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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended December 26, 2004

OR

For the transition period from                      to                     

Commission file number 1-1370

BRIGGS & STRATTON CORPORATION

(Exact name of registrant as specified in its charter)

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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

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.

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BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

INDEX

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PART I - FINANCIAL INFORMATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

ASSETS

The accompanying notes are an integral part of these statements.

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CONSOLIDATED CONDENSED BALANCE SHEETS (Continued)

(In thousands, except per share data)

LIABILITIES & SHAREHOLDERS’ INVESTMENT

The accompanying notes are an integral part of these statements.

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CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

The accompanying notes are an integral part of these statements.

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

The accompanying notes are an integral part of these statements.

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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 accounting principles generally accepted in the United States. However, in the opinion of Briggs & Stratton, 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 consolidated condensed financial statements should be read in conjunction with the financial statements and the notes thereto which were included in our latest Annual Report on Form 10-K.

Common Stock

On August 4, 2004, Briggs & Stratton’s board approved a two–for–one stock split of its common stock, which became effective on October 29, 2004 following shareholder approval of the amendment to the Briggs & Stratton Corporation Articles of Incorporation. The stock split was distributed on November 9, 2004 to shareholders of record on October 29, 2004. Certain references in the Consolidated Condensed Financial Statements to the number of common shares and related per share amounts have been restated to reflect the stock split.

Accounts Receivable

Accounts Receivable include $40 million from Murray Inc., a major original equipment manufacturer. Murray, Inc. filed a voluntary petition for reorganization under Chapter 11 of the U. S. Bankruptcy Code on November 8, 2004. Accordingly, during the first and second quarter of fiscal 2005 we have recorded a reserve of $10 million and $30 million, respectively. At December 26, 2004 the receivable is fully reserved.

Earnings Per Share

Basic earnings per share, for each period presented, is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed reflecting the potential dilution that would occur if options or other contracts to issue common stock were exercised or converted into common stock at the beginning of the period.

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Information on earnings per share is as follows (in thousands):

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Comprehensive Income

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. Comprehensive income is defined as net income and other changes in shareholders’ investment from transactions and events other than with shareholders. Total comprehensive income is as follows (in thousands):

The components of Accumulated Other Comprehensive Income (Loss) are as follows (in thousands):

Derivatives

Derivatives are recorded on the balance sheet as assets or liabilities, measured at fair value. 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. Briggs & Stratton has used interest rate swaps designated as fair value hedges to manage its debt portfolio. These instruments generally have maturities and terms consistent with the underlying debt instrument. In April 2004, all interest rate swaps were terminated.

Changes in the fair value of cash flow hedges are recorded on the Consolidated Condensed Statements of Income or on the Consolidated Condensed Balance Sheets as a component of Accumulated Other Comprehensive Income (Loss). The amounts included in Accumulated Other Comprehensive Income (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. Changes in the fair value of fair value hedges related to interest rate swaps were recorded as either an increase or decrease to long-term debt. Changes in the fair value of all derivatives deemed to be ineffective are recorded as either income or expense in the accompanying Consolidated Condensed Statements of Income.

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Segment and Geographic Information

Briggs & Stratton operates in two reportable business segments that are managed separately based on fundamental differences in their operations. Summarized segment data is as follows (in thousands):

Warranty

Briggs & Stratton recognizes the cost associated with its standard warranty on Engines and Power Products at the time of sale. The amount recognized is based on historical failure rates and current claim cost experience. The following is a reconciliation of the changes in accrued warranty costs for the reporting period (in thousands):

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Stock Options

Briggs & Stratton has an Incentive Compensation Plan that is accounted for under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. Under the plan, no compensation cost has been recognized. Had compensation cost for this plan been determined consistent with Statement of Financial Accounting Standard (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” and SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”, the Company’s net income and earnings per share would have been reduced to the following pro forma amounts (in thousands, except per share data):

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Pension and Postretirement Benefits

Briggs & Stratton has noncontributory, defined benefit retirement plans and postretirement plans covering certain employees. The following tables summarize the plans’ income and expense for the periods indicated (in thousands):

Employer Contributions:

Briggs & Stratton does not expect to make any contributions to the pension plans in fiscal 2005.

Estimated Benefit Payments for Unfunded Plans:

Briggs & Stratton expects to make benefit payments of approximately $1.6 million for its non-qualified pension plan during fiscal 2005. As of December 26, 2004, Briggs & Stratton had made payments of approximately $0.8 million. Briggs & Stratton anticipates benefit payments of approximately $28.4 million for its other postretirement benefit plans during fiscal 2005. As of December 26, 2004, Briggs & Stratton had made payments of approximately $14.2 million.

Subsequent Event

On January 25, 2005, Briggs & Stratton Power Products Group, LLC and Briggs & Stratton Canada, Inc., which are wholly-owned subsidiaries of Briggs & Stratton Corporation, (collectively “Briggs”) executed an Asset Purchase Agreement (the “APA”) with Murray, Inc. and Murray Canada Co. (collectively “Murray”). On January 31, 2005, the United States Bankruptcy Court for the Middle District of Tennessee approved this agreement.

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The APA provides for the purchase by Briggs of substantially all of the Murray assets in the United States and Canada, excluding real estate located in the United States, for an aggregate purchase price of $125 million. The final closing of this transaction remains subject to, among other things, expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

The APA contains customary representations, warranties and closing conditions, and provides that the purchase price of $125 million is subject to adjustment for the Murray working capital at closing.

Acquisition

On July 7, 2004, Briggs & Stratton and its subsidiary, Briggs & Stratton Power Products Group, LLC (“BSPPG”) acquired Simplicity Manufacturing, Inc. (“Simplicity”). Simplicity designs, manufactures and markets a wide variety of premium yard and garden tractors, lawn tractors, riding mowers, snow throwers, attachments, and other lawn and garden products like rototillers and chipper shredders. The purchase price included $240.9 million of cash, a $10.0 million liability for future tax benefits subject to adjustment based on the actual tax benefits received and $130.1 million of liabilities assumed. The cash paid included $17.8 million of cash acquired and $9.3 million of direct acquisition costs.

The acquisition has been accounted for using the purchase method of accounting. The purchase price was allocated on a preliminary basis to identifiable assets acquired and liabilities assumed based upon their estimated fair values, with the excess purchase price recorded as goodwill. Final adjustments to the purchase price allocation, which will include the resolution of certain tax matters, are not expected to be material to the consolidated financial statements.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

Other intangible assets are comprised of trademarks, patents and customer relationships. Patents have been assigned an estimated weighted average useful life of thirteen years. The customer relationships have been assigned an estimated useful life of twenty-five years. The patents and customer relationships are being amortized on a straight-line basis. The trademarks and goodwill, which are considered to have an indefinite life and will not be amortized, will be tested annually for impairment.

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The following table summarizes pro forma results for the three and six months ended December 28, 2003 as though the business combination had been completed at the beginning of the earliest comparable period (in thousands, except per share data):

New Accounting Pronouncements

In December 2004, the FASB issued Statement 123R, “Share-Based Payment,” to be effective for interim or annual periods beginning after June 15, 2005; thereby, becoming effective for Briggs & Stratton in the first quarter of fiscal 2006. Statement 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as an operating expense in the income statement. The cost is recognized over the requisite service period based on fair values measured on grant dates. The new standard may be adopted using either the modified prospective transition method or the modified retrospective method. We are currently evaluating our share-based employee compensation programs, the potential impact of this statement on our consolidated financial position and results of operations, and the alternative adoption methods.

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Financial Information of Subsidiary Guarantor of Indebtedness

In June 1997, Briggs & Stratton issued $100 million of 7.25% senior notes and in May 2001, the Company issued $275 million of 8.875% senior notes. In addition, Briggs & Stratton has a $275 million revolving credit facility that expires in May 2009 that is used to finance seasonal working capital needs.

Under the terms of Briggs & Stratton’s 8.875% senior notes, 7.25% senior notes and the revolving credit agreement (collectively, the “Domestic Indebtedness”), BSPPG and effective July 7, 2004, its wholly owned subsidiary Simplicity Manufacturing Inc., are joint and several guarantors of the Domestic Indebtedness (the “Guarantor”). The guarantees are full and unconditional guarantees. 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. Currently, all of the Domestic Indebtedness is unsecured. If Briggs & Stratton were to fail to make a payment of interest or principal on its due date, the Guarantor is obligated to pay the outstanding Domestic Indebtedness. Briggs & Stratton had the following outstanding amounts related to the guaranteed debt (in thousands):