UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended February 28, 1994
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OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-7002
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BLOUNT, INC.
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(Exact name of registrant as specified in its charter)
Delaware 63-0593908
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4520 Executive Park Drive, Montgomery, Alabama 36116-1602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205) 244-4000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Class A Common Stock, $1.00 par value
Class B Common Stock, $1.00 par value American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained, and will not be contained, to the best of
registrant's knowledge, in the definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
Yes No X
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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
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Page 1
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
Aggregate market value of voting stock held by nonaffiliates as of April 1,
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1994: $179,922,498
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock $1.00 par value, as of April 1, 1994: 8,282,515 shares
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Class B Common Stock $1.00 par value, as of April 1, 1994: 4,178,175 shares
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DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
Portions of proxy statement for the annual meeting of stockholders to be held
June 27, 1994 are incorporated by reference in Part III.
Page 2
PART I
ITEM 1. BUSINESS
The Company is an international manufacturing company with operations in three
business segments: Outdoor Products, Industrial and Power Equipment and
Sporting Equipment. The Company's current manufacturing operations date
largely to the acquisition of Omark Industries, Inc. in 1985. The Company was
founded in 1946 as a general construction company and, over the succeeding
years, grew into one of the largest construction companies in the United
States. In February 1994, the Company adopted a plan to discontinue its
construction business. See "Business - Acquisitions and Dispositions" on
pages 6 and 7, "Management's Discussion and Analysis of Results of Operations
and Financial Condition" on pages 12 through 15 and Note 4 of Notes to
Consolidated Financial Statements on pages 29 and 30.
OUTDOOR PRODUCTS
The Company's Outdoor Products segment is comprised of the Oregon Cutting
Systems Division ("Oregon") and Dixon Industries, Inc. ("Dixon"). Oregon
produces a wide variety of saw chain, bars, sprockets and chain maintenance
equipment for use primarily on portable gasoline and electric chainsaws. The
Oregon trademark is well known to end-users and the Company believes that it
is a world leader in the production of saw chain. Oregon's saw chain and
related products are used primarily by professional loggers, construction
workers, homeowners, farmers and tree surgeons. Recent new products from
Oregon include the Woodzig power pruner and the Industrial Cutting System
("ICS") concrete cutter. Winner of an Industrial Design Excellence Award in
1991, the Woodzig is an electric power pruner designed primarily for use by
homeowners. ICS, a diamond-tipped chain cutting system for concrete
(including steel-reinforced concrete), is a faster and more flexible concrete
cutting method than others currently employed in the construction and
demolition industries.
Oregon sells to a large number of distributors, dealers and mass merchandisers
serving the retail replacement market. In addition, Oregon currently sells
its products to more than 50 original equipment manufacturers ("OEMs"). Due
to the high level of technical expertise and capital investment required to
manufacture saw chain, the Company believes that it is able to produce
durable, high-quality saw chain more efficiently than most of those OEMs. The
use of Oregon cutting chain as original equipment on chainsaws is also
promoted through cooperation with OEMs in improving the design and
specifications of chain and saws. Sales of saw chain for replacement use,
which accounted for approximately three-quarters of the Company's saw chain
sales in fiscal 1994, are generally more profitable than sales of saw chain to
OEMs.
The Company has Outdoor Products sales personnel throughout the United States
and in a number of foreign countries. Sales derived from operations outside
the United States accounted for 45%, and export sales accounted for 10%, of
Outdoor Products sales during fiscal 1994. Oregon manufactures saw chain and
related products in Milwaukie, Oregon; Guelph, Ontario, Canada and Curitiba,
Brazil.
Oregon's products compete on the basis of quality and price, primarily with
the products of other saw chain manufacturers as well as a small number of
international chainsaw manufacturers, some of whom are also customers.
Page 3
Segment operating income is subject to seasonality with over half of annual
operating income generated during the last half of the fiscal year. Sales are
seasonal to a much lesser extent, reflecting the effect of volume sales to
several OEMs at lower margins typically than replacement sales. This
segment's principal raw material, strip steel, is generally purchased from two
vendors, although it is readily available from other sources.
Dixon, a manufacturer of ZTR (zero turning radius) riding lawn mowers and
related attachments, was acquired in early fiscal 1991. The maneuverability
of ZTR mowers significantly reduces mowing time and distinguishes them from
competitors' products. These mowers accounted for $29.5 million or 13% of
Outdoor Product sales.
INDUSTRIAL AND POWER EQUIPMENT
The Company's Industrial and Power Equipment segment manufactures equipment
for timber harvesting and log loading, industrial tractors and loaders,
rotation bearings and mechanical power transmission components. The Company
believes that it is a world leader in the manufacture of hydraulic timber
harvesting equipment, which includes a line of self-propelled and truck-
mounted loaders and feller bunchers (tractors with hydraulic attachments for
felling timber) under the Prentice brand name and a line of tractors, feller
bunchers and related attachments under the Hydro-Ax brand name. Major
customers of the Industrial and Power Equipment segment include timber
harvesters, land reclamation companies, contractors and scrap yard operators.
The Company sells its products through a network of approximately 60 dealers
in over 100 locations in the United States and currently has an additional 13
dealers overseas, primarily in South America and Southeast Asia. Over 90% of
this segment's sales in fiscal 1994 were in the United States, primarily in
the southeast states.
The Company places a strong emphasis on the quality, safety, comfort,
durability and productivity of its products and on the after-market service
provided by its distribution and support network. The Company's Industrial
and Power Equipment segment competes primarily on the basis of quality with a
number of domestic and foreign manufacturers of log loaders and feller
bunchers.
The Company attempts to capitalize on its technological and manufacturing
expertise as a means of increasing its participation in the market for
replacement parts for products which it manufactures, as well as of developing
new product applications both within and beyond the timber, scrap and
construction industries. The Company is committed to continuing research and
development in this segment to respond quickly to increasing mechanization and
environmental awareness in the timber harvesting industry. For example, the
Company's products include three-wheel tractors and boom harvesters, which
permit harvesters to employ selective cutting and thinning methods that may
not be as destructive as traditional clear cutting.
The Company's Industrial and Power Equipment segment has manufacturing
facilities in Owatonna, Minnesota; Prentice and Spencer, Wisconsin; Tulsa,
Oklahoma and Zebulon, North Carolina. A majority of the components used in
the Company's products are obtained from a number of domestic manufacturers.
Page 4
Segment results also include those of Gear Products, Inc. ("Gear"), acquired
by the Company early in fiscal 1992. Gear designs, manufactures and
distributes rotation bearings and mechanical power transmission components for
manufacturers of equipment that serve the utility, man-lift, construction,
forestry and marine industries.
SPORTING EQUIPMENT
The Company's Sporting Equipment segment manufactures small arms ammunition,
reloading equipment, primers, gun care products and accessories. Principal
products include CCI and Speer ammunition sold for use by hunters, sportsmen
and law enforcement and military personnel, RCBS reloading equipment for use
by hunters and sportsmen who prefer to reload their own ammunition, Outers
gun-care and trap-shooting products and Weaver shooting mounts and scopes.
The Company believes that it is a market leader in the domestic gun care and
reloading markets with high levels of brand name recognition in each of these
areas. The Sporting Equipment segment also produces industrial powerloads
which are used in the construction industry to drive fastening pins into metal
or concrete.
The market for Sporting Equipment products is characterized by a high degree
of customer loyalty to brand names and historically has not been affected by
adverse economic conditions. A continuing focus on new and better
technologies has enabled the Company to introduce a number of new and improved
products in recent years. These products include Blazer aluminum-case
ammunition. Up to 15% less expensive than traditional brass-case ammunition,
Blazer aluminum-case ammunition is used as training ammunition by numerous
law-enforcement agencies located throughout the world. The Company developed
its Clean-Fire ammunition, made with lead-free primers, in response to concern
in the shooting community about exposure to lead and other heavy metals,
particularly in indoor ranges.
Principal raw materials include brass, lead, aluminum and powder, which are
purchased from several suppliers. The Company manufactures ammunition in
Lewiston, Idaho, reloading equipment in Oroville, California and mounts,
scopes and gun care equipment in Onalaska, Wisconsin.
In the market for small arms ammunition and primers, the Company competes with
several larger manufacturers with well established brand names and market
share positions. In the segment's other product lines, the Company competes
with a number of smaller competitors, none of whom has a dominant market
share.
CAPACITY UTILIZATION
Based on an 80-hour work week, the Outdoor Products, Industrial and Power
Equipment and Sporting Equipment segments utilized approximately 90%, 72% and
56%, respectively, of their production capacity in fiscal 1994.
Page 5
BACKLOG
The backlog for each of the Company's business segments as of the end of each
of its last four fiscal years was as follows:
Last day of February
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1994 1993 1992 1991
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(In thousands)
Outdoor Products $ 36,507 $ 31,369 $ 33,561 $ 19,830
Industrial and Power Equipment 93,794 32,883 20,058 9,178
Sporting Equipment 16,750 3,048 5,437 8,100
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$147,051 $ 67,300 $ 59,056 $ 37,108
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The total backlog as of February 28, 1994 is expected to be completed and
shipped within fiscal 1995.
ACQUISITIONS AND DISPOSITIONS
In fiscal 1990, the Company sold certain of its remaining agri/industrial
operations for cash and notes of $4.4 million and its foreign resource
recovery subsidiary for cash of approximately $24 million. The Company's
Board of Directors in March 1990 ratified a plan adopted by management in
fiscal 1990 for the disposal of the Company's remaining resource
recovery/development operations.
In March 1990, the Company acquired all of the outstanding capital stock of
Dixon Industries, Inc. for cash of approximately $25 million. Dixon
manufactures specialty riding lawn mowers and related attachments. The
transaction was accounted for as a purchase.
In fiscal 1991, the Company acquired certain product line manufacturing and
marketing rights for its Industrial and Power Equipment segment at a cost of
$5.5 million.
In fiscal 1991, the Company sold its rights to certain resource recovery
technology for cash and notes of approximately $5 million.
In March 1991, the Company acquired all the outstanding capital stock of Gear
Products Inc. for cash and notes of $17.4 million. Gear designs and
manufactures rotation bearings and mechanical power transmission components
for manufacturers of equipment that serve the utility, man-lift, construction,
forestry and marine industries. The transaction was accounted for as a
purchase.
In May 1991, the Company sold its remaining resource recovery operations
consisting principally of two resource recovery facilities. The sales price
was approximately $14.5 million in cash. The Company has been released from
its contingent liabilities under guarantees with respect to the two
facilities.
In fiscal 1993, the Company sold its remaining agri/industrial plants for cash
of $.9 million.
Page 6
In February 1994, the Company adopted a plan to discontinue its construction
business. The plan provides for the orderly completion and close-out of the
Company's principal domestic and foreign construction projects ("the
projects") and the sale of Pozzo Construction Company ("Pozzo"), the Company's
wholly owned subsidiary headquartered in Los Angeles, California. In March
1994, the company entered into an agreement with Caddell Construction Co.,
Inc. ("Caddell") under which Caddell will provide the consulting and
construction management services necessary to complete the projects and
acquired the Company's right to use the name "Blount" in the construction
business for a period of years. As of February 28, 1994, the projects
encompassed by the agreement with Caddell have a remaining contract value of
approximately $94 million and are expected to be completed within two years.
Although Caddell will actively manage the projects, the Company will remain
subject to the inherent risks associated with a general construction
contractor. On most of the projects, the Company will participate in future
profits and remain responsible for substantially all losses, if any, in excess
of current estimates of final project profit or loss. The Company is pursuing
the sale of Pozzo and expects a sale to be concluded within 12 months. During
the period until sale, Pozzo will continue normal operations, including the
pursuit of new contracts. An after-tax loss of $650 thousand was recorded for
the disposal of this segment.
EMPLOYEES
At February 28, 1994, the Company employed approximately 4,700 individuals,
16% of whom were employed by its discontinued construction business. None of
the Company's employees in the manufacturing operations are unionized. The
Company believes its relations with its employees are satisfactory.
ENVIRONMENTAL MATTERS
The United States Environmental Protection Agency ("EPA") has designated a
predecessor of the Company as a potentially responsible party ("PRP") with
respect to the Onalaska Municipal Landfill in Onalaska, Wisconsin. The waste
complained of was placed in the landfill prior to 1981 by a corporation, some
of whose assets were purchased in 1981 by the predecessor of the Company. It
is the view of the Company that because its predecessor corporation purchased
assets rather than stock, the Company does not have successor liability and is
not properly a PRP. However, the EPA has indicated it does not accept this
position. The Company believes the EPA is wrong on the successor liability
issue. However, with other PRP's, the Company made a good faith offer to the
EPA to pay a portion of the clean-up costs. The offer was rejected and the
EPA is proceeding with the clean-up. The estimated clean-up costs are
approximately $5 to $10 million with maintenance costs of approximately
$150,000 per year for 30 years. The Company does not expect the situation to
have a material adverse effect.
The Company announced in January 1989, that a pocket of a cleaning solvent,
trichloroethylene ("TCE"), had been detected under the concrete floor of the
Company's cutting systems division plant in Milwaukie, Oregon. TCE was also
detected in the City of Milwaukie drinking water wells. The Company's deep
wells, which are surrounded by the City of Milwaukie wells, draw from the same
aquifer and show TCE amounts less than those of the City's wells. On December
6, 1989, the Company entered into a Stipulation and Consent Agreement for
facility investigation with the Department of Environmental Quality ("DEQ") of
the State of Oregon and agreed to investigate the TCE contamination beneath
Page 7
the plant and take appropriate measures to remediate potential adverse effects
from such contamination. In November 1992, the Company submitted a Facility
Investigation Final Report ("Report") to the DEQ for the Milwaukie, Oregon
plant. The Report states that the contamination has affected a limited
portion of the saturated engineered fill under the building. Since monitoring
began in 1988, the contaminant plume in the engineered fill has not migrated.
The concentration of the contaminants in the plume has been reduced by greater
than 50% since 1989. The TCE plume has not migrated off Company property.
The Company believes the contaminants pose no risk to Company employees or the
community because the ground water within the shallow alluvium is not used and
the contaminants are not migrating towards the drinking water supply aquifer.
There is no evidence that the Company's operations have affected the drinking
water supply aquifer. The Company does not expect the situation to have a
material adverse effect.
From time to time the Company may be identified as a potentially responsible
party with respect to a Superfund site. EPA (or a state) can either (a) allow
such a party to conduct and pay for a remedial investigation and feasibility
study and remedial action or (b) conduct the remedial investigation and action
and then seek reimbursement from the parties. Each party can be held jointly,
severally and strictly liable for all costs, but the parties can then bring
contribution actions against each other. As a result of the Superfund Act,
the Company may be required to expend amounts on remedial investigations and
actions which amounts cannot be determined at the present time but may
ultimately prove to be significant.
During fiscal 1994, the Company spent an aggregate of approximately $1.2
million on improvements in connection with environmental quality standards.
The Company expects to spend approximately $.8 million during fiscal 1995 and
between $1.0 million and $1.2 million for each of the two years thereafter on
compliance costs.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS AND FOREIGN AND DOMESTIC
OPERATIONS
For information about industry segments and foreign and domestic operations,
see "Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 12 through 15 and Note 10 of Notes to
Consolidated Financial Statements on pages 37 and 38.
ITEM 2. PROPERTIES
The corporate headquarters of the Company occupies executive offices at 4520
Executive Park Drive, Montgomery, Alabama.
The other principal properties of the Company and its subsidiaries are as
follows:
Cutting chain and accessories manufacturing plants are located in Milwaukie,
Oregon; Guelph, Ontario, Canada; and Curitiba, Brazil and sales and
distribution offices are located in Europe and Japan. Lawn mowers and related
attachments are manufactured at a plant in Coffeyville, Kansas. Log loaders
and feller-bunchers are manufactured at plants in Prentice and Spencer,
Wisconsin; Zebulon, North Carolina; and Owatonna, Minnesota. Rotation
bearings and mechanical power transmission components are manufactured at a
plant in Tulsa, Oklahoma. Sporting ammunition, reloading equipment products,
Page 8
gun care equipment and industrial power loads are manufactured at plants in
Lewiston, Idaho; Oroville, California; and Onalaska, Wisconsin.
All of these plants are in good condition, are currently in normal operation
and are generally suitable and adequate for the business activity conducted
therein. Approximate square footage of principal properties is as follows:
Area in Square Feet
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Owned Leased
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Outdoor Products 894,000 204,000
Sporting Equipment 705,000 0
Industrial & Power Equipment 630,000 0
Corporate Office 191,000 15,000
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Total 2,420,000 219,000
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ITEM 3. LEGAL PROCEEDINGS
On December 20, 1989, the Company sold to Asea Brown Boveri Ltd. ("ABB") all
the stock of W+E Umwelttechnik AG, then an engineering subsidiary of the
Company in the waste-to-energy business located in Zurich, Switzerland. On
July 26, 1993, ABB filed a Request for Arbitration with the Zurich Chamber of
Commerce. The request contains statements that ABB has or anticipates having
losses on two projects which were underway at the time of sale. While it is
not clear, ABB appears to be claiming approximately 100 Million Swiss francs
and rescission of the purchase agreement based on the Company's alleged wilful
failure to disclose material facts and that ABB made a fundamental mistake in
entering into the purchase agreement. Executives of the two companies have
discussed the matter and were not able to resolve it. The matter proceeded to
mediation and the parties were not able to resolve it. The Company believes
it has valid defenses based on the terms of the purchase agreement, the facts
and the law. In March 1994, the Company filed a lawsuit against ABB and two
of its subsidiaries in the Circuit Court of Jefferson County, Alabama seeking
declaratory judgment and injunctive relief as well as money damages for (i)
intentional interference with the Company's business relationships and (ii)
abuse of process. The Company does not expect the situation to have a
material adverse effect on its financial condition.
General contractors in the ordinary course of business become involved in
claims, many of which are settled in the field, some of which are settled by
the parties involved prior to or upon completion of work and some of which are
ultimately litigated. Such disputes have arisen routinely in the course of
the Company's construction business and may arise as the final projects are
completed.
The Company is a defendant in a number of product liability lawsuits involving
serious personal injuries for which it is self-insured, some of which seek
significant or unspecified damages. In addition, the Company is a party to a
number of other suits arising out of the conduct of its business. While there
can be no assurance as to their ultimate outcome, the Company does not believe
these lawsuits will have a material adverse effect on its financial condition.
Page 9
For information regarding legal proceedings see Note 8 of Notes to
Consolidated Financial Statements on pages 34 through 36.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table presents for the two years ended the last day of February
1994 the quarterly high and low prices on the American Stock Exchange and cash
dividends declared for the Company's Common Stock. The Company had
approximately 8,900 shareholders as of April 15, 1994.
Class A Common Stock Class B Common Stock
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High Low Dividend High Low Dividend
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1994
First quarter $16 1/2 $12 1/8 $ .1125 $16 5/8 $12 7/8 $ .1000
Second quarter 16 1/2 13 1/8 .1125 16 3/8 12 3/4 .1000
Third quarter 23 3/8 14 1/2 .1125 23 3/4 14 3/8 .1000
Fourth quarter 32 1/2 22 3/4 .1250 32 1/2 23 3/8 .1125
1993
First quarter $ 8 1/2 $ 7 $ .1125 $ 8 1/4 $ 7 1/8 $ .1000
Second quarter 9 1/4 8 1/4 .1125 9 1/8 8 1/4 .1000
Third quarter 9 3/4 8 5/8 .1125 9 3/4 8 1/2 .1000
Fourth quarter 17 9 3/4 .1125 16 7/8 9 5/8 .1000
For information regarding restrictions on the Company's ability to pay cash
dividends, see Note 3 of Notes to Consolidated Financial Statements on pages
27 through 29.
For information regarding restrictions on the net assets of foreign
subsidiaries, see Note 11 of Notes to Consolidated Financial Statements on
pages 39 and 40.
Page 10
ITEM 6. SELECTED FINANCIAL DATA
For the years ended the last day of February 1994 1993 1992 1991 1990
Dollar amounts in thousands, except share data
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Operating Results:
Sales $ 487,312 $ 426,237 $ 382,532 $ 355,061 $ 335,524
Operating income from segments 73,631 43,404 25,372 28,384 31,341
Income (loss) from continuing operations
before extraordinary gain (loss) and
cumulative effect of accounting changes 24,304 12,007 (4,295) 644 7,070
Net income(1) 14,080 7,239 683 2,242 21,800
Per share:
Income (loss) from continuing operations
before extraordinary gain (loss) and
cumulative effect of accounting changes 1.91 .98 (.35) .06 .59
Net income(1) 1.11 .59 .06 .19 1.81
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Year-End Financial Position:
Total assets $ 492,901 $ 447,151 $ 466,243 $ 496,319 $ 518,003
Working capital 104,346 58,340 63,671 86,911 75,286
Property, plant and equipment-gross 276,116 270,312 265,067 244,672 225,604
Property, plant and equipment-net 140,422 149,061 154,280 147,274 140,359
Long-term debt 107,651 82,046 105,654 124,052 100,277
Total debt 109,733 88,143 130,846 144,358 102,359
Net debt (total debt less cash and cash
equivalents) to total capitalization 20.8% 29.0% 44.1% 40.7% 9.2%
Shareholders' equity 166,853 155,071 151,129 155,409 158,406
Current ratio 1.6 to 1 1.4 to 1 1.4 to 1 1.5 to 1 1.3 to 1
- - --------------------------------------------- ------------- ------------- ------------- ------------- -----------
Other Data:
Property, plant and equipment additions(2) $ 14,711 $ 20,373 $ 32,983 $ 27,145 $ 19,021
Depreciation and amortization 22,801 23,361 22,251 17,261 15,789
Interest expense, net 9,551 9,687 14,384 11,099 4,466
Stock price Class A high 32 1/2 17 12 7/8 13 3/4 13 1/4
Class A low 12 1/8 7 5 3/4 6 7/8 9 1/4
Stock price Class B high 32 1/2 16 7/8 14 3/4 14 5/8 13 1/4
Class B low 12 3/4 7 1/8 5 5/8 7 9 1/4
Per common share dividends Class A .4625 .45 .45 .45 .45
Class B .4125 .40 .40 .40 .40
Weighted average common shares outstanding 12,730,733 12,283,592 11,958,557 12,000,207 12,040,823
Employees (approximate) 4,700 4,800 4,700 4,600 5,000
- - --------------------------------------------- ------------- ------------- ------------- ------------- -----------
(1) Includes an extraordinary gain of $92 ($.01 per share) on repurchase of
debt in 1994, an extraordinary loss of $119 ($.01 per share) on repurchase of
debt in 1993, income of $6,014 ($.50 per share) representing the cumulative
effect of adopting Statement of Financial Accounting Standards ("SFAS") No.
106 and SFAS No. 109 in 1992, an extraordinary gain of $1,205 ($.10 per share)
on repurchase of debt in 1991 and a gain on disposal of discontinued
operations of $7,693 ($.64 per share) in 1990.
(2) Includes property, plant and equipment of acquired companies at date of
purchase of $6,034 in 1992 and $4,675 in 1991 and $11,300 resulting from the
adoption of SFAS No. 109 in 1992.
Page 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes.
OPERATING RESULTS
TOTAL COMPANY
FISCAL 1994 COMPARED TO FISCAL 1993
Sales in fiscal 1994 were $487.3 million compared to $426.2 million in fiscal
1993. Income from continuing operations before extraordinary gain improved to
$24.3 million in fiscal 1994, more than twice the $12.0 million in fiscal
1993. The improved sales and operating results reflect continued strong
performance by each of the Company's manufacturing segments. Net income of
$14.1 million in fiscal 1994 compared to net income of $7.2 million in fiscal
1993. Fiscal 1994 net income included a loss of $10.3 million from
discontinued operations and an extraordinary gain of $92 thousand on
repurchase of debt. Fiscal 1993 net income included a loss of $4.6 million
from discontinued operations and an extraordinary loss of $119 thousand on
repurchase of debt.
Selling, general and administrative expenses increased by $12.0 million in
fiscal 1994, principally as a result of accruals for expected legal costs
related to the sale of a former subsidiary (see Note 8 of Notes to
Consolidated Financial Statements) and management incentive plans resulting
from the Company's improved earnings and increased stock price.
Net other expense in fiscal 1994 increased by $3.0 million over fiscal 1993
primarily due to losses resulting from disposals and reductions in carrying
value of certain property, plant and equipment.
In February 1994, the Company adopted a plan to discontinue its construction
business. The plan provides for the orderly completion and close-out of the
Company's principal domestic and foreign construction projects ("the
projects") and the sale of Pozzo Construction Company ("Pozzo"), the Company's
wholly owned subsidiary headquartered in Los Angeles, California. In March
1994, the Company entered into an agreement with Caddell Construction Co.,
Inc. ("Caddell") under which Caddell will provide the consulting and
construction management services necessary to complete the projects and
acquired the Company's right to use the name "Blount" in the construction
business for a period of years. The projects encompassed by the agreement
with Caddell have a remaining contract value of approximately $94 million and
are expected to be completed within two years. Although Caddell will actively
manage the projects, the Company will remain subject to the inherent risks
associated with a general construction contractor. On most of the projects,
the Company will participate in future profits and remain responsible for
substantially all losses, if any, in excess of current estimates of final
project profit or loss. The Company is pursuing the sale of Pozzo and expects
a sale to be concluded within 12 months. During the period until sale, Pozzo
will continue normal operations, including the pursuit of new contracts.
Page 12
In fiscal 1994, an after-tax loss of $650 thousand was provided for disposal
of the construction segment. The results of construction operations are
classified as discontinued operations in the Company's consolidated statements
of income.
FISCAL 1993 COMPARED TO FISCAL 1992
Sales in fiscal 1993 were $426.2 million compared to $382.5 million in fiscal
1992. Net income of $7.2 million in fiscal 1993 compared to net income of $683
thousand for fiscal 1992. Fiscal 1993 net income included a loss of $4.6
million from discontinued operations and an extraordinary loss of $119
thousand on repurchase of debt. Fiscal 1992 results included a loss of $1.0
million from discontinued operations and after tax income of $6.0 million
resulting from the cumulative effect of accounting changes for income taxes
and postretirement benefits other than pensions.
Selling, general and administrative expenses were down $5.9 million (including
a reduction of $3.1 million in corporate expenses) or 5.4% during fiscal 1993
reflecting a major emphasis on the reduction of overhead expenses. Net
interest expense was $4.7 million lower than in fiscal 1992 principally due to
lower average interest rates and lower average debt levels, including debt
reductions resulting from the Company's improved cash flows and receivable
sale agreement (see below). Net other expense increased by $1.7 million in
fiscal 1993 over fiscal 1992 as gains in fiscal 1992 on a lease termination
were not present in fiscal 1993.
SEGMENTS
FISCAL 1994 COMPARED TO FISCAL 1993
Sales for the Outdoor Products segment in fiscal 1994 were $234.5 million
compared to $213.6 million during fiscal 1993. Operating income increased to
$34.0 million during fiscal 1994 from $20.6 million in fiscal 1993. The
improved results for this segment were primarily due to increased sales and
operating income of $15.3 million and $11.6 million, respectively, at the
Company's Oregon Cutting Systems Division ("Oregon"), reflecting an 11%
increase in the sales volume of saw chain, Oregon's principal product, and
reduced unit costs. A significant part of Oregon's operations are conducted
in foreign countries, and as a result, fluctuations in exchange rates impact
the amount of reported sales, operating margins and the amount of foreign
exchange adjustments reflected in income. The Company enters into foreign
exchange forward contracts to reduce the effects of exchange rate fluctuations
on Oregon's anticipated future foreign currency cash flows. As these
contracts are accounted for at market value, the effects of exchange rate
fluctuations are recognized in income until the contracts are terminated (see
Note 1 of Notes to Consolidated Financial Statements). Oregon has
manufacturing facilities in Brazil whose operations are significantly affected
by high inflation, currency devaluation and resulting government policies.
Operating income from Brazil was $749 thousand in fiscal 1994 compared to $384
thousand in fiscal 1993. Sales and operating income at other units of the
Outdoor Products segment were up by 20% to $33.8 million and 115% to $3.3
million, respectively, in fiscal 1994, principally as a result of higher
average selling prices and a 20% increase in the sales volume of riding lawn
mowers. In fiscal 1995, the Company expects the sales of the Outdoor Products
segment to continue at fiscal 1994 levels with moderate gains in Europe and
improved results in the former Eastern Bloc countries.
Page 13
Sales for the Industrial and Power Equipment segment were $162.0 million
during fiscal 1994 compared to $128.9 million during fiscal 1993. Operating
income increased to $24.5 million during fiscal 1994 from $12.8 million during
fiscal 1993. Demand for this segment's products remained high as the
aggregate volume of timber harvesting and industrial tractor and loader units
sold during fiscal 1994 increased by 20% over the prior fiscal year. The
improvement in operating income was principally due to this increase in
volume, improved parts sales and increased average selling prices. High
backlogs combined with an expected increase in capital spending by the forest
products industry and expanding international opportunities indicate continued
growth for this segment.
Sales for the Sporting Equipment segment were $90.8 million during fiscal 1994
compared to $83.7 million in fiscal 1993. Operating income increased to $15.2
million from $10.0 million during fiscal 1993. The increases in sales and
operating income were principally due to improved margins on higher volume and
income recognized in fiscal 1994 upon finalizing a license and technical
assistance agreement with a foreign company. This agreement is expected to
lead to future product sales as well as royalties. The Company expects fiscal
1995 to be another good year for the Sporting Equipment segment.
FISCAL 1993 COMPARED TO FISCAL 1992
Sales for the Outdoor Products segment in fiscal 1993 increased by $16.9
million over fiscal 1992, while operating income was up by $7.2 million. The
improved results for this segment were principally attributable to increased
sales of $11.3 million and an operating income increase of $6.7 million at
Oregon; approximately $2.4 million of the sales increase resulted from higher
average sales prices for a core product and $7.7 million was attributable to
the increased volume of products purchased for resale and new products. The
improved operating income at Oregon resulted from the additional margin on
increased sales and a reduction of $2.6 million in selling, general and
administrative expenses. In fiscal 1993, operating income from Brazil was
$384 thousand compared to $524 thousand in fiscal 1992. The aggregate sales
and operating income at other Outdoor Products segment units were up by
approximately 24% to $28.3 million and 47% to $1.6 million, respectively, in
fiscal 1993.
The results from the Industrial and Power Equipment segment reflected
substantial improvement during fiscal 1993. Sales for this segment increased
by $27.5 million in fiscal 1993, approximately $17.9 million from the
increased volume and $7.0 million from the higher average sales prices of
forestry and industrial equipment units sold. Fiscal 1992 results were
adversely affected by the effects of the recession on the segment's principal
market, the forest products industry. Operating income improved by $13.3
million principally as a result of the additional margin on increased sales.
Sales from the Company's Sporting Equipment segment were down slightly in
fiscal 1993 compared to fiscal 1992 while operating income dropped 19.8%. The
reduced fiscal 1993 operating results were principally due to margin
reductions of $2.8 million resulting from both reduced average selling prices
and lower export volume for a major ammunition product line and higher
warranty costs from prior year foreign sales.
Page 14
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1994, the Company had $1.1 million outstanding under its
uncommitted short-term lines of credit. At February 28, 1994, the Company's
long-term debt and equity were $107.7 million and $166.9 million,
respectively, for a long-term debt to equity ratio of .6 to 1 as compared to a
ratio of .5 to 1 at February 28, 1993. In July 1993, the Company issued 9%
senior subordinated notes ("the 9% notes") due 2003 in the principal amount of
$100 million. In August 1993, the majority of the proceeds from the 9% notes
was used to retire $73.6 million 12% subordinated notes due 1996. In June
1993, the Company increased the amount that can be borrowed under its
revolving credit agreement from $50 million to $60 million. At February 28,
1994, no amounts were outstanding under the revolving credit agreement. Since
issuing the 9% notes, the Company has temporarily discontinued the sale of
receivables under a receivable sale agreement with a major bank under which
the Company can sell up to $25 million of eligible receivables. See Note 3 of
Notes to Consolidated Financial Statements for a description of the terms and
conditions of the 9% notes, the revolving credit agreement and the receivable
sale agreement.
Working capital was $104.3 million at February 28, 1994, compared to $58.3
million at February 28, 1993. The principal reasons for this increase were
the Company's improved earnings in fiscal 1994 and the excess proceeds from
the 9% notes over the amount utilized to retire the 12% subordinated notes.
The Company's operating cash flows for fiscal 1994 were $29.2 million compared
to $68.1 million in fiscal 1993. This reduction in operating cash flows is
primarily due to the reduced sales of receivables under the Company's
receivable sale agreement, higher income tax payments and an increase in
inventories in the fourth quarter of fiscal 1994 to meet expected demand early
in fiscal 1995. Cash and cash equivalent balances increased to $52.2 million
at February 28, 1994 from $17.7 million at February 28, 1993, reflecting the
Company's operating cash flows and excess proceeds from the 9% notes. The
Company believes that its operating cash flows, working capital and unused
credit facilities will provide both short-term and long-term liquidity.
Restrictions on the Company's ability to pay cash dividends are contained in
the indenture related to the 9% notes and in certain financial covenants of
the revolving credit agreement. Under the most restrictive requirement,
retained earnings of approximately $13.0 million were available for the
payment of dividends at February 28, 1994.
The Company and its operations are subject to various environmental laws and
regulations. See "Business - Environmental Matters" and Note 8 of Notes to
Consolidated Financial Statements for a description of certain environmental
matters.
Management believes that the impact of domestic inflation on the Company has
not been material in recent years as inflation rates have remained low.
Page 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
We have audited the consolidated financial statements and the financial
statement schedules of Blount, Inc. and subsidiaries listed in Item 14(a) of
this Form 10-K. These financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules 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 consolidated financial position of Blount, Inc. and
subsidiaries as of the last day of February 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended February 28, 1994 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
In accordance with statements issued by the Financial Accounting Standards
Board, as discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for postretirement benefits other
than pensions and income taxes in 1992.
COOPERS & LYBRAND
Atlanta, Georgia
April 12, 1994
Page 16
MANAGEMENT RESPONSIBILITY
All information contained in the consolidated financial statements of Blount,
Inc., has been prepared by management, which is responsible for the accuracy
and internal consistency of the information. Generally accepted accounting
principles have been followed. Reasonable judgments and estimates have been
made where necessary.
Management is responsible for establishing and maintaining a system of
internal accounting controls designed to provide reasonable assurance as to
the integrity and reliability of financial reporting. The system of internal
accounting controls is tested by the internal audit department as part of its
normal responsibilities and by Coopers & Lybrand to the extent deemed
necessary in accordance with generally accepted auditing standards. Management
believes the system of internal controls has been effective during the
Company's most recent fiscal year and that no matters have arisen which
indicate a material weakness in the system. Management follows the policy of
responding to the recommendations concerning the system of internal controls
made both by Coopers & Lybrand and by the internal audit department.
Management implements those recommendations that it believes would improve the
system of internal controls and be cost justified.
Six directors of the Company, not members of management, serve as the Audit
Committee of the Board and are the principal means through which the Board
discharges its financial reporting responsibility. The Audit Committee meets
with management personnel, the internal auditors and the Company's independent
auditors, Coopers & Lybrand, several times each year to consider the results
of internal and external audits of the Company and to discuss internal
accounting control, auditing and financial reporting matters. At these
meetings, the Audit Committee also meets privately with Coopers & Lybrand and
the General Auditor of the Company to ensure free access by the independent
auditors and internal auditors to the committee.
The Company's independent auditors, Coopers & Lybrand, audited the financial
statements prepared by the Company. Their opinion on these statements is
presented on page 16.
JOHN M. PANETTIERE HAROLD E. LAYMAN
President and Senior Vice President and
Chief Executive Officer Chief Financial Officer
Page 17
CONSOLIDATED STATEMENTS OF INCOME
Blount, Inc. and Subsidiaries
For the years ended the last day of February 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------
In thousands, except share data
Sales $ 487,312 $ 426,237 $ 382,532
Cost of sales 320,455 292,411 263,964
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Gross profit 166,857 133,826 118,568
Selling, general and administrative expenses 116,272 104,277 110,194
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Income from operations 50,585 29,549 8,374
Interest expense, net (9,551) (9,687) (14,384)
Other expense, net (4,760) (1,742) (62)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Income (loss) before income taxes 36,274 18,120 (6,072)
Provision (benefit) for income taxes 11,970 6,113 (1,777)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Income (loss) from continuing operations before extraordinary
gain (loss) and cumulative effect of accounting changes 24,304 12,007 (4,295)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Discontinued operations:
Loss from operations, net (9,666) (4,649) (1,036)
Loss on disposal, net (650)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Total loss from discontinued operations (10,316) (4,649) (1,036)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Income (loss) before extraordinary gain (loss) and
cumulative effect of accounting changes 13,988 7,358 (5,331)
Extraordinary gain (loss) on repurchase of debt, net 92 (119)
Cumulative effect of accounting changes, net 6,014
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Net income $ 14,080 $ 7,239 $ 683
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Income (loss) per share of common stock:
Income (loss) from continuing operations before extraordinary
gain (loss) and cumulative effect of accounting changes $ 1.91 $ .98 $ (.35)
Discontinued operations (.81) (.38) (.09)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Income (loss) before extraordinary gain (loss)
and cumulative effect of accounting changes 1.10 .60 (.44)
Extraordinary gain (loss) .01 (.01)
Cumulative effect of accounting changes .50
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Net income $ 1.11 $ .59 $ .06
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Weighted average number of common
shares outstanding 12,730,733 12,283,592 11,958,557
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
The accompanying notes are an integral part of these statements.
Page 18
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Blount, Inc. and Subsidiaries
For the years ended the last day of February 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------
In thousands, except share data
Balance at beginning of period $ 128,833 $ 126,813 $ 131,284
Net income 14,080 7,239 683
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
142,913 134,052 131,967
Less cash dividends declared:
Common stock (Class A - $.4625 per share in 1994 and
$.45 per share in 1993 and 1992;
Class B - $.4125 per share in 1994 and $.40 per share
in 1993 and 1992) 5,473 5,219 5,154
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Balance at end of period $ 137,440 $ 128,833 $ 126,813
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
The accompanying notes are an integral part of these statements.
Page 19
CONSOLIDATED BALANCE SHEETS
Blount, Inc. and Subsidiaries
As of the last day of February 1994 1993
- - ---------------------------------------------------------------------------------------------------------------------
In thousands, except share data
Assets
- - ------------------------------------------------------------------------------------- ----------------- -------------
Current assets:
Cash and cash equivalents, including short-term
investments of $48,810 and $15,223 $ 52,213 $ 17,723
Accounts receivable, net of allowances for
doubtful accounts of $2,238 and $2,563 134,458 117,956
Inventories 60,180 55,900
Deferred income taxes 17,742 2,178
Other current assets 12,812 24,390
- - ------------------------------------------------------------------------------------- ----------------- -------------
Total current assets 277,405 218,147
Property, plant and equipment, net of accumulated
depreciation of $135,694 and $121,251 140,422 149,061
Cost in excess of net assets of acquired businesses, net 60,171 62,065
Other assets 14,903 17,878
- - ------------------------------------------------------------------------------------- ----------------- -------------
Total Assets $ 492,901 $ 447,151
- - ------------------------------------------------------------------------------------- ----------------- -------------
Liabilities and Shareholders' Equity
- - ------------------------------------------------------------------------------------- ----------------- -------------
Current liabilities:
Notes payable and current maturities of long-term debt $ 2,082 $ 6,097
Accounts payable 74,267 66,292
Accrued expenses 83,757 70,741
Billings in excess of costs and recognized profits
on uncompleted contracts 12,953 16,677
- - ------------------------------------------------------------------------------------- ----------------- -------------
Total current liabilities 173,059 159,807
Long-term debt, exclusive of current maturities 107,651 82,046
Deferred income taxes, exclusive of current portion 13,499 12,966
Other liabilities 31,839 37,261
- - ------------------------------------------------------------------------------------- ----------------- -------------
Total liabilities 326,048 292,080
- - ------------------------------------------------------------------------------------- ----------------- -------------
Commitments and Contingent Liabilities
- - ------------------------------------------------------------------------------------- ----------------- -------------
Shareholders' equity:
Common stock: par value $1.00 per share;
Class A: 8,273,035 and 7,883,630 shares issued 8,273 7,884
Class B: 4,178,197 and 4,345,537 shares issued 4,178 4,346
Capital in excess of par value of stock 9,515 6,773
Retained earnings 137,440 128,833
Accumulated translation adjustment 7,447 7,235
- - ------------------------------------------------------------------------------------- ----------------- -------------
Total shareholders' equity 166,853 155,071
- - ------------------------------------------------------------------------------------- ----------------- -------------
Total Liabilities and Shareholders' Equity $ 492,901 $ 447,151
- - ------------------------------------------------------------------------------------- ----------------- -------------
The accompanying notes are an integral part of these statements.
Page 20
CONSOLIDATED STATEMENTS OF CASH FLOWS
Blount, Inc. and Subsidiaries
For the years ended the last day of February 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------
In thousands
Cash flows from operating activities:
Net income $ 14,080 $ 7,239 $ 683
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary loss (gain) (92) 119
Cumulative effect of accounting changes (6,014)
Depreciation, amortization and other noncash charges 23,576 24,357 23,701
Deferred income taxes (15,031) (8,558) (3,064)
Loss (gain) on disposals of property, plant and equipment 3,349 1,482 (2,161)
Changes in assets and liabilities, net of effects
of acquisitions of businesses:
Increase (decrease) in aggregate balance
of accounts receivable sold (17,637) 3,637 14,000
Decrease in accounts receivable 1,135 2,684 9,451
(Increase) decrease in inventories (4,280) 9,569 19
(Increase) decrease in other assets 12,337 140 (4,916)
Increase (decrease) in accounts payable 7,975 2,929 (5,027)
Increase in accrued expenses 12,701 8,135 8,534
Increase (decrease) in other liabilities (8,946) 16,402 (22,038)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Net cash provided by operating activities 29,167 68,135 13,168
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Cash flows from investing activities:
Proceeds from sales of businesses and property, plant
and equipment 3,916 11,129 16,496
Purchases of property, plant and equipment (14,605) (17,965) (15,546)
Acquisitions of businesses (14,590)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Net cash used in investing activities (10,689) (6,836) (13,640)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Cash flows from financing activities:
Net reduction in short-term borrowings (2,246) (15,903) (568)
Issuance of long-term debt 97,327
Reduction of long-term debt (75,325) (29,615) (8,876)
Dividends paid (5,473) (5,219) (5,154)
Purchase of treasury stock (682)
Issuance of stock under stock option and dividend
reinvestment plans 1,729 529 53
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Net cash provided by (used in) financing activities 16,012 (50,208) (15,227)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Net increase (decrease) in cash and cash equivalents 34,490 11,091 (15,699)
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Cash and cash equivalents at beginning of period 17,723 6,632 22,331
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
Cash and cash equivalents at end of period $ 52,213 $ 17,723 $ 6,632
- - ------------------------------------------------------------------- ----------------- ----------------- -------------
The accompanying notes are an integral part of these statements.
Page 21
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL STOCK ACCOUNTS
Blount, Inc. and Subsidiaries
Common Stock Capital Accumulated
------------------ In Excess Translation Treasury
In thousands Class A Class B of Par Adjustment Stock
- - ---------------------------------------------------------------------------------------------------------------
Balance, February 28, 1991 $ 7,554 $ 4,467 $ 4,930 $ 8,100 $ (926)
Conversion of Class B Common Stock
into Class A Common Stock 91 (91)
Issuance of shares under dividend
reinvestment plan 6 47
Aggregate adjustment resulting from
translation of foreign currency statements (458)
Purchase of treasury stock (682)
Issuance of shares to employee benefit plan 95 1,183
- - --------------------------------------------------- ---------- ------------- -------------- ----------- -------
Balance, February 29, 1992 7,651 4,376 5,072 7,642 (425)
Conversion of Class B Common Stock
into Class A Common Stock 35 (35)
Exercise of employee stock options 51 5 416
Issuance of shares under dividend
reinvestment plan 6 51
Aggregate adjustment resulting from
translation of foreign currency statements (407)
Issuance of shares to employee benefit plan 141 1,234 425
- - --------------------------------------------------- ---------- ------------- -------------- ----------- -------
Balance, February 28, 1993 7,884 4,346 6,773 7,235 0
Conversion of Class B Common Stock
into Class A Common Stock 168 (168)
Exercise of employee stock options 142 1,511
Issuance of shares under dividend
reinvestment plan 5 71
Aggregate adjustment resulting from
translation of foreign currency statements 212
Issuance of shares to employee benefit plan 74 1,160
- - --------------------------------------------------- ---------- ------------- -------------- ----------- -------
Balance, February 28, 1994 $ 8,273 $ 4,178 $ 9,515 $ 7,447 $ 0
- - --------------------------------------------------- ---------- ------------- -------------- ----------- -------
The accompanying notes are an integral part of these statements.
Page 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Blount, Inc. and Subsidiaries
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation:
The consolidated financial statements include the accounts of Blount, Inc. and
its subsidiaries. All significant intercompany balances and transactions are
eliminated in consolidation.
Reclassifications:
Certain amounts in the 1993 and 1992 financial statements and notes to
consolidated financial statements have been reclassified to conform with the
1994 presentation, principally discontinuance of construction operations (see
Note 4).
Balance sheet classifications:
Assets and liabilities arising from the Company's remaining long-term
construction activities, the operating cycle of which extends over one year,
are classified as current in the financial statements. A one-year time period
is used as the basis for classification of all other current assets and
liabilities.
Checks in transit are classified as accounts payable to the extent the
aggregate of such checks exceeds available cash balances not temporarily
invested. Checks classified as accounts payable were $5.5 million and $2.2
million as of the last day of February 1994 and 1993. All other checks in
transit are recorded as reductions of cash.
Inventories:
Inventories are stated at the lower of first-in, first-out cost or market.
Property, plant and equipment:
These assets are stated at cost and are depreciated principally on the
straight-line method over the estimated useful lives of the individual assets.
Gains or losses on disposal are reflected in income. Property, plant and
equipment held under leases which are essentially installment purchases are
capitalized, with the related obligations stated at the principal portion of
future lease payments. Depreciation charged to costs and expenses was $19.9
million, $20.5 million and $19.6 million in 1994, 1993 and 1992. Maintenance
and repair costs were $16.0 million, $14.2 million and $14.0 million in 1994,
1993 and 1992.
Capitalization of interest:
Interest cost incurred during the period of construction of plant and
equipment is capitalized. The interest cost capitalized on plant and equipment
was minimal in 1994 and 1992 and $620 thousand in 1993.
Cost in excess of net assets of acquired businesses:
The excess cost is being amortized by the straight-line method over periods
ranging from 30 to 40 years. Amortization expense was $1.9 million in each of
the three fiscal years in the period ended February 28, 1994. Accumulated
amortization was $15.3 million and $13.4 million as of the last day of
February 1994 and 1993.
Page 23
Foreign currency:
For foreign subsidiaries which have a majority of transactions denominated in
U.S. dollars or conduct operations in a highly inflationary economy, monetary
assets and liabilities are translated into U.S. dollars at the current
exchange rate, while other assets (principally property, plant and equipment
and inventories) and related costs and expenses are generally translated at
historic exchange rates. Revenues and other costs and expenses are translated
at the average exchange rate for the period and the resulting foreign exchange
adjustments are recognized in income. Assets and liabilities of the remaining
foreign operations are translated into U.S. dollars at the current exchange
rate and their statements of income are translated at the average exchange
rate for the period. Gains and losses resulting from translation of the
financial statements of these operations are accumulated in a separate
component of shareholders' equity. The amount of income taxes allocated to
this translation adjustment is not significant.
The Company enters into foreign exchange forward contracts to reduce the
effect of exchange rate fluctuations on anticipated future foreign currency
cash flows. These contracts are accounted for at market value with the
resulting gains or losses recognized in income. Foreign exchange adjustments,
including gains or losses on foreign exchange forward contracts, reduced
pretax income by $484 thousand and $340 thousand in 1994 and 1993 and
increased pretax income by $274 thousand in 1992.
Insurance accruals:
It is the Company's policy to self-insure a portion of expected losses related
to workers' compensation and general, product and vehicle liability.
Provisions for losses expected under these programs are recorded based on
estimates of the aggregate liabilities for known claims and claims incurred
but not reported.
Postretirement benefits other than pensions:
Effective March 1, 1991, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", which requires the accrual of medical and life
insurance benefits provided to retirees over the service lives of employees.
In prior years, expense was generally recognized as claims were paid. A
charge of $5.9 million ($.49 per share), net of income taxes of $3.0 million,
consisting of the accumulated postretirement benefit obligation for prior
service, was recognized as the cumulative effect of this accounting change as
of the beginning of fiscal 1992.
Postemployment benefits:
In fiscal 1994, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits", which requires the accrual of the cost of benefits
to former or inactive employees after employment but before retirement. The
Company's prior accounting practices for postemployment benefits do not differ
materially from those required by SFAS No. 112.
Research and development:
Expenditures for research and development are expensed as incurred. These
costs were $7.0 million, $6.9 million and $8.9 million for 1994, 1993 and
1992.
Page 24
Income taxes:
Effective March 1, 1991, the Company adopted SFAS No. 109, "Accounting for
Income Taxes". This statement requires an asset and liability approach for
financial accounting and reporting for income taxes and also requires certain
adjustments to the balances of remaining assets and liabilities acquired in
purchase business combinations consummated prior to the beginning of the year
for which the statement is first applied. Net income for 1992 includes
income of $11.9 million ($.99 per share) as the cumulative effect of applying
the accounting change. Income taxes for 1991 were accounted for in accordance
with SFAS No. 96.
Net income per common share:
Net income per common share is based on the weighted average number of common
and common equivalent shares (stock options and performance shares)
outstanding in each period.
Statements of cash flows:
For purposes of the statements of cash flows, the Company considers all highly
liquid temporary cash investments that are readily convertible to known
amounts of cash and present minimal risk of changes in value because of
changes in interest rates to be cash equivalents.
Page 25
NOTE 2:
INCOME TAXES
The provision (benefit) for income taxes attributable to continuing operations
is as follows:
For the years ended the last day of February 1994 1993 1992
- - -----------------------------------------------------------------------------
In thousands
Current provision (benefit):
Federal $ 17,608 $ 3,446 $ (5,423)
State 400 114 50
Foreign 8,993 9,851 6,660
Deferred provision (benefit):
Federal (13,234) (6,314) (2,868)
State (1,000)
Foreign (1,797) 16 (196)
- - -----------------------------------------------------------------------------
$ 11,970 $ 6,113 $ (1,777)
- - -----------------------------------------------------------------------------
A reconciliation of the provision (benefit) for income taxes attributable to
continuing operations to the amount computed by applying the statutory federal
income tax rate to income (loss) from continuing operations before income
taxes is as follows:
For the years ended the last day of February 1994 1993 1992
- - -----------------------------------------------------------------------------
In thousands
Income (loss) before income taxes:
Domestic $ 16,377 $ 853 $ (22,978)
Foreign 19,897 17,267 16,906
- - -----------------------------------------------------------------------------
$ 36,274 $ 18,120 $ (6,072)
- - -----------------------------------------------------------------------------
% % %
Statutory tax rate 35.0 34.0 (34.0)
Impact of earnings of foreign operations (.1) 10.7 (17.0)
State income taxes, net of federal
tax benefit 1.1 (4.9) 7.5
Adjustments to prior year estimates (4.3) (5.5)
Permanent differences between book
bases and tax bases of assets acquired 1.3 (1.8) 11.1
Other items, net 1.2 3.1
- - -----------------------------------------------------------------------------
Effective income tax rate 33.0 33.7 (29.3)
- - -----------------------------------------------------------------------------
All years reflect the allocation of substantially all corporate office
expenses and interest expense to domestic operations.
Page 26
As of the last day of February 1994 and 1993, deferred income tax assets were
$30.8 million and $25.4 million and deferred income tax liabilities were $26.5
million and $36.2 million. Deferred income taxes applicable to principal
temporary differences are as follows:
For the years ended the last day of February 1994 1993
- - -----------------------------------------------------------------------------
In thousands
Property, plant and equipment basis differences $ 20,611 $ 20,829
Foreign income 3,624 5,200
Accrued expenses, principally
employee benefits (28,478) (15,241)
- - -----------------------------------------------------------------------------
$ (4,243) $ 10,788
- - -----------------------------------------------------------------------------
Deferred income taxes of approximately $2.1 million have not been provided on
undistributed earnings of foreign subsidiaries in the amount of $22.5 million
as the earnings are considered to be permanently reinvested.
The Company has settled its issues with the Internal Revenue Service through
the 1990 fiscal year with no material adverse effect on the Company. The years
1991 through 1994 are still open for review.
NOTE 3:
DEBT AND FINANCING AGREEMENTS
Long-term debt consists of the following:
As of the last day of February 1994 1993
- - -----------------------------------------------------------------------------
In thousands
9% subordinated notes $ 100,000
12% subordinated notes $ 73,555
Industrial Revenue Bonds payable, maturing
between 1995 and 2014, interest at varying
rates (approximately 2.6% at February 28, 1994) 5,238 5,575
Other long-term debt, interest from 6% to 10%,
payable in installments to 1999 1,632 3,254
Lease purchase obligations, interest at varying
rates, payable in installments to 2000 1,727 2,377
- - -----------------------------------------------------------------------------
108,597 84,761
Less current maturities (946) (2,715)
- - -----------------------------------------------------------------------------
$ 107,651 $ 82,046
- - -----------------------------------------------------------------------------
Page 27
Maturities of long-term debt and the principal and interest payments on
capital leases are as follows:
Fiscal Year Capital Leases
--------------------- Total
In thousands Debt Principal Interest Payments
- - -----------------------------------------------------------------------------
1995 $ 347 $ 599 $ 138 $ 1,084
1996 1,929 346 88 2,363
1997 348 337 63 748
1998 348 425 19 792
1999 348 15 1 364
2000 and beyond 103,550 5 103,555
- - -----------------------------------------------------------------------------
$ 106,870 $ 1,727 $ 309 $ 108,906
- - -----------------------------------------------------------------------------
Interest expense was $11.1 million, $10.5 million and $15.6 million in 1994,
1993 and 1992.
In July 1993, the Company issued 9% senior subordinated notes ("the 9% notes")
in the principal amount of $100 million maturing on June 15, 2003. The 9%
notes are redeemable at the election of the Company, in whole or in part, at
any time on or after June 15, 1998, initially at 103 3/8% of the principal
amount and thereafter at prices declining to par on June 15, 2001. The 9%
notes were issued under an indenture ("the indenture") between the Company and
a major bank as trustee. The indenture restricts the Company's ability to
incur additional debt, pay dividends, make certain investments, dispose of
assets, create liens on assets and merge or consolidate with another entity.
The majority of the net proceeds from the 9% notes was used to retire the
Company's 12% subordinated notes in the principal amount of $73.6 million. In
conjunction with the retirement of the 12% subordinated notes, an interest
rate swap, accounted for as a hedge of part of the retired debt, was
effectively terminated. The extraordinary gain on retirement of the 12%
subordinated notes and termination of the interest rate swap was $92 thousand,
net of taxes of $49 thousand. During fiscal 1993, the Company repurchased
$4.6 million of the 12% subordinated notes. The extraordinary loss on
repurchase was $119 thousand, net of income tax benefit of $61 thousand.
In November 1991, the Company entered into a three year agreement expiring
December 1994 with a major bank under which it has the right to sell, on a
limited recourse basis, up to $25 million of undivided interests in a pool of
eligible accounts receivable. The purchaser's level of investment is subject
to change based on the level of eligible receivables. As of the last day of
February 1994, the Company had temporarily discontinued the sale of
receivables under this agreement and all receivables sold had been collected.
At February 28, 1993, the uncollected balance of accounts receivable sold
under this agreement was $17 million. The accounts receivable sold are
reflected as a reduction of accounts receivable in the accompanying balance
sheets. Other expense, net includes expenses of approximately $405 thousand,
$878 thousand and $388 thousand in 1994, 1993 and 1992 related to the sale of
accounts receivable under this agreement.
The Company maintains a $60 million revolving credit facility with a group of
five banks. Under the provisions of the agreement, the Company currently has
the option to borrow at (i) the higher of the prime rate plus 3/4% or the
Federal Funds rate plus 1 1/4%, (ii) an adjusted Certificate of Deposit Rate
Page 28
plus 1 7/8%, or (iii) an adjusted London Interbank Offered Rate plus 1 3/4%.
The rates may be increased up to a maximum increase of 1/4% depending on the
Company's debt to tangible net worth ratio. In addition, a commitment fee of
1/2% is charged on the unused commitment. Under provisions of this agreement,
the Company is limited as to indebtedness, guarantees, investments,
acquisitions, liens and disposal of assets, as well as being required to
maintain a specified fixed charge coverage ratio and tangible net worth
levels. The commitment will expire on December 31, 1995. At February 28,
1994, no amounts were outstanding under the facility.
Under the most restrictive debt requirement, retained earnings of
approximately $13.0 million were available for the payment of dividends at
February 28, 1994.
At February 28, 1994, the Company had $1.1 million outstanding under
uncommitted short-term foreign lines of credit. The following information
relates to short-term bank borrowings of the Company:
As of the last day of February 1994 1993 1992
- - -----------------------------------------------------------------------------
In thousands
Borrowings as of the end of the period $ 1,136 $ 3,382 $ 19,285
- - -----------------------------------------------------------------------------
Borrowings during the period:
Maximum 4,556 32,734 43,490
Average 1,713 14,686 24,448
- - -----------------------------------------------------------------------------
Weighted average interest rates:
During the period 5.9% 4.8% 6.7%
End of period 5.1% 9.7% 6.2%
- - -----------------------------------------------------------------------------
NOTE 4:
ACQUISITIONS AND DISPOSALS
In February 1994, the Company adopted a plan to discontinue its construction
business. The plan provides for the orderly completion and close-out of the
Company's principal domestic and foreign construction projects ("the
projects") and the sale of Pozzo Construction Company ("Pozzo"), the Company's
wholly owned subsidiary headquartered in Los Angeles, California. In March
1994, the Company entered into an agreement with Caddell Construction Co.,
Inc. ("Caddell") under which Caddell will provide the consulting and
construction management services necessary to complete the projects and
acquired the Company's right to use the name "Blount" in the construction
business for a period of years. As of February 28, 1994, the projects
encompassed by the agreement with Caddell have a remaining contract value of
approximately $94 million and are expected to be completed within two years.
Although Caddell will actively manage the projects, the Company will remain
subject to the inherent risks associated with a general construction
contractor. On most of the projects, the Company will participate in future
profits and remain responsible for substantially all losses, if any, in excess
of current estimates of final project profit or loss. The Company is pursuing
the sale of Pozzo and expects a sale to be concluded within 12 months. During
the period until sale, Pozzo will continue normal operations, including the
pursuit of new contracts.
Page 29
A provision for loss of $650 thousand (after tax benefits of $350 thousand)
was recorded for disposal of the construction segment, which is reflected as
discontinued operations in the accompanying consolidated statements of income.
Results of the discontinued operations are summarized as follows (in
thousands):
For the years ended the last day of February 1994 1993 1992
- - -----------------------------------------------------------------------------
Revenues $ 210,090 $ 265,177 $ 254,756
Loss before income taxes (14,871) (7,044) (1,569)
Provision (benefit) for income taxes (5,205) (2,395) (533)
Loss from discontinued operations (9,666) (4,649) (1,036)
The 1994 loss before taxes of $14.9 million is net of income of approximately
$7.3 million from a less than majority-owned foreign joint venture.
Distributions to the Company from this joint venture were approximately $21.2
million during fiscal 1994.
The principal assets and liabilities of the discontinued operations included
in the Company's consolidated balance sheets are as follows (in thousands):
As of the last day of February 1994 1993
- - -----------------------------------------------------------------------------
Accounts receivable $ 59,265 $ 59,878
Other current assets 7,922 20,450
Other assets 6,013 9,714
Accounts payable (38,503) (38,841)
Accrued expenses (11,106) (10,516)
Other current liabilities (13,015) (16,805)
Other liabilities (7,312) (9,644)
On March 1, 1991, the Company acquired all the outstanding capital stock of
Gear Products, Inc. for cash and notes of approximately $17.4 million. Gear
manufactures and sells rotation bearings and mechanical transmission
components. The transaction has been accounted for as a purchase and,
accordingly, the net assets and results of operations of the acquired business
have been included in the Company's consolidated financial statements since
the date of acquisition. The excess of the purchase price over the fair value
of the net assets acquired is being amortized on a straight-line basis over 40
years.
In May 1991, the Company sold its remaining resource recovery operations
consisting principally of two resource recovery facilities. The sales price
was approximately $14.5 million in cash.
NOTE 5:
CAPITAL STRUCTURE
The Company has authorized 40 million shares of Class A Common Stock, 12
million shares of Class B Common Stock and 4,456,855 shares of Preference
Stock. The Class A Common Stock is entitled to elect 25% of the Company's
Board of Directors, is entitled to one-tenth of one vote per share on all
other matters and will receive an additional dividend of $.0125 in any quarter
that a cash dividend is declared on the Class B Common Stock. The Class B
Common Stock is entitled to elect 75% of the Company's Board of Directors and
is entitled to one vote per share on all other matters. Each share of Class B
Page 30
Common Stock is convertible at any time at the option of the shareholder into
one share of Class A Common Stock.
The Company has granted options to purchase its Class A Common Stock to
certain officers and key employees under a non-qualified plan approved in 1994
and an Incentive Stock Option Plan ("ISOP") approved in 1992. The non-
qualified plan terminates in January 2004 and provides for granting of options
for up to 400,000 shares with an option price not less than fair market value
at the time of grant. The ISOP terminates in January 2002 and provides for
the granting of options for up to 750,000 shares with an option price not less
than fair market value at the time of grant. The options granted are
exercisable for a period of up to ten years under both plans. As of the last
day of February 1994, there were options for 41,667 shares and 38,700 shares
available for grant under the non-qualified plan and ISOP, respectively.
Options for 30,476 shares remain outstanding from a prior plan which has
terminated. At February 28, 1994, options for 157,330 shares were
exercisable. Changes with respect to options for each of the last three years
are as follows (in thousands, except per share prices):
1994 1993 1992
---------------------- ---------------------- ----------------------
Average Total Average Total Average Total
Per Option Per Option Per Option
Shares Share Price Shares Share Price Shares Share Price
---------------------- ---------------------- ----------------------
Outstanding,
beginning of period 729 $ 8.46 $ 6,160 649 $ 8.23 $ 5,346 110 $14.31 $ 1,580
Options granted 393 28.46 11,193 188 9.37 1,761 590 7.75 4,575
Options exercised (142) 9.14 (1,294) (54) 8.56 (469)
Options cancelled (32) 7.67 (247) (54) 8.84 (478) (51) 15.86 (809)
------ ------- ------- ------ ------- ------- ------ ------- -------
Outstanding, end
of period 948 $16.68 $15,812 729 $ 8.46 $ 6,160 649 $ 8.23 $ 5,346
------ ------- ------- ------ ------- ------- ------ ------- -------
Under the Company's Long-Term Performance Share Plan approved in June 1982,
certain officers and key employees were granted performance share awards, each
share of which, if earned, has a value equal to the fair market value of one
share of Class A Common Stock. As of February 28, 1994, no additional awards
may be granted under the Plan and 78,461 performance share awards were
outstanding. The awards are payable in fiscal 1995 if the Compensation and
Management Development Committee of the Board of Directors determines that the
conditions for payment have been satisfied. The amount charged to expense for
the plan was $2.9 million in 1994 and minimal in 1993 and 1992.
Page 31
NOTE 6:
PENSION PLANS
The Company maintains funded, non-contributory, trusteed, defined benefit
pension plans covering the majority of the domestic employees of the Company
and certain subsidiaries. In addition, the Company sponsors certain
supplemental defined benefit plans and employees of certain foreign operations
participate in local plans.
The formulas of defined benefit plans generally base pension benefits paid to
retired employees upon their length of service and a percentage of average
compensation during the years of employment. The plans' assets are invested
principally in common stocks and equity funds, bond funds, and temporary cash
investments. The actuarial method used for financial reporting purposes is
the projected unit credit method. The components of pension expense for
Company-sponsored defined benefit plans for each of the last three years were
(in thousands):
1994 1993 1992
- - ----------------------------------------------------------------------------
Service cost-benefits earned $ 3,814 $ 3,743 $ 3,086
Interest cost 4,649 4,211 3,923
Actual return on plan assets (2,462) (2,404) (2,466)
Net amortization and deferral 345 817 1,448
- - ----------------------------------------------------------------------------
$ 6,346 $ 6,367 $ 5,991
- - ----------------------------------------------------------------------------
The Company's general funding policy for qualified plans is to fund amounts
deductible for income tax purposes. Supplemental non-qualified plans are not
funded and benefit payments are made as they become due. The funded status of
qualified and non-qualified defined benefit plans as of the last day of
February 1994 and 1993 was as follows (in thousands):
1994 1993
----------------------------- -----------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
- - ------------------------------------------------------------------------------------------------------------
Actuarial present value of projected
benefit obligation:
Vested $ 7,063 $ 37,904 $ 5,882 $ 24,932
Nonvested 211 1,891 160 1,328
- - ------------------------------------------------- ------------- ----------------- -------------- -----------
Accumulated benefit obligation 7,274 39,795 6,042 26,260
Effect of projected compensation increases 5,267 14,048 4,135 14,828
- - ------------------------------------------------- ------------- ----------------- -------------- -----------
Projected benefit obligation 12,541 53,843 10,177 41,088
Plan assets at fair value 15,838 33,671 13,081 25,213
- - ------------------------------------------------- ------------- ----------------- -------------- -----------
Projected benefit obligation
greater (less) than plan assets (3,297) 20,172 (2,904) 15,875
Unrecognized transition asset (obligation) 1,065 (655) 1,316 (646)
Unrecognized prior service liability (197) (4,972) (166) (7,273)
Unrecognized net gain (loss) (383) (5,422) (555) 3,249
- - ------------------------------------------------- ------------- ----------------- -------------- -----------
Net accrued (prepaid) pension cost $ (2,812) $ 9,123 $ (2,309) $ 11,205
- - ------------------------------------------------- ------------- ----------------- -------------- -----------
Page 32
The weighted average rate assumptions used in 1994, 1993 and 1992 to determine
pension expense and related pension obligations for domestic and foreign
defined benefit plans were as follows:
1994 1993 1992
- - -----------------------------------------------------------------------------
Discount rate 7.6% 8.6% 8.6%
Rate of increase in compensation levels 4.4% 5.3% 5.3%
Expected long-term rate of return on
plan assets 8.6% 9.0% 9.0%
- - -----------------------------------------------------------------------------
The Company's share of unfunded liability, if any, related to multi-employer
pension plans is not determinable.
The Company provides a defined contribution 401(k) plan to the majority of
domestic employees. The expense was $1.9 million, $1.8 million and $1.7
million in 1994, 1993 and 1992.
NOTE 7:
POSTRETIREMENT INSURANCE BENEFITS
The Company sponsors plans which provide postretirement health care and life
insurance benefits ("postretirement benefits") to eligible domestic retirees.
The Company has funded the estimated liability for retirees of certain
operations sold in a prior year. Other postretirement benefit plans are not
funded and benefit payments are made as they become due.
Net periodic postretirement benefit expense for 1994, 1993 and 1992 consisted
of the following components (in thousands):
1994 1993 1992
- - ----------------------------------------------------------------------------
Service cost-benefits earned $ 284 $ 275 $ 271
Interest cost 1,406 1,200 1,166
Actual return on plan assets (125) (215) (323)
Net amortization and deferral 47 (31) 77
- - ----------------------------------------------------------------------------
$ 1,612 $ 1,229 $ 1,191
- - ----------------------------------------------------------------------------
Page 33
The accumulated postretirement benefit obligation for the funded plan was $2.4
million as of the last day of February 1994 and 1993. A reconciliation of the
accumulated postretirement benefit obligation to the accrued liability
included in the Company's balance sheets as of the last day of February 1994
and 1993 follows (in thousands):
1994 1993
- - ----------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 10,640 $ 8,784
Fully eligible active plan participants 2,740 2,312
Other active plan participants 3,641 2,537
- - ----------------------------------------------------------------------------
17,021 13,633
Plan assets at fair value 2,650 3,074
- - ----------------------------------------------------------------------------
Postretirement benefits in excess of assets 14,371 10,559
Unrecognized net gain (loss) (3,086) 264
- - ----------------------------------------------------------------------------
Accrued postretirement benefit cost $ 11,285 $ 10,823
- - ----------------------------------------------------------------------------
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7 1/2% in 1994 and 8 1/2% in 1993 and
1992. The expected long-term rate of return on plan assets was 8 3/4% in 1994
and 9 1/4% in 1993 and 1992. A 12% annual rate of increase in the cost of
health care benefits was assumed for 1994; the rate was assumed to decrease 1%
per year until 5% is reached and remain at that level thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. Increasing the assumed health care cost trend rate by 1% in each
year would increase the accumulated postretirement benefit obligation as of
February 28, 1994 by $1.6 million and the aggregate of the service and
interest cost components of net periodic expense for 1994 by $200 thousand.
NOTE 8:
COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office space and equipment under operating leases expiring
in 1 to 12 years. Most leases include renewal options and some contain
purchase options and escalation clauses. Future minimum rental commitments
required under operating leases having initial or remaining noncancelable
lease terms in excess of one year as of February 28, 1994 are as follows (in
thousands): 1995--$4,167; 1996--$3,240; 1997--$2,505; 1998--$1,214; 1999--$932
and 2000 and beyond--$791. Rentals charged to costs and expenses under
cancelable and noncancelable lease arrangements were $5.7 million, $5.1
million and $4.1 million for 1994, 1993 and 1992.
The Company announced in January 1989, that a pocket of a cleaning solvent,
trichloroethylene ("TCE"), had been detected under the concrete floor of the
Company's cutting systems division plant in Milwaukie, Oregon. TCE was
detected in the City of Milwaukie drinking water wells. The Company's deep
wells, which are surrounded by the City of Milwaukie wells, draw from the same
aquifer and show TCE amounts less than those of the City's wells. On December
6, 1989, the Company entered into a Stipulation and Consent Agreement for
Page 34
facility investigation with the Department of Environmental Quality ("DEQ") of
the State of Oregon and agreed to investigate the TCE contamination beneath
the plant and take appropriate measures to remediate potential adverse effects
from such contamination. In November 1992, the Company submitted a Facility
Investigation Final Report ("Report") to the DEQ for the Milwaukie, Oregon
plant. The Report states that the contamination has affected a limited
portion of the saturated engineered fill under the building. Since monitoring
began in 1988, the contaminant plume in the engineered fill has not migrated.
The concentration of the contaminants in the plume has been reduced by greater
than 50% since 1989. The TCE plume has not migrated off Company property.
The Company believes the contaminants pose no risk to Company employees or the
community because the groundwater within the shallow alluvium is not used and
the contaminants are not migrating towards the drinking water supply aquifer.
There is no evidence that the Company's operations have affected the drinking
water supply aquifer. The Company does not expect the situation to have a
material adverse effect.
The United States Environmental Protection Agency ("EPA") has designated a
predecessor of the Company as a potentially responsible party ("PRP") with
respect to the Onalaska Municipal Landfill in Onalaska, Wisconsin. The waste
complained of was placed in the landfill prior to 1981 by a corporation, some
of whose assets were purchased in 1981 by the predecessor of the Company. It
is the view of the Company that because its predecessor corporation purchased
assets rather than stock, the Company does not have successor liability and is
not properly a PRP. However, the EPA has indicated it does not accept this
position. The Company believes the EPA is wrong on the successor liability
issue. However, with other PRP's, the Company made a good faith offer to the
EPA to pay a portion of the clean-up costs. The offer was rejected and the
EPA is proceeding with the clean-up. The estimated clean-up costs are
approximately $5 million to $10 million with maintenance costs of
approximately $150 thousand per year for 30 years. The Company does not
expect the situation to have a material adverse effect.
On December 20, 1989, the Company sold to Asea Brown Boveri Ltd. ("ABB") all
the stock of W+E Umwelttechnik AG, then an engineering subsidiary of the
Company in the waste-to-energy business located in Zurich, Switzerland. On
July 26, 1993, ABB filed a Request for Arbitration with the Zurich Chamber of
Commerce. The request contains statements that ABB has or anticipates having
losses on two projects which were underway at the time of sale. While it is
not clear, ABB appears to be claiming approximately 100 million Swiss francs
and rescission of the purchase agreement based on the Company's alleged wilful
failure to disclose material facts and that ABB made a fundamental mistake in
entering into the purchase agreement. Executives of the two companies have
discussed the matter and were not able to resolve it. The matter proceeded to
mediation and the parties were not able to resolve it. The Company believes
it has valid defenses based on the terms of the purchase agreement, the facts
and the law. In March 1994, the Company filed a lawsuit against ABB and two
of its subsidiaries in the Circuit Court of Jefferson County, Alabama seeking
declaratory judgment and injunctive relief as well as money damages for (i)
intentional interference with the Company's business relationships and (ii)
abuse of process. The Company does not expect the situation to have a
material adverse effect on its financial condition.
The Company is a defendant in a number of product liability lawsuits involving
serious personal injuries for which it is self-insured, some of which seek
significant or unspecified damages. In addition, the Company is a party to a
number of other suits arising out of the conduct of its business. While there
Page 35
can be no assurance as to their ultimate outcome, the Company does not believe
these lawsuits will have a material adverse effect on its financial condition.
The Company's contingencies include normal liabilities for performance and
completion of construction contracts. At February 28, 1994, the Company had
outstanding bank letters of credit in the approximate amount of $23.2 million
issued principally in connection with various construction contracts for which
the Company is contingently liable to the issuing banks in the event payment
is demanded by the holder.
The Company is contingently liable for the remaining rental payments, net of
the value of the leased equipment, under leases transferred to the buyer of a
former subsidiary. The leases have rental payments remaining of $10.6 million
which expire in 1999. The Company has received indemnification against
liabilities arising from the leases from the purchaser of the former
subsidiary.
NOTE 9:
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
The Company enters into foreign exchange forward contracts with major banks.
At February 28, 1994, the Company had foreign exchange forward contracts
maturing on February 28, 1995 in the aggregate amount of approximately $23.4
million. These contracts are accounted for at market value, which was minimal
at February 28, 1994 and 1993.
At February 28, 1994, approximately 56% of the Company's accounts receivable
arose from manufacturing operations with the remainder resulting principally
from the Company's discontinued construction operations. The Company has
manufacturing or distribution operations in Brazil, Canada, Europe, Japan and
the United States. The Company sells to customers in these locations,
primarily in the United States, and other countries throughout the world.
Accounts receivable from manufacturing customers are principally from service
and dealer groups, distributors and chainsaw manufacturers, and are generally
not collateralized. The Company's remaining construction activity is
primarily with customers within the United States and Kuwait. At February 28,
1994, approximately 41% of accounts receivable from construction activities
was from governmental entities with the balance principally from customers in
private industry. Construction related accounts receivable are generally
larger and from a smaller base of customers than those from manufacturing
operations.
The estimated fair values of certain of the Company's financial instruments
are as follows (in thousands):
As of the last day of February 1994 1993
- - -----------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
Cash and short-term investments $ 52,213 $ 52,213 $ 17,723 $ 17,723
Other assets (principally notes receivable) 3,012 3,301 7,157 6,510
Notes payable and long-term debt (see Note 3) (109,733) (113,295) (88,143) (90,806)
Interest rate swap 123 3,249
Page 36
The carrying amount of cash and short-term investments approximates fair value
because of the short maturity of those instruments. The fair value of notes
receivable is estimated based on the discounted value of estimated future cash
flows. The fair value of long-term debt is estimated based on recent market
transaction prices or on current rates available to the Company for debt with
similar terms and maturities. The fair value of the interest rate swap (used
for hedging purposes) is the estimated amount the Company would receive to
terminate the swap agreement. The fair value of foreign exchange forward
contracts is estimated by obtaining market quotes.
NOTE 10:
SEGMENT INFORMATION
The Company's business consists of three segments: outdoor products,
industrial and power equipment and sporting equipment. Identifiable assets
consist of those assets used by the segments; corporate assets consist
principally of cash and temporary investments and facilities used by the
corporate office.
In 1994, 1993 and 1992, no customer accounted for more than 10% of
consolidated sales.
Information on Geographic Areas
For the years ended the last day of February 1994 1993 1992
- - -----------------------------------------------------------------------------
In thousands
Sales:
United States $ 382,596 $ 318,125 $ 282,990
Outside United States 104,716 108,112 99,542
- - -----------------------------------------------------------------------------
$ 487,312 $ 426,237 $ 382,532
- - -----------------------------------------------------------------------------
Operating income:
United States $ 52,750 $ 24,568 $ 7,731
Outside United States 20,881 18,836 17,641
- - -----------------------------------------------------------------------------
Operating income from segments $ 73,631 $ 43,404 $ 25,372
- - -----------------------------------------------------------------------------
Identifiable assets:
United States $ 391,260 $ 328,450 $ 340,558
Outside United States 101,641 118,701 125,685
- - -----------------------------------------------------------------------------
$ 492,901 $ 447,151 $ 466,243
- - -----------------------------------------------------------------------------
Included in United States sales were export sales of $54.5 million, $39.9
million and $41.8 million in 1994, 1993 and 1992.
Page 37
Information on Segments
For the years ended the last day of February 1994 1993 1992
- - -----------------------------------------------------------------------------
In thousands
Sales:
Outdoor products $ 234,502 $ 213,625 $ 196,758
Industrial and power equipment 162,026 128,912 101,437
Sporting equipment 90,784 83,700 84,337
- - -----------------------------------------------------------------------------
$ 487,312 $ 426,237 $ 382,532
- - -----------------------------------------------------------------------------
Operating income (loss):
Outdoor products $ 33,974 $ 20,611 $ 13,394
Industrial and power equipment 24,503 12,843 (434)
Sporting equipment 15,154 9,950 12,412
- - -----------------------------------------------------------------------------
Operating income from segments 73,631 43,404 25,372
Corporate office expenses (23,046) (13,855) (16,998)
- - -----------------------------------------------------------------------------
Income from operations 50,585 29,549 8,374
Interest expense, net (9,551) (9,687) (14,384)
Other expense, net (4,760) (1,742) (62)
- - -----------------------------------------------------------------------------
Income (loss) before income taxes $ 36,274 $ 18,120 $ (6,072)
- - -----------------------------------------------------------------------------
Identifiable assets:
Outdoor products $ 202,671 $ 201,824 $ 217,335
Industrial and power equipment 69,230 67,799 75,647
Sporting equipment 59,152 48,621 58,607
Corporate office 88,648 38,865 19,874
Discontinued operations 73,200 90,042 94,780
- - -----------------------------------------------------------------------------
$ 492,901 $ 447,151 $ 466,243
- - -----------------------------------------------------------------------------
Depreciation and amortization:
Outdoor products $ 14,511 $ 14,653 $ 14,560
Industrial and power equipment 3,616 3,770 3,652
Sporting equipment 3,594 3,685 3,389
Corporate office 1,080 1,253 650
- - -----------------------------------------------------------------------------
$ 22,801 $ 23,361 $ 22,251
- - -----------------------------------------------------------------------------
Capital expenditures:
Outdoor products $ 5,335 $ 15,743 $ 8,207
Industrial and power equipment 698 2,123 7,617
Sporting equipment 1,377 1,425 4,483
Corporate office 7,029 420 79
- - -----------------------------------------------------------------------------
$ 14,439 $ 19,711 $ 20,386
- - -----------------------------------------------------------------------------
Page 38
NOTE 11:
SUPPLEMENTAL INFORMATION
The following balance sheet captions are comprised of the items specified
below:
As of the last day of February 1994 1993
- - ---------------------------------------------------------------------------------------------------
In thousands
Accounts receivable:
Trade accounts and other $ 84,635 $ 68,616
Billings on construction contracts:
Current 37,527 37,966
Retainage estimated to be collected within one year 14,534 12,631
Retainage estimated to be collected after one year 1,306
Allowance for doubtful accounts (2,238) (2,563)
- - ------------------------------------------------------------------- ----------------- -------------
$ 134,458 $ 117,956
- - ------------------------------------------------------------------- ----------------- -------------
Inventories:
Finished goods $ 27,169 $ 25,826
Work in process 13,329 12,495
Raw materials and supplies 19,682 17,579
- - ------------------------------------------------------------------- ----------------- -------------
$ 60,180 $ 55,900
- - ------------------------------------------------------------------- ----------------- -------------
Property, plant and equipment:
Land $ 6,506 $ 6,506
Buildings and improvements 80,948 80,546
Machinery and equipment 146,449 149,506
Furniture, fixtures and office equipment 28,036 20,193
Transportation equipment 11,582 5,190
Construction in progress 2,595 8,371
Accumulated depreciation (135,694) (121,251)
- - ------------------------------------------------------------------- ----------------- -------------
$ 140,422 $ 149,061
- - ------------------------------------------------------------------- ----------------- -------------
Accounts payable:
Trade accounts and other $ 62,196 $ 53,550
Retainage estimated to be paid within one year 12,071 11,396
Retainage estimated to be paid after one year 1,346
- - ------------------------------------------------------------------- ----------------- -------------
$ 74,267 $ 66,292
- - ------------------------------------------------------------------- ----------------- -------------
Accrued expenses:
Salaries, wages and related withholdings $ 19,777 $ 20,126
Employee benefits 15,049 10,266
Casualty insurance costs 12,453 15,027
Income taxes payable 8,232 5,143
Other 28,246 20,179
- - ------------------------------------------------------------------- ----------------- -------------
$ 83,757 $ 70,741
- - ------------------------------------------------------------------- ----------------- -------------
Page 39
As of the last day of February 1994 1993
- - ---------------------------------------------------------------------------------------------------
Other liabilities:
Employee benefits $ 20,534 $ 22,681
Casualty insurance costs 8,276 10,837
Other 3,029 3,743
- - ------------------------------------------------------------------- ----------------- -------------
$ 31,839 $ 37,261
- - ------------------------------------------------------------------- ----------------- -------------
At February 28, 1994, the Company's manufacturing operation in Canada had net
assets of $40.4 million which were subject to withdrawal restrictions
resulting from a financing agreement. The majority of this amount was invested
in property, plant and equipment.
Advertising costs were $8.9 million, $7.0 million and $7.1 million for 1994,
1993 and 1992.
Supplemental cash flow information is as follows (in thousands):
1994 1993 1992
- - --------------------------------------------------------------------------------------
Interest paid $ 12,121 $ 11,203 $ 15,540
Income taxes paid 18,572 7,193 3,628
Capital lease obligations incurred (terminated) 106 2,408 (7,056)
Issuance of Company stock to employee benefits plan 1,234 1,800 1,278
Acquisitions of businesses (see Note 4):
Fair value of assets acquired 20,062
Liabilities assumed and incurred 5,477
Cash paid 14,585
- - ----------------------------------------------------- ----------- ----------- --------
Page 40
SUPPLEMENTARY DATA
QUARTERLY RESULTS OF OPERATIONS
(unaudited)
The following table sets forth a summary of the quarterly results of
operations for the two years ended the last day of February 1994.
In thousands, First Second Third Fourth Fiscal
except share data Quarter Quarter Quarter Quarter Year Total
- - -------------------------------------------------------------------------------------------------
1994
Sales $ 117,369 $ 118,385 $ 127,563 $ 123,995 $ 487,312
Gross profit 37,807 39,791 45,420 43,839 166,857
Income before extraordinary gain 1,207 2,442 6,671 3,668 13,988
Net income 1,207 2,534 6,671 3,668 14,080
Income per share:
Income before extraordinary gain .10 .19 .52 .29 1.10
Net income .10 .20 .52 .29 1.11
The first quarter includes net income of $.9 million ($.07 per share)
resulting from finalizing a license and technical agreement for a Company
product. The second quarter includes an after-tax extraordinary gain of $.1
million ($.01 per share) from the retirement of $73.6 million of the Company's
12% subordinated notes. The third and fourth quarters include after-tax
charges of $1.3 million ($.10 per share) and $2.6 million ($.21 per share),
respectively, resulting from accruals for expected legal costs related to the
sale of a former subsidiary. The fourth quarter includes a net loss of $650
thousand ($.05 per share) for disposal of the Company's construction business,
an after-tax charge of $1.1 million ($.08 per share) for accruals for a
management incentive plan and net income of $1.6 million ($.12 per share)
resulting from the resolution of a prior year tax issue.
In thousands, First Second Third Fourth Fiscal
except share data Quarter Quarter Quarter Quarter Year Total
- - --------------------------------------------------------------------------------------------------
1993
Sales $ 93,311 $ 105,455 $ 119,468 $ 108,003 $ 426,237
Gross profit 28,515 30,573 39,635 35,103 133,826
Income before extraordinary loss 439 1,339 4,345 1,235 7,358
Net income 439 1,339 4,226 1,235 7,239
Income per share:
Income before extraordinary loss .04 .11 .35 .10 .60
Net income .04 .11 .34 .10 .59
The third quarter includes an after-tax extraordinary loss of $.1 million
($.01 per share) from the repurchase of $4.6 million of the Company's 12%
subordinated notes. The results for the fourth quarter include a net gain of
$.5 million ($.04 per share) from the sale of the Company's interest in a
Mexican company and income of $.8 million ($.07 per share) resulting from an
adjustment to estimated income taxes.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the "Directors", "Executive Officers" and "Filing Disclosure" sections of
the proxy statement for the June 27, 1994 Annual Meeting of Stockholders of
Blount, Inc., which sections are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
See the "Executive Compensation and Other Information" section of the proxy
statement for the June 27, 1994 Annual Meeting of Stockholders of Blount,
Inc., which section is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the "Principal Stockholders" section of the proxy statement for the June
27, 1994 Annual Meeting of Stockholders of Blount, Inc., which section is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the "Certain Transactions and Other Matters" section of the proxy
statement for the June 27, 1994 Annual Meeting of Stockholders of Blount,
Inc., which section is incorporated herein by reference.
Page 42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
Reference
---------
(a) Certain documents filed as part of Form 10-K
(1) Financial Statements and Supplementary Data
Report of Independent Accountants 16
Consolidated Statements of Income for the years
ended the last day of February 1994, 1993 and 1992 18
Consolidated Statements of Retained Earnings for the
years ended the last day of February 1994, 1993 and 1992 19
Consolidated Balance Sheets as of the last day of
February 1994 and 1993 20
Consolidated Statements of Cash Flows
for the years ended the last day of
February 1994, 1993 and 1992 21
Consolidated Statements of Changes in Capital Stock
Accounts for the years ended the last day of
February 1994, 1993 and 1992 22
Notes to Consolidated Financial Statements 23 - 40
Supplementary Data 41
(2) Schedules for the years ended the last day of
February 1994, 1993 and 1992 *
II. Amounts receivable from related parties
and underwriters, promoters, and employees
other than related parties 48
V. Property, plant and equipment 49 - 51
VI. Accumulated depreciation, depletion
and amortization of property, plant
and equipment 52
VIII. Valuation and qualifying accounts 53
* All other schedules have been omitted because they are not required or
because the information is presented in the Notes to Consolidated Financial
Statements.
Page 43
(b) Reports on Form 8-K in the Fourth Quarter
None.
(c) Exhibits required to be filed by Item 601 of Regulation S-K:
3(a) The Restated Certificate of Incorporation which was filed as an
exhibit to the Blount, Inc. Form 10-K for the fiscal year ended 2-28-90 is
incorporated herein by reference.
3(b) The Amended Bylaws which were filed as an exhibit to the Blount,
Inc. Form 10-K for the fiscal year ended 2-29-92 is incorporated herein by
reference.
4(a) The registration of 9% subordinated notes due June 2003 filed on
Form S-2, registration number 33-62728 including amendments and exhibits which
became effective June 30, 1993, is incorporated herein by reference.
10(a) The Blount Long-Term Performance Share Plan which was filed as
Exhibit B to the Blount, Inc. Proxy Statement for the Annual Meeting of
Stockholders held June 28, 1982, is incorporated herein by reference.
10(b) The Insurance Agreements with the following individuals which were
filed as an exhibit to the Blount, Inc. Form 10-K for the fiscal year ended
2-28-83, are incorporated herein by reference:
(i) Winton M. Blount
(ii) Oscar J. Reak
(iii) Frank H. McFadden
10(c) The Supplemental Executive Retirement Plan for Oscar J. Reak which
was filed as an exhibit to the Blount, Inc. Form 10-K for the fiscal year
ended 2-28-83, is incorporated herein by reference.
10(d) The Supplemental Retirement and Disability Plan which was filed as
an exhibit to the Blount, Inc. Form 10-K for the fiscal year ended 2-29-92, is
incorporated herein by reference.
10(e) A written description of the Management Incentive Plan which was
filed as an exhibit to the Blount, Inc. Form 10-K for the fiscal year ended
2-28-83, is incorporated herein by reference.
10(f) Amendments to the Blount Long-Term Performance Share Plan which
were filed as Exhibit C to the Blount, Inc. Proxy Statement for the Annual
Meeting of Stockholders held June 27, 1983, are incorporated herein by
reference.
10(g) The Supplemental Retirement Savings Plan which was filed as an
exhibit to the Blount, Inc. Form 10-K for the fiscal year ended 2-29-92, is
incorporated herein by reference.
10(h) Stock Purchase Agreement between BI Holdings Corp. ("Seller") and
Mercury Stainless Corp. ("Buyer"), Amendments No. 1 and No. 2 to the Stock
Purchase Agreement, and Guaranty dated August 17, 1988 made by Blount, Inc.,
which were filed as exhibits to the Blount, Inc. Form 8-K dated November 1,
1988, are incorporated herein by reference.
Page 44
10(i) The Insurance Agreements with the following individual which was
filed as an exhibit to the Blount, Inc. Form 10-K for the fiscal year ended
2-28-91, is incorporated herein by reference:
(i) Duncan J. McInnes
10(j) The Supplemental Executive Retirement Plans with the following
individuals which were filed as an exhibit to the Blount, Inc. Form 10-K for
the fiscal year ended 2-28-91, are incorporated herein by reference:
(i) Winton M. Blount
(ii) Frank H. McFadden
10(k) The 1992 Blount Incentive Stock Option Plan which was filed as
Exhibit A to the Blount, Inc. Proxy Statement for the Annual Meeting of
Stockholders held June 22, 1992, is incorporated herein by reference.
10(l) Employment Agreements with the following individuals which were
filed as exhibits to the Blount, Inc., Form 10-K for the fiscal year ended
2-29-92, are incorporated herein by reference:
(i) Duncan J. McInnes
(ii) John M. Panettiere
10(m) The $25,000,000 Receivable Purchase Agreement which was filed as
an exhibit to the Blount, Inc., Form 10-K for the fiscal year ended 2-29-92,
is incorporated herein by reference.
10(n) Stock Purchase Agreement between Blount, Inc. ("Buyer") and Simon
United States Holding, Inc. ("Seller") which was filed as an exhibit to the
Blount, Inc., Form 10-K for the fiscal year ended 2-29-92, is incorporated
herein by reference.
10(o) The Supplemental Executive Retirement Plan with John M. Panettiere
which was filed as an exhibit to the Blount, Inc., Form 10-K for the fiscal
year ended 2-28-93, is incorporated herein by reference.
10(p) The Employment Agreement with Harold E. Layman which was filed as
an exhibit to the Blount, Inc., Form 10-K for the fiscal year ended 2-28-93,
is incorporated herein by reference.
10(q) The Blount, Inc. $50,000,000 Revolving Credit Agreement which was
filed as an exhibit to the Blount, Inc., Form 10-K for the fiscal year ended
2-28-93, is incorporated herein by reference.
10(r) The 1994 Blount Executive Stock Option Plan filed as Exhibit A to
the Blount, Inc. Proxy Statement for the Annual Meeting of Stockholders to be
held June 27, 1994, is incorporated herein by reference.
10(s) The Blount, Inc. Executive Management Target Incentive Plan filed
as Exhibit B to the Blount, Inc. Proxy Statement for the Annual Meeting of
Stockholders to be held June 27, 1994, is incorporated herein by reference.
10(t) Amendments number 1 and 2 to the $25,000,000 Receivable Credit
Agreement filed as an exhibit to the Blount, Inc. Form 10-K for the fiscal
year ended 2-29-92. *
Page 45
10(u) Amendments number 1 (amending certain definitions and covenants)
and 2 (adding an additional bank as a party to the agreement and raising the
credit limit to $60,000,000) to the $50,000,000 Revolving Credit Agreement
filed as an exhibit to the Blount, Inc. Form 10-K for the fiscal year ended 2-
28-93. *
10(v) The Employment Agreement with Donald B. Zorn. *
10(w) The Employment Agreement dated January 1, 1994 with Harold E.
Layman. *
11. Computation of net income per common share included herein on page 54.
13. The 1994 Annual Report to Stockholders of Blount, Inc. and the Proxy
Statement have not been sent to the stockholders of Blount, Inc., and are to
be furnished subsequent to the filing of this Form 10-K.
21. A list of the significant subsidiaries of Blount, Inc. included herein on
page 55.
23. Consent of Independent Accountants included herein on page 56.
* Filed electronically herewith. Copies of such exhibits may be obtained
upon written request from:
Corporate Communications
Blount, Inc.
P.O. Box 949
Montgomery, AL 36101-0949
Page 46
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.
BLOUNT, INC.
By: /s/ Harold E. Layman
Harold E. Layman
Senior Vice President and
Chief Financial Officer
Dated: April 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report is signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Dated: April 29, 1994
/s/ Winton M. Blount /s/ Mary D. Nelson
Winton M. Blount Mary D. Nelson
Chairman of the Board Director
and Director
/s/ W. Houston Blount /s/ John M. Panettiere
W. Houston Blount John M. Panettiere
Director President and Chief Executive
Officer and Director
/s/ C. Todd Conover /s/ Oscar J. Reak
C. Todd Conover Oscar J. Reak
Director Director
/s/ H. Corbin Day /s/ Arthur P. Ronan
H. Corbin Day Arthur P. Ronan
Director Director
/s/ Herbert J. Dickson /s/ Joab L. Thomas
Herbert J. Dickson Joab L. Thomas
Director Director
/s/ Alfred M. Gleason /s/ Rodney W. Blankenship
Alfred M. Gleason Rodney W. Blankenship
Director Chief Accounting Officer
/s/ James W. Hargrove
James W. Hargrove
Director
Page 47
BLOUNT, INC. & SUBSIDIARIES
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES, UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
For the years ended the last day of February 1993 and 1994
In thousands
- - ------------
Column A Column B Column C Column D Column E
-------- -------- -------- -------------------------- -------------------
Balance at End
Deductions of Period
-------------------------- -------------------
Balance at
Beginning of Amounts Amounts Not
Name of Debtor Period Additions Collected Written Off Current Current
- - -------------- ------------ --------- --------- ----------- -------- -------
1993
- - ----
H. E. Layman (A) $411 $411
M. N. Luciano (B) 263 $190 73
1994
- - ----
H. E. Layman (A) $411 411
M. N. Luciano (B) 73 73
Notes (A) Non-interest-bearing loan for purchase of home.
(B) Non-interest-bearing loan for purchase of home.
Page 48
BLOUNT, INC. & SUBSIDIARIES
SCHEDULE V
CONSOLIDATED SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
For the year ended February 29, 1992
In thousands
- - ------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Additions Other Changes Balance at
Beginning of at --------------------------- End of
Classification Period Cost Retirements Add Deduct Period
-------------- ------------ --------- ----------- ------------ ------------ ----------
Land $ 6,984 $ 190 $ 50 $ 7,124
$ 1,327 (1)
46 (2)
Buildings and improvements 73,565 1,979 541 3,203 (4) $ 6 (3) 79,573
5,417 (5)
7,300 (1) 10 (3)
Machinery and equipment 127,942 5,204 9,692 8,097 (4) 195 (2) 144,063
387 (1)
Transportation equipment 10,033 1,389 6,442 138 (2) 41 (3) 5,464
65 (3)
Furniture, fixtures and office equipment 19,161 1,173 973 912 (1) 85 (2) 20,123
11 (2)
Leasehold and leasehold improvements 602 731 268 (1) 6 (3) 1,606
10,194 (1)
Construction in progress 6,385 11,017 36 11 (3) 69 (2) 7,114
--------- --------- --------- --------- --------- ---------
$ 244,672 $ 21,683 $ 17,734 $ 27,117 $ 10,671 $ 265,067
========= ========= ========= ========= ========= =========
(1) Construction in progress transfers
(2) Reclassifications within Schedules V and VI
(3) Foreign currency translation adjustments
(4) Cumulative effect of accounting change
(5) Other reclassifications
Page 49
BLOUNT, INC. & SUBSIDIARIES
SCHEDULE V
CONSOLIDATED SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
For the year ended February 28, 1993
In thousands
- - ------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Additions Other Changes Balance at
Beginning of at --------------------------- End of
Classification Period Cost Retirements Add Deduct Period
-------------- ------------ --------- ----------- ------------ ------------ ----------
Land $ 7,124 $ 493 $ 125 (2) $ 6,506
$ 1,744 (1)
Buildings and improvements 79,573 $ 451 3,112 327 (2) 18 (3) 78,965
8,673 (1)
Machinery and equipment 144,063 4,491 4,723 3 (3) 3,001 (2) 149,506
186 (1)
Transportation equipment 5,464 749 1,180 16 (2) 45 (3) 5,190
31 (2)
Furniture, fixtures and office equipment 20,123 1,227 1,483 439 (1) 82 (3) 20,193
90 (1)
Leasehold and leasehold improvements 1,606 74 1 6 (3) 194 (2) 1,581
11,132 (1)
Construction in progress 7,114 13,381 992 (2) 8,371
--------- --------- --------- --------- --------- ---------
$ 265,067 $ 20,373 $ 10,992 $ 11,484 $ 15,620 $ 270,312
========= ========= ========= ========= ========= =========
(1) Construction in progress transfers
(2) Reclassifications within Schedules V and VI
(3) Foreign currency translation adjustments
Page 50
BLOUNT, INC. & SUBSIDIARIES
SCHEDULE V
CONSOLIDATED SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
For the year ended February 28, 1994
In thousands
- - ------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Additions Other Changes Balance at
Beginning of at --------------------------- End of
Classification Period Cost Retirements Add Deduct Period
-------------- ------------ --------- ----------- ------------ ------------ ----------
Land $ 6,506 $ 6,506
$ 1,551 (1)
Buildings and improvements 78,965 $ 158 $ 1,781 290 (2) 79,183
8,617 (1)
Machinery and equipment 149,506 453 4,615 21 (3) $ 7,533 (2) 146,449
Transportation equipment 5,190 7,565 1,261 89 (1) 1 (3) 11,582
807 (1)
8,297 (2)
Furniture, fixtures and office equipment 20,193 576 1,853 16 (3) 28,036
49 (1)
124 (2)
Leasehold and leasehold improvements 1,581 14 9 6 (3) 1,765
11,113 (1)
Construction in progress 8,371 5,945 172 436 (2) 2,595
---------- -------- -------- -------- -------- ---------
$ 270,312 $ 14,711 $ 9,691 $ 19,867 $ 19,083 $ 276,116
========== ======== ======== ======== ======== =========
(1) Construction in progress transfers
(2) Reclassifications within Schedules V and VI
(3) Foreign currency translation adjustments
Page 51
BLOUNT, INC. & SUBSIDIARIES
SCHEDULE VI
CONSOLIDATED SCHEDULE OF ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
For the years ended the last day of February 1992, 1993 and 1994
In thousands
- - ------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- --------------------------- --------
Balance at Charged to Other Changes Balance at
Beginning of Costs and --------------------------- End of
Description Period Expenses Retirements Add Deduct Period
----------- ------------ ---------- ----------- ------------ ------------ ----------
1992
- - ----
$ 15 (1)
Buildings and improvements $ 16,816 $ 3,297 $ 201 4 (2) $ 19,931
37 (2)
Machinery and equipment 65,907 13,834 8,190 3,396 (3) $ 273 (1) 74,711
Transportation equipment 3,001 1,167 1,361 132 (1) 22 (2) 2,917
39 (1)
Furniture, fixtures and office equipment 11,426 2,430 843 26 (2) 12,948
Leasehold and leasehold improvement 248 20 12 (2) 280
--------- --------- --------- --------- -------- ---------
$ 97,398 $ 20,748 $ 10,595 $ 3,596 $ 360 $ 110,787
========= ========= ========= ========= ======== =========
1993
- - ----
Buildings and improvements $ 19,931 $ 3,654 $ 1,517 $ 8 (2) $ 22,060
Machinery and equipment 74,711 14,017 2,909 $ 14 (2) 3,987 (1) 81,846
4 (1)
Transportation equipment 2,917 945 854 24 (2) 2,980
9 (1)
Furniture, fixtures and office equipment 12,948 2,358 1,319 73 (2) 13,905
Leasehold and leasehold improvement 280 182 1 1 (2) 460
--------- --------- --------- --------- -------- ---------
$ 110,787 $ 21,156 $ 6,600 $ 14 $ 4,106 $ 121,251
========= ========= ========= ========= ======== =========
1994
- - ----
Buildings and improvements $ 22,060 $ 3,704 $ 1,428 $ 97 (1) $ 24,239
Machinery and equipment 81,846 13,510 2,801 $ 11 (2) 6,872 (1) 85,694
15 (1)
Transportation equipment 2,980 866 814 5 (2) 3,052
7,581 (1)
Furniture, fixtures and office equipment 13,905 2,236 1,776 16 (2) 21,962
Leasehold and leasehold improvement 460 180 7 115 (1) 1 (2) 747
--------- --------- --------- --------- -------- ---------
$ 121,251 $ 20,496 $ 6,826 $ 7,743 $ 6,970 $ 135,694
========= ========= ========= ========= ======== =========
(1) Reclassifications within Schedules V and VI
(2) Foreign currency translation adjustments
(3) Other reclassifications
Page 52
BLOUNT, INC. & SUBSIDIARIES
SCHEDULE VIII
CONSOLIDATED SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
For the years ended the last day of February 1992, 1993 and 1994
In thousands
- - ------------
Column A Column B Column C Column D Column E
-------- -------- ------------------------- ----------- ----------
Additions
-------------------------
Balance at Charged to Charged to Balance at
Beginning of Cost and Other End of
Description Period Expenses Accounts Deductions Period
----------- ------------ ---------- ---------- ------------ -----------
1992
- - ----
Allowance for doubtful accounts receivable $ 1,082 $ 1,653 $ 100 (2) $ 357 (1) $ 2,478
======== ======== ======== ======== =======
1993
- - ----
Allowance for doubtful accounts receivable $ 2,478 $ 992 $ 907 (1) $ 2,563
======== ======== ======== =======
1994
- - ----
Allowance for doubtful accounts receivable $ 2,563 $ 967 $ 1,292 (1) $ 2,238
======== ======== ======== =======
(1) Principally amounts written off less recoveries of amounts previously written off
(2) Principally from acquisitions
Page 53