumstances require an extension of time for processing the claim. If the claims administrator determines that an extension of time for processing is required, written notice of the extension will be furnished to the claimant prior to the termination of the initial 90-day period. In no event will the extension exceed a period of 90 days from the end of the initial 90-day period. The extension notice will indicate the special circumstances requiring an extension of time and the date by which the claims administrator expects to render the claim determination. 8.3 Manner and Content of Notification of Claim Determination. The claims administrator will provide the claimant with written or electronic notification of any adverse claim determination. The notification will set forth: (a) The specific reason or reasons for the adverse determination; (b) Reference to the specific plan provisions on which the determination is based; (c) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) A description of the plan's claim appeal procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA") following an adverse claim determination on appeal. 8.4 Appeal Procedure. A claimant is entitled to request the entire Committee to review any denial by written request to the Committee within 60 days of receipt of the denial. Absent a request for review within the 60-day period, the claim will be deemed to be conclusively denied. In connection with the claimant's appeal the claimant may submit written comments, documents, records and other information relating to the claimant's claim. Upon request the claimant will be provided, free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant's claim for benefits. The Committee's decision regarding the claimant's appeal will take into account all comments, documents, records and other information the claimant submits relating to the claimant's claim, 14 without regard to whether such information was submitted or considered in the initial claim determination. 8.5 Timing of Notification of Claim Determination on Appeal. The Committee will notify the claimant of its determination of the claimant's claim on appeal within a reasonable period of time, but not later than 60 days after receipt of the claimant's request for review by the Committee unless the Committee determines that special circumstances require an extension of time for processing the claim. If the Committee determines that an extension of time for processing is required, written notice of the extension will be furnished to the claimant prior to the termination of the initial 60-day period. In no event will the extension exceed a period of 60 days from the end of the initial 60-day period. The extension notice will indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the determination on review. 8.6 Manner and Content of Notification of Claim Determination on Appeal. The Committee will provide the claimant with written or electronic notification of its determination with respect to the claimant's appeal. In the case of an adverse claim determination on appeal, the notification will set forth: (a) The specific reason or reasons for the adverse determination; (b) Reference to the specific plan provisions on which the determination is based; (c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits. (d) A statement of the claimant's right to bring an action under section 502(a) of ERISA. 15 ARTICLE IX Miscellaneous 9.1 No Right to Continued Employment. Neither participation in this Plan, nor the payment of any benefit hereunder, shall be construed as giving to the Participant any right to be retained in the service of the Employer, or limiting in any way the right of the Employer to terminate the Participant's employment at any time. Nor does the participation in this Plan guarantee the Participant the right to receive any specific amount of compensation or bonus, such amount being determined solely under such applicable compensation or bonus arrangement as established by the Employer. 9.2 Impact on Other Plans. No amounts credited to any Participant under this Plan and no amounts paid from this Plan will be taken into account as "wages", "salary", "base pay" or any other type of compensation when determining the amount of any payment or allocation, or for any other purpose, under any other qualified or nonqualified pension or profit sharing plan of the Employer or other plan or program of the Employer, except as otherwise may be specifically provided by such plan or program. 9.3 Severability. If any provisions of the Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts of the Plan, but this Plan shall be construed and enforced as if said illegal and invalid provisions had never been included herein. 9.4 Gender and Number. Masculine gender shall include the feminine, and the singular shall include the plural, unless the context clearly indicates otherwise. 9.5 Evidence Conclusive. The Employer, the Committee and any person or persons involved in the administration of the Plan shall be entitled to rely upon any certification, statement, or representation made or evidence furnished by any person with respect to any facts required to be determined under any of the provisions of the Plan, and shall not be liable on account of the payment of any monies or the doing of any act or failure to act in reliance thereon. Any such certification, statement, representation, or evidence, upon being duly made or furnished, shall be conclusively binding upon the person furnishing it but not upon the Employer, the Committee or any other person involved in the administration of the Plan. Nothing herein contained shall be construed to prevent any such parties from contesting any such certification, statement, representation, or evidence or to relieve any person from the duty of submitting satisfactory proof of any fact. 9.6 Status of Plan Under ERISA. The Plan is intended to be an unfunded plan maintained by an Employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, as described in Section 201(2), Section 301(a)(3), Section 401(a)(1) and Section 4021(b)(6) of the Employee Retirement Income Security Act of 1974, as amended. 9.7 Name and Address Changes. Each Participant shall keep his name and address on file with the Employer and shall promptly notify the Employer of any changes in his name or address. All notices required or contemplated by this Plan shall be deemed to have been given to 16 a Participant if mailed with adequate postage prepaid thereon addressed to him at his last address on file with the Employer. If any check in payment of a benefit hereunder (which was mailed to the last address of the payee as shown on the Employer's records) is returned unclaimed, further payments shall be discontinued unless evidence is furnished that the recipient is still alive. 9.8 Limitations on Provisions. The provisions of the Plan and any benefits payable hereunder shall be limited as described herein. Any benefit payable under the Pension Plan shall be paid solely in accordance with the terms and provisions of the Pension Plan, and nothing in the Plan shall operate or be construed in any way to modify, amend, or affect the terms and provisions of the Pension Plan. 9.9 Identity of Payee. If at any time any doubt exists as to the identity of any person entitled to payment of any benefit hereunder or as to the amount or time of any such payment, such sum shall be held by the Employer until such doubt is cured or the Employer may pay such sum into a court of competent jurisdiction in accordance with any lawful procedure in such case made and provided. 17 EX-10.2 5 c69461ex10-2.txt AMENDED & RESTATED ECONOMIC VALUE ADDED COMP. PLAN BRIGGS & STRATTON CORPORATION FORM 10-Q for Quarterly Period Ended March 31, 2002 Exhibit No. 10.2 AMENDED AND RESTATED ECONOMIC VALUE ADDED INCENTIVE COMPENSATION PLAN Effective July 1, 2002 As Amended and Restated Effective 7-1-02 BRIGGS & STRATTON CORPORATION ECONOMIC VALUE ADDED INCENTIVE COMPENSATION PLAN As adopted by the Board of Directors on November 12, 1990, and amended and restated by resolution of the Board of Directors effective as of April 18, 1995, further amended by resolutions effective October 17, 1995 and April 16, 1997; further amended and restated by resolution of the Board of Directors on April 21, 1999, further amended by resolutions of the Board of Directors on October 17, 2000, on October 17, 2001 effective July 1, 2001, and on April 17, 2002 effective July 1, 2002 BRIGGS & STRATTON CORPORATION ECONOMIC VALUE ADDED INCENTIVE COMPENSATION PLAN - -------------------------------------------------------------------------------- I. Plan Objectives A. To promote the maximization of shareholder value over the long term by providing incentive compensation to key employees of Briggs & Stratton Corporation (the "Company") in a form which is designed to financially reward participants for an increase in the value of the Company to its shareholders. B. To provide competitive levels of compensation to enable the Company to attract and retain employees who are able to exert a significant impact on the value of the Company to its shareholders. C. To encourage teamwork and cooperation in the achievement of Company goals. D. To recognize differences in the performance of individual participants. II. Plan Administration The Compensation Committee of the Board of Directors (the "Committee") shall be responsible for the design, administration, and interpretation of the Plan. III. Definitions A. "Accrued Bonus" means the bonus, which may be negative or positive, which is calculated in the manner set forth in Section V.A. B. "Actual EVA" means the EVA as calculated for the relevant Plan Year. C. "Base Salary" means the amount of a Participant's base compensation earned during the Plan Year without adjustment for bonuses, salary deferrals, value of benefits, imputed income, special payments, amounts contributed to a savings plan or similar items. D. "Capital" means the Company's weighted average monthly operating capital for the Plan Year, calculated as follows: Current Assets - Non-operating Investments + Bad Debt Reserve + LIFO Reserve - Deferred Tax Liabilities or Assets Classified as Current Assets - Current Noninterest-Bearing Liabilities + Warranty Reserve + Environmental Reserve + Property, Plant, Equipment, Net - Construction in Progress + Other Assets (not including prepaid Pension Costs) (+/-) Unusual Capital Items E. "Capital Charge" means the deemed opportunity cost of employing Capital in the Company's businesses, determined as follows: Capital Charge = Capital X Cost of Capital F. "Cost of Capital" means the weighted average of the cost of equity and the after tax cost of debt for the relevant Plan Year on a market value basis. The Cost of Capital will be determined (to the nearest tenth of a percent) by the Committee prior to each Plan Year, consistent with the following methodology: 2 a) Cost of Equity = Risk Free Rate + (Business Risk Index X Average Equity Risk Premium) b) Debt Cost of Capital = Debt Yield X (1 - Tax Rate) c) The weighted average of the Cost of Equity and the Debt Cost of Capital is determined by reference to the actual debt-to-capital ratio where the Risk Free Rate is the average daily closing yield rate on 10 year U.S. Treasury Bonds for the month of March immediately preceding the relevant Plan Year, the Business Risk Index is determined by using an average of the Beta available in the four (4) most recent Value Line reports on the Company. The Average Equity Risk Premium is 6%, the Debt Yield is the weighted average yield of all borrowing included in the Company's permanent capital, and the tax rate is the combination of the relevant federal and state income tax rates. G. "Designated Key Contributor" means those Participants named by the Chief Executive Officer as a Designated Key Contributor under the Plan. H. "Divisional EVA Performance Factor" means an Individual Performance Factor calculated in the same manner as the Company Performance Factor as set forth in Section VI.A., except that EVA, Actual EVA, Target EVA, EVA Leverage Factor, NOPAT, Capital, Capital Charge, Cost of Capital and other relevant terms shall be defined by reference to the particular operating division, service division or sales group, not by reference to the entire Company. I. "Economic Value Added" or "EVA" means the NOPAT that remains after subtracting capital Charge, expressed as follows: NOPAT - Capital Charge = EVA EVA may be positive or negative. J. "EVA Leverage Factor" means the expected deviation in EVA from the average EVA, generally reflected as a percentage of capital employed. For purposes of this Plan, the Company's EVA Leverage Factor is determined to be $34 million. K. "NOPAT" means cash adjusted net operating profits after taxes for the Plan Year, calculated as follows: Net Sales - Cost of Goods Sold (+/-) Change in LIFO Reserve - Engineering/Selling & Administration - Normal Pension Costs (+/-) Change in Bad Debt Reserve (-) Eliminate the Pension Income from Overfunded Pension Plans (+/-) Change in Warranty Reserve (+/-) Change in Environmental Reserve (+/-) Other Income & Expense on Non-Operating Investments (+/-) Other Unusual Income or Expense Items (+/-) Amortization of Unusual Income or Expense Items - Cash Taxes on the Above (+/- change in deferred tax liability) L. "Plan Year" means the one year period coincident with the Company's fiscal year. M. "Senior Executives" means those Participants designated as Senior Executives by the Committee with respect to any Plan Year. 3 EXHIBIT 10.2 N. "Target EVA" means the target level of EVA for the Plan Year, determined as follows: Prior Year Prior Year Target EVA = Target EVA + Actual EVA + Expected Improvement --------------------------- 2 Expected Improvement will be $2 million, except that it shall not be added to the current Plan Year Target EVA to the extent it would make such Target EVA exceed $32 million. IV. Eligibility A. Eligible Positions. In general, all Company Officers, Division General Managers, and members of the corporate operations group, and certain direct reports of such individuals may be eligible for participation in the Plan. However, actual participation will depend upon the contribution and impact each eligible employee may have on the Company's value to its shareholders, as determined by the Chief Executive Officer of the Company, and approved by the Committee. B. Nomination and Approval. Each Plan year, the Chief Executive Officer of the Company will nominate eligible employees to participate in the Plan for the next Plan Year. The Committee will have the final authority to select Plan participants (the "Participants") among the eligible employees nominated by the Chief Executive Officer of the Company. Continued participation in the Plan is contingent on approval of the Committee. Selection normally will take place, and will be communicated to each Participant, prior to the beginning of the pertinent Plan Year. V. Individual Participation Levels A. Calculation of Accrued Bonus. Each Participant's Accrued Bonus will be determined as a function of the Participant's Base Salary, the Participant's Target Incentive Award (provided in paragraph V.B., below), Company Performance Factor (provided in Section VI.A.) and the Individual Performance Factor (provided in Section VI.B.) for the Plan Year. Each Participant's Accrued Bonus will be calculated as follows: Target Company Target Individual 30% Participant's x Incentive x Performance + 70% Participant's x Incentive x Performance Base Salary Award Factor Base Salary Award Factor
B. Target Incentive Awards. The Target Incentive Awards will be determined according to the following schedule:
Target Incentive Award Executive Position (% of Base Salary) ------------------ ------------------ Chief Executive Officer 100% Executive Vice President & Senior Vice President 60% Other Elected Officers 40% Division General Manager 40% Designated Key Contributors 25% All Others 20%
VI. Performance Factors A. Company Performance Factor Calculation. For any Plan Year, the Company Performance Factor will be calculated as follows: Company Performance Factor = 1.00 + Actual EVA - Target EVA ------------------------- EVA Leverage Factor B. Individual Performance Factor Calculation. Determination of the Individual Performance Factor will be the responsibility of the individual to whom the participant reports. This determination will be subject to approval by the Committee and should be in conformance with the process set forth below: 4 (1) Quantifiable Supporting Performance Factors. The Individual Performance Factor of the Accrued Bonus calculation will be based on the accomplishment of individual, financial and/or other goals ("Supporting Performance Factors"). Whenever possible, individual performance will be evaluated according to quantifiable benchmarks of success. These Supporting Performance Factors will represent an achievement percentage continuum that ranges from 50% to 150% of the individual target award opportunity, and will be enumerated from .5 to 1.5 based on such continuum. Provided, however, that if the Quantifiable Supporting Performance Factor is based on divisional EVA and is calculated in the same manner as the Company Performance Factor as set forth in Section VI.A. with respect to such division (such Supporting Performance Factor referred to herein as a Divisional EVA Performance Factor), then the Supporting Performance Factor may be unlimited, if so approved by the Committee. A Quantifiable Supporting Performance Factor may also be unlimited if the Quantifiable Supporting Performance Factor as approved by the Committee for such individual is the same as the Company Performance Factor determined in accordance with Section VI.A. (2) Non-Quantifiable Supporting Performance Factors. When performance cannot be measured according to a quantifiable monitoring system, an assessment of the Participant's overall performance may be made based on a Non-Quantifiable Supporting Performance Factor (or Factors). The person to whom the Participant reports will evaluate the Participant's performance, and this evaluation will determine the Participant's Supporting Performance Factor (or Factors) according to the following schedule:
Individual Supporting Performance Rating Performance Factor ------------------ ------------------ Outstanding 1.3 - 1.5 Excellent 1.1 - 1.3 Good .9 - 1.1 Satisfactory .5 - .9 Unsatisfactory 0
(3) Aggregate Individual Performance Factor. The Individual Performance Factor to be used in the calculation of the Accrued Bonus shall be equal to the average (or weighted average) of one or more Quantifiable and/or Non-Quantifiable Supporting Performance Factors according to relative importance, except that the Non-Quantifiable Supporting Performance Factor shall account for no more than 15% of the Accrued Bonus. VII. Change in Status During the Plan Year A. New Hire, Transfer, Promotion, Demotion A newly hired employee or an employee transferred, promoted, or demoted during the Plan Year to a position qualifying for participation (or leaving the participating class) may accrue (subject to discretion of the Committee) a pro rata Accrued Bonus based on the percentage of the Plan Year (actual weeks/full year times a full year award amount for that position) the employee is in each participating position. B. Discharge An employee discharged during the Plan Year shall not be eligible for an Accrued Bonus, even though his or her service arrangement or contract extends past year-end, unless the Committee determines that the conditions of the termination indicate that a prorated Accrued Bonus is appropriate. The Committee shall have full and final authority in making such a determination. C. Resignation An employee who resigns during the Plan Year to accept employment elsewhere (including self-employment) will not be eligible for an Accrued Bonus. 5 D. Death, Disability, Retirement If a Participant's employment is terminated during a Plan Year by reason of death, disability, or normal or early retirement under the Company's retirement plan, a tentative Accrued Bonus will be calculated as if the Participant had remained employed as of the end of the Plan Year. The final Accrued Bonus will be calculated by multiplying the tentative Accrued Bonus by a proration factor. The proration factor will be equal to the number of full weeks of employment during the Plan Year divided by fifty-two. For purposes of this section, the date a participant is deemed to be terminated pursuant to disability shall be the date the employee begins receiving a monthly Long Term Disability Benefit under the Company's Group Insurance Plan. Each employee may name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in case of the employee's death. Each such designation shall revoke all prior designations by the employee, shall be in the form prescribed by the Committee, and shall be effective only when filed by the employee in writing with the Committee during his or her lifetime. In the absence of any such designation, benefits remaining unpaid at the employee's death shall be paid to the employee's estate. E. Leave of Absence An employee whose status as an active employee is changed during a Plan Year as a result of a leave of absence may, at the discretion of the Committee, be eligible for a pro rata Accrued Bonus determined in the same way as in paragraph D. of this Section. VIII. Bonus Paid and Bonus Bank All or a portion of the Accrued Bonus will be either paid to the Participant or credited to or charged against the Bonus Bank as provided in this Article. A. Participants Who Are Not Senior Executives. All positive Accrued Bonuses of Participants who are not Senior Executives for the Plan Year shall be paid in cash, less amounts required by law to be withheld for income and employment tax purposes, on or before the end of the second month following the end of the Plan Year in which the Accrued Bonus was earned. Participants who are not Senior Executives shall not be charged or otherwise assessed for negative Accrued Bonuses nor shall such Participants have any portion of their Accrued Bonuses banked. B. Participants Who Are Senior Executives. The Total Bonus Payout to Participants who are Senior Executives for the Plan Year shall be as follows: Accrued Bonus - Extraordinary Bonus Accrual + Bank Payout = Total Bonus Payout The Total Bonus Payout for each Plan Year, less amounts required by law to be withheld for income tax and employment tax purposes, shall be paid on or before the end of the second month following the end of the Plan Year in which it was earned. C. Establishment of a Bonus Bank. To encourage a long term commitment to the enhancement of shareholder value by Senior Executives, "Extraordinary Bonus Accruals" shall be credited to an "at risk" deferred account ("Bonus Bank") for each such Participant, and all negative Accrued Bonuses shall be charged against the Bonus Bank, as determined in accordance with the following: 1. "Bonus Bank" means, with respect to each Senior Executive, a bookkeeping record of an account to which Extraordinary Bonus Accruals are credited, and negative Accrued Bonuses debited as the case may be, for each Plan Year, and from which bonus payments to such Senior Executive are debited. 6 2. "Bank Balance" means, with respect to each Senior Executive, a bookkeeping record of the net balance of the amounts credited to and debited against such Senior Executive's Bonus Bank. The Bank Balance shall initially be equal to zero. 3. "Extraordinary Bonus Accrual" shall mean the amount of the Accrued Bonus for any year that exceeds 1.25 times the portion of the Senior Executive's Base Salary which is represented by the Target Incentive Award in the event that the beginning Bank Balance is positive or zero, and .75 times the portion of the Senior Executive's Base Salary which is represented by the Target Incentive Award to the extent that the beginning Bank Balance is negative. 4. Annual Allocation. Each Senior Executive's Extraordinary Bonus Accrual or negative Accrued Bonus is credited or debited to the Bonus Bank maintained for that Senior Executive. Such Annual Allocation will occur as soon as possible after the conclusion of each Plan Year. Although a Bonus Bank may as a result of negative Accrual Bonuses have a deficit, no Senior Executive shall be required, at any time, to reimburse his/her Bonus Bank. 5. "Available Balance" means that the Bank Balance at the point in time immediately after the Annual Allocation has been made. 6. "Payout Percentage" means the percentage of the Available Balance that may be paid out in cash to the Participant. The Payout Percentage will equal 33%. 7. "Bank Payout" means the amount of the Available Balance that may be paid out in cash to the Senior Executive for each Plan Year. The Bank Payout is calculated as follows: Bank Payout = Available Balance X Payout Percentage The Bank Payout is subtracted from the Bank Balance. 8. Treatment of Available Balance Upon Termination a) Resignation or Termination With Cause. Senior Executives leaving voluntarily to accept employment elsewhere (including self-employment) or who are terminated with cause will forfeit their Available Balance. b) Retirement, Death, Disability or Termination Without Cause. In the event of a Senior Executive's normal or early retirement under the Company's retirement plan, death, disability, or termination without cause, the Available Balance, less amounts required by law to be withheld for income tax and employment tax purposes, shall be paid to the Senior Executive on or before the end of the second month following the end of the Plan Year in which the termination for one of such events occurred. c) For purposes of this Plan "cause" shall mean: (i) any act or acts of the Participant constituting a felony under the laws of the United States, any state thereof or any foreign jurisdiction; (ii) any material breach by the Participant of any employment agreement with the Company or the policies of the Company or the willful and persistent (after written notice to the Participant) failure or refusal of the Participant to comply with any lawful directives of the Board; (iii) a course of conduct amounting to gross neglect, willful misconduct or dishonesty; or (iv) any misappropriation of material property of the Company by the Participant or any misappropriation of a corporate or business opportunity of the Company by the Participant. 7 IX. Administrative Provisions A. Amendments. The Board of Directors of the Company shall have the right to modify or amend this Plan from time to time, or suspend it or terminate it entirely; provided that no such modification, amendment, suspension, or termination may, without the consent of any affected participants (or beneficiaries of such participants in the event of death), reduce the rights of any such participants (or beneficiaries, as applicable) to a payment or distribution already earned under Plan terms in effect prior to such change. B. Interpretation of Plan. Any decision of the Committee with respect to any issues concerning individual selected for awards, the amount, terms, form and time of payment of awards, and interpretation of any Plan guideline, definition, or requirement shall be final and binding. C. Effect of Award on Other Employee Benefits. By acceptance of a bonus award, each recipient agrees that such award is special additional compensation and that it will not affect any employee benefit, e.g., life insurance, etc., in which the recipient participates, except as provided in paragraph D. below. D. Retirement Programs. Awards made under this Plan shall be included in the employee's compensation for purposes of the Company Retirement Plans and Savings Plan. E. Right to Continued Employment; Additional Awards. The receipt of a bonus award shall not give the recipient any right to continued employment, and the right and power to dismiss any employee is specifically reserved to the Company. In addition, the receipt of a bonus award with respect to any Plan Year shall not entitle the recipient to an award with respect to any subsequent Plan Year. F. Adjustments to Performance Goals. When a performance goal is based on Economic Value Added or other quantifiable financial or accounting measure, it may be necessary to exclude significant nonbudgeted or noncontrollable gains or losses from actual financial results in order to properly measure performance. The Committee will decide those items that shall be considered in adjusting actual results. For example, some types of items that may be considered for exclusion are: (1) Any gains or losses which will be treated as extraordinary in the Company's financial statements. (2) Profits or losses of any entities acquired by the Company during the Plan Year, assuming they were not included in the budget and/or the goal. (3) Material gains or losses not in the budget and/or the goal which are of a nonrecurring nature and are not considered to be in the ordinary course of business. Some of these would be as follows: (a) Gains or losses from the sale or disposal of real estate or property. (b) Gains resulting from insurance recoveries when such gains relate to claims filed in prior years. (c) Losses resulting from natural catastrophes, when the cause of the catastrophe is beyond the control of the Company and did not result from any failure or negligence on the Company's part. G. Vesting. All amounts due but unpaid to any Participant under this plan shall vest, subject to the terms of this EVA Plan, upon actual termination of employment of the Participant. X. Miscellaneous A. Indemnification. Each person who is or who shall have been a member of the Committee or of the Board, or who is or shall have been an employee of the Company, shall not be liable for, and shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with any claim, action, suit, or proceeding to which he or she may be a party by reason of any action taken or failure to act under this Plan. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or 8 Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. B. Expenses of the Plan. The expenses of administering this Plan shall be borne by the Company. C. Withholding Taxes. The Company shall have the right to deduct from all payments under this Plan any Federal or state taxes required by law to be withheld with respect to such payments. D. Governing Law. This Plan shall be construed in accordance with and governed by the laws of the State of Wisconsin. 9 EX-10.3 6 c69461ex10-3.txt AMENDED & RESTATED DIRECTOR'S LEVERAGED ST. OP. PG BRIGGS & STRATTON CORPORATION FORM 10-Q for Quarterly Period Ended March 31, 2002 Exhibit 10.3 AMENDED AND RESTATED DIRECTOR'S LEVERAGED STOCK OPTION PROGRAM Effective July 1, 2002 BRIGGS & STRATTON CORPORATION DIRECTOR'S LEVERAGED STOCK OPTION PROGRAM As adopted by the Board of Directors on April 16, 1997, effective beginning Fiscal 1998 and amended by resolutions effective July 1, 1999 and July 1, 2002 BRIGGS & STRATTON CORPORATION DIRECTOR'S LEVERAGED STOCK OPTION PLAN 1.0 Objectives The Director's Leveraged Stock Option Plan ("Director's LSO Plan" or "Plan") is designed to build upon the Company's Economic Value Added Incentive Compensation Plan ("EVA Plan") for key employees and Leveraged Stock Option Program ("LSO Program") for Senior Executives by tying the interests of the Company's directors to the long term market value added performance of the Company. In this way, the objectives of directors will be more closely aligned with those of the Company's Shareholders. The Director's LSO Plan will allow nonemployee directors to participate in the long-term appreciation in the equity value of the Company. In general, the Plan is structured such that each nonemployee director may receive options on the Company's Stock ("LSOs"), the number of such LSOs to be determined by reference to the Company Performance Factor achieved under the EVA Plan. These LSOs become exercisable after they have been held for three years, and they expire at the end of ten years. The Director's LSO Plan is structured so that a fair return must be provided to the Company's Shareholders before the options become valuable. 2.0 Administration The Plan shall be administered by the Board of Directors ("Board"). 3.0 Stock Subject to Plan The total number of shares reserved and available for distribution pursuant to LSOs under the Plan shall be 100,000 shares of the Company's common stock, par value $0.01 per share ("Stock"). Such shares may consist, in whole or in part, of treasury or market purchase shares. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split or other change in corporate structure affecting the Stock, such substitution or adjustments shall be made in the aggregate number of shares reserved for issuance under the Plan, and in the number and option price of shares subject to outstanding LSOs, as may be determined to be appropriate by the Board, in its sole discretion; provided, however, that the number of shares subject to any award shall always be a whole number. 4.0 Eligibility Each nonemployee director of the Company shall be eligible to participate in the Plan. 5.0 Leveraged Stock Option Grant For fiscal 1998 and subsequent fiscal years, each nonemployee director of the Company who serves as a director through the end of the fiscal year shall receive a number of LSOs determined as follows, based on the Company Performance Factor achieved under the EVA Plan for that fiscal year: 2
Company Performance Factor Number of LSOs -------------------------- -------------- Under .5 0 .5 1,000 1.0 2,000 1.5 3,000 2.0 4,000 Over 2.0 An additional 1,000 LSOs for each .5 increase in the Company Performance Factor
LSO grants shall be evidenced by option agreements, the terms and provisions of which shall be determined by this Director's LSO Plan or the Board. These grants will be awarded at the same time the Company awards grants to Senior Executives under the LSO Program. The LSOs shall constitute non-qualified stock options. No LSO shall be transferable by the optionee other than by will or by the laws of descent and distribution, and all LSOs shall be exercisable, during the optionee's lifetime, only by the optionee or by the guardian or legal representative of the optionee, it being understood that the terms "holder" and "optionee" include the guardian and legal representative of the optionee named in the option agreement and any person to whom an option is transferred by will or the laws of descent and distribution. If an optionee's service as a director terminates by reason of death, any LSO held by such optionee may thereafter be exercised, to the extent then exercisable or on such accelerated basis as the Board may determine, for a period of one year (or such other period as the Board may specify at grant) from the date of such death or until the expiration of the stated term of such LSO, whichever period is shorter. When an optionee's service as a director terminates due to reaching the mandatory retirement age or due to retirement upon reaching the end of the term for which elected, an LSO held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of such retirement or on such accelerated basis as the Board may determine, for a period of three years (or such shorter period as the Board may specify at grant) from the date of such retirement or until the expiration of the stated term of such LSO, whichever period is shorter; provided, however, that if the optionee dies within such three-year (or such shorter) period, any unexercised LSO held by such optionee shall, notwithstanding the expiration of such three-year (or such shorter) period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of one year from the date of such death or until the expiration of the stated term of such LSO, whichever period is shorter. When an optionee's service as a director terminates for any reason other than death or retirement as described above, unless otherwise determined by the Board at grant, the LSO shall thereupon terminate, except that such LSO, to the extent then exercisable, may be exercised for the lesser of three months or the balance of the term. Notwithstanding the foregoing, if an optionee's service as a director terminates at or after a Change in Control (as defined in the Company's Stock 3 Incentive Plan), other than by death or retirement (as described above), any LSO held by such optionee shall be exercisable for the lesser of (x) six months and one day, and (y) the balance of such LSO's term. 6.0 Term All LSOs shall be exercisable beginning on the third anniversary of the date of grant, and shall terminate on the tenth anniversary of the date of grant, unless sooner exercised or the Board determines other dates at grant. 7.0 Exercise Price The exercise price for LSOs granted hereunder shall be the exercise price for LSOs granted under the LSO Program for Senior Executives for that fiscal year. 8.0 Definitions All capitalized terms used herein that are not otherwise defined shall have the same meaning given to them in the EVA Plan, LSO Program or Stock Incentive Plan. 9.0 Amendments and Termination The Board may amend, alter, or discontinue the Plan but no amendment, alteration or discontinuation shall be made which would impair the rights of an optionee under an LSO granted without the optionee's or recipient's consent. The Board may amend the terms of any LSO theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any holder without the holder's consent. Subject to the above provisions, the Board shall have authority to amend the Plan to take into account changes in law and tax and accounting rules, as well as other developments. 10.0 Unfunded Status of Plan It is presently intended that the Plan constitute an "unfunded" plan for incentive and deferred compensation. The Board may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock; provided, however, that, unless the Board otherwise determines, the existence of such trusts or other arrangements is consistent with the "unfunded" status of the Plan. 11.0 General Provisions (a) The Board may require each person purchasing shares pursuant to an LSO grant to represent to and agree with the Company in writing that the optionee or participant is acquiring the shares without a view to the distribution thereof. 4 All certificates for shares of Stock or other securities delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Board may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is then listed and any applicable Federal or state securities law, and the Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (b) Nothing contained in this Plan shall prevent the Company, a subsidiary or affiliate from adopting other or additional compensation arrangements for its nonemployee directors. (c) The adoption of the Plan shall not confer upon any director any right to continue to serve as a director. (d) The Plan and all awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Wisconsin. 5 EX-10.4 7 c69461ex10-4.txt AMENDED & RESTATED LEVERAGED STOCK OPTION PROGRAM BRIGGS & STRATTON CORPORATION Form 10-Q for Quarterly Period Ended March 31, 2002 Exhibit 10.4 AMENDED AND RESTATED LEVERAGED STOCK OPTION PROGRAM Effective July 1, 2002 BRIGGS & STRATTON CORPORATION LEVERAGED STOCK OPTION PROGRAM As adopted by the Nominating and Salaried Committee of the Board of Directors on August 16, 1993 and amended by resolutions effective July 31, 1995, July 1, 1999, July 25, 2001 and July 1, 2002 BRIGGS & STRATTON CORPORATION LEVERAGED STOCK OPTION PROGRAM 1.0 Objectives. The Leveraged Stock Option Program ("LSO Program") is designed to build upon the Company's Economic Value Added Incentive Compensation Plan ("EVA Plan") by tying the interests of all Senior Executives to the long term consolidated results of the Company. In this way, the objectives of Senior Executives throughout the Company will be more closely aligned with the Company's Shareholders. Whereas the EVA Plan provides for near and intermediate term rewards, the LSO Program provides a longer term focus by allowing Senior Executives to participate in the long-term appreciation in the equity value of the Company. In general, the LSO Program is structured such that each year an amount equivalent to the Total Bonus Payout under the EVA Plan is invested on behalf of Senior Executives in options on the Company's Stock ("LSOs"). These LSOs become exercisable after they have been held for three years, and they expire at the end of ten years. The LSO Program is also structured so that a fair return must be provided to the Company's Shareholders before the options become valuable. 2.0 Leveraged Stock Option Grant. For fiscal 1994 and subsequent years, the dollar amount to be invested in LSOs for each Senior Executive shall be equal to the amount of each Participant's Total Bonus Payout determined under the EVA Plan as amended effective for fiscal year 1994. The number of LSOs awarded shall be determined by dividing (a) the dollar amount of such LSO award by (b) 10% of the Fair Market Value of Company stock on the date of the grant, as determined by the Committee, rounded (up or down) to the nearest 10 shares. Fair Market Value is defined in the Company's Stock Incentive Plan ("SIP Plan"). 3.0 Term. All LSOs shall be exercisable beginning on the third anniversary of the date of grant. All LSOs granted for fiscal years through June 30, 1999 shall terminate on the fifth anniversary of the date of grant unless sooner exercised, unless the Committee determines other dates. All LSOs granted for fiscal years from July 1, 1999 through June 30, 2002 shall terminate on the seventh anniversary of the date of grant unless sooner exercised, unless the Committee determines other dates. All LSOs granted thereafter shall terminate on the tenth anniversary of the date of grant unless the Committee determines other dates. 4.0 Exercise Price. Effective for fiscal years commencing July 1, 2002 or later, the exercise price for LSOs shall be the product of 90% of the Fair Market Value per share as determined above, times the sum taken to the third 2 (3rd) power of (a) 1, plus (b) the Estimated Annual Growth Rate, but in no event may the exercise price be less than Fair Market Value on the date of grant. The Estimated Annual Growth Rate (intended to represent annual percentage stock appreciation at least in the amount of the Company's cost of capital, with due consideration for dividends paid, risk and illiquidity) is the average daily closing 10 year U.S. Treasury bond yield rate for the month of March immediately preceding the relevant Plan Year, plus 1%. So, Exercise Price = (.9 x FMV) x (1 + Estimated Annual Growth Rate)(3) Example: $75 share price; 7.85% Estimated Annual Growth Rate (6.85% 10 year U.S. Treasury bond rate, plus 1%): $67.50 (90% FMV x (1.0785)(3) = $84.68 5.0 Limitations on LSO Grants and Carryover. Notwithstanding Section 2, the maximum number of LSOs that may be granted to all Senior Executives for any Plan Year of this LSO Program, shall be 600,000, and the maximum number of LSOs that may be granted cumulatively under this LSO Program shall be 4,539,986. In the event that the 600,000 limitation shall be in effect for any Plan Year, the dollar amount to be invested for each Senior Executive shall be reduced by proration based on the aggregate Total Bonus Payouts of all Senior Executives so that the limitation is not exceeded. The amount of any such reduction shall be carried forward to subsequent years and invested in LSOs to the extent the annual limitation is not exceeded in such years. 6.0 The Stock Incentive Plan. Except as modified herein, LSOs are Incentive Stock Options under the Company's SIP Plan as amended from time to time to the extent they are eligible for treatment as such under Section 422 of the Internal Revenue Code. If not eligible for ISO Treatment, the LSOs shall constitute nonqualified stock options. Except as specifically modified herein, LSOs shall be governed by the terms of the Company's Stock Incentive Plan, and shall be granted as described in this LSO Program annually unless the Committee modifies or terminates either the EVA Plan or the SIP Plan. As provided in the SIP Plan, all grants of LSOs to Participants who are subject to Sec. 16(b) of the Securities Exchange Act of 1934 are subject to approval of the Company Shareholders. In the event such approval is not obtained, this Program shall terminate. 7.0 Definitions. All capitalized terms used herein that are not otherwise defined shall have the same meaning given to them in the Company's Economic Value Added Incentive Compensation Plan. 3 EX-11 8 c69461ex11.txt COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK EXHIBIT 11 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK (In thousands except per share data)
Quarter Ended Nine Months Ended ------------------------ ------------------------ March 31, April 1, March 31, April 1, 2002 2001 2002 2001 --------- -------- --------- -------- COMPUTATIONS FOR STATEMENTS OF INCOME Basic earnings per share of common stock: Net income $37,614 $29,889 $22,569 $43,513 ======= ======= ======= ======= Average shares of common stock outstanding 21,620 21,599 21,608 21,600 ======= ======= ======= ======= Basic earnings per share of common stock $ 1.74 $ 1.38 $ 1.04 $ 2.01 ======= ======= ======= ======= Diluted earnings per share of common stock: Net income $37,614 $29,889 $22,569 $43,513 Adjustment to net income to add after-tax interest expense on convertible notes 1,138 -- -- -- ------- ------- ------- ------- Adjusted net income $38,752 $29,889 $22,569 $43,513 ======= ======= ======= ======= Average shares of common stock outstanding 21,620 21,599 21,608 21,600 Incremental common shares applicable to common stock options based on the common stock average market price during the period 5 9 7 10 Incremental common shares applicable to restricted common stock based on the common stock average market price during the period 5 4 5 4 Incremental common shares applicable to convertible notes based on the conversion provisions of the convertible notes 2,826 -- -- -- ------- ------- ------- ------- Average common shares assuming dilution 24,456 21,612 21,620 21,614 ======= ======= ======= ======= Fully diluted earnings per average share of common stock, assuming conversion of all applicable securities $ 1.58 $ 1.38 $ 1.04 $ 2.01 ======= ======= ======= =======
EX-12 9 c69461ex12.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in thousands)
Nine Months Ended ----------------------------- March 31, 2002 April 1, 2001 -------------- ------------- Net income $22,569 $43,513 Add: Interest 33,923 21,689 Income tax expense and other taxes on income 11,636 25,550 Fixed charges of unconsolidated subsidiaries -- -- ------- ------- Earnings as defined $68,128 $90,752 ======= ======= Interest $33,923 $21,689 Fixed charges of unconsolidated subsidiaries -- -- ------- ------- Fixed charges as defined $33,923 $21,689 ======= ======= Ratio of earnings to fixed charges 2.01 x 4.18 x ======= =======
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