Washington, D.C. 20549

______________________________________________________ 

(Mark One)

For the fiscal year ended July 3, 2016

OR

For the transition period from __________ to __________

Commission file number 1-1370

_____________________________________________________________

(Exact name of registrant as specified in its charter)

12301 West Wirth Street, Wauwatosa, Wisconsin 53222

(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: 414-259-5333

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   o No x

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   o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   x     No   o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K or any amendment of this Form 10-K.   x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o    No    x

The aggregate market value of Common Stock held by nonaffiliates of the registrant was approximately $705.2 million based on the last reported sale price of such securities as of December 24, 2015 , the last business day of the most recently completed second fiscal quarter.

Number of Shares of Common Stock Outstanding at August 18, 2016 : 43,111,917 .

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the definitive proxy statement for the Annual Meeting to be held on October 26, 2016.

Cautionary Statement on Forward-Looking Statements

This report contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. The words "anticipate", "believe", "estimate", "expect", "forecast", "intend", "plan", "project", and similar expressions are intended to identify forward-looking statements. The forward-looking statements are based on the Company's current views and assumptions and involve risks and uncertainties that include, among other things, the ability to successfully forecast demand for its products; changes in interest rates and foreign exchange rates; the effects of weather on the purchasing patterns of consumers and original equipment manufacturers (OEMs); actions of engine manufacturers and OEMs with whom we compete; changes in laws and regulations; changes in customer and OEM demand; changes in prices of raw materials and parts that we purchase; changes in domestic and foreign economic conditions (including effects from the U.K.'s decision to exit the European Union); the ability to bring new productive capacity on line efficiently and with good quality; outcomes of legal proceedings and claims; the ability to realize anticipated savings from restructuring actions; and other factors disclosed from time to time in its SEC filings or otherwise, including the factors discussed in Item 1A, Risk Factors, of this Annual Report on Form 10-K and in the Company's periodic reports on Form 10-Q. The Company is not undertaking any obligation to update forward-looking statements or other statements it may make even though these statements may be affected by events or circumstances occurring after the forward-looking statements or statements were made.

Briggs & Stratton Corporation ("Briggs & Stratton" or the "Company") is the world's largest producer of gasoline engines for outdoor power equipment. Briggs & Stratton designs, manufactures, markets, sells and services these products for original equipment manufacturers (OEMs) worldwide. In addition, the Company markets and sells related service parts and accessories for its engines. Briggs & Stratton is recognized worldwide for its strong brand name and a reputation for quality, design, innovation and value.

The Company's wholly owned subsidiaries include North America's number one marketer of pressure washers, and it is a leading designer, manufacturer and marketer of power generation, lawn and garden, turf care and job site products through its Simplicity®, Snapper®, Snapper Pro®, Ferris®, PowerBoss®, Allmand™, Billy Goat®, Murray®, Branco® and Victa® brands. Briggs & Stratton products are designed, manufactured, marketed, sold, and serviced in over 100 countries on six continents.

The Company conducts its operations in two reportable segments: Engines and Products. Further information about Briggs & Stratton's business segments is contained in Note 9 of the Notes to Consolidated Financial Statements.

The Company's internet address is www.basco.com. The Company makes available free of charge (other than an investor's own internet access charges) through its internet website the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after it electronically files such material with, or furnishes such material to, the Securities and Exchange Commission. Charters of the Audit, Compensation, Finance, and Nominating and Governance Committees, Corporate Governance Guidelines, Stock Ownership Guidelines and code of business conduct and ethics contained in the Briggs & Stratton Business Integrity Manual are available on the Company's website and are available in print to any shareholder upon request to the Corporate Secretary. The information contained on and linked from the Company's website is not incorporated by reference into this Annual Report on Form 10-K.

Engines Segment

General

Briggs & Stratton manufactures four-cycle aluminum alloy gasoline engines with horsepower ranging from 5.5hp up to 37hp and torques that range from 4.50 ft-lbs gross torque to 21.00 ft-lbs gross torque. The Company's engines are used primarily by the lawn and garden equipment industry, which accounted for 87% of the Engines segment's fiscal 2016 engine sales to OEMs. Major lawn and garden equipment applications include walk-behind lawn mowers, riding lawn mowers, garden tillers and snow throwers. The remaining 13% of engine sales to OEMs in fiscal 2016 was for use on products for industrial, construction, agricultural and other consumer applications that include portable and standby generators, pumps and pressure washers. Many retailers specify the Company's engines on the power equipment they sell and the Briggs & Stratton logo is often featured prominently on a product because of the appeal and reputation of the brand.

In fiscal 2016 approximately 31% of the Engines segment net sales was derived from sales in international markets, primarily to customers in Europe. The Company serves its key international markets through its European regional office in Switzerland, its distribution center in the Netherlands and sales and service subsidiaries in Australia, Austria, Brazil, Canada, China, the Czech Republic, England, France, Germany, India, Italy, Japan, Malaysia, Mexico, New Zealand, Russia, South Africa, Spain, and Sweden. Briggs & Stratton is a leading supplier of gasoline engines in developed countries where there is an established lawn and garden equipment market. Briggs & Stratton also exports engines to developing nations where its engines are used in agricultural, marine, construction and other applications. More information about its foreign operations is in Note 9 of the Notes to Consolidated Financial Statements.

The Company's engines are sold primarily by its worldwide sales force through direct interaction with customers. The Company's marketing staff and engineers provide support and technical assistance to its sales force.

The Engines segment also manufactures replacement engines and service parts and sells them to sales and service distributors. During fiscal 2014, the Company joined with one of its independent distributors to form Power Distributors, LLC (the venture) to distribute service parts in the United States. The Company contributed non-cash assets in exchange for receiving an ownership interest in the venture. Subsequent to its formation, the venture acquired the service businesses of three additional independent domestic distributors. During the third quarter of fiscal 2016, the Company contributed cash as well as non-cash assets in exchange for receiving an additional ownership interest in the venture. Also during the third quarter of fiscal 2016, the venture acquired the assets of the final independent distributor needed to achieve a national distribution network. The Company's remaining domestic distributors are independently owned and operated. The Company owns its principal international distribution centers, but also uses independently owned and operated distributors.

These distributors supply service parts and replacement engines directly to independently owned, authorized service dealers throughout the world. These distributors and service dealers incorporate the Company's commitment to reliability and service.

Customers

The Company's engine sales are primarily to OEMs. The Company's three largest external engine customers in fiscal years 2016, 2015 and 2014 were Husqvarna Outdoor Products Group (HOP), MTD Products Inc. (MTD) and Deere & Company. Engines segment sales to the top three customers combined were 49%, 48% and 51% of Engines segment sales in fiscal 2016, 2015 and 2014, respectively. Under purchasing plans available to all of its gasoline engine customers, Briggs & Stratton typically enters into annual engine supply arrangements. In certain cases, the Company has entered into longer supply arrangements of two to three years.

The Company believes that in fiscal 2016 more than 80% of all lawn and garden powered equipment sold in the United States was sold through mass merchandisers such as The Home Depot, Inc. (The Home Depot), Lowe's Companies, Inc. (Lowe's), Sears Holdings Corporation (Sears) and Wal-Mart Stores, Inc. (Wal-Mart). Given the buying power of the mass merchandisers, Briggs & Stratton, through its customers, has continued to experience pricing pressure; however, the development of new and innovative products may assist the Company and its customers in realizing higher margins.

Competition

The Company's major competitors in engine manufacturing are Honda Motor Co., Ltd. (Honda), Kawasaki Heavy Industries, Ltd. (Kawasaki) and Kohler Co. (Kohler). Several Japanese and Chinese small engine manufacturers, of which Honda and Kawasaki are the largest, compete directly with the Company in world markets in the sale of engines to other OEMs and indirectly through their sale of end products.

The Company believes it has a significant share of the worldwide market for engines that power outdoor equipment.

The Company believes the major areas of competition from all engine manufacturers include product quality, brand, price, delivery and service. Other factors affecting competition are short-term market share objectives, short-term profit objectives, exchange rate fluctuations, technology, new product innovation, product support, distribution strength, and advertising. The Company believes its technology, product value, distribution, marketing, and service reputation have given it strong brand name recognition and enhanced its competitive position.

Seasonality of Demand

Sales of engines to lawn and garden OEMs are highly seasonal because of consumer buying patterns. The majority of lawn and garden equipment is sold during the spring and summer months when most lawn care and gardening activities are performed. Sales of lawn and garden equipment are also influenced by consumer sentiment, employment levels, new and existing home sales and weather conditions. Engine sales in the Company's third fiscal quarter have historically been the highest, while sales in the first fiscal quarter have historically been the lowest.

In order to efficiently use its capital investments and meet seasonal demand for engines, the Company pursues a relatively balanced production schedule throughout the year. The schedule is adjusted to reflect changes in estimated demand, customer inventory levels and other matters outside the control of the Company. Accordingly, inventory levels generally increase during the first and second fiscal quarters in anticipation of customer demand. Inventory levels begin to decrease as sales increase in the third fiscal quarter. This seasonal pattern results in high inventories and low cash flow for the Company in the first, second and the beginning of the third fiscal quarters. The pattern generally results in higher cash flow in the latter portion of the third fiscal quarter and in the fourth fiscal quarter as inventories are liquidated and receivables are collected.

Manufacturing

The Company manufactures engines and parts at the following locations: Auburn, Alabama; Statesboro, Georgia; Murray, Kentucky; Poplar Bluff, Missouri; Wauwatosa, Wisconsin; and Chongqing, China. Briggs & Stratton has a parts distribution center in Menomonee Falls, Wisconsin and Nijmegen, Netherlands. The Engines segment also purchases certain products under contract manufacturing agreements.

The Company manufactures a majority of the structural components used in its engines, including aluminum die castings, carburetors and ignition systems. The Company purchases certain parts such as piston rings, spark plugs, valves, ductile and grey iron castings, plastic components, some stampings and screw machine parts and smaller quantities of other components. Raw material purchases consist primarily of aluminum and steel. The Company believes its sources of supply are adequate.

The Company has joint ventures with Daihatsu Motor Company for the manufacture of engines in Japan, and with Starting Industrial of Japan for the production of rewind starters and punch pressed components in the United States.

During the first quarter of fiscal 2016, the Company implemented and completed restructuring actions within the Engines segment. These actions included a headcount reduction at its plant in Chongqing, China to offset lower production of engines used on snow throwers.

Products Segment

General

The Products segment's principal product lines include portable and standby generators, pressure washers, snow throwers, lawn and garden power equipment, turf care, and job site products. Products sells its products through multiple channels of retail distribution, including consumer home centers, warehouse clubs, mass merchants and independent dealers and distributors. The Company sells its lawn and garden products, turf care, and standby generators primarily through an independent dealer network and sells its pressure washers and portable generators primarily through the U.S. mass retail channel. The Company sells its job site products primarily into the rental, construction, mining and oil & gas industries.

The Products segment product lines are marketed under its own brands such as Briggs & Stratton, Simplicity®, Snapper®, Snapper Pro®, Ferris®, Allmand™, Billy Goat®, Murray®, Branco® and Victa®, as well as other brands such as Craftsman and Troy-Bilt.

In fiscal 2013, the Company exited placement of lawn and garden products at national mass retailers. The Engines segment continues to support lawn and garden equipment OEMs who provide lawn and garden equipment to these retailers. In certain cases, the Company may license its brand name to others for use in selling lawn and garden equipment in the U.S. mass retail channel. The Products segment continues to focus on innovative, higher margin products that are sold through its independent dealer network and regional retailers. The Company also continues to sell pressure washers and portable and standby generators through the U.S. mass retail channel.

In fiscal 2015, the Company began implementing restructuring actions to narrow its assortment of lower-priced Snapper consumer lawn and garden equipment and consolidate its Products segment manufacturing facilities in order to further reduce costs. The Company continues to focus on premium residential products to customers through its Snapper and Simplicity brands and commercial products through its Snapper Pro and Ferris brands. The Company closed its McDonough, Georgia location in the fourth quarter of fiscal 2015 and consolidated production into existing facilities. Production of pressure washers, riding mowers, and snow

throwers has been moved to the Company's Wauwatosa, Wisconsin facility. These restructuring actions were completed in the fourth quarter of fiscal 2016.

Products has a network of independent dealers worldwide for the sale and service of snow throwers, standby generators and lawn and garden powered equipment. To support its international business, Products has leveraged the existing Briggs & Stratton worldwide distribution network and regional sales offices.

During fiscal 2014, the Company joined with one of its independent distributors to form Power Distributors, LLC (the venture) to distribute service parts in the United States. The Company contributed non-cash assets in exchange for receiving an ownership interest in the venture. Subsequent to its formation, the venture acquired the service businesses of three additional independent domestic distributors. During the third quarter of fiscal 2016, the Company contributed cash as well as non-cash assets in exchange for receiving an additional ownership interest in the venture. Also during the third quarter of fiscal 2016, the venture acquired the assets of the final independent distributor needed to achieve a national distribution network. 

Customers

Historically, Products' major customers have included Lowe's, Sears, PACE Inc., The Home Depot, Wal-Mart, Tractor Supply Inc., Bunnings Warehouse, as well as numerous distributors and dealers. Sales to the top three customers combined were 25%, 27% and 27% of Products segment net sales in fiscal 2016, 2015 and 2014, respectively.

Competition

The principal competitive factors in the power products industry include price, service, product performance, brand, innovation and delivery. Products has various competitors, depending on the type of equipment. Primary competitors include: Honda (portable generators, pressure washers and lawn and garden equipment), Generac Power Systems, Inc. (portable and standby generators and job site products), Alfred Karcher GmbH & Co. (pressure washers), Techtronic Industries (pressure washers and portable generators), Deere & Company (commercial and consumer lawn mowers), MTD (commercial and consumer lawn mowers), The Toro Company (commercial and consumer lawn mowers), Scag Power Equipment, a Division of Metalcraft of Mayville, Inc. (commercial lawn mowers), and HOP (commercial and consumer lawn mowers).

Seasonality of Demand

A significant portion of Products' sales are subject to seasonal patterns. Due to seasonal and regional weather factors, sales of pressure washers and lawn and garden powered equipment are typically higher during the third and fourth fiscal quarters than at other times of the year. Sales of portable generators and snow throwers are typically higher during the first and second fiscal quarters and can spike during weather related power outage events.

Manufacturing

Products' manufacturing facilities are located in Munnsville, New York; Wauwatosa, Wisconsin; Holdrege, Nebraska; Lee's Summit, Missouri; and Sydney, Australia. Products also purchases certain powered equipment under contract manufacturing agreements.

Products manufactures core components for its products, where such integration improves operating profitability by providing lower costs.

Products purchases engines from its parent, Briggs & Stratton, as well as from Honda, Kawasaki and Kohler. Products has not experienced any difficulty obtaining necessary engines or other purchased components.

Products assembles products for the international markets at its U.S. and Australian locations and through contract manufacturing agreements with other OEMs and suppliers.

Consolidated

General Information

The Company holds patents on features incorporated in its products; however, the success of the Company's business is not considered to be primarily dependent upon patent protection. The Company owns several

trademarks which it believes significantly affect a consumer's choice of outdoor powered equipment and job site products, and therefore create value. Licenses, franchises and concessions are not a material factor in the Company's business.

For the fiscal years ended July 3, 2016 , June 28, 2015  and June 29, 2014 , the Company spent approximately $20.0 million , $19.9 million and $19.7 million , respectively, on research activities relating to the development of new products or the improvement of existing products.

In fiscal 2016, the Company initiated a limited offer for former employees with vested pension benefits to elect to receive a lump sum payout of their benefit. This program reduced the size of the pension plan while allowing former employees who accepted the offer to control the investment of their retirement funds. The Company completed this program during fiscal 2016. As a result of this program, the Company recognized pension settlement expense of $20.2 million during fiscal 2016.

The average number of persons employed by the Company during fiscal 2016 and fiscal 2015 was 5,549 and 5,682, respectively. Employment in fiscal 2016 ranged from a high of 5,641 in February 2016 to a low of 5,439 in July 2015.

Export Sales

Export sales for fiscal 2016, 2015 and 2014 were $285.5 million (16% of net sales), $334.0 million (18% of net sales) and $314.6 million (17% of net sales), respectively. These sales were principally to customers in Europe, Asia, Australia, and Canada.

Refer to Note 9 of the Notes to Consolidated Financial Statements for financial information about geographic areas. Also, refer to Item 7A of this Form 10-K and Note 15 of the Notes to Consolidated Financial Statements for information about Briggs & Stratton's foreign exchange risk management.

In addition to the risks referred to elsewhere in this Annual Report on Form 10-K, the following risks, among others, may have affected, and in the future could materially affect, the Company and its subsidiaries' business, financial condition or results of operations.

Demand for products fluctuates significantly due to seasonality. In addition, changes in the weather and consumer confidence impact demand.

Sales of our products are subject to seasonal and consumer buying patterns. Consumer demand in our markets can be reduced by unfavorable weather and weak consumer confidence. Although we manufacture throughout the year, our sales are concentrated in the second half of our fiscal year. This operating method requires us to anticipate demand of our customers many months in advance. If we overestimate or underestimate demand during a given year, we may not be able to adjust our production quickly enough to avoid excess or insufficient inventories, and that may in turn limit our ability to maximize our potential sales or maintain optimum working capital levels.

We have only a limited ability to pass through cost increases in our raw materials to our customers during the year.

We generally enter into annual purchasing plans with our largest customers, so our ability to raise our prices during a particular year to reflect increased raw materials costs is limited.

A significant portion of our net sales comes from major customers and the loss of any of these customers would negatively impact our financial results.

In fiscal 2016, our three largest customers accounted for 32% of our consolidated net sales. The loss of any of these customers or a significant portion of the business from one or more of our key customers would significantly impact our net sales and profitability.

A significant change or disruption in the U.S. retail market for lawn and garden products could have an adverse impact on our business.

The retail market in the U.S. for lawn and garden products is concentrated with a few large traditional retailers. A disruption or significant change at any of these large traditional retailers could have an adverse impact on our customers and on our business.

Changes in environmental or other laws could require extensive changes in our operations or to our products.

Our operations and products are subject to a variety of foreign, federal, state and local laws and regulations governing, among other things, emissions to air, discharges to water, noise, the generation, handling, storage, transportation, treatment and disposal of waste and other materials and health and safety matters. We do not expect these laws and regulations to have an adverse effect on us, but we cannot be certain that these or other proposed changes in applicable laws or regulations, or their enforcement, will not adversely affect our business or financial condition in the future.

Our international operations are subject to risks and uncertainties, which could adversely affect our business or financial results.

In fiscal 2016 , we derived approximately 28% of our consolidated net sales from international markets, primarily Europe. Our international operations are subject to various economic, political, and other risks and uncertainties that could adversely affect our business and operating results, including, but not limited to, regional or country specific economic downturns, fluctuations in currency exchange rates, labor practices, complications in complying with, or exposure to liability under, a variety of laws and regulations, including anti-corruption laws and regulations, political instability and significant natural disasters and other events or factors impacting local infrastructure.

Actions of our competitors could reduce our sales or profits.

Our markets are highly competitive and we have a number of significant competitors in each market. Competitors may reduce their costs, lower their prices or introduce innovative products that could adversely affect our sales or profits. In addition, our competitors may focus on reducing our market share to improve their results.

Disruptions caused by labor disputes or organized labor activities could harm our business and reputation.

Currently, approximately 12% of our workforce is represented by labor unions. In addition, we may from time to time experience union organizing activities in our non-union facilities. Disputes with the current labor union or new union organizing activities could lead to work slowdowns or stoppages and make it difficult or impossible for us to meet scheduled delivery times for product shipments to our customers, which could result in loss of business and damage to our reputation. In addition, union activity could result in higher labor costs, which could harm our financial condition, results of operations and competitive position.

Our level of debt and our ability to obtain debt financing could adversely affect our operating flexibility and put us at a competitive disadvantage.

Our level of debt and the limitations imposed on us by the indenture relating to the Senior Notes (as defined below) and our other credit agreements could have important consequences, including the following:

The terms of the indenture for the 6.875% Senior Notes due December 2020 (the "Senior Notes") do not fully prohibit us from incurring substantial additional debt in the future and our revolving credit facilities permit additional borrowings, subject to certain conditions. If incremental debt is added to our current debt levels, the related risks we now face could intensify.

We expect to obtain the money to pay our expenses and to pay the principal and interest on the outstanding Senior Notes, the credit facilities and other debt primarily from our operations or by refinancing part of our existing debt. Our ability to meet our expenses thus depends on our future performance, which will be affected by financial, business, economic and other factors. We will not be able to control many of these factors, such as economic conditions in the markets where we operate and pressure from competitors. We cannot be certain that the money we earn will be sufficient to allow us to pay principal and interest on our debt and meet our other obligations. If we do not have enough money, we may be required to refinance all or part of our existing debt, sell assets or borrow more money. We cannot guarantee that we will be able to do so on terms acceptable to us. In addition, the terms of existing or future debt agreements, including the revolving credit facilities and our indentures, may restrict us from adopting certain of these alternatives.

We are restricted by the terms of the outstanding Senior Notes and our other debt, which could adversely affect us.

The indenture relating to the Senior Notes and our multicurrency credit agreement include a number of financial and operating restrictions, which may prevent us from capitalizing on business opportunities and taking some corporate actions. These covenants could adversely affect us by limiting our ability to plan for or react to market conditions or to meet our capital needs. These covenants include, among other things, restrictions on our ability to:

In addition, our multicurrency credit agreement contains financial covenants that, among other things, require us to maintain a minimum interest coverage ratio and impose a maximum average leverage ratio.

Our failure to comply with the restrictive covenants described above could result in an event of default, which, if not cured or waived, could result in us being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms, our results of operations and financial condition could be adversely affected by increased costs and rates.

Worldwide economic conditions may adversely affect our industry, business and results of operations.

General worldwide economic conditions have experienced volatility in recent years due to the sequential effects of the subprime lending crisis, general credit market crisis, sovereign debt crisis, collateral effects on the finance and banking industries, changes in energy costs, concerns about inflation, slower economic activity, decreased consumer confidence, reduced corporate profits and capital spending, adverse business conditions and liquidity concerns. These conditions make it difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they may cause U.S. and foreign OEMs and consumers to slow spending on our products. We cannot predict the timing or duration of any future economic slowdown or the timing or strength of a subsequent economic recovery, worldwide or in the specific end markets we serve. If the consumer and commercial lawn and garden markets significantly deteriorate due to these economic effects, our business, financial condition and results of operations will likely be adversely affected. Additionally, our stock price could decrease if investors have concerns that our business, financial condition and results of operations will be negatively impacted by a worldwide economic downturn.

In addition, on June 23, 2016, the United Kingdom (the "U.K.") held a referendum in which voters approved an exit from the European Union (the "E.U."), commonly referred to as "Brexit". As a result of the referendum, it is expected that the British government will begin negotiating the terms of the U.K.'s withdrawal from the E.U. A withdrawal could, among other outcomes, disrupt the free movement of goods, services and people

between the U.K. and the E.U., undermine bilateral cooperation in key policy areas and significantly disrupt trade between the U.K. and the E.U. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate. Given the lack of comparable precedent, it is unclear what financial, trade and legal implications the withdrawal of the U.K. from the E.U. would have and how such withdrawal would affect us. The announcement of Brexit caused significant volatility in global stock markets and currency exchange rate fluctuations that resulted in the strengthening of the U.S. dollar against foreign currencies in which we conduct business. The strengthening of the U.S. dollar relative to other currencies may adversely affect our operating results. The announcement of Brexit and the withdrawal of the U.K. from the E.U. may also create global economic uncertainty, which may cause our customers to closely monitor their costs and reduce their spending budgets. Any of these effects of Brexit, among others, could adversely affect our business, financial condition, operating results and cash flows.

We have goodwill and intangible assets, which were written-down in fiscal 2016 and prior years. If we determine that goodwill and other intangible assets have become further impaired in the future, net income in such years would be adversely affected.

At July 3, 2016, goodwill and other intangible assets represented approximately 18.2% of our total assets. Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. We are required to evaluate whether our goodwill and indefinite-lived intangible assets have been impaired on an annual basis, or more frequently if indicators of impairment exist. In fiscal 2016 and fiscal 2014, we recorded pre-tax non-cash goodwill and tradename impairment charges of $10.3 million and $8.5 million, respectively. In fiscal 2015, there was no impairment of goodwill or other intangible assets.The impairments were determined as part of the fair value assessments of goodwill and other intangible assets. Any additional write-down of our goodwill or intangible assets could adversely affect our results of operations.

We are subject to litigation, including product liability, patent infringement, and warranty claims, that may adversely affect our business and results of operations.

We are a party to litigation that arises in the normal course of our business operations, including product warranty and liability (strict liability and negligence) claims, patent and trademark matters, contract disputes and environmental, asbestos, employment and other litigation matters. See Note 13, "Commitments and Contingencies," to the Consolidated Financial Statements for a description of unresolved legal actions. We face an inherent business risk of exposure to product liability and warranty claims in the event that the use of our products is alleged to have resulted in injury or other damage or our products are alleged to be defective. In addition, we face an inherent risk that our competitors will allege that aspects of our product designs infringe their protected intellectual property. While we currently maintain general liability and product liability insurance coverage in amounts that we believe are adequate, we cannot be sure that we will be able to maintain this insurance on acceptable terms or that this insurance will provide sufficient coverage against potential liabilities that may arise. Any claims brought against us, with or without merit, may have an adverse effect on our business and results of operations as a result of potential adverse outcomes, the expenses associated with defending such claims, the diversion of our management's resources and time and the potential adverse effect to our business reputation.

Our pension and postretirement benefit plan obligations are currently underfunded, and we may have to make significant cash payments to some or all of these plans, which would reduce the cash available for our businesses.

We have unfunded obligations under our domestic and foreign pension and postretirement benefit plans. As of July 3, 2016, our pension plans were underfunded by approximately $313 million . The funded status of our pension plans is dependent upon many factors, including returns on invested assets, the level of certain market interest rates, the mortality tables used, and the discount rate used to determine pension obligations. Unfavorable returns on the plan assets or unfavorable changes in applicable laws or regulations could materially change the timing and amount of required plan funding, which would reduce the cash available for our businesses. In addition, a decrease in the discount rate used to determine pension obligations could result in an increase in the valuation of pension obligations, which could affect the reported funding status of our pension plans and future contributions, as well as the periodic pension cost in subsequent fiscal years.

Our dependence on, and the price of, raw materials may adversely affect our profits.

The principal raw materials used to produce our products are aluminum, copper and steel. We source raw materials on a global or regional basis, and the prices of those raw materials are susceptible to significant price fluctuations due to supply/demand trends, transportation costs, government regulations and tariffs, changes in currency exchange rates, price controls, the economic climate and other unforeseen circumstances. If we are unable to pass on raw material price increases to our customers, our future profitability may be adversely affected.

We may be adversely affected by health and safety laws and regulations.

We are subject to various laws and regulations relating to the protection of human health and safety and have incurred and will continue to incur capital and other expenditures to comply with these regulations. Failure to comply with regulations could subject us to future liabilities, fines or penalties or the suspension of production, as well as damage our reputation.

The operations and success of our Company can be impacted by natural disasters, terrorism, acts of war, international conflict and political and governmental actions, which could harm our business.

Natural disasters, acts or threats of war or terrorism, international conflicts and the actions taken by the United States and other governments in response to such events could cause damage or disrupt our business operations, our suppliers or our customers, and could create political or economic instability, any of which could have an adverse effect on our business. Although it is not possible to predict such events or their consequences, these events could decrease demand for our products, could make it difficult or impossible for us to deliver products or could disrupt our supply chain. We may also be impacted by actions by foreign governments, including currency devaluation, tariffs and nationalization, where our facilities are located, which could disrupt manufacturing and commercial operations. In addition, our foreign operations make us subject to certain U.S. laws and regulations, including the Export Administration Regulations administered by the U.S. Department of Commerce, the trade sanctions laws and regulations administered by the U.S. Department of the Treasury's Office of Foreign Assets Control and the Foreign Corrupt Practices Act. A violation of these laws and regulations could adversely affect our business, financial condition, and results of operations and reputation.

We are subject to tax laws and regulations in many jurisdictions, and the inability to successfully defend claims from taxing authorities could adversely affect our operating results and financial position.

We conduct business in many countries, which requires us to interpret the income tax laws and rulings in each of those taxing jurisdictions. Due to the subjectivity of tax laws between those jurisdictions as well as the subjectivity of factual interpretations, our estimates of income tax liabilities may differ from actual payments or assessments. Claims from taxing authorities related to these differences could have an adverse impact on our operating results and financial position.

If we fail to remain current with changes in gasoline engine technology or if the technology becomes less important to customers in our markets due to the impact of alternative fuels, our results would be negatively affected. In addition, if we are unable to continue to enhance existing products, as well as develop and market new products, that respond to customer needs and preferences and achieve market acceptance, our results may be negatively impacted.

Our ability to remain current with changes in gasoline engine technology may significantly affect our business. Any advances in gasoline engine technology, including the impact of alternative fuels, may inhibit our ability to compete with other manufacturers. Our competitors may also be more effective and efficient at integrating new technologies.

Through our Products segment, we compete with certain customers of our Engines segment, thereby creating inherent channel conflict that may impact the actions of engine manufacturers and OEMs with whom we compete.

Through our Products segment, we compete with certain customers of our Engines segment. Any further forward integration of our products may strain relationships with OEMs that are significant customers of our Engines segment and have an adverse impact on operating results.

The financial stability of our suppliers and the ability of our suppliers to produce quality materials could adversely affect our ability to obtain timely and cost-effective raw materials.

The loss of certain of our suppliers or interruption of production at certain suppliers from adverse financial conditions, work stoppages, equipment failures or other unfavorable events would adversely affect our ability to obtain raw materials and other inputs used in the manufacturing process. Our cost of purchasing raw materials and other inputs used in the manufacturing process could be higher and could temporarily affect our ability to produce sufficient quantities of our products, which could harm our financial condition, results of operations and competitive position.

An inability to successfully manage information systems, or to adequately maintain these systems and their security, as well as to protect data and other confidential information, could adversely affect our business and reputation.

We depend on our information systems to successfully manage our business. Any inability to successfully manage these systems, including matters related to system and data security, privacy, reliability, compliance, performance and access, as well as any inability of these systems to fulfill their intended purpose within our business, could have an adverse effect on our business.

In the ordinary course of business, we collect and store sensitive data and information, including our proprietary and regulated business information and that of our customers, suppliers and business partners, as well as personally identifiable information about our employees. Our information systems, like those of other companies, are susceptible to outages due to natural disasters, power loss, telecommunications failures, viruses, break-ins and similar events, breaches of security, or during system upgrades or new system implementations. We have taken steps to maintain adequate data security and address these risks and uncertainties by implementing security technologies, internal controls, network and data center resiliency and recovery processes. However, any operational failure or breach of security from increasingly sophisticated cyber threats could lead to the loss or disclosure of both our and our customers' financial, product and other confidential information, result in regulatory actions and legal proceedings, and have an adverse effect on our business and reputation.

We have implemented, and Wisconsin law contains, anti-takeover provisions that may adversely affect the rights of holders of our common stock.

Our articles of incorporation contain provisions that could have the effect of discouraging or making it more difficult for someone to acquire us through a tender offer, a proxy contest or otherwise, even though such an acquisition might be economically beneficial to our shareholders. These provisions include a board of directors divided into three classes of directors serving staggered terms of three years each and the removal of directors only for cause and only with the affirmative vote of a majority of the votes entitled to be cast in an election of directors.

We are subject to the Wisconsin Business Corporation Law, which contains several provisions that could have the effect of discouraging non-negotiated takeover proposals or impeding a business combination.

These provisions include:

An inability to identify, complete and integrate acquisitions may adversely impact our sales, results of operations, cash flow and liquidity.

Our historical growth has included acquisitions, and our future growth strategy includes acquisition opportunities. For example, in fiscal 2015, the Company acquired Allmand, a leading designer and manufacturer of high quality towable light towers, industrial heaters and solar LED arrow boards, for approximately $59.9 million in cash. Also, in fiscal 2015, the Company acquired Billy Goat, a leading manufacturer of specialty turf equipment, which includes aerators, sod cutters, overseeders, power rakes, brush cutters, walk behind blowers, lawn vacuums, and debris loaders, for total cash consideration of $28.3 million. We may not be able to identify acquisition targets or successfully complete acquisitions in the future due to the absence of quality companies in our target markets, economic conditions, competition from other bidders, or price expectations from sellers. If we are unable to complete additional acquisitions, our growth may be limited.

Additionally, as we grow through acquisitions, we will continue to place significant demands on management, operational, and financial resources. Recent and future acquisitions will require integration of operations, sales and marketing, information technology, finance and administrative operations, which could decrease the time available to serve and attract customers. We cannot assure that we will be able to successfully integrate acquisitions, that these acquisitions will operate profitably, or that we will be able to achieve the desired financial or operational success. Our financial condition, cash flows, liquidity and results of operations could be adversely affected if we do not successfully integrate the newly acquired businesses, or if our other businesses suffer due to the increased focus on the newly acquired businesses. 

An inability to successfully manage the upgrade of our global enterprise resource planning ("ERP") system could adversely affect our operations and operating results.

We are in the process of upgrading our global ERP system. This upgrade will affect many of our existing operating and financial systems. This is a major undertaking both financially and from a management and personnel perspective. Should the upgrade not be implemented successfully and within budget, or if the system does not perform in a satisfactory manner, it could be disruptive and adversely affect our operations and results of operations, including our ability to report accurate and timely financial results.

Our common stock is subject to substantial price and volume fluctuations.

The market price of shares of our common stock may be volatile. Among the factors that could affect our common stock price are those previously discussed, as well as:

In addition, the stock markets have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.

None.

The Company maintains leased and owned manufacturing, office, warehouse, distribution and testing facilities throughout the world. The Company believes that its owned and leased facilities are adequate to perform its operations in a reasonable manner. As the Company's business is seasonal, additional warehouse space may be leased when inventory levels are at their peak. Facilities in the United States occupy approximately 5.8 million square feet, of which 62% is owned. Facilities outside of the United States occupy approximately 0.9 million square feet, of which 29% is owned. Certain of the Company's facilities are leased through operating lease agreements. See Note 10 to the Consolidated Financial Statements for information on the Company's operating leases.

The following table provides information about each of the Company's facilities (exceeding 25,000 square feet) as of July 3, 2016:

(1) During fiscal 2015, the Company closed its McDonough, Georgia manufacturing facility and consolidated production into its existing facilities. At July 3, 2016, the Company had $2.5 million classified as assets held for sale, which is included in Prepaid Expenses and Other Current Assets within the Consolidated Balance Sheets, related to the McDonough, Georgia manufacturing location.

The Company is subject to various unresolved legal actions that arise in the normal course of its business. These actions typically relate to product liability (including asbestos-related liability), patent and trademark matters, and disputes with customers, suppliers, distributors and dealers, competitors and employees.

On May 14, 2010, the Company notified retirees and certain retirement eligible employees of various amendments to the Company-sponsored retiree medical plans intended to better align the plans offered to both hourly and salaried retirees. On August 16, 2010, a putative class of retirees who retired prior to August 1, 2006 and the United Steel Workers filed a complaint in the U.S. District Court for the Eastern District of Wisconsin (Merrill, Weber, Carpenter, et al.; United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO/CLC v. Briggs & Stratton Corporation; Group Insurance Plan of Briggs & Stratton Corporation; and Does 1 through 20, Docket No. 10-C-0700), contesting the Company's right to make these changes. The complaint sought an injunction preventing the alleged unilateral termination or reduction in insurance coverage to the class of retirees, a permanent injunction preventing defendants from ever making changes to the retirees' insurance coverage, restitution with interest (if applicable) and attorneys' fees and costs. A class was certified and discovery was concluded. Both parties moved for summary judgment, which was fully briefed on December 23, 2014. The court denied both sides' motions on September 3, 2015, concluding that factual issues were present which precluded summary judgment and should be determined by the jury at trial.  The Company filed a motion requesting permission to appeal the court's decision on an interlocutory basis. The plaintiffs also moved the court to clarify its decision. Upon the request of all parties, the court stayed any further decisions in the matter pending mediation in mid-December 2015. The mediation led to an agreement in principle to settle this case for an aggregate payment of $3.95 million covering both claimed benefits and plaintiffs' attorneys fees, which resulted in a contribution of $1.975 million from the Company and $1.975 million from a third party insurance provider. The Company recorded a total charge of $1.975 million as Engineering, Selling, General and Administrative Expense on the Condensed Consolidated Statements of Operations in the second quarter of fiscal 2016 related to this matter. The parties filed a signed Stipulation of Settlement with the court on April 12, 2016 and the court held a hearing on the fairness, reasonableness and adequacy of the terms and conditions of the settlement and on the fee petition of the plaintiffs' counsel on August 11, 2016. The court approved the settlement following that hearing.

On May 12, 2010, Exmark Manufacturing Company, Inc. filed suit against Briggs & Stratton Power Products Group, LLC ("BSPPG"), a wholly owned subsidiary of the Company (Case No. 8:10CV187, U.S. District Court for the District of Nebraska), alleging that certain Ferris® and Snapper Pro® mower decks infringed an Exmark mower deck patent. Exmark sought damages relating to sales since May 2004, attorneys' fees, and enhanced damages. As a result of a reexamination proceeding in 2012, the United States Patent and Trademark Office ("USPTO") initially rejected the asserted Exmark claims as invalid.  However, in 2014, that decision was reversed by the USPTO on appeal by Exmark. Following discovery, each of BSPPG and Exmark filed several motions for summary judgment in the Nebraska district court, which were decided on July 28, 2015. The court concluded that older mower deck designs infringed Exmark's patent, leaving for trial the issues of whether current designs infringed, the amount of damages, and whether any infringement was willful.

The trial began on September 8, 2015, and on September 18, 2015, the jury returned its verdict, finding that BSPPG's current mower deck designs do not infringe the Exmark patent. As to the older designs, the jury awarded Exmark $24.3 million in damages and found that the infringement was willful, allowing the judge to enhance the jury's damages award post-trial by up to three times. Also on September 18, 2015, the U.S. Court of Appeals for the Federal Circuit issued its decision in an unrelated case, SCA Hygiene Products Aktiebolag SCA Personal Care, Inc. v. First Quality Baby Products, LLC, et al. (Case No. 2013-1564) ("SCA"), confirming the availability of laches as a defense to patent infringement claims. Laches is an equitable doctrine that may bar a patent owner from obtaining damages prior to commencing suit in circumstances in which the owner knows or should have known its patent was being infringed for more than six years. Although the court in the Exmark case ruled before trial that BSPPG could not rely on the defense of laches, as a result of the subsequent SCA decision, the court held a bench trial on that defense on October 21 and 22, 2015. On May 2, 2016, the United States Supreme Court agreed to review the SCA decision.

The parties submitted post-trial motions and briefing related to: damages; willfulness; laches; attorney fees; enhanced damages; and prejudgment/post-judgment interest and costs.  All post-trial motions and briefing were completed on December 18, 2015.  On May 11, 2016, the court ruled on those post-trial motions and entered judgment against BSPPG and in favor of Exmark in the amount of $24.3 million in compensatory damages, an additional $24.3 million in enhanced damages, and $1.5 million in pre-judgment interest along with post-judgment interest and costs to be determined. BSPPG and the Company strongly disagree with the jury verdict, certain rulings made before and during trial, and the May 11, 2016 post-trial rulings. BSPPG has appealed to the U.S. Court of Appeals for the Federal Circuit on several bases, including the issues of obviousness and invalidity of Exmark's patent, the damages calculation, willfulness and laches.

In assessing whether the Company should accrue a liability in its financial statements as a result of the May 11, 2016 post-trial rulings, the Company considered various factors, including the legal and factual circumstances of the case, the trial record, the post-trial orders, the current status of the proceedings, applicable law, the views of legal counsel, and the likelihood of successful appeals. As a result of this review, the Company has concluded that a loss from this case is not probable and reasonably estimable at this time and, therefore, a liability has not been recorded with respect to this case as of July 3, 2016.

Although it is not possible to predict with certainty the outcome of these and other unresolved legal actions or the range of possible loss, the Company believes the unresolved legal actions will not have a material adverse effect on its results of operations, financial position or cash flows.

Not applicable.

Executive Officers of the Registrant

(1) Officer is also a Director of Briggs & Stratton.

(2) Member of the Board of Directors Executive Committee.

Officers are elected annually and serve until they resign, die, are removed, or a different person is appointed to the office.

Briggs & Stratton common stock is traded on the NYSE under the symbol "BGG". Information required by this Item is incorporated by reference from the "Quarterly Financial Data, Dividend and Market Information" (unaudited), included in Item 8 of this report.

Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

The table below sets forth the information with respect to purchases made by or on behalf of the Company of its common stock during the quarterly period ended July 3, 2016 .

(1) On August 13, 2014, the Board of Directors of the Company authorized up to $50 million  in funds associated with the common share repurchase program with an expiration date of June 30, 2016 . On April 21, 2016, the Board of Directors authorized up to an additional  $50 million  in funds for use in the common share repurchase program with an expiration date of June 29, 2018 . The common share repurchase program authorizes the purchase of shares of the Company's common stock on the open market or in private transactions from time to time, depending on market conditions and certain governing debt covenants.

Five-year Stock Performance Graph

The graph below shows the cumulative total stockholder return of an investment of $100 (and the reinvestment of any dividends thereafter) at the close of business on June 30, 2011 in each of Briggs & Stratton common stock, the Standard & Poor's (S&P) Smallcap 600 Index and the S&P Machinery Index.

Results of Operations

FISCAL 2016 COMPARED TO FISCAL 2015

(1) For the fiscal year ended July 3, 2016, includes pre-tax restructuring charges of $10,195 ($6,672 after tax), goodwill impairment charge of $7,651 which is not deductible for income tax purposes, pre-tax tradename impairment charge of $2,683 ($1,771 after tax), pre-tax acquisition-related charges of $276 ($180 after tax), pre-tax litigation charges of $2,825 ($1,836 after tax), pre-tax pension settlement charges of $20,245 ($13,160 after tax), and a pre-tax gain on the sale of an investment in marketable securities of $3,343 ($2,842 after tax). For the fiscal year ended June 28, 2015, includes pre-tax restructuring charges of $27,288 ($17,749 after tax) and pre-tax acquisition-related charges of $2,115 ($1,374 after tax).

(2) Adjusted financial results are non-GAAP financial measures. The Company believes this information is meaningful to investors as it isolates the impact that restructuring charges, acquisition-related charges, certain litigation charges, pension settlement charges, gains on sale of marketable securities, and goodwill and tradename impairment charges have on reported financial results and facilitates comparisons between peer companies. The Company may utilize non-GAAP financial measures as a guide in the forecasting, budgeting, and long-term planning process. While the Company believes that adjusted financial results are useful supplemental information, such adjusted financial results are not intended to replace its GAAP financial results and should be read in conjunction with those GAAP results.

(3) The Company defines segment income (loss) as income from operations plus equity in earnings of unconsolidated affiliates. For all periods presented, equity in earnings of unconsolidated affiliates is included in segment income (loss). Beginning with the third quarter of fiscal 2016, the Company classifies its equity in earnings of unconsolidated affiliates within income from operations. Prior to the third quarter of fiscal 2016, equity in earnings of unconsolidated affiliates is classified in other income.

Net Sales

Consolidated net sales for fiscal 2016 were $1.81 billion. Consolidated net sales decreased $86 million or 4.5% from fiscal 2015. Consolidated net sales decreased $65 million or 3.4% before the impact of unfavorable currency rates. The decrease in net sales is due to a $25 million reduction in job site products sales and lower international sales caused by cool spring weather primarily in Europe as well as economic uncertainty.

Engines segment net sales for fiscal 2016 were $1.1 billion, which was $66.1 million or 5.5% lower than the prior year. Net sales decreased by $57.9 million or 4.8% before currency impacts, primarily due to lower shipments of engines into Europe and other international markets. Total engine unit shipments decreased by 7%, but reflected a favorable sales mix shift to large engines.

Products segment net sales for fiscal 2016 were $772.2 million, a decrease of $16.4 million or 2.1% from the prior year. Net sales decreased by $3.2 million or 0.4% before currency impacts, primarily due to a $25 million reduction in job site products sales, lower international sales and lower sales of pressure washers due to the cool spring weather. Increased sales of high-end residential and commercial lawn and garden mowers and the Billy Goat acquisition helped partially offset the decrease.

Gross Profit Percentage

The consolidated gross profit percentage was 20.0% in fiscal 2016, an increase of 1.1% from fiscal 2015.

Included in consolidated gross profit for fiscal 2016 were pre-tax charges of $8.1 million related to previously announced restructuring actions, $0.3 million related to acquisition-related charges recorded in the Products segment, and $11.1 million of pension settlement expense recorded in the Engines segment. During fiscal 2015, the Products segment recorded pre-tax restructuring charges and acquisition-related charges within gross profit of $24.3 million and $1.4 million, respectively.

The Engines segment gross profit percentage for fiscal 2016 was 22.1%, which was consistent with the 22.2% in fiscal 2015. Adjusted gross profit percentage for fiscal 2016 was 23.1%, which was 90 basis points higher compared to fiscal 2015. The improvement in adjusted gross profit percentage was due to expanded margins on new products, manufacturing efficiency improvements and lower material costs.

The Products segment gross profit percentage for fiscal 2016 was 14.4%, which was higher than the 11.3% in fiscal 2015. The Products segment adjusted gross profit percentage for fiscal 2016 was 15.4%, which was 80 basis points higher compared to the adjusted gross profit percentage for fiscal 2015. The improvement in adjusted gross profit percentage was due to a favorable sales mix from our focus on selling higher margin lawn and garden equipment and the results of Billy Goat acquisition, higher margins from manufacturing efficiency improvements and lower material costs. The Products segment realized incremental restructuring savings of $6.2 million in fiscal 2016 as part of the efficiency improvements.

Engineering, Selling, General and Administrative Expenses

Engineering, selling, general and administrative expenses were $305.5 million in fiscal 2016, an increase of $15.6 million or 5.4% from fiscal 2015.

The Engines segment engineering, selling, general and administrative expenses were $193.7 million in fiscal 2016, or $14.2 million higher compared to fiscal 2015, primarily due to $9.1 million of pension settlement charges and $2.8 million of litigation charges in fiscal 2016. Adjusted engineering, selling, general and administrative expenses were $181.8 million in fiscal 2016, or $2.2 million higher than fiscal 2015, largely due to spending on strategic initiatives including $2.8 million related to our ERP upgrade.

The Products segment engineering, selling, general and administrative expenses were $111.8 million in fiscal 2016, an increase of $1.4 million from fiscal 2015 due to spending on strategic initiatives including $0.9 million related to our ERP upgrade.

Restructuring Actions

During the fourth quarter of fiscal 2016, the Company completed the restructuring actions announced in fiscal 2015. Pre-tax restructuring costs for the twelve months ended July 3, 2016 were $10.2 million. Incremental cost savings as a result of these actions were $6.2 million in fiscal 2016.

Interest Expense

Interest expense for fiscal 2016 was $20.0 million, which was $0.5 million higher than fiscal 2015, due to higher borrowings on the Revolver during fiscal 2016.

Provision for Income Taxes

The effective tax rate for the year ended fiscal 2016 was 24.9% compared to 19.8% for the same period last year.  The tax rate for the year ended fiscal 2016 was lower than statutory rates primarily as a result of the reenactment of the federal research and development credit, which provided the Company one and a half years' tax benefit in fiscal 2016.  Additionally, the tax rate for the year ended fiscal 2016 was driven by a non-deductible goodwill impairment and foreign earnings in jurisdictions with tax rates that vary from the U.S. statutory rate.  The tax rate for the year ended fiscal 2015 was lower than statutory rates due to a net tax benefit of $5 million related to recognizing incremental federal research and development tax credits related to prior years.  In addition, the year ended fiscal 2015 tax rate was impacted by the reversal of previously recorded reserves as a result of the favorable resolution of an IRS audit.

FISCAL 2015 COMPARED TO FISCAL 2014

(1) For the fiscal year ended June 28, 2015, includes pre-tax restructuring charges of $27,288 ($17,749 after tax) and pre-tax acquisition-related charges of $2,115 ($1,374 after tax). For the fiscal year ended June 29, 2014, includes restructuring charges of $6,539 ($5,163 after tax) and goodwill and tradename impairment charges of $8,460 ($5,529 after tax).

(2) Adjusted financial results are non-GAAP financial measures. The Company believes this information is meaningful to investors as it isolates the impact that restructuring charges, acquisition-related charges, and goodwill and tradename impairment charges have on reported financial results and facilitates comparisons between peer companies. The Company may utilize non-GAAP financial measures as a guide in the forecasting, budgeting, and long-term planning process. While the Company believes that adjusted financial results are useful supplemental information, such adjusted financial results are not intended to replace its GAAP financial results and should be read in conjunction with those GAAP results.

(3) The Company defines segment income (loss) as income from operations plus equity in earnings of unconsolidated affiliates.

Net Sales

Consolidated net sales for fiscal 2015 were $1.89 billion. Consolidated net sales increased $36 million or 1.9% from fiscal 2014, which includes $29 million related to unfavorable currency rates. Consolidated net sales increased $65 million or 3.5% before the impact of unfavorable currency rates. The increase in net sales was due to the results from the Allmand and Billy Goat acquisitions, a 3% increase in global engine unit shipments and higher sales of commercial lawn and garden equipment and pressure washers in North America. Partially offsetting the increase were reduced sales of generators, unfavorable engine sales mix and the planned actions to narrow the assortment of lower-priced Snapper consumer lawn and garden equipment.

Engines segment net sales for fiscal 2015 were $1.2 billion, which was $10.7 million or 0.9% lower than the prior year. This decrease was due to an unfavorable foreign exchange impact of approximately $15.3 million and an unfavorable mix of engines sold, partially offset by a 3% increase in unit shipments of global engines. Fiscal 2015 sales skewed proportionately towards small engines due to elevated levels of large engines in the channel entering the lawn and garden season.

Products segment net sales for fiscal 2015 were $788.6 million, an increase of $52.3 million or 7.1% from fiscal 2014. The increase in net sales was due to the results of the Allmand and Billy Goat acquisitions, higher commercial lawn and garden equipment sales, higher sales in Australia on an improved lawn and garden season and higher pressure washer sales. Partially offsetting the increase was the unfavorable impact of foreign exchange of $13.6 million, reduced sales of generators due to fewer major power outages, and the planned actions to narrow the assortment of lower-priced Snapper consumer lawn and garden equipment.

Gross Profit Percentage

The consolidated gross profit percentage was 19.0% in fiscal 2015, an increase of 0.3% from fiscal 2014.

Included in consolidated gross profit for fiscal 2015 were pre-tax charges of $24.3 million related to previously announced restructuring actions and $1.4 million related to acquisition-related charges recorded in the Products segment. During fiscal 2014, the Engines segment and Products segment recorded pre-tax restructuring charges within gross profit of $3.1 million and $2.7 million, respectively.

The Engines segment gross profit percentage for fiscal 2015 was 22.2%, which was higher than the 21.1% in fiscal 2014. Adjusted gross profit percentage for fiscal 2015 was 22.2%, which was 80 basis points higher compared to fiscal 2014. The previously announced retirement plan changes improved adjusted gross profit margins by approximately 90 basis points. Slightly lower material costs and cost reductions also improved margins by 50 basis points. Partially offsetting this increase was the impact of unfavorable foreign exchange, primarily related to the Euro, which reduced adjusted gross profit margins by approximately 40 basis points, and an unfavorable mix of engines produced as production slightly skewed toward small units rather than large engines, which reduced margins by 10 basis points.

The Products segment gross profit percentage for fiscal 2015 was 11.3%, which was lower than the 11.9% in fiscal 2014. The Products segment adjusted gross profit percentage for fiscal 2015 was 14.6%, which was 230 basis points higher compared to the adjusted gross profit percentage for fiscal 2014. Adjusted gross profit percentage improved due to favorable sales mix by approximately 140 basis points, the impact of acquisitions by 90 basis points, and by 30 basis points or $2.6 million from incremental savings realized from restructuring actions. Manufacturing throughput increased by 13.0%, which led to an increase in adjusted gross profit percentage of 60 basis points. Partially offsetting the higher gross profit percentage was the impact of unfavorable foreign exchange of 90 basis points, primarily the Brazilian real and Australian dollar.

Engineering, Selling, General and Administrative Expenses

Engineering, selling, general and administrative expenses were $289.9 million in fiscal 2015, a decrease of $1.5 million or 0.5% from fiscal 2014.

The Engines segment engineering, selling, general and administrative expenses were $179.6 million in fiscal 2015, or $5.2 million lower compared to fiscal 2014. The decrease was largely due to the retirement plan changes. Higher compensation expense and international expenses in fiscal 2015 were partially offset by the benefit of the movement in foreign exchange rates.

The Products segment engineering, selling, general and administrative expenses were $110.4 million in fiscal 2015, an increase of $3.8 million from fiscal 2014. The increase was primarily attributable to higher expenses due to the Allmand and Billy Goat acquisitions, increased compensation expense, and higher international expenses. Partially offsetting the increase were $7.4 million in savings related to the restructuring actions and the impact of foreign exchange.

Restructuring Actions

During fiscal 2015, the Company made progress on implementing the previously announced restructuring actions to narrow its assortment of lower-priced Snapper consumer lawn and garden equipment and consolidate its Products segment manufacturing facilities in order to reduce costs. The Company ceased production at the McDonough, Georgia plant during the fourth quarter of fiscal 2015 and began production of pressure washers and snow throwers at its Wauwatosa, Wisconsin plant. Pre-tax restructuring costs for the twelve months ended June 28, 2015 were $27.3 million, and pre-tax savings were $10.0 million.

Allmand Bros., Inc. and Billy Goat Industries, Inc. Acquisitions

On August 29, 2014, the Company completed the acquisition of Allmand Bros., Inc. for approximately $59.9 million in cash, net of cash acquired. Allmand is a leading designer and manufacturer of high quality towable light towers, industrial heaters, and solar LED arrow boards. Allmand is included within the Products segment.

On May 20, 2015, the Company acquired all of the outstanding shares of Billy Goat Industries, Inc. for approximately $28.3 million, net of cash acquired. Billy Goat is a leading manufacturer of specialty turf equipment, which includes aerators, sod cutters, overseeders, power rakes, brush cutters, walk behind blowers, lawn vacuums, and debris loaders. Billy Goat is included within the Products segment.

Interest Expense

Interest expense for fiscal 2015 was $19.5 million, which was $1.1 million higher than fiscal 2014, due to higher borrowings on the Revolver during fiscal 2015.

Provision for Income Taxes

The effective tax rates for fiscal 2015 was 19.8% compared to 23.7% for fiscal 2014. The tax rate for fiscal 2015 was lower than statutory rates due to a net tax benefit of $5 million related to recognizing incremental federal research & development tax credits related to prior years.  In addition, the fiscal 2015 tax rate was impacted by the reversal of previously recorded reserves as a result of the favorable resolution of an IRS audit.  The fiscal 2014 tax rate included a taxpayer election filed pursuant to the outcome of a U.S. court case that provided the Company precedent to record a tax benefit of $2.9 million for the permanent exclusion of qualified export activity from prior years' taxable income.

Liquidity and Capital Resources

FISCAL YEARS 2016, 2015 AND 2014

Cash flows provided by operating activities for fiscal 2016 were $112 million compared to $148 million in fiscal 2015. The decrease in operating cash flows was primarily related to lower net income and changes in working capital from higher inventory levels due to lower sales volume.

Cash flows provided by operating activities for fiscal 2015 were $148 million compared to $127 million in fiscal 2014. The increase in operating cash flows was primarily related to higher net income and changes in working capital, specifically lower accounts receivable and higher accounts payable.

Net cash used in investing activities was $86 million, $158 million, and $60 million in fiscal 2016, 2015 and 2014, respectively. These cash flows include capital expenditures of $64 million, $72 million, and $60 million in fiscal 2016, 2015 and 2014, respectively. The capital expenditures related primarily to reinvestment in equipment and new products and technology. Further, in fiscal 2016, approximately $19 million of cash was used for an increased investment in an unconsolidated affiliate. In fiscal 2015, approximately $88 million of cash was used for the acquisitions of Allmand Bros., Inc. and Billy Goat Industries, Inc.

Net cash used in financing activities was $51 million, $65 million, and $62 million in fiscal 2016, 2015 and 2014, respectively. In fiscal 2016, the Company repurchased treasury stock at a total cost of $37 million compared to $47 million and $43 million stock repurchases in fiscal 2015 and 2014, respectively. In fiscal 2016, 2015, and 2014, the Company received proceeds and tax benefits of $12 million, $5 million, and $5 million, respectively, from the exercise of stock options. The Company paid cash dividends on its common stock of $24 million, $23 million, and $23 million in fiscal 2016, 2015 and 2014, respectively.

Given the Company's international operations, a portion of the Company's cash and cash equivalents are held in non-U.S. subsidiaries where its undistributed earnings are considered to be permanently reinvested. Generally, these would be subject to U.S. tax if repatriated. As of July 3, 2016 , approximately $48 million of the Company's $90 million of cash and cash equivalents was held in non-U.S. subsidiaries.

Future Liquidity and Capital Resources

On December 20, 2010 , the Company issued $225 million of 6.875% Senior Notes ("Senior Notes") due December 15, 2020 . During fiscal 2016, the Company repurchased  $1.9 million  of the Senior Notes after receiving unsolicited offers from bondholders.

On March 25, 2016 , the Company entered into a $500 million amended and restated multicurrency credit agreement (the "Revolver") that matures on March 25, 2021 . The Revolver amended and restated the Company's $500 million  multicurrency credit agreement dated as of October 13, 2011 (as previously amended), which would have matured on October 21, 2018 . The initial maximum availability under the Revolver is  $500 million . Availability under the Revolver is reduced by outstanding letters of credit. The Company may from time to time increase the maximum availability under the Revolver by up to  $250 million  if certain conditions are satisfied. There were no borrowings under the revolving credit facility as of July 3, 2016 and June 28, 2015.

In August 2016, the Company announced that its Board of Directors declared an increase in the quarterly dividend from $0.135 per share to $0.14 per share on the Company's common stock, payable October 3, 2016 to shareholders of record at the close of business on September 16, 2016.

On August 13, 2014, the Board of Directors of the Company authorized up to $50 million  in funds associated with the common share repurchase program with an expiration date of June 30, 2016 . On April 21, 2016, the Board of Directors authorized up to an additional  $50 million  in funds for use in the common share repurchase program with an expiration date of June 29, 2018 . As of July 3, 2016, the total remaining authorization was approximately $50.0 million . Share repurchases, among other things, allow the Company to offset any potentially dilutive impacts of share-based compensation. The common share repurchase program authorizes the purchase of shares of the Company's common stock on the open market or in private transactions from time to time, depending on market conditions and certain governing debt covenants. In fiscal 2016, the Company repurchased 2,034,146 shares on the open market at a total cost of $37.4 million , or $18.41 per share. There were 2,423,044 shares repurchased in fiscal 2015 at a total cost of $47.0 million , or $19.42 per share.

The Company expects capital expenditures to be approximately $70 to $75 million in fiscal 2017 . These anticipated expenditures reflect the Company's plans to continue to reinvest in efficient equipment and innovative new products.

On July 6, 2012, the Moving Ahead for Progress in the 21st Century Act (MAP-21 Act) was signed into law. The MAP-21 Act included certain pension-related provisions which included changes to the methodology used to determine discount rates for ERISA funding purposes for qualified defined benefit pension plans. Based on historical interest rates, the MAP-21 Act allows plan sponsors to utilize a higher discount rate to value pension liabilities, which results in lower required pension plan contributions under ERISA. On August 8, 2014, the Highway and Transportation Funding Act of 2014 (HATFA Act) was enacted. The HATFA Act extends the pension provisions included in the MAP-21 Act. During fiscal 2016, the Company made no cash contributions to the qualified pension plan. Based upon current regulations and actuarial studies the Company is required to make no minimum contributions to the qualified pension plan in fiscal 2017 and fiscal 2018. The Company may be required to make further contributions in future years depending on the actual return on plan assets and the funded status of the plan in future periods.

Management believes that available cash, cash generated from operations, existing lines of credit and access to debt markets will be adequate to fund the Company's capital requirements and operational needs for the foreseeable future.

The Senior Notes and the Revolver contain restrictive covenants. These covenants include restrictions on the ability of the Company and/or certain subsidiaries to pay dividends, repurchase equity interests of the Company and certain subsidiaries, incur indebtedness, create liens, consolidate and merge and dispose of assets, and enter into transactions with our affiliates. The Revolver contains financial covenants that require the Company to maintain a minimum interest coverage ratio and impose on the Company a maximum average leverage ratio. As of July 3, 2016 , the Company was in compliance with these covenants.

Financial Strategy

Management believes that the value of the Company is enhanced if the capital invested in operations yields a cash return that is greater than the cost of capital. Management maintains a balanced approach to capital allocation. The balance is amongst the following areas: reinvesting capital into physical assets and products that maintain or grow the global cost leadership and market positions that the Company has achieved, and drive the economic value of the Company, identifying strategic acquisitions or alliances that may enhance revenues and provide a higher economic return, and returning capital to shareholders through dividends and/or share repurchases.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements or significant guarantees to third parties not fully recorded in our Consolidated Balance Sheets or fully disclosed in our Notes to Consolidated Financial Statements. The Company's significant contractual obligations include our debt agreements and certain employee benefit plans.

Contractual Obligations

A summary of the Company's expected payments for significant contractual obligations as of July 3, 2016 is as follows (in thousands):

(a) Includes an estimate of future expected funding requirements related to our pension plans. Any further funding requirements for pension plans beyond fiscal 2022 cannot be estimated at this time. Because their future cash outflows are uncertain, liabilities for unrecognized tax benefits and other sundry items are excluded from the table above.

Critical Accounting Policies

The Company's accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements. As discussed in Note 2, the preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP") requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements.

The Company believes the following critical accounting policies represent the more significant judgments and estimates used in preparing the consolidated financial statements.

Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over tangible and intangible assets acquired less liabilities assumed arising from business combinations. Goodwill is not amortized. The Company evaluates goodwill and other indefinite-lived intangible assets for impairment annually as of the end of the fourth fiscal quarter, and more frequently if events or circumstances indicate that the assets may be impaired.

For the goodwill evaluation for one reporting unit, the Company generally first determines based on a qualitative assessment whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. For other reporting units or if the Company's qualitative assessment conclusion is that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company will test goodwill using a two-step process. The first step of the goodwill impairment test is to identify a potential impairment by comparing the carrying values of each of the Company's reporting units to their estimated fair values as of the test dates. The estimates of fair value of the reporting units are computed using an income approach. The income approach utilizes a multi-year forecast of estimated cash flows and a terminal value at the end of the cash flow period. The forecast period assumptions consist of internal projections that are based on the Company's budget and long-range strategic plan. The discount rate used at the test date is the weighted-average cost of capital which reflects the overall level of inherent risk of the reporting unit and the rate of return an outside investor would expect to earn.

If the fair value of a reporting unit exceeds its book value, goodwill of the reporting unit is not deemed impaired and the second step of the impairment test is not performed. If the book value of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined by allocating the estimated fair value of the reporting unit to the estimated fair value of its existing tangible assets and liabilities as well as existing identified intangible assets and previously unrecognized intangible assets in a manner similar to a purchase price allocation. The unallocated portion of the estimated

fair value of the reporting unit is the implied fair value of goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The Company performed the annual impairment test on all of its reporting units as of July 3, 2016 . Based on a qualitative assessment of its Engines reporting unit, the Company determined that it is more likely than not that the fair value of its reporting unit exceeds its carrying amount. As a result, the Company concluded that the Engines reporting unit is not impaired as of July 3, 2016.

The Company also performed an impairment test over its Products reportable segment, which consists of three reporting units, specifically Turf & Consumer, Standby Generators, and Job Site reporting units. The Standby Generators reporting unit does not have goodwill.

The impairment testing performed by the Company at July 3, 2016 indicated that the estimated fair value of the Turf & Consumer reporting unit exceeded its corresponding carrying amount, including recorded goodwill, and as such, no impairment existed. At July 3, 2016, the Turf & Consumer reporting unit had $11.6 million of goodwill. The discount rate used for the reporting unit was 9.5%. The growth rate and gross profit margin used for the terminal value calculation for the reporting unit were 3.0% and 18.5%, respectively.

As discussed in Note 7 to the Consolidated Financial Statements, the Company determined that its forecasted cash flow estimates used in the goodwill assessment and other intangibles assessment for its Job Site reporting unit as of March 27, 2016 were adversely impacted by elevated channel inventories. The inventory channel for job site products, particularly portable light towers and portable heaters, was elevated due to the rapid and significant change in market demand following the reduction in North American oil production and was compounded by the recent mild winter.

The Company performed an interim and annual goodwill impairment test on its Job Site reporting unit as of March 27, 2016 and July 3, 2016, respectively. The Company concluded that the carrying value of the Job Site reporting unit exceeded its fair value. The Company recorded a non-cash goodwill impairment charge in the third quarter of fiscal 2016 of $7.7 million, which was determined by comparing the carrying value of the reporting unit's goodwill with the implied fair value of goodwill for the reporting unit. The impairment charge was a non-cash expense that was recorded as a separate component of operating expenses. The goodwill impairment was not deductible for income tax purposes. The impairment charge did not adversely affect the Company's debt position, cash flow, liquidity or compliance with financial covenants under its revolving credit facility. 

At July 3, 2016, the Job Site reporting unit had $12.0 million of goodwill. The discount rate used for the reporting unit was 13.0%. The growth rate and gross profit margin used for the terminal value calculation for the reporting unit were 3.5% and 22.9%, respectively.

The assumptions included in the impairment test require judgment, and changes to these inputs could impact the results of the calculation. Other than management's internal projections of future cash flows, the primary assumptions used in the impairment test were the weighted-average cost of capital and long-term growth rates.

Qualitative assessments of goodwill and quantitative assessments of goodwill and tradenames involve significant judgments by management. Although the Company's cash flow forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management is using to operate the underlying businesses, there is significant judgment in determining the expected future cash flows attributable to these businesses. Changes in such estimates or the application of alternative assumptions could produce significantly different results.

Tradenames are not amortized. If impairment occurs, the impaired amount of the tradename is written off immediately. For purposes of the tradename impairment analysis, the Company performs its assessment of fair value based on an income approach using the relief-from-royalty method. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these types of assets. The Company determines the fair value of each tradename by applying a royalty rate to a projection of net sales discounted using a risk adjusted cost of capital. The Company believes the relief-

from-royalty method to be an acceptable methodology due to its common use by valuation specialists in determining the fair value of intangible assets. Sales growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches and many other variables. Each royalty rate is based on profitability of the business to which it relates and observed market royalty rates.

As discussed in Note 7 to the consolidated financial statements, the Company performed the annual impairment test on its indefinite-lived intangible assets as of July 3, 2016 . In fiscal 2016 and fiscal 2014, the Company recognized a $2.7 million and a $5.5 million non-cash impairment charge, respectively, related to tradenames in the Products segment. In fiscal 2015, the Company determined that no indefinite-lived intangible asset impairment existed. The assumptions included in the impairment test require judgment, and changes to these inputs could impact the results of the calculation.

Definite-lived intangible assets consist primarily of customer relationships and patents. These definite-lived intangible assets are amortized over their estimated useful lives and are subject to impairment testing if events or changes in circumstances indicate that an asset may be impaired.

Pension and Other Postretirement Plans

The pension benefit obligation and related pension expense or income are impacted by certain actuarial assumptions, including the discount rate, mortality tables, and the expected rate of return on plan assets. These rates are evaluated on an annual basis considering such factors as market interest rates and historical asset performance. Actuarial valuations at July 3, 2016 used a discount rate of 3.75% and the determination of fiscal 2016 expense used an expected rate of return on plan assets of 7.50% . The discount rate was selected using a methodology that matches plan cash flows with a selection of Standard and Poor's AA or higher rated bonds, resulting in a discount rate that better matches a bond yield curve with comparable cash flows. A 0.25% decrease in the discount rate would decrease annual pension service and interest costs by approximately $1.5 million. A 0.25% decrease in the expected return on plan assets would increase annual pension service and interest costs by approximately $2.4 million. In estimating the expected return on plan assets, the Company considers the historical returns on plan assets, adjusted for forward looking considerations, including inflation assumptions and active management of the plan's invested assets, knowing that investment performance has been in the top decile compared to other plans. Changes in the discount rate, mortality tables, and return on assets can have a significant effect on the funded status of the pension plans, shareholders' investment and related expense. The Company cannot predict these changes in discount rates or investment returns and, therefore, cannot reasonably estimate whether the impact in subsequent years will be significant.

The funded status of the Company's pension plan is the difference between the projected benefit obligation and the fair value of its plan assets. The projected benefit obligation is the actuarial present value of all benefits expected to be earned by the employees' service adjusted for future potential wage increases. At July 3, 2016 and June 28, 2015 , the fair value of plan assets was less than the projected benefit obligation by approximately $313 million and $212 million , respectively.

Based upon current regulations and actuarial studies the Company is required to make no minimum contributions to the qualified pension plan in fiscal 2017 and fiscal 2018. The Company may be required to make further contributions in future years depending on the actual return on plan assets and the funded status of the plan in future periods.

In 2012, the Board of Directors of the Company authorized an amendment to the Company's defined benefit retirement plans for U.S., non-bargaining employees. The amendment froze accruals for all non-bargaining employees effective January 1, 2014.

The other postretirement benefits obligation and related expense or income are impacted by certain actuarial assumptions, including the health care trend rate. An increase of one percentage point in health care costs would increase the accumulated postretirement benefit obligation by $1.1 million and would increase the service and interest cost by $0.1 million . A corresponding decrease of one percentage point, would decrease the accumulated postretirement benefit by $1.2 million and decrease the service and interest cost by $0.1 million .

For pension and postretirement benefits, actuarial gains and losses are accounted for in accordance with U.S. GAAP. Refer to Note 16 of the Notes to the Consolidated Financial Statements for additional discussion.

Contingent Liabilities

The Company has contingent liabilities related to litigation and claims that arise in the normal course of business. The Company accrues for contingent liabilities when management determines it is probable that a liability has been incurred and the amount can be reasonably estimated. Liabilities are recorded based on management's current judgments as to the probable and reasonably estimable outcome of the contingencies. To the extent that management's future judgments related to the outcome of the contingencies differ from current expectations or as additional information becomes available, earnings could be impacted in the period such changes occur. See Note 13, "Commitments and Contingencies," to the Consolidated Financial Statements for a description of these matters.

Other Reserves

Other significant accounting estimates inherent in the preparation of the Company's financial statements include estimates as to the realizability of accounts receivable and inventory assets, as well as estimates used in the determination of liabilities related to customer rebates, warranty, and group health insurance. Various assumptions and other factors underlie the determination of these significant estimates. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and, in some instances, actuarial techniques. The Company re-evaluates these significant factors as facts and circumstances change.

New Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU was issued as part of the FASB Simplification Initiative and involves several aspects of accounting for share-based payment transactions, including the income tax consequences and classification on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company is currently assessing the impact of this new accounting pronouncement on its results of operations, financial position, and cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Certain qualitative and quantitative disclosures are required, as well as a modified retrospective recognition and measurement of impacted leases. The new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the impact of this new accounting pronouncement on its results of operations, financial position, and cash flows.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (ASU No. 2016-01). ASU No. 2016-01 enhances the existing financial instruments reporting model by modifying fair value measurement tools, simplifying impairment assessments for certain equity instruments, and modifying overall presentation and disclosure requirements. The new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the impact of this new accounting pronouncement on its results of operations, financial position, and cash flows.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740). Current guidance requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position; however, the new guidance requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company does not expect the

impact of adoption to have a significant impact on the Company's financial position and will have no impact on the results of operations and cash flows.

In May 2015, the FASB issued ASU No. 2015-07, "Fair Value Measurement (Topic 820)." The core principle of the guidance is to remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The guidance also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. This guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. A reporting entity should apply the guidance retrospectively to all periods presented. Earlier application is permitted. The Company adopted ASU No. 2015-07 beginning with the fiscal year ended June 28, 2015. In Note 16, certain investments within the Company's pension plan assets that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The adoption of this ASU did not have any impact on the Company's results of operations, financial position, and cash flows.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03). ASU No. 2015-03 amends the guidance within ASC Topic 835, Interest, to require that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt premiums and discounts. In August 2015, the FASB further clarified their views on debt costs incurred in connection with a line of credit arrangement by issuing ASU No. 2015-15 Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (ASU 2015-15). ASU No. 2015-15 amends the guidance within ASC Topic 835 to allow an entity to defer and present debt issuance costs associated with a line of credit arrangement as an asset, regardless of whether there are any outstanding borrowings on the line of credit arrangement. The new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015, with early adoption permitted. The Company early adopted ASU No. 2015-03 beginning with the fiscal year ended July 3, 2016, and retrospectively as of the fiscal year ended June 28, 2015. As discussed in Note 11, the Company reclassified debt issuance costs, other than debt issuance costs related to the revolving credit facility, from other assets to debt on the Consolidated Balance Sheet. The Company continues to classify debt issuance costs related to the revolving credit facility as an asset, regardless of whether it has any outstanding borrowings on the line of credit arrangements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, under either full or modified retrospective adoption. Early application is only permitted for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently assessing the impact of this new accounting pronouncement on its results of operations, financial position, and cash flows.

Other Matters

Labor Agreements

The Company has collective bargaining agreements with its unions. These collective bargaining agreements cover approximately 12% of the total employees as of July 3, 2016. These agreements expire at various times beginning in calendar year 2017. 

Emissions

The United States Environmental Protection Agency (EPA) has adopted multiple stages of emission regulations for small air cooled engines. The Company currently has a full product offering that complies with the standards in those regulations.  

Canada's emission regulations incorporate the EPA emission standards. Canada is currently aligning its small off road engine emission regulations with the EPA's Phase 3 standards. The Company does not anticipate

that compliance with these revisions will have a material adverse effect on its financial position or operations, as they will be substantially similar to the existing EPA standards.  

The California Air Resources Board (CARB) announced its 2030 Plan which contemplates changing the emission regulations for all mobile sources in phases over the next decade.  CARB anticipates publishing revisions to its existing regulations for small off road engines in calendar year 2016 that harmonize its standards with EPA's Phase 3 standards and eliminate exemptions from its evaporative emissions control requirements. The Company does not anticipate that compliance with these revisions will have a material adverse effect on its financial position or operations as they are expected to be substantially similar to the EPA's existing standards. 

The European Union has adopted multiple stages of emission standards for small air cooled engines and will be  implementing regulations in 2019 that align with the EPA's Phase 3 standards. The Company does not anticipate that compliance with these revisions will have a material adverse effect on its financial position or operations as they are substantially similar to the EPA's existing standards.

Australia announced that it will be adopting emission regulations for small air cooled engines in 2016 and 2017 that align with the EPA's Phase 2 and Phase 3 standards. The Company does not anticipate that compliance with these new regulations will have a material adverse effect on its financial position or operations as they are expected to be substantially similar to EPA standards.

China announced that it will be adopting emission regulations for small air cooled engines that align with the EPA's Phase 3 standards to be effective in 2019. The Company does not anticipate that compliance with these standards will have a material adverse effect on its financial position or operations as they are expected to be substantially similar to the EPA's Phase 3 standards.

The Company is exposed to market risk from changes in foreign exchange rates, commodity prices and interest rates. To reduce the risk from changes in certain foreign exchange rates, commodity prices and interest rates, the Company uses financial instruments. The Company does not hold or issue financial instruments for trading purposes.

Foreign Currency

The Company's earnings are affected by fluctuations in the value of the U.S. Dollar against various currencies. The Company receives Euros for certain products sold to European customers and receives Canadian dollars for certain products sold to Canadian customers. The Yen and Renminbi are used to purchase engines from the Company's joint venture in Japan and the Company's subsidiary in China, respectively. The Company receives Mexican Pesos for certain products sold to the Company's subsidiary in Mexico. The Company's foreign subsidiaries' earnings are also influenced by fluctuations of local currencies, including the Australian dollar and Brazilian Real, against the U.S. dollar as these subsidiaries purchase components and inventory from vendors and the parent in U.S. dollars. Forward foreign exchange contracts are used to partially hedge against the earnings effects of such fluctuations.

Amounts invested in the Company's non-U.S. subsidiaries and joint ventures are translated into U.S. dollars at the exchange rates in effect at fiscal year-end. The resulting cumulative translation adjustments are recorded in Shareholders' Investment as Accumulated Other Comprehensive Income (Loss). The cumulative translation adjustments component of Shareholders' Investment decreased by $4.7 million during fiscal 2016. Using the year-end exchange rates, the total amount invested in non-U.S. subsidiaries on July 3, 2016 was approximately $234.8 million.

Commodity Prices

The Company is exposed to fluctuating market prices for commodities, including steel, natural gas, copper and aluminum. The Company has established programs to manage commodity price fluctuations through contracts that fix the price of certain commodities, some of which are financial derivative instruments. The maturities of these contracts coincide with the expected usage of the commodities for periods up to the next thirty-six months. At July 3, 2016 the Company had the following outstanding commodity derivative contracts with the fair value (gains) losses shown (in thousands):

Interest Rates

The Company is exposed to interest rate fluctuations on its borrowings, depending on general economic conditions. On July 3, 2016 , long-term loans consisted of the following (in thousands):

The Senior Notes carry a fixed rate of interest and are therefore not subject to market fluctuation.

The Company is also exposed to interest rate risk associated with programs under which the Company shares the expense of financing certain dealer and distributor inventories through a third party financing source. The Company enters into interest rate swaps to manage a portion of this interest rate risk. The swaps are designated as cash flow hedges and are used to effectively fix the interest payments to a third party financing source, exclusive of lender spreads, ranging from 0.98% to 1.60% for a notional principal amount of  $145 million with expiration dates ranging from July 2017 to July 2021.

AS OF JULY 3, 2016 AND JUNE 28, 2015

(in thousands)

AS OF JULY 3, 2016 AND JUNE 28, 2015

(in thousands, except per share data)