<PAGE>   1
                                   FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


(Mark One)  
[X]    ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE 
                 SECURITIES EXCHANGE ACT OF 1934 

       For the fiscal year ended    JUNE 28, 1998 
                                      OR
[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934                           
       For the transition period from ____________ to ____________

Commission file number 1-1370

                          BRIGGS & STRATTON CORPORATION
                          -----------------------------
             (Exact name of registrant as specified in its charter)

             A Wisconsin Corporation                       39-0182330
          ------------------------------             ---------------------      
         (State or other jurisdiction of               (I.R.S. Employer
         incorporation or organization)                Identification No.)

             12301 WEST WIRTH STREET
              WAUWATOSA, WISCONSIN                            53222
         ----------------------------------------       -------------------
         (Address of principal executive offices)           (Zip Code)

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

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



<TABLE>
<CAPTION>
      Title of Each Class                    Name of Each Exchange on Which Registered
      -------------------                    -----------------------------------------
<S>                                                 <C>
Common Stock (par value $0.01 per share)             New York Stock Exchange

         Common Share Purchase Rights                New York Stock Exchange

</TABLE>


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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes  X     No
                                          ---       ---

Indicate by check mark 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.    [X]

The aggregate market value of voting stock held by nonaffiliates of the
registrant was approximately $877,470,000 based on the reported last sale price
of such securities as of August 20, 1998.

Number of Shares of Common Stock Outstanding at August 20, 1998: 23,623,591.

                      DOCUMENTS INCORPORATED BY REFERENCE
                      -----------------------------------

                                    Part of Form 10-K Into Which Portions
         Document                         of Document are Incorporated
         --------                         ----------------------------

Proxy Statement for Annual Meeting
    on October 21, 1998                            Part III

The Exhibit Index is located on page 30.



<PAGE>   2



                         BRIGGS & STRATTON CORPORATION
                       1998 FORM 10-K - TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                   PAGE
                                                                                                   ----
<S>                                                                                                <C>

PART I


Item 1.           Business                                                                          1


Item 2.           Properties                                                                        3


Item 3.           Legal Proceedings                                                                 4


Item 4.           Submission of Matters to a Vote of Security Holders                               4

                  Executive Officers of the Registrant                                              4


PART II


Item 5.           Market for the Registrant's Common Equity and Related Stockholder Matters         5


Item 6.           Selected Financial Data                                                           6


Item 7.           Management's Discussion and Analysis of Financial Condition and
                   Results of Operations                                                            7


Item 7A.          Quantitative and Qualitative Disclosures About Market Risk                       11


Item 8.           Financial Statements and Supplementary Data                                      12


Item 9.           Changes in and Disagreements with Accountants on Accounting and
                   Financial Disclosure                                                            28


PART III


Item 10.          Directors and Executive Officers of the Registrant                               28


Item 11.          Executive Compensation                                                           28


Item 12.          Security Ownership of Certain Beneficial Owners and Management                   28


Item 13.          Certain Relationships and Related Transactions                                   28


PART IV


Item 14.          Exhibits, Financial Statement Schedules, and Reports on Form 8-K                 28

                  Signatures                                                                       29
</TABLE>



CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Certain statements in Item 1. Business and Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations may contain
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those projected in the forward-looking
statements. The words "anticipate", "believe", "estimate", "expect",
"objective", and "think" or 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 effects of weather on the purchasing patterns
of the Company's customers and end use purchasers of the Company's engines; the
seasonal nature of the Company's business; actions of competitors; changes in
laws and regulations, including accounting standards; employee relations;
customer demand; prices of purchased raw materials and parts; domestic economic
conditions, including housing starts and changes in consumer disposable income;
foreign economic conditions, including currency rate fluctuations; the ability
of the Company's customers and suppliers to meet year 2000 compliance; and
unanticipated internal year 2000 issues. Some or all of the factors may be
beyond the Company's control.






<PAGE>   3

                                     PART I


ITEM 1. BUSINESS

GENERAL

Briggs & Stratton Corporation is the world's largest producer of air cooled
gasoline engines for outdoor power equipment. The Company designs, manufactures,
markets and services these products for original equipment manufacturers (OEMs)
worldwide. These engines are aluminum alloy gasoline engines ranging from 3
through 22 horsepower.

The Company's engines are used primarily by the lawn and garden equipment
industry, which accounted for 79% of fiscal 1998 OEM engine sales. The major
lawn and garden equipment applications include walk-behind lawn mowers, riding
lawn mowers and garden tillers. The remaining 21% of OEM sales in fiscal 1998
were for use on many products for industrial, construction, agricultural and
consumer applications, including generators, pumps and pressure washers. Many
retailers specify the Company's engines on the powered equipment they sell, and
the Briggs & Stratton name is often featured prominently on a product despite
the fact that its engine is just a component. Briggs & Stratton engines are
marketed under various brand names including Classic(TM), Sprint(TM), Quattro
(TM), Quantum(R), INTEK(TM), I/C(R), Diamond I/C(R), Industrial Plus(TM) and
Vanguard(TM).

In fiscal 1998, approximately 22% of the Company's net sales were derived from
sales in international markets, primarily to customers in Europe. Briggs &
Stratton 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, Canada, Czech Republic, France,
Germany, New Zealand, Sweden, the United Kingdom and Mexico. The Company is a
leading supplier of gasoline engines in developed countries where there is an
established lawn and garden equipment market. The Company also exports to
developing nations where its engines are used in agricultural, marine,
construction and other applications.

Briggs & Stratton engines are sold primarily by its worldwide sales force
through direct calls on customers. The Company's marketing staff and engineers
provide support and technical assistance to its sales force.

Briggs & Stratton also manufactures replacement engines and service parts and
sells them to sales and service distributors. The Company owns its principal
international distributors. In the United States the distributors are
independently owned and operated. These distributors supply service parts and
replacement engines directly to approximately 30,000 independently owned
authorized service dealers throughout the world. These distributors and service
dealers implement Briggs & Stratton's commitment to reliability and service.

CUSTOMERS

The Company's sales are primarily made directly to original equipment
manufacturers. The Company's three largest customers accounted for 46%, 46% and
48% of net sales in fiscal 1998, 1997 and 1996, respectively. Sales to the
Company's largest engine customer, MTD Products Inc., were 18%, 21% and 21% of
net sales in fiscal 1998, 1997 and 1996, respectively. Sales to its second
largest customer, AB Electrolux (including its Frigidaire Home Products group),
were 15%, 14% and 14% of net sales in fiscal 1998, 1997 and 1996, respectively,
and sales to its third largest customer, Tomkins PLC (including its Murray
subsidiary products), were 13%, 11% and 13% of net sales in fiscal 1998, 1997
and 1996, respectively. Under purchasing plans available to all of its gasoline
engine customers, the Company typically enters into annual engine supply
arrangements with these large customers. The Company has no reason to anticipate
a change in this practice or in its historical business relationships with these
equipment manufacturers.

Over the past several years, sales in the United States of lawn and garden
equipment by mass merchandisers have increased significantly, while sales by
independent distributors and dealers have declined. The Company believes that in
1998 more than 75% of all lawn and garden equipment sold in the United States
was sold through mass merchandisers such as Sears, Wal-Mart, Kmart, Home Depot
and Lowe's. Given the buying power of the mass merchandisers, the Company,
through its



                                       1

<PAGE>   4



customers, has experienced pricing pressure. The Company expects that this trend
will continue in the foreseeable future. The Company believes that a similar
trend has developed for commercial products for industrial and consumer
applications.

COMPETITION

The small gasoline  engine industry is highly  competitive.  The Company's major
domestic  competitors in engine  manufacturing  are Tecumseh  Products  Company,
Honda Motor Co., Ltd., Kohler Co. and Kawasaki Heavy Industries,  Ltd. Also, two
domestic lawn mower manufacturers, Toro Co. under its Lawn-Boy brand, and Honda,
manufacture  their own engines.  Eight Japanese small engine  manufacturers,  of
which Honda and Kawasaki are the largest,  compete  directly with the Company in
world  markets in the sale of engines and  indirectly  through their sale of end
products that compete with the end products produced by the Company's customers.
Tecumseh Europa S.p.A., located in Italy, is a major competitor in Europe.

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

SEASONALITY OF DEMAND

Sales of engines to lawn and garden equipment manufacturers are highly seasonal
because of the buying patterns of retail customers. 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 weather conditions. Sales in the Company's fiscal third
quarter have historically been the highest, while sales in the first fiscal
quarter have historically been the lowest.

The sale of lawn and garden equipment has shifted from smaller dealers to larger
mass merchandisers, who do not wish to carry large inventories of lawn and
garden equipment. In order to efficiently use its capital investments and meet
seasonal demand for engines, the Company pursues a balanced production schedule
throughout the year, subject to ongoing adjustment to reflect changes in
estimated demand, customer inventory levels and other matters outside the
control of the Company. Accordingly, inventory levels are generally higher
during the first and second fiscal quarters in anticipation of increased
customer demand in the third fiscal quarter, at which time inventory levels
begin to decrease as sales increase.

In recent years, lawn and garden equipment manufacturers have tended to place
orders with engine manufacturers and to take deliveries later in the selling
season, specifically later in the Company's third fiscal quarter and in the
Company's fourth fiscal quarter. This seasonal pattern results in high
inventories and receivables and low cash for the Company in the second and the
beginning of the third fiscal quarters, with a rapid shift to lower inventories
and receivables and ultimately higher cash in the latter portion of the third
fiscal quarter and in the fourth fiscal quarter.

MANUFACTURING

Briggs & Stratton manufactures engines and parts at the following locations in
the United States: Wauwatosa, Wisconsin; Murray, Kentucky; Poplar Bluff and
Rolla, Missouri; Auburn, Alabama; and Statesboro, Georgia. The Company has a
parts distribution center in Menomonee Falls, Wisconsin. Parts and components
are manufactured at foundries located in West Allis, Wisconsin and Ravenna,
Michigan. The Company believes that it has adequate capacity to meet its
currently anticipated production needs.

Briggs & Stratton manufactures a majority of the structural components used in
its engines, including ductile iron castings, aluminum die castings and a high
percentage of other major components, such as carburetors and ignition systems.
The Company purchases certain finished




                                       2

<PAGE>   5

standard commercial parts such as piston rings, spark plugs, valves, grey iron
castings, zinc die castings and plastic components, some stampings and screw
machine parts and smaller quantities of other components. Raw material purchases
are principally for aluminum, iron 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, with Puling Machinery Works and Yimin Machinery Plant for
the production of engines in China, and with Starting Industrial of Japan for
the production of rewind starters in the U.S. The Company also has two new joint
ventures in India. Kirloskar Briggs & Stratton, a joint venture with Kirloskar
Oil Engines Ltd., will be responsible for sales and distribution of Briggs &
Stratton engines and parts in India and will assemble and distribute generators
and pumps powered by Briggs & Stratton engines. Hero Briggs & Stratton is a
joint venture with Hero Motors, part of the Hero Group, for the manufacture of
engines and transmissions to be used in two wheel transportation vehicles.

The Company has a strategic relationship with Mitsubishi Heavy Industries (MHI)
for the international distribution of engines for outdoor power equipment
manufactured by MHI in Japan.

OTHER GENERAL INFORMATION

The Company holds certain 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. Licenses, franchises and concessions are not a
material factor in the Company's business.

For the years ending June 28, 1998, June 29, 1997 and June 30, 1996, the Company
spent approximately $19,950,000, $19,525,000 and $15,019,000, respectively, on
Company sponsored research activities relating to the development of new
products or the improvement of existing products.

The average number of persons employed by the Company during the fiscal year was
7,350. Employment ranged from a low of 7,205 in July 1997 to a high of 7,486 in
October 1997.

EXPORT SALES

Export sales for fiscal 1998 were $288,510,000 (22% of total sales), for fiscal
1997 were $304,230,000 (23% of total sales) and for fiscal 1996 were
$323,747,000 (25% of total sales). These sales were principally to customers in
European countries.


I
TEM 2. PROPERTIES

The corporate offices and two of the Company's manufacturing facilities are
located in suburbs of Milwaukee, Wisconsin. The Company also has manufacturing
facilities in Murray, Kentucky; Poplar Bluff and Rolla, Missouri; Auburn,
Alabama; Statesboro, Georgia; and Ravenna, Michigan. These are owned facilities
containing over 3.9 million square feet of office and production area. The
Company occupies warehouse space totalling 400,000 square feet in a suburb of
Milwaukee, Wisconsin under a reservation of interest agreement.

The engine business is seasonal, with demand for engines at its height in the
winter and early spring. Engine manufacturing operations run at capacity levels
during the peak season, with many operations running three shifts. Engine
operations generally run one shift in the summer, when demand is weakest and
production is considerably under capacity. During the winter, when finished
goods inventories reach their highest levels, owned warehouse space may be
insufficient and capacity may be expanded through rented space. Excess warehouse
space exists in the spring and summer seasons. The Company's owned properties
are well maintained.

The Company leases 174,000 square feet of space to house its European warehouse
in the Netherlands and its foreign sales and service operations in Australia,
Austria, Canada, the Czech Republic, France, Germany, Mexico, New Zealand,
Sweden, Switzerland and the United Kingdom.



                                       3

<PAGE>   6


ITEM 3. LEGAL PROCEEDINGS

There are no pending legal proceedings that are required to be reported under
this item.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the three months ended June 28,
1998.

EXECUTIVE OFFICERS OF THE REGISTRANT


<TABLE>
<CAPTION>

Name, Age, Position                            Business Experience for Past Five Years                                           
- -------------------                            ---------------------------------------                                      
<S>                                            <C>                                                                               
FREDERICK P. STRATTON, JR., 59                 Mr. Stratton was elected to the position of Chief Executive Officer in May        
Chairman and Chief Executive Officer           1977 and Chairman in November 1986. He also served in the position of President   
(1) (2) (3)                                    from January 1992 to August 1994.                                                 
                                                                                                                                 
JOHN S. SHIELY, 46                             Mr. Shiely was elected to his current position in August 1994, after serving      
President and Chief Operating Officer          as Executive Vice President - Administration since November 1991.                 
(1) (2)                                                                                                                          
                                                                                                                                 
ROBERT H. ELDRIDGE, 59                         Mr. Eldridge was elected to his current position effective April 1995. He has     
Executive Vice President and                   served as Secretary-Treasurer since January 1984.                                 
Chief Financial Officer,                                                                                                         
Secretary-Treasurer  (1)                                                                                                         
                                                                                                                                 
MICHAEL D. HAMILTON, 56                        Mr. Hamilton was elected to his present position effective June 1989.             
Executive Vice President -                                                                                                       
Sales and Service                                                                                                                
                                                                                                                                 
JAMES A. WIER, 55                              Mr. Wier was elected to his current position in April 1989.                       
Executive Vice President - Operations                                                                                            
                                                                                                                                 
                                                                                                                                 
JAMES E. BRENN, 50                             Mr. Brenn was elected to his current position in November 1988.                   
Vice President and Controller                                                                                                    
                                                                                                                                 
RICHARD J. FOTSCH, 43                          Mr. Fotsch was elected to his current position effective July 1997, after serving 
Senior Vice President -                        in the executive officer position of Vice President; General Manager - Small      
Engine Group                                   Engine Division since May 1993.                                                   
                                                                                                                                 
HUGO A. KELTZ, 50                              Mr. Keltz was elected to his present position in May 1992.                        
Vice President - International                                                                                                   
                                                                                                                                 
CURTIS E. LARSON, JR., 50                      Mr. Larson was elected to this executive officer position in October 1995 after   
Vice President - Distribution                  serving as Vice President - Industrial Engine Division since January 1993.        
Sales and Service                                                

</TABLE>




                                       4

<PAGE>   7



<TABLE>


<S>                                            <C>                                                                             
PAUL M. NEYLON, 51                             Mr. Neylon was elected to his current position in May 1993.                     
Vice President; General Manager -                                                                                              
Spectrum Division                                                                                                              
                                                                                                                               
WILLIAM H. REITMAN, 42                         Mr. Reitman was elected an executive officer effective April 20, 1998. He has   
Vice President - Marketing                     served as Vice President - Marketing since November 1995, after serving as      
                                               Marketing Director - New Ventures since March 1993.                             
                                                                                                                               
STEPHEN H. RUGG, 51                            Mr. Rugg was elected to his current position in November 1995, after serving as 
Vice President - Sales                         Vice President - Sales and Marketing since November 1988.                       
                                                                                                                               
THOMAS R. SAVAGE, 50                           Mr. Savage was elected to his current position effective July 1997, after       
Senior Vice President - Administration         serving as Vice President - Administration and General Counsel since November   
                                               1994. He joined the Company in April 1992 as General Counsel.                   
                                                                                                                               
GREGORY D. SOCKS, 49                           Mr. Socks was elected to his current position effective July 1997, after serving
Vice President; General Manager -              in the executive officer position of Vice President; General Manager - Large    
Castings Division                              Engine Division since May 1993.                                                 
                                                                                                                               
GERALD E. ZITZER, 51                           Mr. Zitzer was elected to his current position in November 1988.                
Vice President - Human Resources        
</TABLE>


(1) Officer is also a Director of the Company.

(2) Member of Executive Committee.

(3) Member of Planning Committee.

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


                                    PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
         MATTERS

Information required by this Item is incorporated by reference to "Quarterly
Financial Data, Dividend and Market Information" on page 27.




                                       5






<PAGE>   8


ITEM 6. SELECTED FINANCIAL DATA



<TABLE>
<CAPTION>

 Fiscal Year                                         1998       1997         1996       1995        1994


(dollars in thousands, except per share data)

<S>                                              <C>         <C>         <C>        <C>          <C>
SUMMARY OF OPERATIONS

  NET SALES                                       1,327,610   1,316,413   1,287,029   1,339,677   1,285,517
                                               
  GROSS PROFIT ON SALES                             254,674     221,216     261,748     271,618     266,540
                                               
  PROVISION FOR INCOME TAXES                         42,500      37,740      56,640      65,570      67,240
                                               
  NET INCOME BEFORE CUMULATIVE EFFECT OF       
   ACCOUNTING CHANGES                                70,645      61,565      92,412     104,805     102,481
                                               
  NET INCOME                                         70,645      61,565      92,412     104,805      69,923
                                               
  WEIGHTED AVERAGE NUMBER OF SHARES OF         
   COMMON STOCK OUTSTANDING (000)                    24,666      28,551      28,927      28,927      28,927
                                               
  DILUTED NUMBER OF SHARES OF                  
   COMMON STOCK OUTSTANDING (000)                    24,775      28,678      29,059      29,072      29,120
                                               
  PER SHARE OF COMMON STOCK:                   
                                               
    Basic Earnings                               
     before cumulative effect of accounting changes    2.86        2.16        3.19        3.62        3.54
                                               
    Basic Earnings                                     2.86        2.16        3.19        3.62        2.42
                                               
    Diluted Earnings                                   2.85        2.15        3.18        3.61        2.40
                                               
    Cash Dividends                                     1.12        1.09        1.05         .98         .90
                                               
    Shareholders' Investment                          13.28       13.82       17.30       15.19       13.96



OTHER DATA

 SHAREHOLDERS' INVESTMENT                           316,488     351,097     500,505     439,478     403,792
                                      
 LONG-TERM DEBT                                     128,102     142,897      60,000      75,000      75,000
                                      
 TOTAL ASSETS                                       793,409     842,189     838,164     798,493     777,355
                                      
 PLANT AND EQUIPMENT                                812,428     796,714     776,638     726,331     669,593
                                      
 PLANT AND EQUIPMENT, NET OF RESERVES               391,927     396,266     374,212     343,297     285,890
                                      
 PROVISION FOR DEPRECIATION                          47,511      43,345      43,032      44,445      42,950
                                      
 EXPENDITURES FOR PLANT AND EQUIPMENT                45,893      71,262      77,746     131,034      40,804
                                      
 WORKING CAPITAL                                    159,101     204,422     266,208     256,075     276,040
                                      
   Current Ratio                                   1.7 to 1    2.0 to 1    2.4 to 1    2.3 to 1    2.3 to 1
                                     
                                      
 NUMBER OF EMPLOYEES AT YEAR END                      7,265       7,661       7,199       6,958       8,628
                                      
 NUMBER OF SHAREHOLDERS AT YEAR END                   4,911       5,336       5,879       6,792       6,228
                                      
 QUOTED MARKET PRICE:                 
                                      
    High                                             53-3/8      53-5/8      46-7/8      39-1/4      45-1/8
                                    
    Low                                              36-7/8      36-1/2      32-3/4      30-1/2      32-1/2

</TABLE>


NOTES:

(1) The number of shares of common  stock and per share data have been  adjusted
    for a 2-for-1 stock split in fiscal 1995.

(2) The cumulative effects of accounting changes in 1994 were for postretirement
    health care, postemployment benefits and deferred income taxes.




                                      6


<PAGE>   9

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
        AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

FISCAL 1998 COMPARED TO FISCAL 1997

Sales

Net sales for fiscal 1998 totaled $1,328 million, up 1% or $11 million from the
preceding year. This increase resulted primarily from a $34 million increase in
sales dollars due to a 3% increase in engine unit shipments and a $6 million
increase in service parts sales due to increased demand. These increases were
partially offset by a $19 million decrease in sales dollars due to a mix change
to lower horsepower, lower priced engines and a $10 million decrease in revenue
from European customers with whom the Company shares currency risk.

Gross Profit

The gross profit margin for the 1998 fiscal year increased to 19% from 17% in
the 1997 fiscal year. The primary reason for this favorable change was the lack
of the $37 million charge related to the early retirement window (described
later). There was also a $2 million increase due to improvements in
manufacturing productivity. These were offset by the $10 million in lost gross
profit due to the reduced revenue from European customers described above.

Engineering, Selling, General and Administrative Expenses

Engineering, selling, general and administrative expenses increased $12 million
or 11% between years. This increase was caused primarily by the costs associated
with the new company-wide information system which totaled $7 million (discussed
later) and increased costs of new venture activities which totaled $7 million,
of which $4 million related to the Company's POWERCOM software business. The
Company signed a letter of intent for the sale of its POWERCOM software business
shortly after the end of the fiscal year. This sale is not expected to result in
any material gains or losses.

Interest Expense

Interest expense for the 1998 fiscal year was $9 million higher than in 1997.
This resulted from using increased domestic short-term borrowings to finance
seasonal increases in accounts receivable and inventories during the year and an
increase in long-term debt over the preceding year. Seasonal borrowings were
paid off by the end of the fiscal year.

Provision for Income Taxes

The effective tax rate decreased to 37.6% in 1998 from 38.0% in the previous
year. This was due primarily to reductions in the foreign tax provision and in
other tax related items that were individually insignificant.

FISCAL 1997 COMPARED TO FISCAL 1996

Sales

Net sales for fiscal 1997 increased 2% or $29.4 million compared to the prior
year. The primary reason for this was a 1% increase in engine unit shipments.
The remaining 1% increase in net sales was a result of modest price increases
and a mix improvement.

Gross Profit

Gross profit for fiscal 1997 decreased 15% or $40.5 million compared to the same
period in the prior year. The primary reason for this decrease was a charge of
$37.1 million related to an early retirement window accepted by certain
Milwaukee hourly employees in accordance with the current union contract.

The gross profit rate was 17% in fiscal 1997 compared to 20% in fiscal 1996. In
addition to the early retirement window, the gross profit rate was also
negatively impacted by increases in warranty expenses totaling $9.3 million due
to claims experience, increases in the unit price of aluminum totaling $3.7
million, and the absence in fiscal 1997 of the $3.5 million credit for employees
who had accepted early retirement in fiscal 1995 and canceled their acceptance
in fiscal 1996. Savings from lower labor costs at the Company's new engine
plants partially offset the preceding factors impacting the gross profit rate.

Engineering, Selling, General and Administrative Expenses

Engineering, selling, general and administrative expenses for fiscal 1997
increased 8% or $9.2 million compared to fiscal 1996. This increase was
primarily due to increased employee compensation of $4.0 million, planned
increases in manpower and other costs of $2.7 million relating to new venture
activities, and increased professional services of $1.5 million primarily
resulting from the start of the implementation of a new enterprise-wide
information system.





                                       7

<PAGE>   10




Provision for Income Taxes

The effective income tax rate used in both periods was 38.0%.

LIQUIDITY AND CAPITAL RESOURCES

FISCAL YEARS 1998, 1997 AND 1996

Cash flows from operating activities was $136 million, $143 million and $94
million, in fiscal 1998, 1997 and 1996, respectively. The primary source of
funds was from net income excluding depreciation. The significant change between
fiscal 1997 and fiscal 1996 amounts was due to changes in working capital as
explained below.

The fiscal 1998 cash flow from operating activities reflects a $7 million
increase in accounts receivable and an $18 million decrease in inventories
resulting from increased sales late in the last fiscal quarter.

The fiscal 1997 cash flow from operating activities reflects an increase in
accounts receivable of $11 million and lower inventories of $11 million
resulting from increased sales at the end of the fiscal year when compared to
the previous year. Also, increased accounts payable of $17 million caused by the
timing of payments, increased accrued liabilities of $5 million resulting
primarily from increased profit sharing provisions, and increased federal and
state income taxes payable of $4 million caused by the timing of payments, all
contributed to the cash flows of the Company.

The fiscal 1996 cash flow from operating activities reflects an increase in
receivables of $25 million resulting from higher sales at the end of the fiscal
year and a decrease in accrued liabilities of $26 million primarily due to
decreased profit sharing provisions.

Net cash used in investing activities amounted to $45 million, $51 million and
$77 million in fiscal 1998, 1997 and 1996, respectively. Cash flows used in
investing activities included additions to plant and equipment of $46 million,
$71 million and $78 million in fiscal 1998, 1997 and 1996, respectively. The
fiscal 1998 capital expenditures principally related to investment in equipment.
The fiscal 1997 capital expenditures related primarily to reinvestment in
equipment and new products, while the fiscal 1996 expenditures principally
related to the construction of three new engine manufacturing plants and a
foundry and plant expansions at existing facilities. The 1997 cash flows from
investing activities also included $16 million related to the sale of the
Menomonee Falls, Wisconsin facility. The sale of this facility is described
under "Other Matters."

Net cash used in financing activities amounted to $119 million, $129 million and
$38 million in fiscal 1998, 1997 and 1996, respectively. These financing
activities included the repurchase of the Company's common stock, totaling $86
million in 1998 and $179 million in 1997. In each of fiscal 1998 and 1997, $15
million was paid on the 9.21% Senior Notes due 2001. Cash dividends totaled $28
million, $31 million and $30 million in fiscal 1998, 1997 and 1996,
respectively. The cash dividends in 1998 were less than those paid in the
preceding two years because the common stock repurchase program resulted in less
stock outstanding in that year. In fiscal 1997, the Company issued ten-year
notes which resulted in $98 million of net proceeds from the offering. The $9

million in proceeds from the exercise of stock options in 1998 was substantially
higher than in prior years due to increased option activity.

Future Liquidity and Capital Resources

The Company has in place a $250 million revolving credit facility to be used to
fund seasonal working capital requirements and other financing needs. This
credit facility expires in April 2002 and contains certain restrictive
covenants. Because the Company has been using some available cash in its ongoing
stock repurchase program, the Company will be placing more reliance on
borrowings to fund working capital needs than it did prior to fiscal 1997.
Accordingly, the Company experienced higher interest expense in fiscal 1998, and
anticipates interest expense to remain at such higher levels in the future.

In May 1997, the Company filed a shelf registration for $175 million of debt
securities to be issued periodically. Of this, $75 million has not yet been
issued on the registration statement. The Company may decide to offer all or
part of the remaining securities depending on many factors, including general
economic conditions, cash required for operations and the timing of the
remaining open market repurchases of its common stock.

Management expects capital expenditures to total $72 million in fiscal 1999,
consisting of projects which include reinvestment in equipment and new products.

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




                                       8

<PAGE>   11

FINANCIAL STRATEGY

Management of the Company subscribes to the premise that the value of the
Company is enhanced if the capital invested in the Company's operations yields a
cash return that is greater than the Company's cost of capital. Given this
belief, the Company implemented this financial strategy by means of a "dutch
auction" tender offer (described below) and a public debt offering in fiscal
1997. The Company also continued the repurchase of its outstanding common stock
in the open market in the 1998 fiscal year. The Company believes this will
provide a capital structure that makes greater use of financial leverage without
imposing excessive risk on either the Company's shareholders or creditors. The
Company also believes that the substitution of lower (after-tax) cost debt for
equity in its permanent capital structure will reduce its overall cost of
capital and that its profitability and strong cash flows will accommodate the
increased use of debt without impairing its ability to finance growth or
increase cash dividends per share on its common stock.

In fiscal 1997, the Company's Board of Directors authorized the purchase of up
to $300 million of shares of its common stock by means of a tender offer and
open market or private transactions. As of June 28, 1998, purchases totaled $264
million. Future purchases will depend on many factors, including the market
price of the shares, the Company's business and financial position, and general
economic and market conditions. The Company intends to fund any future purchases
of its common stock through a combination of available cash, cash generated from
operations and additional borrowings.

Also as a part of its financial strategy, subject to the discretion of its Board
of Directors and the requirements of applicable law, the Company currently
intends to increase future cash dividends per share at a rate approximating the
inflation rate.

OTHER MATTERS

Year 2000 Issues

The Company is implementing a new company-wide information system. This new
system is expected to address the great majority of information technology year
2000 computer issues. The new system will replace the Company's mainframe
computer, which is being retired in early calendar 1999. The new system has been
installed and implementation has been completed in approximately one-half of the
Company's U.S. operations. Other internal year 2000 issues not directly related
to the previously described project are being addressed and tested in parallel
with the main project. These are expected to be completed by the middle of the
1999 calendar year.

Project expenditures to date total $26 million. The Company expects to incur an
additional $8 million of incremental costs, running through the 2002 fiscal
year, because of related projects.


The Company has developed an overall comprehensive Year 2000 Program to address
year 2000 issues. This program is based on the Automotive Industry Action
Group's model system consisting of five steps: Awareness; Inventory and
Assessment; Remediation; Testing; and Readiness Certification. Oversight of the
program is the responsibility of a group of senior executives with progress
reported to the Company's Board of Directors.

A risk assessment and exposure analysis has been made, and each area has been
ranked as high, medium or low. The Company's high risk areas have been
identified as information technology systems and infrastructures, customers,
suppliers, and financial institutions. The software for a new company-wide
information system, which is broad based, has already been installed and is
effectively in use for over 50% of company operations. And since remaining
operations are substantially similar, management does not anticipate the need to
develop an extensive contingency plan for information technology systems.

The non-information technology systems are midway through the assessment phase
and remediation is scheduled for completion by mid-calendar year 1999 without
material incremental costs anticipated. Based on the assessment of its
non-information technology systems to date, the Company currently does not
anticipate the need to develop an extensive contingency plan for non-information
systems, so it is not expecting to incur material incremental costs to do this.

The Company's largest customers have certified that they will be year 2000
compliant before the end of calendar year 1999, as to their relationships with
the Company. The identification of critical vendors has been completed and a
survey is scheduled for completion by the first quarter of calendar year 1999.
Alternative suppliers will be identified for those not expected to be compliant
by the end of 1999, as to their relationships with the Company. The Company's
financial institutions are currently being surveyed and it is anticipated that
they are year 2000 compliant, or will be before the end of calendar year 1999.



                                       9

<PAGE>   12

Selected areas, both internal and external, will be tested to assure the
integrity of the Company's remediation programs. The testing will be completed
by mid-calendar year 1999.

It is anticipated that any requisite changes necessary to become year 2000
compliant will be completed prior to mid-calendar year 1999 and contingency
plans will be developed, as necessary, to address unforeseen circumstances prior
to the end of calendar year 1999.

The Company believes its Year 2000 Program is adequate to detect in advance year
2000 compliance issues, and that it has the necessary resources to remedy them.
However, the year 2000 problem has many aspects and potential consequences, some
of which are not reasonably foreseeable, and there can be no assurance that
unforeseen consequences will not arise.

Emissions

The U.S. Environmental Protection Agency (EPA) is developing national emission
standards under a two phase process for small air cooled engines. The Company
currently has a complete product offering which complies with EPA's Phase I
engine emission standards. The EPA issued a Notice of Proposed Rulemaking for
Phase II emission standards in January of 1998 incorporating the agreement in
principle reached between EPA and several engine manufacturers, including the
Company. This proposed Phase II program will impose more stringent standards
over the useful life of the engine and will be phased in from 2001 to 2005. EPA
expects to finalize the Phase II regulation by the end of 1998. While it is
impossible to precisely quantify the cost of compliance until the standards are
issued, the Company believes compliance with the new standards will not have a
material adverse effect on its financial position or results of operations.

The California Air Resources Board (CARB) staff completed a review of the
existing Tier II standards and proposed that alternative standards and
implementation dates be adopted by CARB. Alternative Tier II standards were
adopted by CARB at its March 26, 1998 meeting and are not harmonized with EPA's
proposed Phase II, but rather require the accelerated introduction of overhead
valve engine technology into California. In addition, individual companies which
sell more than a threshold number of Class I engines into California must submit
a supplemental compliance plan to CARB to achieve additional reductions in
extreme non-attainment areas. While CARB's aggressive program may result in a
reduced product offering by the Company in California, it is not anticipated
that the California program will have a material effect on the financial
condition or results of operations of the Company.

Sale of the Menomonee Falls, Wisconsin Facility

The sale of the Company's Menomonee Falls, Wisconsin facility for approximately
$16.0 million was completed during fiscal 1997. The provisions of the contract
state that the Company will continue to own and occupy the warehouse portion of
the facility for a period of up to ten years (the "Reservation Period"). The
contract also contains a buyout clause, at the buyer's option and under certain
circumstances, of the remaining Reservation Period. Under the provisions of
Statement of Financial Accounting Standards No. 66, "Accounting for Sales of
Real Estate," the Company is required to account for this as a financing
transaction as the Company continues to have substantial involvement with the
facility during the Reservation Period or until the buyout option is exercised.
Under this method, the cash received is reflected as a deferred revenue, and the
assets and the accumulated depreciation remain on the Company's books.
Depreciation expense continues to be recorded each period, and imputed interest
expense is also recorded and added to deferred revenue. Offsetting this is the
fair value lease income on the non-Company occupied portion of the building. A
pretax gain, which will be recognized at the earlier of the exercise of the
buyout option or the expiration of the Reservation Period, is estimated to be
$10 million to $12 million. The annual cost of operating the warehouse portion
of the facility is not material.

New Accounting Pronouncements

In June 1998 the Financial Accounting Standards Board adopted Financial
Accounting Standard No. 133 "Accounting for Derivative Instruments and Hedging
Activities". This new standard will be effective for the Company in fiscal 2000,
and requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Any fair value changes will be recorded in
net income or comprehensive income. The Company does not expect that the
adoption of this standard will have a material effect on the results of
operations.




                                       10

<PAGE>   13

I
TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in foreign exchange and
interest rates. To reduce the risk from changes in foreign exchange rates, the
Company selectively 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 foreign currencies primarily as a result of purchasing engines
from its Japanese joint venture. The Company's foreign subsidiaries' earnings
are also influenced by fluctuations of the local currency against the U.S.
dollar as these subsidiaries purchase inventory from the parent in U.S. dollars.
Forward foreign exchange contracts are used to partially hedge against the
earnings effects of such fluctuations. At June 28, 1998, the Company had the
following forward foreign exchange contracts outstanding at the Fair Value Gains
and (Losses) shown (in thousands):


<TABLE>
<CAPTION>

                     Notional          U.S.           Fair Value
Currency               Value          Dollars      Gains and (Losses)
- --------             --------         -------      ------------------
<S>                 <C>               <C>          <C>
Japanese Yen         3,600,000         28,000          ($2,200)
Australian Dollars         400            300               60
</TABLE>


All of the above contracts expire in less than one year.

Although the Company sells its domestically produced engines to foreign
customers in U.S. dollars, the Company has shared some of the currency risk with
customers for certain sales transactions. Accordingly, the Company is exposed to
fluctuations in foreign exchange rates, primarily related to the U.S.
dollar/European Currency Unit rate. Historically, the Company has managed these
risks through limitations on the amount of sharing provided to customers. These
programs are generally for one year.

Fluctuations in currency exchange rates may also impact the stockholders' equity
of the Company. Amounts invested in the Company's non-U.S. subsidiaries are
translated into U.S. dollars at the exchange rates in effect at year end. The
resulting translation adjustments are recorded in stockholders' equity as
cumulative translation adjustments. The dollar was stronger relative to many of
the foreign currencies at June 28, 1998 compared to June 29, 1997. Consequently,
the cumulative translation adjustments component of stockholders' equity
decreased $1.1 million during the year. Using the year-end exchange rates, the
total amount invested in subsidiaries at June 28, 1998 was approximately $9.9
million.

INTEREST RATES

The Company is exposed to interest rate fluctuations on its borrowings. The
Company manages its interest rate exposure through a combination of fixed and
variable rate debt. Depending on general economic conditions, the Company has
typically used variable rate debt for short-term borrowings and fixed rate debt
for longer-term borrowings.

At June 28, 1998, the Company had the following short-term loans outstanding
(amount in thousands):


<TABLE>
<CAPTION>
                                                       Average Annual
Currency                      Amount                  Interest Rate
- --------                      ------                  ---------------
<S>                          <C>                        <C>
German Mark                   19,561                     4.52% 
British Pounds                   140                     8.10% 
Dutch Guilder                  1,715                     5.10%          
Irish Punt                       227                     6.90%          
Canadian Dollars               2,797                     6.50%          
Swedish Krona                  1,000                     8.05%          
French Franc                     665                     5.19%          
U.S. Dollars                   4,700                     5.94%          
</TABLE>
                      

All of the above loans carry variable interest rates.

Long-term loans consisted of the following (amounts in thousands):


<TABLE>
<CAPTION>

Description                     Amount            Maturity
- -----------                     ------            --------
<C>                            <C>                <C>              
9.21% Senior Notes             $45,000            $15,000 in fiscal 1999, 2000
                                                  and 2001
7.25% Notes                     98,102            2007
</TABLE>


Each of the above loans carries a fixed rate of interest.


                                       11

<PAGE>   14

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS

AS OF JUNE 28, 1998 AND JUNE 29, 1997
(in thousands)                            


<TABLE>
<CAPTION>
             ASSETS                        1998         1997     
                                           ----         ----    
<S>                                      <C>          <C>                                                  
CURRENT ASSETS:

  Cash and Cash Equivalents              $ 84,527     $112,859
  Receivables, Less Reserves of
    $1,537 and $1,522, Respectively       136,629      129,877
  Inventories -
    Finished Products and Parts            58,975       83,361
    Work in Process                        45,217       37,922
    Raw Materials                           3,684        4,674
                                         --------     --------
      Total Inventories                   107,876      125,957
  Future Income Tax Benefits               31,287       31,602
  Prepaid Expenses                         21,727       18,121
                                         --------     --------
      Total Current Assets                382,046      418,416

DEFERRED INCOME TAX ASSETS                  9,555       16,975

CAPITALIZED SOFTWARE                        9,881       10,532

PLANT AND EQUIPMENT:

  Land and Land Improvements               15,781       15,548
  Buildings                               148,868      146,769
  Machinery and Equipment                 630,043      584,834
  Construction in Progress                 17,736       49,563
                                         --------     --------
                                          812,428      796,714

  Less - Accumulated Depreciation         420,501      400,448
                                         --------     --------
      Total Plant and Equipment, Net      391,927      396,266
                                         --------     --------
                                         $793,409     $842,189
                                         ========     ========
</TABLE>


           The accompanying notes to consolidated financial statements
                 are an integral part of these balance sheets.

                                       12



<PAGE>   15


 AS OF JUNE 28, 1998 AND JUNE 29, 1997
(in thousands)


<TABLE>
<CAPTION>
    LIABILITIES AND SHAREHOLDERS' INVESTMENT         1998           1997
                                                     ----           ----  
<S>                                              <C>            <C>      
CURRENT LIABILITIES:

  Accounts Payable                               $  76,915      $  82,166
  Domestic Notes Payable                             4,700          5,000
  Foreign Loans                                     14,336         13,359
  Current Maturities on Long-Term Debt              15,000         15,000
  Accrued Liabilities -
    Wages and Salaries                              29,502         25,767
    Warranty                                        29,565         27,017
    Other                                           42,398         34,769
                                                 ---------      ---------
      Total Accrued Liabilities                    101,465         87,553
  Federal and State Income Taxes                    10,529         10,916
                                                 ---------      ---------
      Total Current Liabilities                    222,945        213,994

DEFERRED REVENUE ON SALE OF 
  PLANT AND EQUIPMENT                               15,893         15,966

ACCRUED PENSION COST                                26,477         31,891

ACCRUED EMPLOYEE BENEFITS                           12,571         12,324

ACCRUED POSTRETIREMENT
  HEALTH CARE OBLIGATION                            70,933         74,020

LONG-TERM DEBT                                     128,102        142,897

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' INVESTMENT:

  Common Stock -
    Authorized 60,000 shares $.01 Par Value,
      Issued 28,927 in 1998 and 1997                   289            289
  Additional Paid-In Capital                        37,776         40,533
  Retained Earnings                                533,805        490,682
  Cumulative Translation Adjustments                (2,110)        (1,033)
  Treasury Stock at cost,
    5,103 shares in 1998 and 3,513 in 1997        (253,272)      (179,374)
                                                 ---------      ---------
      Total Shareholders' Investment               316,488        351,097
                                                 ---------      ---------
                                                 $ 793,409      $ 842,189
                                                 =========      =========
</TABLE>




          The accompanying notes to consolidated financial statements
                 are an integral part of these balance sheets.

                                       13




<PAGE>   16

CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE YEARS ENDED JUNE 28, 1998, JUNE 29, 1997 AND JUNE 30, 1996
(in thousands, except per share data)       


<TABLE>
<CAPTION>
                                                   1998          1997            1996
                                                   ----          ----            ----
<S>                                            <C>            <C>            <C>        
NET SALES                                      $ 1,327,610    $ 1,316,413    $ 1,287,029
COST OF GOODS SOLD                               1,072,936      1,095,197      1,025,281
                                               -----------    -----------    -----------
    Gross Profit on Sales                          254,674        221,216        261,748
ENGINEERING, SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                          129,986        117,497        108,339
                                               -----------    -----------    -----------
    Income from Operations                         124,688        103,719        153,409
INTEREST EXPENSE                                   (19,352)        (9,880)       (10,069)
OTHER INCOME, Net                                    7,809          5,466          5,712
                                               -----------    -----------    -----------
    Income Before Provision for Income Taxes       113,145         99,305        149,052
PROVISION FOR INCOME TAXES                          42,500         37,740         56,640
                                               -----------    -----------    -----------
NET INCOME                                     $    70,645    $    61,565    $    92,412
                                               ===========    ===========    ===========
    Average Shares Outstanding                      24,666         28,551         28,927
BASIC EARNINGS PER SHARE                       $      2.86    $      2.16    $      3.19
                                               ===========    ===========    ===========
    Diluted Average Shares Outstanding              24,775         28,678         29,059
DILUTED EARNINGS PER SHARE                     $      2.85    $      2.15    $      3.18
                                               ===========    ===========    ===========

</TABLE>





          The accompanying notes to consolidated financial statements
                    are an integral part of these statements.

                                       14



<PAGE>   17

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT

FOR THE YEARS ENDED JUNE 28, 1998, JUNE 29, 1997 AND JUNE 30, 1996
(in thousands) 


<TABLE>
<CAPTION>
                                                        Additional                  Cumulative
                                            Common       Paid-In      Retained      Translation    Treasury
                                            Stock        Capital      Earnings      Adjustments      Stock
                                            -----        -------      --------      -----------      -----
<S>                                        <C>          <C>           <C>           <C>           <C>       
BALANCES, JULY 2, 1995                     $     289    $  41,698     $ 397,627     $    (136)    $    --   
  Net Income                                    --           --          92,412          --            --   
  Cash Dividends Paid ($1.05 per share)         --           --         (30,373)         --            --   
  Purchase of Common Stock
    for Treasury                                --           --            --            --          (1,185)
  Exercise of Stock Options                     --           (800)         --            --           1,185
  Currency Translation Adjustments              --           --            --            (212)         --   
                                           ---------    ---------     ---------     ---------     ---------     
BALANCES, JUNE 30, 1996                          289       40,898       459,666          (348)         --   
  Net Income                                    --           --          61,565          --            --   
  Cash Dividends Paid ($1.09 per share)         --           --         (30,549)         --            --   
  Purchase of Common Stock
    for Treasury                                --           --            --            --        (179,924)
  Exercise of Stock Options                     --           (365)         --            --             550
  Currency Translation Adjustments              --           --            --            (685)         --   
                                           ---------    ---------     ---------     ---------     ---------     
BALANCES, JUNE 29, 1997                          289       40,533       490,682        (1,033)     (179,374)
  Net Income                                    --           --          70,645          --            --   
  Cash Dividends Paid ($1.12 per share)         --           --         (27,522)         --            --   
  Purchase of Common Stock
    for Treasury                                --           --            --            --         (85,943)
  Exercise of Stock Options                     --         (2,757)         --            --          12,045
  Currency Translation Adjustments              --           --            --          (1,077)         --
                                           ---------    ---------     ---------     ---------     ---------     
BALANCES, JUNE 28, 1998                    $     289    $  37,776     $ 533,805     $  (2,110)    $(253,272)
                                           =========    =========     =========     =========     ========= 

</TABLE>



          The accompanying notes to consolidated financial statements
                   are an integral part of these statements.


                                       15



<PAGE>   18

CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE YEARS ENDED JUNE 28, 1998, JUNE 29, 1997 AND JUNE 30, 1996
(in thousands) 


<TABLE>
<CAPTION>
                                                                    1998          1997          1996
                                                                    ----          ----          ----
<S>                                                             <C>           <C>           <C>    
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income                                                     $  70,645     $  61,565     $  92,412
  Adjustments to Reconcile Net Income to
    Net Cash Provided by Operating Activities -
    Depreciation                                                    47,511        43,345        43,032
    Amortization of Discount on 7.25% Notes Due 2007                   205            17          --   
    Loss on Disposition of Plant and Equipment                       1,973         1,608         2,692
    Provision for Deferred Income Taxes                              7,735       (16,105)          770
    Change in Operating Assets and Liabilities -
      (Increase) in Receivables                                     (6,752)      (10,531)      (25,230)
      Decrease in Inventories                                       18,081        11,446         3,271
      (Increase) in Other Current Assets                            (3,606)       (2,396)       (2,895)
      Increase (Decrease) in Accounts Payable,
        Accrued Liabilities and Income Taxes                         8,274        25,378       (15,595)
      Other, Net                                                    (7,676)       28,590        (3,961)
                                                                 ---------     ---------     ---------
        Net Cash Provided by Operating Activities                  136,390       142,917        94,496
                                                                 ---------     ---------     ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to Plant and Equipment                                 (45,893)      (71,262)      (77,746)
  Proceeds Received on Sale of Plant and Equipment                     620         4,133         1,069
  Proceeds Received on Sale of Menomonee Falls,
  Wisconsin Facility                                                  --          15,966          --   
                                                                 ---------     ---------     ---------
        Net Cash Used in Investing Activities                      (45,273)      (51,163)      (76,677)
                                                                 ---------     ---------     ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net Borrowings (Repayments) on Loans and Notes Payable               677        (1,563)       (6,481)
  Net Borrowings on 7.25% Notes Due 2007                              --          97,880          --   
  Repayment on 9.21% Senior Notes Due 2001                         (15,000)      (15,000)         --   
  Cash Dividends Paid                                              (27,522)      (30,549)      (30,373)
  Purchase of Common Stock for Treasury                            (85,943)     (179,924)       (1,185)
  Proceeds from Exercise of Stock Options                            9,288           185           385
                                                                 ---------     ---------     ---------
        Net Cash Used in Financing Activities                     (118,500)     (128,971)      (37,654)
                                                                 ---------     ---------     ---------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
  CHANGES ON CASH AND CASH EQUIVALENTS                                (949)         (563)         (174)
                                                                 ---------     ---------     ---------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                                 (28,332)      (37,780)      (20,009)
CASH AND CASH EQUIVALENTS:
  Beginning of Year                                                112,859       150,639       170,648
                                                                 ---------     ---------     ---------
  End of Year                                                    $  84,527     $ 112,859     $ 150,639
                                                                 =========     =========     =========
SUPPLEMENTAL DISCLOSURE OF
  CASH FLOW INFORMATION:
  Interest Paid                                                  $  17,989     $   9,298     $  10,137
                                                                 =========     =========     =========
  Income Taxes Paid                                              $  33,352     $  49,707     $  48,865
                                                                 =========     =========     =========
</TABLE>


          The accompanying notes to consolidated financial statements
                   are an integral part of these statements.

                                       16





<PAGE>   19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED JUNE 28, 1998, JUNE 29, 1997 AND JUNE 30, 1996

(1)      NATURE OF OPERATIONS:
Briggs & Stratton  Corporation  (the  Company) is a U.S.  based  producer of air
cooled gasoline engines.  These engines are sold primarily to original equipment
manufacturers  of lawn and garden  equipment and other  gasoline  engine powered
equipment worldwide.

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year: The Company's fiscal year consists of 52 or 53 weeks, ending on the
Sunday nearest the last day of June in each year. Therefore,  the 1998, 1997 and
1996 fiscal years were 52 weeks long.  All  references to years relate to fiscal
years rather than calendar years.

Principles of Consolidation:  The consolidated  financial statements include the
accounts of Briggs & Stratton  Corporation  and its wholly  owned  domestic  and
foreign   subsidiaries   after   elimination   of   intercompany   accounts  and
transactions.

Accounting Estimates: The preparation of financial statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Cash and Cash  Equivalents:  This caption  includes cash,  commercial  paper and
certificates  of deposit.  The Company  considers all highly liquid  investments
purchased with a maturity of three months or less to be cash equivalents.

Inventories:  Inventories are stated at cost, which does not exceed market.  The
last-in,   first-out  (LIFO)  method  was  used  for  determining  the  cost  of
approximately  88% of total  inventories  at June 28, 1998,  and 93% at June 29,
1997 and June 30, 1996.  The cost for the remaining  portion of the  inventories
was  determined  using  the  first-in,  first-out  (FIFO)  method.  If the  FIFO
inventory  valuation method had been used  exclusively,  inventories  would have
been  $48,100,000,  $48,894,000 and $48,125,000  higher in the respective years.
The  LIFO  inventory   adjustment  was  determined  on  an  overall  basis,  and
accordingly, each class of inventory reflects an allocation based on the FIFO
amounts.

Plant and Equipment and Depreciation:
Plant and equipment is stated at cost,  and  depreciation  is computed using the
straight-line  method at rates  based  upon the  estimated  useful  lives of the
assets.

Expenditures  for repairs and  maintenance  are charged to expense as  incurred.
Expenditures for major renewals and betterments,  which significantly extend the
useful lives of existing plant and equipment,  are capitalized and  depreciated.
Upon  retirement or  disposition  of plant and  equipment,  the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in other income.

Income Taxes: The Provision for Income Taxes includes Federal, state and foreign
income  taxes  currently  payable  and those  deferred  or  prepaid  because  of
temporary  differences  between the financial  statement and tax basis of assets
and liabilities.  The Future Income Tax Benefits represent temporary differences
relating to current assets and current  liabilities  and the Deferred Income Tax
Assets  represent  temporary  differences  relating  to  noncurrent  assets  and
liabilities.

Research and Development Costs:  Expenditures relating to the development of new
products and processes,  including  significant  improvements and refinements to
existing products,  are expensed as incurred. The amounts charged against income
were $19,950,000 in 1998, $19,525,000 in 1997 and $15,019,000 in 1996.

Accrued Employee Benefits: The Company's life insurance program includes payment
of a death benefit to  beneficiaries of retired  employees.  The Company accrues
for the estimated cost of these benefits over the estimated  working life of the
employee.  Past service costs for all retired employees have been fully provided
for. The Company also accrues for the estimated cost of supplemental  retirement
and death benefit agreements with executive officers.


                                       17

<PAGE>   20

NOTES . . .


Advertising Costs: Advertising costs, included in Engineering,  Selling, General
and  Administrative  Expenses  on the  accompanying  Consolidated  Statement  of
Earnings,  are expensed as incurred.  These expenses totaled $7,325,000 in 1998,
$7,989,000 in 1997 and $7,066,000 in 1996.

Foreign  Currency  Translation:  Foreign  currency  balance  sheet  accounts are
translated  into  United  States  dollars at the rates of  exchange in effect at
fiscal year end.  Income and expenses  are  translated  at the average  rates of
exchange in effect during the year. The related translation adjustments are made
directly to a separate component of Shareholders' Investment.

Start-Up Costs: It is the Company's policy to expense all start-up costs for
new manufacturing plants. Under this policy, the Company expensed $11,660,000
in fiscal 1996.

Capitalized  Software:  This caption  represents  costs of software  used in the
Company's  business.  Amortization  of  Capitalized  Software  is computed on an
item-by-item  basis  over a  period  of  three to ten  years,  depending  on the
estimated  useful life of the  software.  Accumulated  amortization  amounted to
$7,137,000 as of June 28, 1998, and $4,442,000 as of June 29, 1997.

Deferred  Revenue  on  Sale of  Plant &  Equipment:  The  sale of the  Company's
Menomonee  Falls,   Wisconsin  facility  for  approximately  $16.0  million  was
completed at the beginning of the fiscal  quarter ended  December 29, 1996.  The
provisions  of the  contract  state that the  Company  will  continue to own and
occupy the  warehouse  portion of the  facility  for a period of up to ten years
(the "Reservation  Period").  The contract also contains a buyout clause, at the
buyer's  option and under certain  circumstances,  of the remaining  Reservation
Period.  Under the  provisions  of Statement of Financial  Accounting  Standards
(FAS) No. 66,  "Accounting for Sales of Real Estate," the Company is required to
account for this as a financing  transaction  as the Company  continues  to have
substantial involvement with the facility during the Reservation Period or until
the  buyout  option is  exercised.  Under  this  method,  the cash  received  is
reflected as a deferred revenue, and the assets and the accumulated depreciation
remain on the Company's  books.  Depreciation  expense  continues to be recorded
each period, and imputed interest expense is also recorded and added to deferred
revenue.  Offsetting  this  is  the  imputed  fair  value  lease  income  on the
non-Company  occupied  portion of the  building.  A pretax  gain,  which will be
recognized at the earlier of the exercise of the buyout option or the expiration
of the Reservation  Period,  is estimated to be $10 million to $12 million.  The
annual cost of operating the warehouse portion of the facility is not material.

Derivatives:  The Company uses  derivative  financial  instruments to manage its
foreign  currency  and interest  rate  exposures.  Gains and losses  relating to
hedges  of  probable  transactions  with  noncontrolled  subsidiaries  and third
parties are deferred and recognized as adjustments of carrying  amounts when the
transaction  occurs.  Gains and  losses on hedges of  transactions  that are not
probable of occurring and hedges of transactions  with  controlled  subsidiaries
are recognized in the Company's results of operations.

Earnings Per Share: The Company adopted Financial Accounting Standard No. 128
during the second quarter of the current fiscal year. The Company's earnings
per share were computed by dividing net income by the weighted average number
of shares of common stock  outstanding  during the period.  Diluted earnings per
share,  for each period  presented,  were computed on the assumption  that stock
options were exercised at the beginning of the periods reported.  The difference
between  weighted   average  shares   outstanding  and  diluted  average  shares
outstanding reflects the dilutive effects of stock options.

Earnings per share of common stock are  computed  based on the weighted  average
number of shares  outstanding  during each period. The shares repurchased on May
20, 1997 pursuant to the dutch auction  tender  offer,  which totaled  3,506,190
shares at $51.00 per share, and the Company's  ongoing share repurchase  program
affect the year-to-date comparisons.


                                       18



<PAGE>   21

NOTES . . .


(3)      INCOME TAXES:
The  provision  for income  taxes  consists of the  following  (in  thousands of
dollars):


<TABLE>
<CAPTION>

                                 1998                1997              1996
                                 ----                ----              ----
<S>                           <C>              <C>                <C>   
Current 
  Federal                     $ 29,295            $ 45,474           $ 46,448 
  State                          4,442               6,723              7,768 
  Foreign                        1,028               1,648              1,654 
                              --------            --------           -------- 
                                34,765              53,845             55,870
Deferred                         7,735             (16,105)               770
                              --------            --------           --------
Total                         $ 42,500            $ 37,740           $ 56,640 
                              ========            ========           ========
</TABLE>


A  reconciliation  of the U.S.  statutory  tax rates to the  effective tax rates
follows:


                                          1998     1997     1996
                                          ----     ----     ----
U.S. statutory rate                       35.0%    35.0%   35.0%
State taxes, net of
  Federal tax benefit                      3.1%     3.1%    3.4%
Foreign Sales Corporation
  tax benefit                              (.8%)    (.9%)   (.7%)
Other                                       .3%      .8%     .3%
                                          -----   ------   ----- 
Effective tax rate                        37.6%    38.0%   38.0%
                                          =====   ======   ===== 


The  components of deferred tax assets and  liabilities at the end of the fiscal
year were (in thousands of dollars):

                                            1998      1997
                                            ----      ----
Future Income Tax Benefits:             

  Inventory                                $ 2,212    $  2,916
  Payroll related accruals                   3,602       4,244
  Warranty reserves                         11,531      10,537
  Other accrued liabilities                 11,542       8,926
  Miscellaneous                              2,400       4,979
                                          --------    --------
                                          $ 31,287    $ 31,602
                                          ========    ========


                                            1998      1997
                                            ----      ----
Deferred Income Taxes:                                 
  Difference between book and
    tax methods applied to
    maintenance and supply
    inventories                          $ 11,198     $ 12,464
  Pension cost                              7,137        9,688
  Accumulated depreciation                (53,109)     (50,207)
  Accrued employee benefits                 8,529        7,904
  Postretirement
    health care obligation                 27,664       28,868
  Deferred revenue on sale
    of plant & equipment                    6,198        6,226
  Miscellaneous                             1,938        2,032
                                         --------     --------
                                         $  9,555     $ 16,975
                                         ========     ========


The Company has not recorded  deferred income taxes  applicable to undistributed
earnings of foreign  subsidiaries  that are  indefinitely  reinvested in foreign
operations. These undistributed earnings amounted to approximately $7,300,000 at
June 28,  1998.  If these  earnings  were  remitted  to the U.S.,  they would be
subject to U.S. income tax. However,  this tax would be substantially  less than
the U.S. statutory income tax because of available foreign tax credits.

(4)      EXPORT SALES AND SIGNIFICANT CUSTOMERS:
Export sales for fiscal 1998 were $288,510,000 (22% of total sales),  for fiscal
1997 were $304,230,000 (23%) and for fiscal 1996 were $323,747,000  (25%). These
sales were principally to customers in European countries.

In the fiscal years 1998, 1997 and 1996,  there were sales to three major engine
customers  that  exceeded  10% of total  Company  net sales.  The sales to these
customers  are  summarized  below (in  thousands of dollars and percent of total
Company sales):



<TABLE>
<Caption

                       1998                    1997                  1996    
                       ----                    ----                  ----    
Customer      Sales         %          Sales          %      Sales        %  
- --------      -----         -          -----          -      -----        -  
<S>          <C>         <C>        <C>             <C>   <C>          <C>   
  A          $235,468      18%       $282,428        21%   $267,257      21% 
  B           203,931      15%        180,770        14%    177,314      14%  
  C           165,937      13%        142,840        11%    163,065      13%
              -------      --         -------        --     -------      --
             $605,336      46%       $606,038        46%   $607,636      48%
              =======      ==         =======        ==     =======      ==

</TABLE>


                                       19

<PAGE>   22
NOTES . . .


(5)      INDEBTEDNESS:
The Company has access to a $250,000,000  revolving  credit facility (the Credit
Facility) which expires in April 2002. The Company also has access to additional
domestic  lines of credit  totaling  $18,000,000  which  remain in effect  until
canceled by either party.  They provide  amounts for  short-term use at the then
prevailing rate. There are no significant  compensating balance requirements for
any of these lines,  and there were no  borrowings  at June 28, 1998 using these
lines or the Credit Facility.

Borrowings  under the Credit Facility by the Company bear interest at a rate per
annum equal to, at its option, either:

(1) the higher of (a) the bank's  reference rate or (b) 0.5% per annum above the
Federal Funds rate; or

(2) LIBOR plus a margin that may be  adjusted up or down based on the  Company's
debt ratings.

The Credit  Facility  contains  certain  restrictive  covenants that require the
Company to maintain certain  financial  conditions  including a maximum limit on
the ratio of debt to capital and a minimum  fixed  charge  coverage  ratio.  The
Credit Facility imposes limitations on liens, certain indebtedness, the sales of
assets and certain investments.

The following data relates to domestic notes payable (in thousands of dollars):


                        1998     1997
                        ----     ----
Balance at
  Fiscal Year End     $ 4,700    $ 5,000
Weighted Average
  Interest Rate at
  Fiscal Year End        5.94%      5.98%


The lines of  credit  available  to the  Company  in  foreign  countries  are in
connection  with  short-term  borrowings and bank  overdrafts used in the normal
course of business.  These  amounts total  $15,894,000,  expire at various times
through December,  1998 and are  renewable.  None of  these  arrangements  had 
material commitment fees or compensating balance requirements.

The following information relates to foreign loans (in thousands of dollars):


                        1998     1997
                        ----     ----
Balance at
  Fiscal Year End     $14,336    $13,359
Weighted Average
  Interest Rate at
  Fiscal Year End        4.97%      4.49%


The Long-Term Debt caption consists of the following (in thousands of dollars):


                                       1998           1997
                                       ----           ----
9.21% Senior Notes Due 2001
 at Face Amount                     $ 45,000         $ 60,000
7.25% Notes Due 2007, Net of
 Unamortized Discount of
 $1,898 in 1998 and
 $2,103 in 1997                       98,102           97,897
                                    --------         --------
                                    $143,102         $157,897
Less Current Maturities               15,000           15,000
                                    --------         --------
  Total Long-Term Debt              $128,102         $142,897
                                    ========         ========

The 9.21% Senior Notes are due June 15, 2001. Payments on these notes are due in
five equal annual  installments  beginning in 1997. The notes include  covenants
that limit total borrowings,  require maintenance of a minimum net worth and set
certain restrictions on the sale or collateralizing of the Company's assets.

The 7.25% notes are due September 15, 2007. No principal payments are due before
that date. These notes have covenants that limit secured funded debt and certain
sale-leaseback transactions.

(6)      OTHER INCOME:
The components of other income (expense) are (in thousands of dollars):


                              1998       1997       1996
                              ----       ----       ----
Interest income            $  2,720    $ 3,981    $ 4,477
Loss on the
 disposition of
 plant and equipment         (1,973)    (1,608)    (2,692)
Income from joint
 ventures                     5,232      3,026      2,957
Other items                   1,830         67        970
                           --------   --------    -------
Total                      $  7,809   $  5,466    $ 5,712
                           ========   ========    =======

                                       
                                       20

<PAGE>   23


NOTES . . .


(7)      COMMITMENTS AND CONTINGENCIES:
The  Company  is a 50%  guarantor  on bank  loans  of two  unconsolidated  joint
ventures.  One is in Japan for the  manufacture of engines and the second in the
United  States  for  the   manufacture  of  parts.   These  bank  loans  totaled
approximately $6,000,000 at the end of 1998.

Product and general liability claims arise against the Company from time to time
in the  ordinary  course of  business.  The Company is  self-insured  for future
claims up to $1 million per claim. Accordingly,  a reserve is maintained for the
estimated costs of such claims.  At June 28, 1998 and June 29, 1997, the reserve
for product  and general  liability  claims was $5.8  million and $4.6  million,
respectively,  based on available information.  There is inherent uncertainty as
to the eventual resolution of unsettled claims.  Management,  however,  believes
that any  losses in  excess of  established  reserves  will not have a  material
effect on the Company's financial condition or results of operations.

The Company has no material commitments for materials or capital expenditures at
June 28, 1998.

(8)      STOCK OPTIONS:
The Company has a Stock  Incentive Plan under which  3,361,935  shares of common
stock have been reserved for issuance.  The Company  accounts for the plan under
Accounting Principles Board Opinion No. 25, under which no compensation cost has
been  recognized.   Had  compensation  cost  for  these  plans  been  determined
consistent  with FAS No. 123,  "Accounting for  Stock-Based  Compensation,"  the
Company's  net  income and  earnings  per share  would have been  reduced to the
following pro forma amounts:


                              1998            1997             1996
                              ----            ----             ----
Net Income (in thousands):
 As Reported                 $70,645          $61,565           $92,412
 Pro Forma                   $69,574          $60,777           $91,690

Basic Earnings Per Share:
 As Reported                   $2.86            $2.16             $3.19
 Pro Forma                     $2.82            $2.13             $3.17
Diluted Earnings Per Share:
 As Reported                   $2.85            $2.15             $3.18
 Pro Forma                     $2.81            $2.12             $3.16


Because  the FAS No. 123 method of  accounting  has not been  applied to options
granted prior to July 2, 1995, the resulting pro forma compensation cost may not
be representative of that to be expected in future years.

Information on the options outstanding is as follows:

                                                     1996               
                                            -------------------------
                                                           Wtd. Avg.
                                           Shares          Ex. Price
                                           ------          ---------
Balance, beginning of year                1,169,620        $  38.41
Granted during the year                     600,000           49.08
Exercised during the year                   (65,089)          17.07
                                          ---------
Balance, end of year                      1,704,531        $  42.98   
                                          =========
                                                     1997                     
                                            -------------------------
                                                            Wtd. Avg.
                                           Shares           Ex. Price
                                           ------           ---------
Balance, beginning of year                1,704,531        $  42.98
Granted during the year                     106,550           53.30
Exercised during the year                   (24,369)          17.26
                                          ---------
Balance, end of year                      1,786,712        $  43.95
                                          =========
                                                     1998                      
                                            -------------------------
                                                            Wtd. Avg.
                                           Shares           Ex. Price
                                           ------           ---------
Balance, beginning of year                1,786,712         $ 43.95
Granted during the year                     241,980           65.69
Exercised during the year                  (236,873)          35.65
                                          ---------
Balance, end of year                      1,791,819         $ 47.98
                                          =========


                         Grant Summary             
- ---------------------------------------------------------------------------

Fiscal  Grant    Exercise        Date         Options          Expiration
Year    Date     Price (a)    Exercisable   Outstanding          Date           
- ----    ----     ---------    -----------   -----------        ----------    
 1990  2-20-90   $ 13.014     50%, 1-1-94;    1,076             2-19-00
                              50%, 1-1-95
 1991  2-19-91     14.524     50%, 1-1-95;   45,010             2-18-01
                              50%, 1-1-96
 1992  5-18-92     21.525     50%, 1-1-96;  111,722             5-17-02
                              50%, 1-1-97
 1994  8-16-93     48.369       8-16-96     177,828             8-16-98
 1995  8-12-94     45.854       8-12-97     507,653             8-12-99
 1996  8-7-95      49.080       8-7-98      600,000              8-7-00
 1997  8-6-96      53.300       8-6-99      106,550              8-6-01
 1998  8-5-97      65.690       8-5-00      241,980              8-4-02


There were no options granted in fiscal 1993.

(a)      Exercise prices of earlier grants have been adjusted as appropriate
         To reflect a  two-for-one  stock split in October  1994 and the  
         spin-off of the Company's lock business in February 1995.


                                       21


<PAGE>   24

NOTES . . .


The fair  value of each  option  is  estimated  using the  Black-Scholes  option
pricing model.  The grant-date  fair market value of the options and assumptions
used to determine such value are as follows:


Options granted during               1998    1997    1996
                                     ----    ----    ----
Grant date fair value               $5.98   $5.42   $5.39
Assumptions:
 Risk-free interest rates             6.1%    6.3%    6.4%
 Expected volatility                 20.4%   20.6%   24.6%
 Expected dividend yield              2.6%    2.5%    2.7%
 Expected term (in years)             5.0     5.0     5.0


(9)      SHAREHOLDER RIGHTS PLAN:
On August 6, 1996, the Board of Directors  declared a dividend  distribution  of
one common  stock  purchase  right (a "right")  for each share of the  Company's
common  stock   outstanding  on  August  19,  1996.  Each  right  would  entitle
shareowners  to buy  one-half of one share of the  Company's  common stock at an
exercise  price of $160.00 per full common  share,  subject to  adjustment.  The
rights are not currently  exercisable,  but would become  exercisable if certain
events occurred relating to a person or group acquiring or attempting to acquire
15 percent or more of the outstanding  shares of common stock. The rights expire
on August 19, 2006, unless redeemed or exchanged by the Company earlier.  Rights
granted under a previous plan expired July 1, 1996.

(10)     FOREIGN EXCHANGE RISK MANAGEMENT:
The Company enters into forward exchange contracts to hedge purchase commitments
denominated in foreign currencies.  The term of these currency derivatives never
exceeds one year and the  purpose is to protect  the Company  from the risk that
the eventual dollars being transferred will be adversely  affected by changes in
exchange rates.

The Company has forward  foreign  currency  exchange  contracts  to purchase 3.6
billion Japanese yen for $28 million through January,  1999. These contracts are
used to hedge the  commitments to purchase  engines from the Company's  Japanese
joint venture and accordingly any gain or loss has been deferred at the end
of the 1998 fiscal year. The amount deferred was a loss of approximately $2.2
million.

The Company's foreign subsidiaries have the following forward currency contracts
outstanding at the end of fiscal 1998:


                              In Millions           
                         ----------------------
                         Local             U.S.               Latest
Currency               Currency          Dollars           Expiration Date 
- --------               --------          -------           --------------- 
Australian Dollars       .4                .3               July, 1998


There are no significant gains or losses included in the above amounts.

                                       22

<PAGE>   25


NOTES . . .


(11)     EMPLOYEE BENEFIT COSTS:
Retirement Plan
The Company has noncontributory,  defined benefit retirement plans covering most
Wisconsin  employees.  The  following  tables  summarize  the plans'  income and
expense, actuarial assumptions,  and funded status for the three years indicated
(dollars in thousands):


<TABLE>
<CAPTION>

                                               Qualified Plans                   Supplemental Plans           
                                       --------------------------------    -------------------------------
                                         1998         1997         1996       1998        1997       1996
                                         ----         ----         ----       ----        ----       ----
<S>                                <C>            <C>            <C>       <C>           <C>        <C>
Income and Expense:
- -------------------
Service Cost-Benefits Earned
 During the Year                      $   9,030    $  11,309    $  13,143    $    461    $    378    $    456

Interest Cost on Projected
 Benefit Obligation                      43,518       40,990       41,722       1,013         860         926
Actual Return on Plan Assets           (118,434)    (114,303)    (104,872)        (11)        (11)         (9)
Net Amortization, Deferral
 and Windows                             59,121       58,525       51,830         374         395         462
                                      ---------    ---------    ---------    --------    --------    --------
Net Periodic Pension
 Expense (Income)                     $  (6,765)   $  (3,479)   $   1,823    $  1,837    $  1,622    $  1,835
                                      =========    =========    =========    ========    ========    ========
Actuarial Assumptions:
- ---------------------
Discount Rate Used to Determine
 Present Value of Projected
 Benefit Obligation:                        7.0%        7.75%        7.75%        7.0%       7.75%       7.75%
Expected Rate of Future
 Compensation Level Increases               5.0%         5.5%         5.5%        5.0%        5.5%        5.5%
Expected Long-Term Rate of
 Return on Plan Assets                      9.0%         9.0%         9.0%        9.0%        9.0%        9.0%

Funded Status:
- -------------
Actuarial Present Value of
 Benefit Obligations:
 Vested                               $ 539,480    $ 482,712    $ 413,035    $ 12,863    $  8,869    $  8,286
 Non-Vested                              29,638       32,735       34,268        --          --            21
                                      ---------    ---------    ---------    --------    --------    --------
 Accumulated Benefit
  Obligation                            569,118      515,447      447,303      12,863       8,869       8,307
Effect of Projected Future
 Wage and Salary Increases               64,472       82,941      120,083       2,630       3,228       4,766
                                      ---------    ---------    ---------    --------    --------    --------              
  Projected Benefit Obligation          633,590      598,388      567,386      15,493      12,097      13,073
Plan Assets at Fair Market Value        845,828      767,108      681,819         127         127         126
                                      ---------    ---------    ---------    --------    --------    --------
Plan Assets in Excess of (Less Than)
 Projected Benefit Obligation           212,238      168,720      114,433     (15,366)    (11,970)    (12,947)
Remaining Unrecognized Net
 Obligation (Asset) Arising
 from the Initial Application of
 SFAS No. 87                            (20,739)     (26,006)     (31,321)       --           132         179
Unrecognized Net Loss (Gain)           (207,403)    (164,779)     (75,983)      4,778       2,531       4,494
Unrecognized Prior Service Cost          (1,394)      (2,002)      (2,447)        881         953       1,029
                                      ---------    ---------    ---------    --------    --------    --------
Prepaid (Accrued) Pension Cost        $ (17,298)   $ (24,067)   $   4,682    $ (9,707)   $ (8,354)   $ (7,245)
Less Current Portion                       --           --           --           528         530         511   
                                      ---------    ---------    ---------    --------    --------    --------
                                      $ (17,298)   $ (24,067)   $   4,682    $ (9,179)   $ (7,824)   $ (6,734)
                                      =========    =========    =========    ========    ========    ========
</TABLE>




                                       23

<PAGE>   26
NOTES . . .

The Company offered early  retirement  windows to certain of its Milwaukee union
members  during the 1995  fiscal  year.  As a result,  $13,806,000  was added to
pension expense and $5,253,000 was added to  postretirement  health care expense
in the  fourth  quarter  of the 1995  fiscal  year.  When the  retirements  were
scheduled to occur in the first fiscal  quarter of 1996, a number of these union
members canceled their  acceptance,  and thus credits  totaling  $3,477,000 were
recorded as a change in the original  accounting  estimate.  A second retirement
window  was  offered in fiscal  1997.  The cost of this  window  was  additional
pension expense of $33,457,000 and additional postretirement health care expense
of $3,644,000 in the fourth quarter of the 1997 fiscal year.

During fiscal 1996, the defined benefit pension plan which covered  employees at
two  of  the  Company's   plants  was  terminated  and  replaced  by  a  defined
contribution  retirement plan that includes most U.S.  non-Wisconsin  employees.
The impact of the termination was not material.  Under the new plan, the Company
will make a  contribution  on behalf of  covered  employees  equal to 2% of each
participant's  gross income,  as defined.  For fiscal years 1998, 1997 and 1996,
the cost to the Company was $1,641,000, $1,352,000 and $757,000, respectively.

Most  U.S.  employees  of the  Company  may  participate  in a salary  reduction
deferred compensation  retirement plan. The Company makes matching contributions
of $.50 for every $1.00  deferred by a participant  to a maximum of 1-1/2% or 3%
of each participant's  salary,  depending upon the participant's  group. Company
contributions  totaled $3,918,000 in 1998,  $3,944,000 in 1997 and $2,825,000 in
1996.

Postretirement Benefits
The Company  records the expected  health care and life  insurance  benefits for
employees during the years that the employees render service.

For measurement purposes, a 9% annual rate of increase in the per capita cost of
covered  health  care  claims  was  assumed  for the years  1998  through  2000,
decreasing  gradually  to 6% for the year 2007.  The health care cost trend rate
assumption  has a  significant  effect on the amounts  reported.  The rates,  if
changed by one percentage  point,  would change the  accumulated  postretirement
benefit by $5,704,000 and would change the service and interest cost by $701,000
for the year.

The discount rate used in determining  the  accumulated  postretirement  benefit
obligations  was  7.0%  compounded  annually.  Both  the  health  care  and life
insurance plans are unfunded.

The components of the accumulated  postretirement  benefit  obligations were (in
thousands of dollars):

                                                     Health Care   
                                                     -----------   
                                                1998             1997
                                                ----             ----
Retirees                                      $49,307           $51,553
Fully eligible plan participants                2,897               467
Other active participants                      30,131            26,961
                                              -------           -------
                                               82,335            78,981
Unrecognized loss                              (6,602)             (161)
                                              -------           -------
                                               75,733            78,820
Less current portion                            4,800             4,800
                                              -------           -------
                                              $70,933           $74,020         
                                              =======           =======         

                                                   Life Insurance       
                                                   --------------       
                                                1998             1997
                                                ----             ----

Retirees                                      $11,354          $  9,048
Fully eligible plan participants                1,315             1,720
Other active participants                       1,576             1,453
                                              -------          --------
                                               14,245            12,221
Unrecognized net obligation                      (460)             (507)
Unrecognized prior service cost                  (756)             (827)
Unrecognized loss                              (1,985)              (35)
                                              -------          -------- 
                                               11,044            10,852
                                                  --                --
Less current portion                          -------          --------   
                                              $11,044          $ 10,852
                                              =======          ========


The current portion of the health care component  above  represents the benefits
expected to be paid within the next twelve months and is included in the caption
Accrued  Liabilities  in the  accompanying  balance  sheet.  The net health care
balance has its own caption in this balance sheet. The life insurance  component
is included in the caption Accrued Employee Benefits.

                                     24

<PAGE>   27


NOTES . . .


The net periodic postretirement costs recorded were (in thousands of dollars):


                                                  Health Care      
                                               -----------------
                                      1998           1997             1996
                                      ----           ----             ----
Service cost-benefits
 attributed to service
 during the year                     $1,145         $1,272         $ 1,596
Interest cost on accumulated
 benefit obligation                   5,856          5,226           5,480
Other                                  --             --               (91)
                                     ------         ------         -------
                                     $7,001         $6,498         $ 6,985
                                     ======         ======         =======

                                               Life Insurance            
                                             ---------------------
                                       1998           1997         1996
                                       ----           ----         ----
Service cost-benefits
 attributed to service
 during the year                     $   61         $   87         $   90
Interest cost on accumulated
 benefit obligation                     917            964            947
Other                                   118            118            118
                                     ------         ------         ------
                                     $1,096         $1,169         $1,155
                                     ======         ======         ======


Postemployment Benefits
The Company also accrues the expected cost of  postemployment  benefits over the
years that the  employees  render  service.  These  benefits  are  substantially
smaller amounts  because they apply only to employees who permanently  terminate
employment prior to retirement. The items included in this amount are disability
payments,  life  insurance  and  medical  benefits,  and these  amounts are also
discounted using a 7.0% interest rate.

The balance in this reserve at the end of fiscal 1998 was  $1,527,000 and at the
end of fiscal 1997 was  $1,468,000.  Both were  included in the caption  Accrued
Employee Benefits in the accompanying balance sheets.

(12)     DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Cash and Cash  Equivalents,  Domestic  Notes  Payable  and  Foreign  Loans:  The
carrying amount  approximates  fair value because of the short maturity of those
instruments.

Long-Term Debt: The fair value of the Company's long-term debt is estimated
based on quotations made on similar issues.

The estimated fair values of the Company's financial  instruments are as follows
(in thousands of dollars):


            
                                                         1998         
                                                    -------------
                                               Carrying         Fair
                                                Amount          Value 
                                               --------         ----- 

Cash and cash equivalents                     $ 84,527         $ 84,527
Domestic notes payable                        $  4,700         $  4,700
Foreign loans                                 $ 14,336         $ 14,336
Long-term debt -
 9.21% Senior Notes due 2001,
  including current maturities                $ 45,000         $ 47,012
 7.25% Notes due 2007                         $ 98,102         $105,071

                                                         1997
                                                    -------------
                                               Carrying          Fair
                                                Amount          Value
                                               --------         ------
Cash and cash equivalents                     $112,859         $112,859
Domestic notes payable                        $  5,000         $  5,000
Foreign loans                                 $ 13,359         $ 13,359
Long-term debt -
 9.21% Senior Notes due 2001,
  including current maturities                $ 60,000         $ 62,885
 7.25% Notes due 2007                         $ 97,897         $100,531

  
                                       25



<PAGE>   28

R
EPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 


To the Shareholders of
Briggs & Stratton Corporation:

We have  audited  the  accompanying  consolidated  balance  sheets  of  Briggs &
Stratton  Corporation (a Wisconsin  Corporation) and subsidiaries as of June 28,
1998 and June 29,  1997,  and the  related  consolidated  statements  of income,
shareholders'  investment  and cash  flows  for each of the  three  years in the
period ended June 28, 1998. These financial statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Briggs & Stratton  Corporation
and subsidiaries as of June 28, 1998 and June 29, 1997, and the results of their
operations  and their cash flows for each of the three years in the period ended
June 28, 1998, in conformity with generally accepted accounting principles.

                                                  Arthur Andersen LLP

Milwaukee, Wisconsin,
July 30, 1998.





                                       26



<PAGE>   29
QUARTERLY FINANCIAL DATA, DIVIDEND AND MARKET INFORMATION (UNAUDITED)




<TABLE>
<CAPTION>
                                    In Thousands                              Per Share of Common Stock     
                      ------------------------------------               -------------------------------------------
                                                                                                 Market Price Range
                                                                                                 on New York       
                                                   Net                    Net                    Stock Exchange    
Quarter                    Net        Gross      Income                  Income     Dividends    -------------------
Ended                     Sales      Profit      (Loss)                  (Loss)     Declared     High       Low   
- -------                   -----      ------      ------                  ------     ---------    ----       ---          
<S>                   <C>            <C>         <C>                  <C>           <C>         <C>        <C>    
FISCAL 1998                                                                                                       
- -----------
SEPTEMBER             $   170,557   $    26,411  $    (2,632)          $ (.10)       $ .28       51-3/8     47-1/8
DECEMBER                  308,481        50,897       10,294              .41          .28       53-3/8     47-1/4
MARCH                     469,055        94,773       35,778             1.46          .28       49         43-1/8
JUNE                      379,517        82,593       27,205             1.13          .28       46-1/4     36-7/8
                      -----------   -----------  -----------           ------        -----                                  
 TOTAL                $ 1,327,610   $   254,674  $    70,645           $ 2.86*       $1.12                        
                      ===========   ===========  ===========           ======        =====
                                                                                                                  
Fiscal 1997                                                                                                       
- -----------
September             $   161,731   $    17,969  $    (5,262)          $ (.18)       $ .27       45-7/8     36-1/2
December                  299,664        56,857       16,694              .58          .27       44-5/8     39-1/4
March                     475,955       107,119       46,514             1.60          .27       46-3/8     43 
June                      379,063        39,271        3,619              .13          .28       53-5/8     42-5/8
                      -----------   -----------  -----------           ------        -----                                  
  Total               $ 1,316,413   $   221,216  $    61,565           $ 2.16*       $1.09                     
                      ===========   ===========  ===========           ======        =====
</TABLE>


The number of record holders of Briggs & Stratton Corporation Common Stock on
August 20, 1998 was 4,892.

Net Income (Loss) per share of Common Stock represents Basic Earnings per Share.

* See Footnote No. 2 "Summary of Accounting Policies - Earnings per Share" to
the Consolidated Financial Statements.

                   
                  
                  








                                       27


<PAGE>   30

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
         ACCOUNTING AND FINANCIAL DISCLOSURE

The Company has not changed independent accountants in the last two years.


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information in the Corporation's definitive Proxy Statement, prepared for
the 1998 Annual Meeting of Shareholders, concerning directors of the Corporation
under the caption "Election of Directors", is incorporated herein by reference.
The information concerning "Executive Officers of the Registrant" as a separate
item, appears in Part I of this Form 10-K. There is no information required by
Item 405 of Regulation S-K to be reported.


ITEM 11. EXECUTIVE COMPENSATION

The information in the Corporation's definitive Proxy Statement, prepared for
the 1998 Annual Meeting of Shareholders, concerning this item, in paragraphs two
and three under the caption "Election of Directors", in the final two paragraphs
of the "Nominating, Compensation and Governance Committee Report on Executive
Compensation" and the "Executive Compensation" section, is incorporated herein
by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information in the Corporation's definitive Proxy Statement, prepared for
the 1998 Annual Meeting of Shareholders, concerning this item, under captions
"Security Ownership of Certain Beneficial Owners" and "Security Ownership of
Management", is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has no relationships or related transactions to report pursuant to
Item 13.


                                    PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. Financial Statements
       The following financial statements are included under the caption
       "Financial Statements and Supplementary Data" in Part II, Item 8 hereof
       and are incorporated herein by reference:

           Consolidated Balance Sheets, June 28, 1998 and June 29, 1997

           For the Years Ended June 28, 1998, June 29, 1997 and June 30, 1996:

             Consolidated Statements of Earnings and Shareholders' Investment
             Consolidated Statements of Cash Flow 

             Notes to Consolidated Financial Statements

 
          Report of Independent Public Accountants

    2. Financial Statement Schedules
       All financial statement schedules for which provision is made in the
       applicable accounting regulations of the Securities and Exchange
       Commission are not required under the related instructions.

    3. Exhibits
       See Exhibit Index following the Signature Page, which is incorporated
       herein by reference. Each management contract or compensatory plan or
       arrangement required to be filed as an exhibit to this report is
       identified in the Exhibit Index by an asterisk following the Exhibit
       Number.

(b) Reports on Form 8-K

    No reports on Form 8-K were filed during the last quarter of the period
    covered by this report.

                                       28


<PAGE>   31


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                   BRIGGS & STRATTON CORPORATION

                                   By        /s/ R. H. Eldridge
                                       ----------------------------------------
                                                 R. H. Eldridge

September 3, 1998                          Executive Vice President and

                                   Chief Financial Officer, Secretary-Treasurer


                               POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Frederick P. Stratton, Jr. and Robert H. Eldridge, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this report, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitutes, may lawfully
do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.*


/s/ F. P. Stratton, Jr.                    /s/ Peter A. Georgescu             
- -----------------------------------        -----------------------------------
F. P. Stratton, Jr.                        Peter A. Georgescu                 
Chairman and Chief Executive Officer       Director                           
and Director (Principal Executive                                             
Officer)                                   
                                           
/s/ Robert H. Eldridge                     /s/ Robert J. O'Toole              
- -----------------------------------        -----------------------------------
Robert H. Eldridge                         Robert J. O'Toole                  
Executive Vice President and               Director                           
Chief Financial Officer,                                                      
Secretary-Treasurer                        
and Director (Principal Financial          
Officer)                                   
                                           
/s/ James E. Brenn                         /s/ C. B. Rogers, Jr.              
- -----------------------------------        -----------------------------------
James E. Brenn                             C. B. Rogers, Jr.                  
Vice President and Controller              Director                           
(Principal Accounting Officer)                                                
                                           
/s/ Michael E. Batten                      /s/ John S. Shiely                 
- -----------------------------------        -----------------------------------
Michael E. Batten                          John S. Shiely                     
Director                                   President and Chief Operating      
                                           Officer and Director               

/s/ E. Margie Filter                       /s/ Charles I. Story               
- -----------------------------------        -----------------------------------
E. Margie Filter                           Charles I. Story                   
Director                                   Director                           
                                           


*Each signature affixed as of September 3, 1998.


                                       29



<PAGE>   32

                         BRIGGS & STRATTON CORPORATION
                          (Commission File No. 1-1370)


                                 EXHIBIT INDEX
                        1998 ANNUAL REPORT ON FORM 10-K

         Exhibit
         Number                Document Description
         ------                --------------------

          3.1     Articles of Incorporation.
                   (Filed as Exhibit 3.2 to the Company's Report on Form 10-Q
                   for the quarter ended October 2, 1994, and incorporated by
                   reference herein.)

          3.2     Bylaws.
                   (Filed as Exhibit 3.2 to the Company's Registration Statement
                   on Form 8-B dated October 12, 1992 and incorporated by
                   reference herein.)

          4.0     Rights Agreement dated as of August 7, 1996, between Briggs &
                  Stratton Corporation and Firstar Trust Company which includes
                  the form of Right Certificate as Exhibit A and the Summary of
                  Rights to Purchase Common Shares as Exhibit B.
                   (Filed as Exhibit 4.1 to the Company's Registration Statement
                   on Form 8-A, dated as of August 7, 1996 and incorporated by
                   reference herein.)

          4.1     Indenture dated as of June 4, 1997 between Briggs & Stratton
                  Corporation and Bank One, N.A., as Trustee.
                   (Filed as Exhibit 4.1 to the Company's Report on Form 8-K
                   dated May 30, 1997 and incorporated by reference herein.)

          4.2     Form of 7-1/4% Note due September 15, 2007 of Briggs & 
                  Stratton Corporation issued pursuant to the Indenture dated as
                  of June 4, 1997 between Briggs & Stratton Corporation and Bank
                  One, N.A., as Trustee.
                   (Filed as Exhibit 4.2 to the Company's Report on Form 8-K
                   dated May 30, 1997 and incorporated by reference herein.)

          4.3     Resolutions of the Board of Directors of Briggs & Stratton
                  Corporation authorizing the public offering of debt
                  securities of Briggs & Stratton Corporation in an aggregate
                  principal amount of up to $175,000,000.
                   (Filed as Exhibit 4.3 to the Company's Report on Form 8-K
                   dated May 30, 1997 and incorporated by reference herein.)

          4.4     Actions of the Authorized Officers of Briggs & Stratton 
                  Corporation authorizing the issuance of $100,000,000 aggregate
                  principal amount of 7-1/4% Notes due September 15, 2007.
                   (Filed as Exhibit 4.4 to the Company's Report on Form 8-K
                   dated May 30, 1997 and incorporated by reference herein.)

          4.5     Officers' Certificate and Company Order of Briggs & Stratton
                  Corporation executed in conjunction with the issuance of
                  $100,000,000 aggregate principal amount of 7-1/4% Notes due
                  September 15, 2007.
                   (Filed as Exhibit 4.5 to the Company's Report on Form 8-K
                   dated May 30, 1997 and incorporated by reference herein.)

         10.0*    Forms of Officer Employment Agreements. 
                   (Filed as Exhibit 10.0 to the Company's Report on Form 10-Q 
                   for the quarter ended March 29, 1998 and incorporated by 
                   reference herein.)

         10.1*    Survivor Annuity Plan.
                   (Filed as Exhibit 10.1 to the Company's Annual Report on Form
                   10-K for fiscal year ended June 30, 1986 and incorporated by
                   reference herein.)

         10.2*    Supplemental Retirement Program.
                   (Filed as Exhibit 10.3 to the Company's Annual Report on Form
                   10-K for fiscal year ended June 30, 1990 and incorporated by
                   reference herein.)


                                       30


<PAGE>   33

         Exhibit
         Number                Document Description
         ------                --------------------

         10.3(a)* Economic Value Added Incentive Compensation Plan, as amended
                  and restated effective April 18, 1995.
                   (Filed as Exhibit 10.3 (b) to the Company's Annual Report on
                   Form 10-K for fiscal year ended July 2, 1995 and incorporated
                   by reference herein.)

         10.3(b)* Amendment to Economic Value Added Incentive Compensation Plan.
                   (Filed as Exhibit 10.3 (c) to the Company's Report on Form
                   10-Q for the quarter ended December 31, 1995 and incorporated
                   by reference herein.)

         10.3(c)* Second Amendment to Economic Value Added Incentive 
                  Compensation Plan.
                   (Filed as Exhibit 10.3 (c) to the Company's Annual Report on
                   Form 10-K for fiscal year ended June 29, 1997 and
                   incorporated by reference herein.)

         10.4*    Form of Change of Control Employment Agreements. 
                   (Filed as Exhibit 10.4 to the Company's Annual Report on Form
                   10-K for fiscal year ended June 27, 1993 and incorporated by
                   reference herein.)

         10.5(a)* Trust Agreement with an independent trustee to provide
                  payments under various compensation agreements with company
                  employees upon the occurrence of a change in control.
                   (Filed as Exhibit 10.5 (a) to the Company's Annual Report on
                   Form 10-K for fiscal year ended July 2, 1995 and incorporated
                   by reference herein.)

         10.5(b)* Amendment to Trust Agreement with an independent trustee to
                  provide payments under various compensation agreements with
                  company employees.
                   (Filed as Exhibit 10.5 (b) to the Company's Annual Report on
                   Form 10-K for fiscal year ended July 2, 1995 and incorporated
                   by reference herein.)

         10.6*    Stock Incentive Plan.
                   (Filed as Exhibit A to the Company's 1993 Annual Meeting
                   Proxy Statement, which was filed as Exhibit 100A to the
                   Company's Annual Report on Form 10-K for fiscal year ended
                   June 27, 1993 and incorporated by reference herein.)

         10.7(a)* Leveraged Stock Option Program. 
                   (Filed as Exhibit 10.7 to the Company's Annual Report on Form
                   10-K for fiscal year ended June 27, 1993 and incorporated by
                   reference herein.)

         10.7(b)* Amendment to Leveraged Stock Option Program. 
                   (Filed as Exhibit 10.7 (b) to the Company's Annual Report on
                   Form 10-K for fiscal year ended July 2, 1995 and incorporated
                   by reference herein.)

         10.8*    Amended and Restated Deferred Compensation Agreement for 
                  Fiscal 1995. 
                   (Filed as Exhibit 10.9 to the Company's Annual Report on Form
                   10-K for fiscal year ended July 2, 1995 and incorporated by
                   reference herein.)

         10.9*    Deferred Compensation Agreement for Fiscal 1997. 
                   (Filed as Exhibit 10.10 to the Company's Annual Report on
                   Form 10-K for fiscal year ended June 30, 1996 and
                   incorporated by reference herein.)

         10.10*   Deferred Compensation Agreement for Fiscal 1998. 
                   (Filed as Exhibit 10.11 to the Company's Annual Report on
                   Form 10-K for fiscal year ended June 29, 1997 and
                   incorporated by reference herein.)

         10.11*   Deferred Compensation Agreement for Fiscal 1999.
                   (Filed herewith.)

         10.12*   Officer Employment Agreement.
                   (Filed as Exhibit 10.11 to the Company's Report on Form 10-Q
                   for the quarter ended December 31, 1995 and incorporated by
                   reference herein.)

         10.13*   Deferred Compensation Plan for Directors.
                   (Filed as Exhibit 10.12 to the Company's Report on Form 10-Q
                   for the quarter ended December 31, 1995 and incorporated by
                   reference herein.)


                                       31

<PAGE>   34

         Exhibit
         Number                Document Description
         ------                --------------------

         10.14*   Director's Leveraged Stock Option Plan. 
                   (Filed as Exhibit 10.14 to the Company's Annual Report on
                   Form 10-K for fiscal year ended June 29, 1997 and
                   incorporated by reference herein.)

         11       Computation of Earnings Per Share of Common Stock. 
                   (Filed herewith.)

         12       Computation of Ratio of Earnings to Fixed Charges. 
                   (Filed herewith.)

         21       Subsidiaries of the Registrant.
                   (Filed herewith.)

         23       Consent of Independent Public Accountants.
                   (Filed herewith.)

         24       Power of Attorney. 
                   (Included in the Signatures Page of this report.)

         27(a)    Financial Data Schedule, 6/28/98.
                   (Filed herewith.)

         27(b)    Restated Financial Data Schedule, 6/29/97.
                   (Filed herewith.)

         27(c)    Restated Financial Data Schedule, 6/30/96.
                   (Filed herewith.)



* Management contracts and executive compensation plans and arrangements
  required to be filed as exhibits pursuant to Item 14 (c) of Form 10-K.



                                       32





<PAGE>   1
                         BRIGGS & STRATTON CORPORATION

                        1998 Annual Report on Form 10-K

                               EXHIBIT NO. 10.11

                DEFERRED COMPENSATION AGREEMENT FOR FISCAL 1999

AGREEMENT made this 2nd day of June, 1998, between Briggs & Stratton
Corporation (the "Company") and Frederick P. Stratton, Jr. (the "Executive").

1.   Deferral of Compensation. This Agreement shall operate to defer, on an
     unfunded basis, compensation earned by the Executive as an employee of the
     Company for the Company's fiscal year ending in 1999, to the extent that
     such compensation would otherwise be non-deductible under Section 162(m) of
     the Internal Revenue Code, as amended from time to time. The amount
     deferred hereunder shall be paid to the Executive as soon as practicable
     following the Company fiscal year in which the Executive terminates
     employment with the Company, such payment to be made in one lump sum, or in
     such other manner as may be agreed upon between the Executive and the
     Company's Nominating and Salaried Personnel Committee of the Board. Such
     agreement, if any, must occur before the termination of employment by the
     Executive, or such payment shall be in a lump sum.

2.   Death of Executive. If the Executive dies prior to receiving all funds
     payable hereunder, the entire unpaid
 balance shall be paid in the same
     manner as provided for the Executive under the Company's Economic Value
     Added Incentive Compensation Plan.

3.   Binding Effect. This Agreement has been approved by the Company's Board of
     Directors and its Nominating and Salaried Personnel Committee, and shall be
     binding and inure to the benefit of the Company, its successors and assigns
     and the Executive and his heirs, executors, administrators, and legal
     representatives.

4.   Earnings on Deferrals. On or before June 27, 1999, the Executive shall
     elect to have any deferrals hereunder credited with earnings in accordance
     with (a) or (b) below:

     (a)  Earnings on a book (unfunded) basis beginning on the date the deferred
          amount would otherwise have been paid, and continuing thereafter at a
          rate equal to 80% of the prime rate made available to the best
          customers of Firstar Bank Milwaukee, N.A., and adjusted and compounded
          annually as of the last day of each subsequent Company fiscal year
          until paid;

     (b)  Earnings at a rate designed to reflect the performance of Company
          stock. Under this alternative, the amount deferred shall be converted
          into shares of phantom Company stock as soon as practicable following
          the determination of the amount deferred under this Agreement. Each
          year, the Committee shall determine the amount of dividends that would
          have been paid on the phantom stock and 



<PAGE>   2


          convert such dividends into additional shares of phantom stock.
          Following the conversions described above, the Company shall promptly
          advise Executive of the number of phantom shares acquired. If
          Executive chooses this investment alternative, Executive may elect to
          receive distributions in cash or stock; provided that any stock
          distributions shall be subject to any necessary approvals under
          securities laws or exchange requirements.

5.   Section 16 Consequences. Executive acknowledges that an election under
     Section 4(b) above will have implications under Section 16 of the
     Securities Exchange Act of 1934, including potential Section 16(b)
     liability if Executive or an affiliate has a matching transaction.
     Executive acknowledges that he will be responsible for reporting
     transactions under this Agreement on the applicable Form 4 or Form 5.

6.   Unfunded Status of Agreement. It is intended that this Agreement constitute
     an "unfunded" arrangement for deferred compensation. The Committee may
     authorize the creation of a trust or other arrangement to meet the
     obligations created under this Agreement provided, however, that unless the
     Committee otherwise determines, the existence of such trust or other
     arrangement is consistent with the "unfunded" status of the Agreement.

7.   Miscellaneous. Payment of deferrals hereunder shall be subject to tax or
     other withholding requirements as may be required by law. The Company's
     Board, or its Nominating and Salaried Personnel Committee, shall have the
     power to modify or terminate this Agreement, but only with consent of the
     Executive.

IN WITNESS WHEREOF, Briggs & Stratton Corporation has caused this Deferred
Compensation Agreement to be executed by its duly authorized Director and
Frederick P. Stratton, Jr., together with his spouse, Anne Y. Stratton, hereunto
have set their hands as of the date first above written.

                                       BRIGGS & STRATTON CORPORATION

                                       By: /s/ C. B. Rogers, Jr.
                                         ----------------------------
                                         Clarence B. Rogers, Jr.
                                         Chairman, Nominating and
                                         Salaried Personnel Committee


                                           /s/ F. P. Stratton, Jr.
                                         ----------------------------
                                         Frederick P. Stratton, Jr.


                                           /s/ Anne Y. Stratton
                                         ----------------------------
                                         Anne Y. Stratton


                                       2



<PAGE>   1
          BRIGGS & STRATTON CORPORATION AND CONSOLIDATED SUBSIDIARIES

                                 EXHIBIT NO. 11

               COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK



<TABLE>
<CAPTION>
                                                                              Fiscal Year Ended
                                                             ---------------------------------------------------
                                                             June 28, 1998      June 29, 1997      June 30, 1996
                                                             -------------      -------------      -------------
<S>                                                          <C>                <C>                <C>          
COMPUTATIONS FOR STATEMENTS OF INCOME

Net income                                                   $      70,645      $      61,565      $      92,412
                                                             =============      =============      =============
Basic earnings per share of common stock:

  Average shares of common stock outstanding                        24,666             28,551             28,927
                                                             =============      =============      =============
  Basic earnings per share of common stock                   $        2.86      $        2.16      $        3.19
                                                             =============      =============      =============
Diluted earnings per share of common stock:

  Average shares of common stock outstanding                        24,666             28,551             28,927
  Incremental common shares applicable to common
   stock options based on the common stock average
   market price during the period                                      109                127                132
                                                             -------------      -------------      -------------
Average common shares assuming dilution                             24,775             28,678             29,059
                                                             =============      =============      =============
Fully diluted earnings per average share of common
   stock, assuming conversion of all applicable securities   $        2.85      $        2.15      $        3.18
                                                             =============      =============      =============
</TABLE>









<PAGE>   1
                         BRIGGS & STRATTON CORPORATION

                                 EXHIBIT NO. 12

               COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
                             (dollars in thousands)


<TABLE>
<CAPTION>
     
                                                                Fiscal Year Ended         
                                                   --------------------------------------------         
                                                   June 28, 1998   June 29, 1997  June 30, 1996
                                                   -------------   -------------  -------------
<S>                                                 <C>             <C>             <C>     
Net income                                            $ 70,645        $ 61,565        $ 92,412

Add:
  Interest                                              19,352           9,880          10,069
  
  Income tax expense and other taxes on income          42,500          37,740          56,640
  
  Fixed charges of unconsolidated subsidiaries             510             668             574
                                                      --------        --------        --------
        Earnings as defined                           $133,007        $109,853        $159,695
                                                      ========        ========        ========

Interest                                              $ 19,352        $  9,880        $ 10,069

Fixed charges of unconsolidated subsidiaries               510             668             574
                                                      --------        --------        --------
      Fixed Charges as defined                        $ 19,862        $ 10,548        $ 10,643
                                                      ========        ========        ========

Ratio of earnings to fixed charges                        6.7x           10.4x           15.0x
                                                      ========        ========        ========
</TABLE>













<PAGE>   1
                 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

                                 EXHIBIT NO. 21
                         SUBSIDIARIES OF THE REGISTRANT


                                               State or Country   Percent Voting
              Subsidiary                       of Incorporation     Stock Owned
              ----------                       ----------------     -----------

Briggs & Stratton AG                              Switzerland         100%
 
Briggs & Stratton Australia Pty. Limited          Australia           100%

Briggs & Stratton Austria GmbH                    Austria             100%

Briggs & Stratton Canada Inc.                     Canada              100%

Briggs & Stratton Czech Republic s.r.o.           Czech Republic      100%

Briggs & Stratton France, S.A.R.L.                France              100%

Briggs & Stratton Germany GmbH                    Germany             100%

Briggs & Stratton International, Inc.             Wisconsin           100%

Briggs & Stratton International Sales Corp.       Virgin Islands      100%

Briggs & Stratton Mexico S.A. de C.V.             Mexico              100%

Briggs & Stratton Netherlands B.V.                Netherlands         100%

Briggs & Stratton New Zealand Limited             New Zealand         100%

Briggs & Stratton Sweden AB                       Sweden              100%

Briggs & Stratton U.K. Limited                    United Kingdom      100%

Briggs & Stratton Daihatsu, Inc.                  Wisconsin           100%

Future Parkland Development, Inc.                 Wisconsin           100%













<PAGE>   1
                 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

                                 EXHIBIT NO. 23
                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
reports included (or incorporated by reference) in this Form 10-K, into the
Company's previously filed Registration Statements, File No. 33-39113, File No.
333-25271 and File No. 33-54357.

                                         ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin,
September 3, 1998.












<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF BRIGGS & STRATTON CORPORATION FOR THE FISCAL YEAR ENDED JUNE 28,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
       
<S>                             <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          JUN-28-1998
<PERIOD-START>                             JUN-30-1997
<PERIOD-END>                               JUN-28-1998
<CASH>                                          84,527
<SECURITIES>                                         0
<RECEIVABLES>                                  136,629
<ALLOWANCES>                                         0
<INVENTORY>                                    107,876
<CURRENT-ASSETS>                               382,046
<PP&E>                                         812,428
<DEPRECIATION>                                 420,501
<TOTAL-ASSETS>                                 793,409
<CURRENT-LIABILITIES>                          222,945
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           289
<OTHER-SE>                                     316,199
<TOTAL-LIABILITY-AND-EQUITY>                   793,409
<SALES>                                      1,327,610
<TOTAL-REVENUES>                             1,327,610
<CGS>                                        1,072,936
<TOTAL-COSTS>                                1,072,936
<OTHER-EXPENSES>                               122,177
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              19,352
<INCOME-PRETAX>                                113,145
<INCOME-TAX>                                    42,500
<INCOME-CONTINUING>                             70,645
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    70,645
<EPS-PRIMARY>                                     2.86
<EPS-DILUTED>                                     2.85
        

</TABLE>






<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF BRIGGS & STRATTON CORPORATION FOR THE FISCAL YEAR ENDED JUNE 29,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS. EARNINGS PER SHARE INFORMATION HAS BEEN RESTATED TO CONFORM WITH THE
REQUIREMENTS OF FAS NO. 128, EARNINGS PER SHARE.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          JUN-29-1997
<PERIOD-START>                             JUL-01-1996
<PERIOD-END>                               JUN-29-1997
<CASH>                                         112,859
<SECURITIES>                                         0
<RECEIVABLES>                                  129,877
<ALLOWANCES>                                         0
<INVENTORY>                                    125,957
<CURRENT-ASSETS>                               418,416
<PP&E>                                         796,714
<DEPRECIATION>                                 400,448
<TOTAL-ASSETS>                                 842,189
<CURRENT-LIABILITIES>                          213,994
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           289
<OTHER-SE>                                     350,808
<TOTAL-LIABILITY-AND-EQUITY>                   842,189
<SALES>                                      1,316,413
<TOTAL-REVENUES>                             1,316,413
<CGS>                                        1,095,197
<TOTAL-COSTS>                                1,095,197
<OTHER-EXPENSES>                               112,031
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               9,880
<INCOME-PRETAX>                                 99,305
<INCOME-TAX>                                    37,740
<INCOME-CONTINUING>                             61,565
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    61,565
<EPS-PRIMARY>                                     2.16<F1>
<EPS-DILUTED>                                     2.15<F2>
<FN>
<F1>REPRESENTS BASIC EARNINGS PER SHARE IN ACCORDANCE WITH FAS NO. 128, EARNINGS 
PER SHARE. 
<F2>REPRESENTS DILUTED EARNINGS PER SHARE IN ACCORDANCE WITH FAS NO. 128, EARNINGS 
PER SHARE. 
</FN>
        




</TABLE>






<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF BRIGGS & STRATTON CORPORATION FOR THE FISCAL YEAR ENDED JUNE 30,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL 
STATEMENTS. EARNINGS PER SHARE INFORMATION HAS BEEN RESTATED TO CONFORM WITH THE
REQUIREMENTS OF FAS NO. 128, EARNINGS PER SHARE.
</LEGEND>
<RESTATED> 
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          JUN-30-1996
<PERIOD-START>                             JUL-03-1995
<PERIOD-END>                               JUN-30-1996
<CASH>                                         150,639
<SECURITIES>                                         0
<RECEIVABLES>                                  119,346
<ALLOWANCES>                                         0
<INVENTORY>                                    137,403
<CURRENT-ASSETS>                               456,387
<PP&E>                                         776,638
<DEPRECIATION>                                 402,426
<TOTAL-ASSETS>                                 838,164
<CURRENT-LIABILITIES>                          190,179
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           289
<OTHER-SE>                                     500,216
<TOTAL-LIABILITY-AND-EQUITY>                   838,164
<SALES>                                      1,287,029
<TOTAL-REVENUES>                             1,287,029
<CGS>                                        1,025,281
<TOTAL-COSTS>                                1,025,281
<OTHER-EXPENSES>                               102,627
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              10,069
<INCOME-PRETAX>                                149,052
<INCOME-TAX>                                    56,640
<INCOME-CONTINUING>                             92,412
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    92,412
<EPS-PRIMARY>                                     3.19<F1>
<EPS-DILUTED>                                     3.18<F2>
<FN>
<F1>REPRESENTS BASIC EARNINGS PER SHARE IN ACCORDANCE WITH FAS NO. 128, EARNINGS
PER SHARE.
<F2>REPRESENTS DILUTED EARNINGS PER SHARE IN ACCORDANCE WITH FAS NO. 128, EARNINGS
PER SHARE.
</FN>
        

</TABLE>