UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the year ended December 31, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission file number: 333-17305

International Knife & Saw, Inc.

(Exact name of registrant as specified in its charter)

Delaware 57-0697252
(State or other jurisdiction (I.R.S. Employer
of
incorporation or Identification No.)
organization)

1299 Cox Avenue
Erlanger, Kentucky 41018
(Address of registrant's principal (Zip Code)
executive offices)

Registrant's telephone number, including area code: (859) 371-0333

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

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

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

As of January 1, 2001, there were 481,971 shares of the registrant's common
stock outstanding, all of which were owned by an affiliate of the registrant.

Documents incorporated by reference: None

Unless otherwise indicated, industry and market data used throughout this
report are based on Company estimates which, while believed by the Company to be
reliable, have not been verified by independent sources. Unless otherwise
indicated or the context otherwise requires, references to "IKS" or the
"Company" are to International Knife & Saw, Inc. and its consolidated
subsidiaries.

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward looking statements. Certain matters discussed in
this filing could be characterized as forward looking statements, such as
statements relating to plans for future expansion, other capital spending,
financing sources and effects of regulation and competition. Such forward
looking statements involve important risks and uncertainties that could cause
actual results to differ materially from those expressed in such forward looking
statements.

PART I
ITEM 1. BUSINESS

General

International Knife & Saw, Inc. ("IKS" or the "Company") is a wholly-owned
subsidiary of IKS Corporation, a Delaware corporation. The Company is a global
leader in the manufacturing, servicing and marketing of industrial and
commercial machine knives and saws. The Company's products, which are consumed
in the normal course of machine operation and need resharpening or replacement
many times a year, are mounted in industrial machines and are used in virtually
every facet of cutting, slitting, chipping and forming of materials. The Company
serves the following major market sectors: (i) Wood (44% of 2000 net sales);
(ii) Paper & Packaging (36%); (iii) Metal (16%); and (iv) Plastic & Recycling
(4%). The Company believes that it has a leading worldwide market share in each
of these market sectors and that there is no other company that serves all four
such sectors.

IKS has undergone two leadership changes over the past two year period.
Following CEO departures in May, 1999 and again in April, 2000, the Board of
Directors of the Company established an executive committee comprised of Messrs.
William M. Schult, Executive Vice President - CFO, Treasurer and Secretary;
Bradley H. Widmann, Vice President - Operations for the Americas; and Jeffrey H.
Welday, Vice President - Sales and Marketing for the Americas. This committee is
responsible for all North American operations of the Company and reports
directly to the Board of Directors. Thomas W.G. Meyer, Executive Vice President,
Europe and Asia, continued in his role with responsibility over those regions
and also reports directly to the Board of Directors.

Deteriorating results in the Company's North American operations over the
past two years, primarily attributable to leadership changes at the Company in
1999 and 2000, as well as an increasingly softening market, have more than
offset improved results in the Company's European operations. For example, in
2000, excluding non-recurring one-time charges, the Company's North American
operations accounted for approximately 57% of net sales and incurred an
operating loss of $1.8 million, while its European operations accounted for
approximately 38% of net sales and 95% of the Company's operating income. In
1998, the Company's North American operations accounted for approximately 71% of
net sales and 70% of the Company's operating income, while its European
operations accounted for approximately 25% and 25%, respectively.

The Company incurred net losses of approximately $15.5 million and $3.4
million in the years ended December 31, 2000 and 1999, respectively, as compared
to net income of approximately $1.6 million in the year ended December 31, 1998.
In addition, the Company generated negative cash flow from operations of
approximately $4.5 million during the year ended December 31, 2000, as compared
to positive cash flow from operations of approximately $6.9 million and $10.7
million during the years ended December 31, 1999 and 1998, respectively.
Continuing adverse market conditions and their negative effect on the Company's
cash flow, coupled with limited liquidity, are likely to impede the Company's
ability to make interest payments of approximately $5.1 million on each of May
15 and November 15, 2001 under the Company's 11 3/8% Senior Subordinated Notes
due 2006 (the "Subordinated Notes").

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These matters raise substantial doubt about the Company's ability to
continue as a going concern. As a result, the Company has retained Jefferies &
Company, Inc. to begin a process to address the Company's highly leveraged
capital structure. The Company expects Jefferies to assist the Company in
developing alternatives in connection with a restructuring of its Subordinated
Notes. While the Company believes that there are certain alternatives available
to the Company, there can be no assurance that the Company will be successful in
implementing any such alternatives or that any such alternatives, if
implemented, will enable the Company to meet its obligations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

The Recapitalization

The Company issued $90 million in aggregate principal amount of
Subordinated Notes on November 6, 1996 under an Indenture, dated as of November
6, 1996 (the "Indenture"), by and between the Company and United States Trust
Company of New York, as trustee. The Subordinated Notes were issued concurrently
with the consummation of a recapitalization (the "Recapitalization") of IKS
Corporation. Prior to the Recapitalization, all of the issued and outstanding
capital stock of IKS Corporation was held by members of the Klingelnberg family
and the Company's issued and outstanding capital stock was held approximately
97% by IKS Corporation and approximately 3% by certain executive officers of the
Company.

Subsequent to the Recapitalization, all of the Company's issued and
outstanding capital stock has been held by IKS Corporation. IKS Corporation's
issued and outstanding capital stock is held approximately 50.4% (on a fully
diluted basis) by Citicorp Venture Capital, Ltd. and co-investors ("CVC"),
approximately 30% by certain Luxembourg holding companies (formerly held by the
Klingelnberg family) and approximately 19.6% by certain current and former
members of management of the Company.

Business Strategy

The Company believes that it can retain and improve its market position
through the continued and renewed commitment to its business strategy. Key
elements of this strategy include (i) maximizing stable, high margin end-user
sales; (ii) increasing its global manufacturing, sourcing and marketing
capabilities through strategic alliances; (iii) focusing on strategically
identified product lines; (iv) maintaining its focus on cost improvement
opportunities through continued rationalization of its factories; and (v) taking
advantage of its purchasing strength and leveraging both the cost and inventory
management aspects of its supply chain.

Products and Markets

The Company manufactures and sells its products in four major market
sectors including (i) Wood (44% of 2000 net sales); (ii) Paper & Packaging
(36%); (iii) Metal (16%); and (iv) Plastic & Recycling (4%). IKS offers an
extensive variety of knives and saws which are mounted in industrial machines
and are sold across a wide customer base and over numerous industries throughout
the world. The Company's knives and saws are consumed in the normal course of
machine operation and need resharpening or replacement many times per year.

Wood

IKS believes it is the largest manufacturer of industrial wood knives and
saws with 2000 net sales of approximately $71 million. Industrial wood knives
and saws are utilized in applications by companies such as Weyerhauser Co. and
Louisiana Pacific Corp. for sawing logs into specific dimensional sized lumber
for use in the housing industry; by companies such as Georgia Pacific Corp.,
Willamette Industries and Boise Cascade Corp. for peeling large diameter logs
into veneer for use in the production of plywood, paneling and furniture; and by
companies such as Fletcher Challenge and International Paper Co., Inc. for the
production of wood chips used in their pulp mills to produce fine paper,
newsprint and craft paper. In addition, the Company's knives are used to cut
wood into chips, used for fuel by wood and coal burning power plants as well as
generating power and steam for large paper and pulp mills worldwide.

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As timber becomes more expensive, the industry is increasingly cognizant of
the need for more effective tree utilization and reducing material lost to
inefficient sawing. As a result, the industry is trending toward engineered and
composite materials made from specially sized wood chips leading to increased
sales of waferizer and flaker knives, and wear parts. Wafer board and oriented
strand board use tight tolerance waferizer and flaker knives to reduce smaller,
less expensive raw material logs into specifically sized and shaped wood chips.
The chips are then assembled with synthetic binders into boards, sheets and
specialty profiles, having properties superior to plywood or solid wood
predecessors which require more expensive large diameter logs as raw material.
The Company believes that it is the leading North American manufacturer of these
specialty knives.

The Company is a leader in the manufacture of carbide edger saws. Using
automated equipment in combination with skilled craftsmen, IKS produces
extremely accurate saws used for the primary wood market to cut logs into
dimensional finished lumber and panel boards.

The Company is also a leader in the manufacture of long wood-peeling and
slicing veneer knives. Veneer knives are among the more difficult industrial
knives to manufacture due to their length (up to six meters) and quality
requirements. IKS is one of only a limited number of manufacturers that can
produce such a knife. As the market demands higher quality veneer knives, the
Company believes that its expertise in the design and manufacture of such knives
gives it a competitive advantage.

The Company has a strong presence in the wood saw machinery market. The
highly trained, experienced, technical sales staff provides primary wood end
users with a valuable resource to improve their mills' performance, thereby
creating mutually beneficial long-term exclusive supplier relationships for
saws, saw maintenance equipment, and supplies.

Paper & Packaging

The Company believes it is the largest manufacturer and supplier of
industrial paper & packaging knives with 2000 net sales of approximately $58
million. Among the Company's four major markets, the paper & packaging knife
market is the largest and most diverse, with the widest variety of cutting
methods. These knives are used in applications by companies such as
Kimberly-Clark Corp., Fort James and Proctor & Gamble Co. for cutting and
perforating tissue paper and paper towels and the production of disposable
diapers; by companies such as Frito-Lay, Inc. and M&M Mars, Inc. which utilize
Zig Zag knives to cut the top and bottom of snack food, salt and pepper and
candy packages sold by convenience stores and fast food chains; and by companies
such as Quebecor World, International Paper and RR Donnelly & Sons Co., Inc. for
cutting and trimming paper in the production of copy paper, books and business
forms. As a result of their many uses, paper & packaging knives represent the
largest category of the Company's approximately 10,000 products with more than
2,500 paper & packaging knife products relating to every aspect of paper &
packaging manufacturing and converting.

Paper converting knives are made from a wide range of steel grades, from
carbon steels to inlaid high speed steels and carbide. Recent trends in the
paper industry, including an increase in the use of recycled fiber and a change
in paper chemistry to more abrasive alkaline additives, have required upgrades
by paper producers to higher quality, more expensive knife materials and designs
which are better suited for more sophisticated and diverse cutting applications.
The Company has developed an expertise in the manufacture of these more
sophisticated cutting tools which allow the paper converter to run longer and
produce better quality cuts, which gives IKS a competitive edge and positions it
to offer the most complete package of new knife products and services in the
world paper market.

The Company has a strong presence in the printing market and a reputation
of being a leading producer of high precision printing press knives and spare
parts. IKS has also been able to expand its precision toothed knife
manufacturing capabilities into the packaging and food industry, growing markets
for the IKS group.

The Company believes that the market for paper & packaging knives is strong
worldwide and is growing in Europe, Latin America and Asia. The Company should
benefit in Asia and Latin America as consumer markets in those regions emerge
and the use of packaged consumer products rapidly increases. The Company
believes that,

I-3

through its continued emphasis on providing specialized technical assistance
resulting in added value, it will continue to grow in these markets.

Metal

The Company believes it is the second largest manufacturer of metal knives
with 2000 net sales of approximately $25 million. The Company's metal knives are
used by steel processing facilities such as Heyco Corp., Edgecomb Metals Co. and
Allegheny Ludlum Corp. and metal products manufacturers such as Deere & Co.
Inc., Caterpillar, Inc. and Steelcase Corp.; in the cutting, shearing and
chopping of steel being produced in steel mills used by companies such as
Bethlehem Steel Corp., Rouge Steel Co. and USX Corp.; and in cutting metal
sheets and slitting strips from rolls of sheet steel processed by companies such
as California Steel Corp. and Joseph T. Ryerson & Son, Inc.

In setting up their steel slitting lines, the Company's customers order
knives specifically designed for the particular demands and characteristics of
each production line. IKS offers expert technical and computer software
assistance to companies setting up such a line. The Company has developed a
proprietary software package, Slitting Assembly Very Easy ("SAVE"), which
assists customers in choosing and setting up metal slitting knives. The IKS SAVE
technology makes use of custom computer software to guide the personnel setting
up the arbor in the selection of the individual slitter knife and spacer
combination to an exact thickness, assuring that, as the arbor is loaded, the
accumulated error is maintained near zero. The accuracy of this knife clearance
directly affects the cut edge quality of the steel strip. By offering this
technology, as well as personal technical assistance, the Company is an integral
part of the steel slitting knife purchasing process, which the Company believes
increases the likelihood that a customer will choose an IKS product.

The market for industrial metal knives is dependent upon the steel usage by
numerous industries including the automotive industry and metal and consumer
product manufacturers, such as aluminum can and appliance manufacturers.

Plastic & Recycling

The Company believes it is one of the largest manufacturers of industrial
plastic & recycling knives with 2000 net sales of approximately $7 million.
Industrial plastic granulator knives are used for the manufacture of plastic,
typically by companies such as Mobil Chemical Corp. and I.C.I. Americas, Inc.
where pelletizing knives are used to cut plastic into small, precise pieces for
processing; by companies such as E.I. DuPont de Nemours & Co. for cutting
artificial fibers; by companies such as Wellman Inc. for recycling plastic
containers; and by companies such as Waste Recovery Corp. for the environmental
recycling of styrofoam, rubber and glass. The Company manufactures knives for
all of these uses, as well as related knives used to cut computer tape, foil and
film by companies such as Alcoa Aluminum Co. of America, Inc. and Eastman Kodak
Co. and household products produced by Hasbro Corp. and Rubbermaid Inc.

The market for industrial plastic granulator knives is currently strong in
Europe as a result of government mandated recycling programs. There is a growing
emphasis on recycling with respect to reclaiming the reusable value of material
in plastic, rubber, glass and metal products, as well as with respect to easing
the disposal of urban waste, medical waste, aluminum cans and soda bottles in
accordance with environmental regulations.

The Company believes that the recycling of copper and aluminum cable and
wires will also increase as fiber optic and satellite communication technologies
become more widespread. The Company manufactures the knives which are used in
the granulator systems used in recycling these materials and is thus well
positioned to benefit as demand for these products increases.

Marketing and Distribution

The Company is the only industrial knife and saw manufacturer with
operations in North America, Europe, Asia, and Latin America and products sold
in more than 75 countries. Historically, the Company's sales

I-4

have been principally in North America and Europe; in the past five years the
Company has expanded operations into the emerging markets of Asia and Latin
America.

The Company has one of the largest direct sales forces focused on
industrial knives and saws. Complementing the Company's knowledgeable worldwide
salesforce, the Company has a significant staff of market managers and product
specialists who are experts in their respective fields and are responsible for
product coordination among the Company's salespeople, customers and
manufacturing operations. The Company concentrates its sales efforts on
end-users, which represent 89% of 2000 net sales, through its direct sales
force, distributors, agents and Company-owned and independent resharpening
service centers. The remaining 11% of the Company's net sales are to original
equipment manufacturers ("OEMs") of cutting machines through its direct sales
force.

In order to better serve its customers, the Company strategically places
its inventory around the world to best suit geographical and customer needs.
This results in the Company being able to ship most products to the end-users
more rapidly than many of its competitors.

End-users -- Direct Salesforce and Company-Owned Service Centers.
Approximately 66% of the Company's 2000 net sales were direct to end-users
through the Company's salesforce and Company-owned service centers, representing
in excess of 10,000 customer accounts. The Company believes that it has been
successful in selling to end-users because of its large and knowledgeable
salesforce, broad product offering, customer service, the strategic placement of
its inventory and its relationships with OEMs. The Company's salesforce develops
close working relationships with end-users, continually providing customers with
direct technical support, offering advice about the types of knives, materials
and specifications which would be appropriate for their specific machines. The
Company believes its competitive position will strengthen with this distribution
channel as many large end-users consolidate and reduce their vendor base,
requiring the technical support and wide breadth of product the Company offers.

The Company is afforded additional direct access to end-users by providing
resharpening services to end-users of both its own and its competitors' products
through its fourteen service centers, seven in the United States, three in
Canada, one in the Netherlands, one in France, one in Mexico, and one in Chile.
In addition to company-owned service centers, the Company works very closely in
conjunction with a network of independently owned dealers and regrind shops.
This enables the Company to create even closer customer relationships which
better position it to be the first choice of the end-user when a replacement is
needed. Since industrial knives and saws are consumable, and generally need
resharpening at least once per week and as often as 50 times over the life of a
product, resharpening revenues can be significantly in excess of the cost of the
product.

The resharpening service centers also act as distributors as they sell
replacement knives and saws. By owning and operating these service centers, the
Company can replace competitors' products with IKS products, including IKS
products that the service center may not have previously sold.

End-users -- Distributors and Independent Service Centers. The Company
sells approximately 23% of its net sales to end-users through distributors and
independent resharpening service centers. The Company's long term relationships
with these distributors, agents and independent resharpening service centers
complements its salesforce by providing the opportunity to access additional
niche markets. The Company will continue to utilize its distribution network to
expand its sales reach and carry the IKS products in their inventory, ready to
be sold to end-users.

OEMs. Approximately 11% of IKS' 2000 net sales were directly to a
variety of OEM manufacturers. The Company believes it is the leading supplier to
the OEM market, placing the original knife or saw in the OEM machine, and has a
close relationship with many of the major cutting machine manufacturers
worldwide. The Company has developed and maintains these close relationships by
providing advice to OEM manufacturers about the types of knives, materials and
specifications which would be appropriate for their particular machines. In
supplying over 350 OEMs, the Company's market managers have an enhanced ability
to identify the needs of its customers and to coordinate the Company's technical
capabilities with those needs. As a result, the Company

I-5

believes that it has greater opportunities to place its products into OEM
machines and by doing so provides itself with a competitive advantage in
capturing the resultant end-user replacement sales.

Strategic Alliances

The Company's strategic alliances include over 50 business relationships
with suppliers of finished industrial knives and saws throughout the world, four
joint ventures and several strategic relationships with independent resharpening
centers. These alliances enable the Company to expand its international
presence, increase its product offerings, maintain a cost competitive position
on its broad base of products and align itself with local entrepreneurs in
international markets where local market expertise is needed while broadening
its customer base with limited additional investment.

Finished Goods Suppliers. The Company's relationships with suppliers of
finished goods are typically with small manufacturers throughout the world. The
Company's relationships with finished goods suppliers allow it the flexibility
to manufacture or source a product based upon cost and delivery time, the
quality of product needed, the region to be supplied and the material to be
used. The more significant of these relationships provide the Company with the
exclusive or semi-exclusive rights to market certain of its partners' products
within the Company's markets and allow the Company to purchase finished goods
for a relatively low cost and then resell these products at attractive margins
often using the Company's trademarks and tradenames. The Company generally has
at least two suppliers for most of the products it sources. In addition, the
loss of any particular supplier would not have a material effect upon the
Company, since the Company is able to manufacture substantially all of the
products it sources.

Joint Ventures. The Company also maintains its international presence
through joint ventures in Asia and Latin America. These include two joint
ventures in China which commenced operations in 1996. The Company increased its
interest from 51% to 80% in 1999 in both Chinese joint ventures. These joint
ventures sell products domestically within China and IKS exclusively exports
these products to most of the rest of the world, providing the Company with a
relatively low cost source of supply for resale to its customers. These joint
ventures provide a distribution network for the Company to import its products
from North America and Europe into the rapidly developing market in China as the
economy expands and demands a greater variety of cutting tool products. The
Company's other joint venture interests are a 42.5% interest in a distributor
and service center in Chile which had net sales of approximately $1.2 million in
2000 and a 30% interest in a distributor in the Philippines which had net sales
of approximately $.6 million in 2000.

Raw Materials

The Company has numerous suppliers of raw materials, including over 20 raw
material suppliers of steel. IKS's steel purchase volume is typically large
enough to allow the Company to purchase steel directly from steel mills. This
advantage along with the Company's continued efforts to leverage its purchasing
strength and consolidate its supplier base results in reduced raw material
costs. The Company believes that its relationships with all of its steel vendors
are good. The Company is not dependent on any one of its suppliers for all of
its raw materials.

Backlog Orders

As of February 28, 2001, the dollar amount of backlog orders, believed by
the Company to be firm totaled approximately $35.5 million. It is expected that
a significant portion of all such orders will be filled during 2001. As of
February 29, 2000 the dollar amount of backlog orders totaled approximately
$34.7 million.

Competition

The industrial knife and saw market is highly fragmented with numerous
participants. The Company competes principally on the basis of price, service,
delivery, quality and technical expertise. The Company's competitors vary in
each of the market sectors that the Company serves. No single company competes
with the
I-6

Company in all four of the market sectors that the Company serves and no single
company is dominant in any of such market sectors. The Company believes that the
reputation it has established over its long history for quality products, its
sales and service network and its in-depth product knowledge combined with its
end-users' supplier reduction programs, provide it with a competitive advantage
in all the market sectors it serves.

Trademarks and Tradenames

The Company markets its products under certain trademarks, including
"IKS(TM)," "IKS Klingelnberg," "Cascade Southern", "Chromavan," "Chromalit,"
"Compaflex," "Compalloy," "Durakut," "Durapid," "Duritan," "Dynabloc(TM),"
"Dynapren," "Dynatherm," "Hyperhone(TM)," "Klirit," "KSFmicroplan,"
"Novacrom(TM)," "Novador," "QCP," "Quality Cut Knife Maintenance Program and
Design," "Rolf Meyer", "SAVE," "Stop," "Surekut(TM)," "Systi-Matic",
"Tecalloy(TM)," "Tecnolite(TM)," "Tungsten Carbide Quattro," "Diamond Cut," "New
Wave," "Dialux," "Ultrid," and "Workalit." In addition, the Company uses the
following tradenames: American Custom Metals; Ban-Carb; Buland; Canadian Knife &
Saw; Diacarb; AK Vander Wijngaart Beheer; Diacarb Stansvormen; Mayemyton
Trading; Durakut; Econokut; Hannaco; Hyperhone; IKS de Mexico; IKS Shanghai;
Kodiak; SPS; Tuff-Tip; Ultrakut; and Boehler Miller Messer und Saegen.

Employees

At December 31, 2000, the Company had 1,594 full-time employees. Of such
employees, 706 were located in North America, 589 were located in Europe and 299
were located in Asia. The Company considers its relations with its employees to
be good.

The Company's employees are primarily non-union. The Company's Bergisch
Born, Germany facility, its Austrian facilities, its China facilities (operated
in connection with its joint venture arrangements) and its Systi-Matic facility
in Kirkland, Washington are the only facilities which employ union workers. The
Company estimates that 50 of its German employees, 213 of its Austrian and 77 of
its U.S employees are union members. The majority of the 281 employees at the
facilities of the two China joint ventures are part of a governmental bargaining
unit. The Company considers its relations with the unions to be good.

Environmental and Regulatory Matters

As with most industrial companies, the Company's facilities and operations
are required to comply with and are subject to a wide variety of federal, state,
local and foreign environmental and worker health and safety laws, regulations
and ordinances, including those related to air emissions, wastewater discharges
and chemical and hazardous waste management and disposal ("Environmental Laws").
Certain of these Environmental Laws hold owners or operators of land or
businesses liable for their own and for previous owners' or operators' releases
of hazardous or toxic substances, materials or wastes, pollutants or
contaminants, including petroleum and petroleum products. Compliance with
Environmental Laws also may require the acquisition of permits or other
authorizations for certain activities and compliance with various standards or
procedural requirements. The nature of the Company's operations, the long
history of industrial uses at some of its current or former facilities, and the
operations of predecessor owners or operators of certain of the businesses
expose the Company to risk of liabilities or claims with respect to
environmental and worker health and safety matters. There can be no assurance
that material costs or liabilities will not be incurred in connection with such
liabilities or claims.

Based on the Company's experience to date, the Company believes that the
future cost of compliance with existing Environmental Laws (or liability for
known environmental liabilities or claims) should not have a material adverse
effect on the Company's business, financial condition or results of operations.
However, future events, such as changes in existing laws and regulations or
their interpretation, may give rise to additional compliance costs or
liabilities that could have a material adverse effect on the Company's business,
financial condition or results of operations. Compliance with more stringent
laws or regulations, as well as more vigorous enforcement policies of regulatory
agencies or stricter or different interpretations of existing laws, may require
additional expenditures by the Company that may be material.

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ITEM 2. PROPERTIES

The Company is headquartered in Erlanger, Kentucky, located a few miles
south of Cincinnati, Ohio. The Company currently owns or leases 25 facilities in
North America, Europe, and Asia, that are used for manufacturing, distribution,
sales, warehousing and service center activity. The Company also leases two
facilities in North America that are idle; the Company is actively pursuing
alternatives for these two leased facilities.

The following table sets forth the location, square footage and principal
functions of each of the Company's facilities.

Approx.
Location Sq. Ft. Use
-------- ---------- ---
North American Facilities 106,600 Manufacturing/Service
Florence, SC Center/Distribution/Sales
Erlanger, KY (corporate 99,700 Manufacturing/Service
Headquarters) Center/Distribution/Sales
Camden, AL.................. 44,700 Manufacturing/Service
Center/Distribution/Sales
McMinnville, OR............. 55,000 Manufacturing/
Distribution/Sales
Granby, Quebec*............. 20,000 Manufacturing/Service
Center/Distribution/Sales
Langley, British Columbia... 19,200 Manufacturing/Service
Center/Distribution/Sales
Kirkland, WA *.............. 30,000 Manufacturing/Service
Center/Distribution/Sales
Milwaukie, OR*.............. 8,600 Idle. Former Manufacturing/
Service Center
Hot Springs, AR............. 6,700 Distribution/Sales
Appleton, WI*............... 5,000 Idle. Former Service Center/
Distribution/Sales
Bangor, ME.................. 12,400 Service Center/Distribution/Sales
Mississauga, Ontario*....... 11,800 Service Center/Distribution/Sales
West Monroe, LA............. 7,500 Service Center/Distribution/Sales
Mexico City, Mexico*........ 3,500 Service Center/Distribution/Sales
Statesboro, GA*............. 2,700 Service Center/Distribution/Sales
European Facilities
Bargteheide, Germany........ 64,500 Manufacturing/Distribution/Sales
Bergisch Born, Germany...... 56,000 Manufacturing/Distribution/Sales
Geringswalde, Germany....... 30,700 Manufacturing
Waidhofen, Austria* ........ 152,800 Manufacturing/Distribution/Sales
Traismauer, Austria*........ 37,700 Manufacturing/Distribution/Sales
Rotterdam, the Netherlands. 23,700 Service Center/Distribution/Sales
Palaiseau, France........... 17,200 Service Center/Distribution/Sales
Asian Facilities
Jakarta, Indonesia*......... 2,700 Distribution/Sales
Kuala Lumpur, Malaysia*..... 1,000 Distribution/Sales
Joint Venture Facilities
Shanghai, China** (80%)..... 32,000 Manufacturing/Distribution/Sales
Concepcion, Chile (42.5%)... 3,700 Service Center/Distribution/Sales
Manila, Philippines (30%).... 2,500 Distribution/Sales

* Leased.
** Facility owned, land leased

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The Company believes that its facilities are suitable for its operations
and provide sufficient capacity to meet the Company's requirements for the
foreseeable future.

The Company places a strong emphasis on producing high quality products.
The Company's European facilities located in Bergisch Born, Germany, and
Waidhofen and Traismauer, Austria have been awarded ISO 9001 certification,
while its Erlanger, Kentucky facility has been awarded ISO 9002 certification
indicating that these facilities have achieved and sustained a high degree of
quality and consistency with respect to their production systems. The Company
believes that ISO certification is an increasingly important selling feature
both domestically and internationally, as it provides evidence to purchasers
that the Company's systems have achieved specified standards and are being
sustained.

ITEM 3. LEGAL PROCEEDINGS

The Company is from time to time involved in legal proceedings arising in
the ordinary course of business. The Company believes there is no outstanding
litigation which could have a material impact on its financial position or
results of operations.

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

This item is not applicable to the registrant for this filing on Form 10-K.

I-9

PART II

ITEM 5. MARKET FOR THE REGISTRANT COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS

The Company is a wholly owned subsidiary of IKS Corporation. The Company's
common equity is not publicly traded and, accordingly, an established market
does not exist for such common equity.

IKS Corporation has two classes of common equity outstanding as well as two
classes of preferred stock. As of March 1, 2001, there were 32 holders of IKS
Corporation's outstanding common equity. During 2000, IKS Corporation issued 40
shares of Class A Common Stock, 4.8 shares of Series A 12% Cumulative
Compounding Preferred Stock and 4.8 shares of Series B 12% Cumulative
Compounding Preferred Stock to a Director for total consideration of $10,000.
The above securities were issued and sold in reliance upon the exemptions
available under Section 4 (2) of the Securities Act of 1993, as amended, and
Regulation D thereunder. See "Item 12. Security Ownership of Certain Beneficial
Owners and Management."

Since the consummation of the Recapitalization, the Company has not paid
any dividends because the Indenture prohibits the Company from declaring or
paying any dividend or making any distribution on account of the Company's
equity interests unless certain conditions, as outlined in the Indenture, exist
at the time of such payment. The Company is not prohibited from declaring or
paying dividends in the form of capital stock of the Company.

ITEM 6. SELECTED FINANCIAL DATA

The following table contains selected historical financial data of the
Company as of and for each of the five years in the period ended December 31,
2000. The information contained in this table should be read in conjunction with
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations", and the Company's historical consolidated financial statements,
including the notes thereto, included elsewhere herein.

II-1

Year Ended December 31,
(dollars in thousands)
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------

Operating Data:
Net sales $ 160,917 $ 153,133 $ 150,891 $ 142,974 $ 119,441
Cost of sales 120,388 108,477 105,779 99,885 83,567
--------- --------- --------- --------- ---------
Gross profit 40,529 44,656 45,112 43,089 35,874

Selling, general and administrative
expenses 40,026 34,517 30,299 27,681 23,952
--------- --------- --------- --------- ---------
Operating income 503 10,139 14,813 15,408 11,922
Interest expense, net 13,031 12,354 12,006 11,687 3,245
Minority interest 157 295 71 174 (271)
--------- --------- --------- --------- ---------
(Loss) income before income taxes (12,685) (2,510) 2,736 3,547 8,948
Provision for income taxes 2,844 880 1,146 1,499 2,924
--------- --------- --------- --------- ---------
Net (loss) income $ (15,529) $ (3,390) $ 1,590 $ 2,048 $ 6,024
========= ========= ========= ========= =========
Net (loss) income per common share $ (32.22) $ (7.03) $ 3.30 $ 4.25 $ 12.50

Other Data:
EBITDA (1) $ 8,230 $ 16,893 $ 20,803 $ 20,027 $ 17,055
Net cash (used) provided by (4,534) 6,889 10,694 7,282 9,999
operating activities
Net cash used in investing
activities (5,747) (5,497) (17,687) (25,183) (8,998)
Net cash provided (used) by
financing activities 12,010 (1,332) 6,690 8,676 965
Depreciation and amortization (2) 7,307 6,360 5,620 5,145 4,596
Capital expenditures (3) 6,921 6,019 9,320 7,734 8,157
Gross margin 25.2% 29.2% 29.9% 30.1% 30.0%
EBITDA margin 5.1% 11.0% 13.8% 14.0% 14.3%
EBITDA including LIFO charges
and credits $ 7,810 $ 16,499 $ 20,434 $ 20,553 $ 16,518

Balance Sheet Data:
Working capital $ 12,286 $ 28,869 $ 26,095 $ 32,91 $ 40,753
Total assets 126,391 127,618 101,275 134,975 115,274
Debt (4) 128,357 114,957 122,455 109,265 100,075
Shareholder's deficit (39,654) (22,846) (18,093) (19,607) (19,644)

(1) EBITDA is defined as operating income plus depreciation and amortization
adjusted to exclude LIFO charges (credits) of $420, $394, $370, ($526), and
$537 for the years ended December 31, 2000, 1999, 1998, 1997 and 1996,
respectively. EBITDA should not be construed as an alternative to operating
income, net income or cash flows from operating activities (as determined in
accordance with accounting principles generally accepted in the United
States) and should not be construed as an indication of the Company's
operating performance or as a measure of liquidity. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations." The EBITDA measure presented by the Company may not be
comparable to similarly titled measures reported by other companies.

(2) Depreciation and amortization as presented will not agree with amounts in
the consolidated statement of cash flows because of the amortization of debt
issuance costs reported below the operating income line.

(3) 1998 included $2,172 of capital expenditures related to the implementation
of a new computer system (SAP) and related system software. 1996 included
$1,524 of capital expenditures related to the consolidation of the Company's
west coast operations and the expansion of the Cincinnati facility and
$1,105 of capital expenditures related to the expansion of the Chinese joint
venture operations.

(4) Debt includes notes payable and current portion of long-term debt and
excludes capital lease obligations.

II-2

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

The following discussion should be read in conjunction with the
Consolidated Financial Statements and related notes.

General

The Company is a global leader in the manufacturing, servicing and
marketing of industrial and commercial machine knives and saws. Together with
its predecessor, the Company has been manufacturing knives and saws for nearly
100 years, beginning in Europe and expanding its presence to the United States
in the 1960s. The Company operates on an international basis with facilities in
North America, Europe, Asia and Latin America and products sold in over 75
countries. The Company offers a broad range of products, used for various
applications in numerous markets.

Presence outside the U.S.

The Company's North American operations accounted for approximately 57% of
its 2000 net sales. The Company's other international operations account for the
remainder and are located primarily in Europe (approximately 38% of 2000 net
sales), and to a lesser extent in Asia.

The Company's operating results are subject to fluctuations in foreign
currency exchange rates as well as the currency translation of its foreign
operations into U.S. dollars. The Company manufactures products in the U.S.,
Germany, Austria, Canada and China and exports products to more than 75
countries. The Company's foreign sales, the majority of which occur in Canada
and European countries, are subject to exchange rate volatility. In addition,
the Company consolidates German, Dutch, French, Austrian, Canadian, Mexican,
Chinese and other Asian operations and changes in exchange rates relative to the
U.S. dollar have impacted financial results. As a result, a decline in the value
of the dollar relative to these other currencies can have a favorable effect on
the profitability of the Company and an increase in the value of the dollar
relative to these other currencies can have a negative effect on the
profitability of the Company. Comparing exchange rates for 2000 to 1999, the
weaker German Mark, Austrian Schilling, Dutch Guilder, and French Franc had the
translation effect of decreasing 2000 net sales by $5.2, $2.9, $.8, and $.5
million, respectively, with a combined $.7 million negative impact on 2000
operating income. To mitigate the short-term effect of changes in currency
exchange rates on the Company's foreign currency based purchases and its
functional currency based sales, the Company occasionally enters into foreign
exchange and U.S. dollar forward contracts to hedge a portion of its budgeted
(future) net foreign exchange and U.S. dollar transactions over periods ranging
from one to fifteen months.

At December 31, 2000 the result of a hypothetical 10% adverse change in
foreign currency rates would not significantly impact the Company's future
results of operations, cash flows or financial position. This calculation
assumes that each exchange rate would change in the same direction relative to
the U.S. dollar. In addition to the direct effects of the changes in exchange
rates, changes in exchange rates also affect the volume of sales and the foreign
currency sales price as competitors' products become more or less attractive.
The Company's sensitivity analysis of the effects of changes in foreign currency
exchange rates does not factor in the potential change in sales levels or local
currency prices.

II-3

Results of Operations

Deteriorating results in the Company's North American operations over the
past two years, primarily attributable to leadership changes at the Company in
1999 and 2000, as well as a softening market, have more than offset improved
results in the Company's European operations. For example, in 2000, excluding
non-recurring one-time charges, the Company's North American operations
accounted for approximately 57% of net sales and incurred an operating loss of
$1.8 million, while its European operations accounted for approximately 38% of
net sales and 95% of the Company's operating income. In 1998, the Company's
North American operations accounted for approximately 71% of net sales and 70%
of the Company's operating income, while its European operations accounted for
approximately 25% and 25%, respectively.

The following table sets forth the items in the Company's consolidated
statements of income as percentages of its net sales for the periods indicated:

Year Ended December 31,
2000 1999 1998
------- ------- -------

Net sales.............................. 100.0% 100.0% 100.0%
Cost of sales.......................... (74.8)% (70.8)% (70.1)%
---------- ---------- ----------
Gross margin....................... 25.2% 29.2% 29.9%
Selling, general and administrative
expenses.......................... (24.9)% (22.5)% (20.1)%
---------- ---------- ----------
Operating income.................. .3% 6.7% 9.8%
Interest expense, net.................. 8.1% 8.1% 8.0%
Minority interest...................... 0.1% 0.2% 0.0%
--------- --------- ---------
(Loss) income before income taxes.. (7.9)% (1.6)% 1.8%
Provision for income taxes............. (1.8)% (0.6)% (0.8)%
---------- ---------- ----------
Net (loss) income............ (9.7)% (2.2)% 1.0%
========== ========== =========

As used in the following discussion of the Company's results of operations,
(i) the term "gross profit" means the dollar difference between the Company's
net sales and cost of sales and (ii) the term "gross margin" means the Company's
gross profit divided by its net sales.

Year Ended December 31, 2000 Compared To Year Ended December 31, 1999

Net Sales: Net sales increased 5.1% to $160.9 million in 2000 from $153.1
million in 1999 primarily attributable to the acquisition of Boehler Miller
Messer und Saegen GmbH ("BMMS") in January 2000, significantly offset by poor
results in North America primarily attributable to two leadership changes over
the past two year period, market softness and the strengthening dollar relative
to the European currencies. The Company experienced net sales reductions in its
North American operations (8.8% to $91.4 million) and sales improvements in its
other operations (31.4% to $69.5 million) in 2000 compared to the same period in
1999.

II-4

Gross Profit: Gross profit decreased 9.2% to $40.5 million in 2000 from
$44.7 million in 1999. Excluding the effect of the non-recurring charges
discussed in Note 11 to the consolidated financial statements, gross profit
would have been $41.0 million in 2000. Gross margin decreased to 25.2% in 2000
compared to 29.2% in 1999 primarily attributable to the factors noted above and
the second quarter non-recurring charges. Excluding the second quarter
non-recurring charges, gross margin for 2000 would have been 25.5%. The Company
experienced gross profit declines in its North American operations (26.7% to
$19.8 million) in 2000 compared to 1999, while gross margin also significantly
declined to 21.7% from 26.9%. Excluding the second quarter non-recurring
charges, the North American operations decline in gross profit would have been
24.8% to $20.3 million in 2000. The decrease in gross profit and gross margin is
attributable to the factors noted above. The Company experienced gross profit
improvements (16.9% to $20.7 million) in its other operations in 2000 compared
to 1999 while gross margin decreased to 29.8% from 33.5%. The gross profit
increase and gross margin decline was primarily due to the BMMS acquisition in
January 2000.

Selling, General and Administrative Expenses: Selling, general and
administrative ("SG&A") expenses were $40.0 million for 2000 compared to $34.5
million for 1999. The increase, net of the second quarter non-recurring charges,
is primarily attributable to the BMMS acquisition. SG&A expenses increased to
24.9% of net sales from 22.5% of net sales for the respective periods. Excluding
the second quarter non-recurring charges, SG&A expenses would have increased to
23.6% of net sales in 2000.

Interest Expense, net: Net interest expense increased to $13.0 million for
2000 compared to $12.4 million for 1999 due to an increase in borrowings related
to the BMMS acquisition in January 2000 and increased working capital needs due
to the decline in net sales in North America.

Income Taxes: Due to pre-tax losses in the United States in 2000 for which
no related current tax benefits were recorded in accordance with income tax
accounting rules, and as a result of pre-tax income in the Company's other
operations for which related tax provisions were recorded, the Company is
reporting a consolidated provision for income tax on a consolidated pre-tax loss
of $12.7 million. Due to pre-tax losses in the United States in 1999, the
Company did not fully realize the related current tax benefits in accordance
with income tax accounting rules. This resulted in a consolidated tax provision
for income tax on a consolidated pre-tax loss of $2.5 million. The significant
change in income taxes from 1999 is due to the above factors and the recording
of a portion of tax benefits related to the pre-tax losses in the United States
in 1999, but not in 2000.

Year Ended December 31, 1999 Compared To Year Ended December 31, 1998

Net Sales: Net sales increased 1.5% to $153.1 million in 1999 from $150.9
million in 1998. The Company experienced net sales declines in its North
American operations (6.3% to $100.2 million) compared to $106.9 million in 1998,
primarily attributable to a leadership change in May 1999 and to a lesser extent
due to pricing pressures from Asian, South American and domestic competitors
that led to a loss of business in the major market sectors the Company serves.
The Company experienced net sales improvements (20.2% to $52.9 million) in its
other operations compared to $44.0 million in 1998, primarily attributable to
acquisitions of Buland S.A. ("Buland") and A.K. van der Wijngaart Beheer B.V.
("Diacarb") in the fourth quarter of 1998.

Gross Profit: Gross profit decreased slightly to $44.7 million in 1999 from
$45.1 million in 1998. Gross margin also decreased slightly to 29.2% for 1999
compared to 29.9% in 1998. The Company experienced a significant decrease in
gross profit in its North American operations (16.7% to $27.0 million) in 1999
compared to $32.4 million in 1998, while gross margin also significantly
declined to 26.9% from 30.3%. The decrease in gross profit and gross margin is
attributable to the factors noted above. The Company experienced significant
gross profit improvements (39.4% to $17.7 million) in its other operations in
1999 compared to $12.7 million in 1998, while gross margin also significantly
increased to 33.5% from 28.9%. The gross profit and gross margin improvement was
primarily due to the fourth quarter 1998 acquisitions of Buland and Diacarb.

Selling, General and Administrative Expenses: SG&A expenses were $34.5
million for 1999 compared to $30.3 million for 1998 and increased to 22.5% of
net sales from 20.1% of net sales for the respective periods. The

II-5

increase in SG&A expenses was primarily due to the Diacarb and Buland
acquisitions and to a lesser extent due to reorganization costs in North
America.

Interest Expense, net: Net interest expense increased to $12.4 million in
1999 from $12.0 million in 1998 due to an increase in borrowings primarily
related to the Diacarb and Buland acquisitions in the fourth quarter of 1998 and
increased working capital needs due to the decrease in net sales in North
America.

Income Taxes: Due to pre-tax losses in the United States in 1999 for which
the Company did not fully realize the related current tax benefits in accordance
with income tax accounting rules, and as a result of pre-tax income in the
Company's other operations for which the Company recorded related tax
provisions, the Company has recorded a consolidated provision for income tax on
a consolidated pre-tax loss of $2.5 million. The Company's effective tax rate
was 41.9% in 1998. The significant change in income taxes from 1998 is due to
the above factors and significant changes in income contributions for the
Company's operations in certain tax jurisdictions.

Liquidity and Capital Resources

The Company's principal capital requirements are to fund working capital
needs, to meet required debt payments and to complete planned maintenance and
expansion expenditures. In the past, the Company's operating cash flow and
available borrowings under the Company's multi-currency credit facilities have
been sufficient to enable the Company to meet its working capital requirements,
debt service requirements and capital expenditure requirements. However,
deteriorating results in the Company's North American operations over the past
two years, primarily attributable to leadership changes at the Company in 1999
and 2000 as well as a softening market, have more than offset improved results
in the Company's European operations. The Company incurred net losses of
approximately $15.5 million and $3.4 million in the years ended December 31,
2000 and 1999, respectively, as compared to net income of approximately $1.6
million in the year ended December 31, 1998. In addition, the Company generated
negative cash flow from operations of approximately $4.5 million during the year
ended December 31, 2000, as compared to positive cash flow from operations of
approximately $6.9 million and $10.7 million during the years ended December 31,
1999 and 1998, respectively. Continuing adverse market conditions and their
negative effect on the Company's cash flow, coupled with limited liquidity, are
likely to impede the Company's ability to make interest payments of
approximately $5.1 million on each of May 15 and November 15, 2001 under the
Company's 11-3/8% Senior Subordinated Notes due 2006 (the "Subordinated Notes").

The Company is highly leveraged. As of December 31, 2000, the Company's
total long-term debt and stockholder's deficit were approximately $112.3 million
and $39.7 million, respectively. The Company's consolidated debt service
obligations in 2001 are expected to be in excess of $12.0 million, including
approximately $10.2 million of interest payments due under the Subordinated
Notes. The Company does not have any significant capital expenditure commitments
in 2001 that cannot be deferred; however, deferral of planned maintenance and
expansion expenditures may negatively impact the Company's operations. At
December 31, 2000, the Company had approximately $9.0 million available under
its multi-currency credit facilities. However, certain provisions of the
Company's German credit facilities limit the flow of cash from the Company's
wholly owned German subsidiary, IKS Klingelnberg GmbH, and its consolidated
subsidiaries to the Company. Such provisions include covenants requiring the
maintenance of a minimum equity in IKS Klingelnberg GmbH and its consolidated
subsidiaries equal to 30% of total asset value. As a result, U.S. availability
was limited to approximately $4.3 million at December 31, 2000. In January 2001,
a U.S. lender withdrew a $1.5 million working capital line that further reduced
U.S. availability to approximately $2.8 million. At March 9, 2001, U.S.
availability under credit facilities totaled approximately $1.3 million. In
addition, the Company had approximately $.7 million cash on hand in the U.S. The
Company's North American operations continue to generate negative cash flow from
operations.

II-6

in connection with a restructuring of its Subordinated Notes. While the Company
believes that there are certain alternatives available to the Company, there can
be no assurance that the Company will be successful in implementing any such
alternatives or that any such alternatives, if implemented, will enable the
Company to meet its obligations.

In response to market conditions and as a part of its market strategy, in
2000 the Company sold six service centers in the U.S. The sales generated
approximately $1.3 million in cash and eliminated the negative cash flow that
these service centers were generating. The Company does not foresee any
additional sales of service centers in 2001, but does expect a tax refund of
approximately $1.1 million in the first quarter of 2001. The Company also
expects to generate cash of approximately $1.5 million in the fourth quarter of
2001 from the planned sale of a building as part of the Company's continuing
rationalization of its manufacturing operations. In addition, the Company is
pursuing aggressive cost cutting programs.

Net cash flow used by operations aggregated $4.5 million in 2000 as
compared to cash provided of $6.9 million for 1999. The decrease was primarily
attributable to a $12.1 million decrease in net income and a $1.7 million
increase in working capital compared to 1999, offset by the $2.0 million loss on
the disposition of businesses in 2000. Net cash flow from operations aggregated
$6.9 million in 1999 as compared to $10.7 million in 1998. The decrease was
primarily attributable to a $5.0 million decrease in net income offset by a $0.9
million decrease in working capital and additional depreciation and amortization
of $0.7 million compared to 1998.

Cash used in investing activities in 2000 was $5.7 million as compared to
$5.5 million in 1999. Cash used in investing activities for 1999 was $5.5
million as compared to $17.7 million in 1998. The decrease in use of cash
compared to 1998 was primarily attributable to a $8.8 million decrease in
purchases of operations, net of cash acquired, and a $3.3 million decrease in
capital expenditures.

Cash provided in financing activities in 2000 was $12.0 million as compared
to cash used of $1.3 million in 1999 and cash provided of $6.7 million in 1998.
The cash provided in 2000 is primarily due to increased borrowings of $10.8
million, primarily attributable to the BMMS acquisition, and increased working
capital needs offset by a decrease in amounts due to parent of $1.1 million. The
1999 use of cash is primarily due to repayments of $.9 million due to parent and
$.5 million net payments of notes payable and long-term debt.

Impact of Recently Issued Accounting Standards

In June, 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, and its
amendments Statements 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 and 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities
issued in June 1999 and June 2000, respectively (collectively referred to as
Statement 133), which was required to be adopted in fiscal years beginning after
June 15, 2000. The Statement required the Company to recognize any derivatives
on the balance sheet at fair value. The Company adopted this new Statement as of
January 1, 2001. The adoption of this Statement did not have a significant
effect on the Company's earnings or financial position.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Information required by Item 7a is included in Item 7 on page II-3 of this
form 10-K.

II-7

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INTERNATIONAL KNIFE & SAW, INC. AND SUBSIDIARIES

Index to Consolidated Financial Statements

Page

Report of Independent Auditors........................................... II-9
Consolidated Balance Sheets as of December 31, 2000 and 1999............. II-10
Consolidated Statements of Income for the years ended
December 31, 2000, 1999 and 1998....................................... II-12
Consolidated Statements of Changes in Shareholder's Deficit
for the years ended December 31, 2000, 1999 and 1998................... II-13
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998....................................... II-14
Notes to Consolidated Financial Statements............................... II-15

II-8

REPORT OF INDEPENDENT AUDITORS

Board of Directors
International Knife & Saw, Inc.

We have audited the accompanying consolidated balance sheets of
International Knife & Saw, Inc. and subsidiaries as of December 31, 2000 and
1999, and the related consolidated statements of income, changes in
shareholder's deficit, and cash flows for each of the three years in the period
ended December 31, 2000. Our audits also included the financial statement
schedule listed in the index at Item 14(a)(2). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
International Knife & Saw, Inc. and subsidiaries at December 31, 2000 and 1999,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

The accompanying consolidated financial statements have been prepared
assuming that International Knife & Saw, Inc. and subsidiaries will continue as
a going concern. As more fully described in Note 2, the Company is highly
leveraged and has incurred recurring net losses and generated negative cash
flows from operations in the current year, which raises substantial doubt about
the Company's ability to continue as a going concern. (Management's plans in
regard to these matters are also described in Note 2.) The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

ERNST & YOUNG LLP

Cincinnati, Ohio
March 8, 2001

II-9

International Knife & Saw, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31,
2000 1999
------------------------------
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 3,392 $ 1,862
Accounts receivable, trade, less allowances
for doubtful accounts of $2,428 and $1,856 24,223 25,620
Inventories 29,526 27,922
Due from parent 34 1,159
Other current assets 2,898 2,759
------------------------------
Total current assets 60,073 59,322

Other assets:
Goodwill 14,773 17,015
Debt issuance costs 2,271 2,736
Other noncurrent assets 2,478 2,163
------------------------------
19,522 21,914

Property, plant and equipment-net 46,796 46,382

==============================
Total assets $ 126,391 $ 127,618
==============================

See accompanying notes.

II-10

International Knife & Saw, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31,
2000 1999
--------------------------
(in thousands)
Liabilities and shareholder's deficit
Current liabilities:
Notes payable $ 19,208 $ 4,362
Current portion of long-term debt 4,027 2,465
Accounts payable 10,807 13,007
Accrued liabilities 13,745 10,619
--------------------------
Total current liabilities 47,787 30,453

Long-term debt, less current portion 108,321 112,391
Other liabilities 8,865 6,557
--------------------------
Total liabilities 164,973 149,401

Minority interest 1,072 1,063

Shareholder's deficit:
Common stock, no par value -
authorized - 580,000 shares; issued - 526,904
shares; outstanding - 481,971 shares 5 5
Additional paid-in capital 10,153 10,153
Accumulated deficit (41,427) (25,898)
Accumulated other comprehensive loss (4,953) (3,674)
Treasury stock, at cost (3,432) (3,432)
--------------------------
Total shareholder's deficit (39,654) (22,846)
--------------------------
Total liabilities and shareholder's deficit $ 126,391 127,618
==========================

See accompanying notes.

II-11

International Knife & Saw, Inc. and Subsidiaries

Consolidated Statements of Income

Year Ended December 31,
2000 1999 1998
-----------------------------------------
(in thousands, except per share amounts)

Net sales $ 160,917 $ 153,133 $ 150,891

Cost of sales 120,388 108,477 105,779
-------------------------------------
Gross profit 40,529 44,656 45,112

Selling, general and administrative
expenses 40,026 34,517 30,299
-------------------------------------
Operating income 503 10,139 14,813

Other expenses (income):
Interest income (179) (141) (175)
Interest expense 13,210 12,495 12,181
Minority interest 157 295 71
-------------------------------------
13,188 12,649 12,077
-------------------------------------
Income (loss) before income taxes (12,685) (2,510) 2,736

Provision for income taxes 2,844 880 1,146
=====================================
Net income (loss) $ (15,529) $ (3,390) $ 1,590
=====================================

Net income (loss) per common share $ (32.22) $ (7.03) $ 3.30

See accompanying notes.

II-12

International Knife & Saw, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholder's Deficit

Accumulated
Additional Other Total
Common Paid-in Accumulated Comprehensive Treasury Shareholder's
Stock Capital Deficit (Loss) Income Stock Deficit
----------- ------------- --------------- --------------- ------------- ---------------
(in thousands)

Balance at December 31, 1997 $ 5 $ 10,153 $ (24,098) $ (2,235) $ (3,432) $ (19,607)

Net income for the year 1,590 1,590
Minimum pension liability adjustment (297) (297)
Foreign currency translation
adjustments, net of tax expense of $50 221 221
----------
Total comprehensive income 1,514
---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 1998 5 10,153 (22,508) (2,311) (3,432) (18,093)
Net loss for the year (3,390) (3,390)
Minimum pension liability adjustment 222 222
Foreign currency translation
adjustments, net of tax expense of $17 (1,585) (1,585)
--------
Total comprehensive loss (4,753)
-------- -------- -------- -------- -------- ----------

Balance at December 31, 1999 5 10,153 (25,898) (3,674) (3,432) (22,846)
Net loss for the year (15,529) (15,529)
Minimum pension liability adjustment 32 32
Foreign currency translation
adjustments, net of tax benefit of $18 (1,311) (1,311)
----------
Total comprehensive loss (16,808)
---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 2000 $ 5 $ 10,153 $ (41,427) $ (4,953)(A) $ (3,432) $(39,654)
========== ========== =========== ========== =========== ==========

(A) At December 31, 2000, accumulated other comprehensive income was a loss of
$4,953 comprised of net foreign currency translation adjustments of $4,910 and a
minimum pension liability of $43.

See accompanying notes.

II-13

International Knife & Saw, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Year ended December 31,
2000 1999 1998
---- ---- ----
(in thousands)
Operating activities
Net (loss) income $(15,529) $(3,390) $ 1,590
Adjustments to reconcile net (loss) income to
net cash (used) provided by operating activities:
Depreciation and amortization 7,773 6,827 6,087
Loss on disposition of businesses 1,981 -- --
Deferred income taxes 1,113 432 1,032
Loss on sale of property, plant and equipment 85 51 89
Minority interest in income of subsidiary 157 295 71
Changes in operating assets and liabilities
net of effects from purchases of operations:
Accounts receivable 3,323 (1,164) 1,832
Inventories 2,376 1,936 (336)
Accounts payable (3,895) 1,078 (502)
Accrued liabilities (1,936) 1,393 31
Other 18 (569) 800
----------------------------
Net cash (used) provided by operating activities (4,534) 6,889 10,694

Investing activities
Purchases of operations, net of cash acquired (956) (650) (9,418)
Purchases of property, plant and equipment (6,921) (6,019) (9,320)
Proceeds from sale of property, plant and equipment 999 578 349
Proceeds from disposition of businesses 1,290 -- --
Increase (decrease) in notes receivable and other (159) 594 702
assets
----------------------------
Net cash used in investing activities (5,747) (5,497) (17,687)

Financing activities
Increase (decrease) in amounts due to parent 1,125 (910) (810)
Increase in notes payable and long-term debt 34,466 20,175 20,538
Repayment of notes payable and long-term debt (23,632) (20,631) (13,042)
Cash received from investees 51 34 4
----------------------------
Net cash provided (used) by financing activities 12,010 (1,332) 6,690

Effect of exchange rate on cash and cash equivalents (199) (230) (14)
----------------------------

Increase (decrease) in cash and cash equivalents 1,530 (170) (317)
Cash and cash equivalents at beginning of year 1,862 2,032 2,349
============================
Cash and cash equivalents at end of year $ 3,392 $ 1,862 $ 2,032
============================

See accompanying notes.

II-14

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements
(in thousands)

1. Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of International
Knife & Saw, Inc. and its majority-owned subsidiaries (the "Company").
Investments in business entities in which the Company does not have control, but
has the ability to exercise significant influence over operating and financial
policies, are accounted for by the equity method. All significant intercompany
balances and transactions have been eliminated in consolidation.

Inventories

Inventories are stated at the lower of cost or market. Cost in the United States
is determined principally by use of the last-in, first-out method. Subsidiaries
use the first-in, first-out method.

Property, Plant, and Equipment

Property, plant and equipment are stated at cost or, for assets acquired through
business combinations, at fair value at the dates of the respective
acquisitions. Depreciation is computed by the straight-line method based on the
estimated useful lives of the assets. Depreciation expense includes amortization
of assets recorded under capitalized leases.

Amortization of Intangibles

Goodwill is being amortized over 10-40 years by the straight-line method. The
carrying value of goodwill is periodically reviewed using estimated undiscounted
cash flows for the businesses acquired over the remaining amortization periods.
Amortization charged to earnings amounted to $705, $731, and $633 for 2000, 1999
and 1998, respectively. As of December 31, 2000, accumulated goodwill
amortization was $3,474.

Debt issuance costs, which originated in 1996, are being amortized over the
ten-year life of the related debt. Amortization of debt issuance costs charged
to earnings amounted to $466, $467 and $467 for 2000, 1999 and 1998,
respectively. As of December 31, 2000, accumulated amortization was $1,945.

Income Taxes

Deferred taxes are provided for accumulated temporary differences due to basis
differences for assets and liabilities for financial reporting and income tax
purposes. The Company's temporary differences are due to accelerated
depreciation and amortization, allowances for doubtful accounts, expenses not
currently deductible, and income not currently taxable.

II-15

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

1. Significant Accounting Policies (continued)

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Revenue Recognition

Revenue from product sales is recognized when the product is shipped, title has
passed and all significant obligations of the Company have been satisfied and
revenue from services is recognized as the services are performed. Revenue is
reduced for estimated customer returns and allowances.

Dividend Payments

Dividend payments are restricted under the covenants of an indenture dated as of
November 6, 1996 between the Company and United States Trust Company of New York
in connection with the issuance of the $90,000 11 3/8% Senior Subordinated Notes
due 2006 (the "Subordinated Notes").

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes.
Actual results could differ from those estimates.

Reclassification

Certain 1999 and 1998 amounts have been reclassified to conform to the current
year presentation.

Net (Loss) Income Per Common Share

Net (loss) income per common share is based on the weighted average number of
common shares outstanding, which amount has remained unchanged at 481,971 shares
for 2000, 1999, and 1998, respectively. The Company does not have any common
stock equivalents.

II-16

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

1. Significant Accounting Policies (continued)

Foreign Currency Translation

The Company maintains the accounting records and prepares the financial
statements of its foreign subsidiaries in their respective functional
currencies. The accompanying financial statements, which include the effects of
the consolidated results of operations of these companies, are expressed in U.S.
dollar equivalents in accordance with Statement of Financial Accounting
Standards (SFAS) No. 52, Foreign Currency Translation. It should not be
construed that the assets and liabilities included at U.S. dollar equivalents
can actually be realized in or extinguished by U.S. dollars at the exchange
rates used in translation. The gains and losses resulting from the changes in
exchange rates from year to year have been reported in other comprehensive
income. The effects on the statements of income of transaction gains and losses
is insignificant for all years presented.

Foreign Currency Forwards

To mitigate the short-term effect of changes in currency exchange rates on the
Company's foreign currency based purchases and its functional currency based
sales, the Company occasionally hedges by entering into foreign exchange and
U.S. dollar forward contracts. A forward contract obligates the Company to
exchange predetermined amounts of specified foreign currencies or U.S. dollars
at specified exchange rates on specified dates or to make an equivalent foreign
currency or U.S. dollar payment equal to the value of such exchange. Discounts
or premiums (the difference between the spot exchange rate and the forward
exchange rate at inception of the contract) are accreted or amortized to other
operating expenses over the contract lives using the straight-line method while
realized and unrealized gains and losses resulting from changes in the spot
exchange rate (including those from open, matured, and terminated contracts),
net of related taxes, are included in the accumulated other comprehensive loss
in shareholder's deficit (the deferral accounting method). The related amounts
due to or from counter parties are included in other assets or other
liabilities. The unrecognized gains or losses were immaterial at year end.

Accounting Changes

In June, 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, and its amendments
Statements 137, Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133 and 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities issued in June
1999 and June 2000, respectively (collectively referred to as Statement 133),
which was required to be adopted in fiscal years beginning after June 15, 2000.
The Statement required the Company to recognize any derivatives on the balance
sheet at fair value. The Company adopted this new Statement as of January 1,
2001. The adoption of this Statement did not have a significant effect on the
Company's earnings or financial position.

II-17

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

1. Significant Accounting Policies (continued)

In September 2000, the Emerging Issues Task Force ("EITF") reached a consensus
on Issue 00-10, "Accounting for Shipping and Handling Fees and Costs." The EITF
requires all shipping and handling amounts billed to a customer in a sale
transaction to be classified as revenue. The EITF also states that a company may
not net the shipping and handling costs against the shipping and handling
revenues in the financial statements. Accordingly, the Company has restated net
sales and cost of sales for the years ended December 31, 1999 and 1998, by
reclassifying shipping and handling costs totaling $2,045 and $759,
respectively, from net sales to cost of sales. Additional shipping and handling
costs totaling $3,329, $3,143 and $2,936 for 2000, 1999 and 1998, respectively,
are included in selling, general, and administrative expenses. Net sales
disclosed in Note 14 for each of the first three quarters of 2000 and for each
of the quarters of 1999 have been restated from amounts previously reported to
comply with EITF 00-10. Net sales amounts disclosed in Note 13 for 1999 and 1998
have also been restated.

2. Going Concern

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The Company incurred net losses of
approximately $15.5 million and $3.4 million in the years ended December 31,
2000 and 1999, respectively, as compared to net income of approximately $1.6
million in the year ended December 31, 1998. In addition, the Company generated
negative cash flow from operations of approximately $4.5 million during the year
ended December 31, 2000, as compared to positive cash flow from operations of
approximately $6.9 million and $10.7 million during the years ended December 31,
1999 and 1998, respectively. Continuing adverse market conditions and their
negative effect on the Company's cash flow, coupled with limited liquidity, are
likely to impede the Company's ability to make interest payments of
approximately $5.1 million on each of May 15 and November 15, 2001 under the
Company's Subordinated Notes.

The Company is highly leveraged. As of December 31, 2000, the Company's total
long-term debt and stockholder's deficit were approximately $112.3 million and
$39.7 million, respectively. The Company's consolidated debt service obligations
in 2001 are expected to be in excess of $12.0 million, including approximately
$10.2 million of interest payments due under the Subordinated Notes. The Company
does not have any significant capital expenditure commitments in 2001 that
cannot be deferred; however, deferral of planned maintenance and expansion
expenditures may negatively impact the Company's operations. At December 31,
2000, the Company had approximately $9.0 million available under its
multi-currency credit facilities. However, certain provisions of the Company's
German credit facilities limit the flow of cash from the Company's wholly owned
German subsidiary, IKS Klingelnberg GmbH, and its consolidated subsidiaries to
the Company. Such provisions include covenants requiring the maintenance of a
minimum equity in IKS Klingelnberg GmbH and its consolidated subsidiaries equal
to 30% of total asset value. As a result, U.S. availability was limited to
approximately $4.3 million at December 31, 2000. In January 2001, a U.S. lender
withdrew a $1.5 million working capital line that reduced U.S. availability to
approximately $2.8 million. At March 9, 2001, U.S. availability under credit
facilities totaled approximately $1.3 million. In addition, the Company had
approximately $.7 million cash on hand in the U.S. The Company's North American
operations continue to generate negative cash flow from operations.

II-18

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

2. Going concern (continued)

These matters raise substantial doubt about the Company's ability to continue as
a going concern. As a result, the Company has retained Jefferies & Company, Inc.
to begin a process to address the Company's highly leveraged capital structure.
The Company expects Jefferies to assist the Company in developing alternatives
in connection with a restructuring of its Subordinated Notes. While the Company
believes that there are certain alternatives available to the Company, there can
be no assurance that the Company will be successful in implementing any such
alternatives or that any such alternatives, if implemented, will enable the
Company to meet its obligations.

In response to market conditions and as a part of its market strategy, in 2000
the Company sold six service centers in the U.S. The sale generated
approximately $1.3 million in cash and eliminated the negative cash flow that
these service centers were generating. The Company does not foresee any
additional sales of service centers in 2001, but does expect a tax refund of
approximately $1.1 million in the first quarter of 2001 and expects to generate
cash of approximately $1.5 million in the fourth quarter of 2001 from the sale
of a building resulting from the Company's rationalization of its manufacturing
operations. In addition, the Company is pursuing aggressive cost cutting
programs.

3. Acquisitions

In January 2000, the Company's German subsidiary acquired all of the shares of
Boehler Miller Messer und Saegen GmbH ("BMMS"). BMMS is headquartered in
Waidhofen, Austria. The purchase price consisted of 13,300 Austrian Schillings
(approximately $956) in cash, net of cash acquired, and 63,000 Austrian
Schillings (approximately $4,530) in assumed debt. The Company's lines of credit
were increased in order to finance the cash payment. Additional consideration is
contingent upon BMMS achieving certain annual earnings and would be payable in
2002. BMMS produces knives, saws and ground flats for the wood, paper and metal
industries with annual sales of approximately 300,000 Austrian Schillings
(approximately $21,600). The acquisition was accounted for under the purchase
method. There was no goodwill on this acquisition.

In November, 1999, the Company acquired an additional 29% interest in its two
Chinese joint venture companies, Shanghai IKS Lida Mechanical Blade Co., Ltd.
and Shanghai IKS Mechanical Blade Co., Ltd. for approximately $1,100. There was
no goodwill recorded on this acquisition.

In November, 1998, the Company acquired all of the shares of A.K. van der
Wijngaart Beheer B.V. and subsidiaries ("Diacarb"). Diacarb's business includes
the regrinding and distribution of industrial knives in the Netherlands, Belgian
and Luxembourg markets. Diacarb is also involved in the manufacture of
stansformen (molds to punch holes) for the carton industry. Diacarb is located
in Rotterdam, the Netherlands. The purchase price consisted of 12,000 Dutch
guilders in cash (approximately $6,250), financed from existing lines of credit,
1,088 Dutch guilders (approximately $567) in assumed debt, and a

II-19

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

3. Acquisitions (continued)

4.5% promissory note to the Seller for 5,000 Dutch guilders (approximately
$2,605), subject to post closing adjustments. The promissory note is payable in
installments of 1,000 Dutch guilders (approximately $521) on January 15, 2000,
and 2,000 Dutch guilders (approximately $1,042) on January 15, 2001 and 2002.
Accordingly, at December 31, 2000, 4,000 Dutch Guilders (approximately $2,084)
remains to be paid. The acquisition was accounted for under the purchase method.
Goodwill totaled $4,683 on this acquisition.

In October, 1998, the Company executed an agreement to purchase the shares of
Buland S.A. ("Buland") for 8,700 French Francs (approximately $1,560) in cash
and 2,175 French Francs (approximately $395) in assumed debt, subject to
post-closing adjustments. Headquartered in France, Buland is a reseller and
regrinder of industrial knives for the printing industry and reseller of rotary
and flexible dies, with annual sales of 36,000 French Francs (approximately
$6,545). The acquisition was accounted for under the purchase method and was
financed from borrowings under the Company's existing revolving credit
facilities. Additional consideration is contingent upon Buland achieving certain
annual earnings and is payable in 2002. Goodwill totaled $558 on this
acquisition.

In June and February, 1998, the Company completed the acquisitions of the assets
of Valiquet, Inc., Des Plaines, IL; the Atlanta, GA division of K.S.W.
Corporation; and Sheridan Saw Works, Sheridan, OR for approximately $1,200 in
cash, $29 in assumed debt, post-closing contingent payments of $55 for achieving
certain annualized earnings levels and promissory notes totaling $140 to two of
the sellers, subject to post-closing adjustments. These service center
acquisitions were financed from available cash balances. These operations have
historically generated combined annual sales of approximately $1,700 and were
accounted for under the purchase method. Goodwill totaled approximately $835 on
these acquisitions.

The consolidated financial statements include the results of operations
generated by and financial position of the above acquisitions from the dates of
acquisition.

II-20

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

4. Inventories

December 31,
2000 1999
---- ----

Finished goods $18,275 $17,120
Work in process 4,795 5,088
Raw materials and supplies 6,456 5,714
======= =======
$29,526 $27,922
======= =======

Inventories include approximately $11,537 in 2000 and $14,285 in 1999 determined
by the LIFO method. If the cost of LIFO inventories had been determined by the
FIFO method for financial reporting, they would have been approximately $4,226
and $3,806 higher than the amounts reported at December 31, 2000 and 1999,
respectively.

5. Property, Plant and Equipment-Net

December 31,
2000 1999
------- -------

Land and land improvements $ 6,000 $ 5,784
Buildings and leasehold improvements 15,420 16,875
Machinery and equipment 54,494 50,119
Furniture and fixtures 4,729 4,020
Construction in progress 1,574 740
Motor vehicles 1,967 2,432
----------- -----------
84,184 79,970
Less accumulated depreciation 37,388 33,588
======= =======
$46,796 $46,382
======= =======

Depreciation expense, including depreciation for assets under capital lease, was
$6,602, $5,629 and $4,987, for 2000, 1999 and 1998, respectively. Depreciation
is provided for on the straight-line method over the following estimated useful
lives:

Land improvements: 15 years
Buildings and leasehold improvements: 15 to 40 years
Machinery and equipment: 5 to 12 years
Furniture and fixtures: 10 years
Motor vehicles: 3 to 5 years

II-21

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

6. Notes Payable and Long-Term Debt

December 31,
2000 1999
----------------------------------------

Notes payable:
Note payable on demand in German Marks to a German bank,
issued under revolving credit agreements, interest
payable quarterly $ 5,499 $ 1,347
Notes payable on demand in Chinese Yuan Renminbi to Chinese
banks, issued under revolving credit agreements, interest
payable monthly 2,125 1,765
Note payable on demand in U.S. Dollars to a German bank,
issued under revolving credit agreements, interest payable
quarterly 8,719 1,250

Note payable on demand in U.S. Dollars to a U.S. bank 1,500 -

Note payable on demand in Austrian Schillings to an Austrian bank 1,365 -
------- -------
$19,208 $ 4,362
======= =======
Long-term debt:
11-3/8% Senior Subordinated Notes due 2006 $90,000 $90,000
Notes payable in German Marks to a German bank 14,559 16,399
Notes payable in Chinese Yuan Renminbi to Chinese Banks 1,017 1,680
Capitalized lease obligations to U.S. lenders 3,199 4,261
Promissory notes payable in Austrian Schillings to an
Austrian bank 1,746 -
Promissory note payable in Dutch Guilders to a
former shareholder of the Diacarb Company 1,792 2,414
Other 35 102
---------------------------------
112,348 114,856
Less current portion 4,027 2,465
=================================
$108,321 $112,391
=================================

II-22

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

6. Notes Payable and Long-Term Debt (continued)

Except for the Subordinated Notes, the carrying amount of the Company's
long-term debt approximates fair value, which is determined using discounted
cash flow analysis based on the Company's incremental borrowing rate for similar
types of financing arrangements. At year-end 2000, the fair value of the
Subordinated Notes was approximately $39,600. Such amounts are based on recent
trade prices through registered securities brokers.

The Subordinated Notes are senior subordinated indebtedness of the Company
ranking pari passu with all other existing and future senior subordinated
indebtedness of the Company.

The notes payable of $14,559 have maturities that extend to 2011 at rates of
2.5% to 5.91%. Outstanding borrowings under the Company's senior credit
facilities are included in long-term debt based on the expectation that these
borrowings will remain outstanding for more than one year. Land and buildings in
Germany with a net book value of $7,888 are pledged as collateral for the German
revolving credit agreements and the German bank notes payable.

The notes payable of $1,017 mature in 2003 at a rate of 9.3% and are
non-recourse to the Company.

The capitalized lease obligations of $3,199 are for capital leases on equipment
that have maturities that extend to 2004 at rates of 6.99% to 8.7%. Included in
property, plant and equipment-net is equipment under capital lease of $3,255.

The notes payable of $1,746 have maturities that extend to 2006 at rates of 2.5%
to 5.4%.

The promissory note payable to a former shareholder of Diacarb of $1,792 is due
in installments of 2,000 Dutch guilders in 2001 and 2002 at a rate of 4.5% in
connection with the Diacarb acquisition.

At December 31, 2000, the Company had committed global, multi-currency credit
facilities totaling approximately $39,258. Unused committed lines of credit from
these facilities available to the U.S. and German operations totaled $4,281 and
$4,742, respectively, for a consolidated availability of $9,023, compared to
$16,801 at December 31, 1999. In January 2001, a U.S. bank withdrew a $1,500
working capital line that reduced the Company's unused committed amount. Fees
for these revolving credit arrangements were $20 in 2000 and $22 in 1999.

The short-term note payable of $5,499 represents short-term bank borrowings at
rates from 5.6% to 5.7%.

The short-term notes payable of $2,125 represent short-term bank borrowings at a
rate of 5.8% to 7.6% and are non-recourse to the Company.

The short-term note payable of $8,719 represents short-term bank borrowings at a
rate of 7.9%.

II-23

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

6. Notes Payable and Long-Term Debt (continued)

The short-term note payable of $1,500 represents short-term bank borrowings at a
rate of 9.5%.

The short-term note payable of $1,365 represents short-term bank borrowings at a
rate of 2.8%.

At December 31, 2000, amounts due as minimum payments under long-term debt were
as follows:

2001 $ 4,027
2002 4,191
2003 5,117
2004 2,084
2005 1,819
Thereafter 95,110
--------------------
$ 112,348
====================

Cash paid for interest amounted to $12,357, $12,097, and $11,670 in the years
ended December 31, 2000, 1999 and 1998, respectively.

7. Accrued Liabilities

December 31,
2000 1999
-----------------------------------

Salaries, wages and bonuses $ 3,044 $ 2,157
Profit sharing and 401(k) plans 846 809
Interest 1,408 1,322
Other employee related accruals 1,357 1,397
Other 7,090 4,934
===================================
$ 13,745 $ 10,619
===================================

8. Income Taxes

IKS Corporation files a consolidated Federal income tax return that includes the
Company. The current and deferred tax expense and benefit for the Company are
recorded as if it filed on a stand-alone basis. All participants in the
consolidated income tax return are separately liable for the full amount of the
taxes, including penalties and interest, if any, which may be assessed against
the consolidated group. The current provision (benefit) for United States income
taxes is recorded to the intercompany account with IKS Corporation.

II-24

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

8. Income Taxes (continued)

Summarized in the following tables are the Company's income (loss) before income
taxes, its provision (benefit) for income taxes, the components of the deferred
income taxes and a reconciliation of the U.S. statutory rate to the tax
provision rate.

Income (Loss) Before Income Taxes Year ended December 31,
2000 1999 1998
-------- -------- --------
United States $(16,792) $ (7,287) $ (705)
Non-U.S 3,441
4,107 4,777
======== ======== ========
$(12,685) $ (2,510) $ 2,736
======== ======== ========

Components of Deferred Tax Assets and Liabilities
December 31,
2000 1999
--------- ---------
Current deferred tax assets (liabilities):
Inventories, primarily obsolescence and
additional costs inventoried for tax purposes $ 767 $ 559
Reserve for bad debts (220) (366)
Accrued employee benefits 486 292
Other 337 166
------- -------
Total current deferred tax assets 1,370 651

Noncurrent deferred tax assets (liabilities):
Net operating loss carryforwards 8,607 2,545
Property, plant and equipment, primarily differences
in Depreciation methods (3,969) (4,028)
Deferred compensation 128 143
Goodwill, difference in amortization methods (600) (523)
Other 117 (21)
------- -------
Total noncurrent deferred tax assets (liabilities): 4,283 (1,884)
Less valuation allowance (8,654) (1,490)
------- -------
Total net noncurrent deferred tax liabilities (4,371) (3,374)
------- -------
Net deferred tax liabilities $(3,001) $(2,723)
======= =======

II-25

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

8. Income Taxes (continued)

Provision (benefit) for Income Taxes Year Ended December 31,
2000 1999 1998
----------- ---------- -----------
Current (benefit) provision
Federal $ -- $ -- $ (562)
State and local 300 (219) --
Foreign 1,431 1,504 676
------- ------- -------
1,731 1,285 114

Deferred provision (benefit)
Federal 969 (909) 321
State and local 86 (6) 28
Foreign 58 510 683
------- ------- -------
1,113 (405) 1,032
======= ======= =======
$ 2,844 $ 880 $ 1,146
======= ======= =======

The differences between the provision and the amount computed by applying the
statutory Federal income tax rate are as follows:

Year Ended December 31,
2000 1999 1998
----------------------------------

Income (loss) before income taxes $(12,685) $ (2,510) $ 2,736
======== ========= =========

Tax (benefit) provision on above amount
at 34% $ (4,313) $ (853) $ 930
Change in valuation allowance 7,164 1,490 --
State income tax (benefit) provision,
net of federal tax impact
198 (225) 28
Foreign tax rates different than U.S.
statutory rate 30 387 134
Foreign losses without tax benefit 49 69 56
Other, net (284) 12 (2)
--------- --------- ---------
Provision for income taxes $ 2,844 $ 880 $ 1,146
======== ========= =========

At year-end 2000, the Company's U.S. operations had net loss carry forwards
aggregating $23,263 which begin to expire in 2019. The Company has recorded a
deferred tax asset of $8,607 related to the net loss carryforwards and a
corresponding full valuation allowance related to its U.S. deferred tax assets.

II-26

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

8. Income Taxes (continued)

Undistributed earnings of foreign subsidiaries which are intended to be
indefinitely reinvested aggregated approximately $11,759 at the end of 2000. In
the event these earnings were to be repatriated, foreign income tax credits and
deductions under existing U.S. federal income tax laws would offset a portion of
any additional U.S. tax liability.

9. Employee Benefit Plans

The Company has profit sharing plans for its U.S. and Canadian employees. Profit
sharing contributions are determined annually by the respective Boards of
Directors. The Company also has a 401(k) plan for its U.S. employees. Company
contributions to the 401(k) plan are equal to one-half of employee
contributions, up to a maximum of 2% of an employee's annual compensation,
subject to certain statutory limitations.

The expense for profit sharing contributions was $636 in 2000, $560 in 1999, and
$953 in 1998. The Company's matching contributions to the 401(k) plan amounted
to $287 in 2000, $285 in 1999, and $368 in 1998.

Included in other liabilities are amounts for deferred compensation plans for
former officers of $345 and $387 at December 31, 2000 and 1999, respectively.
The plans provide for a maximum payment of $25 annually to each officer or
beneficiary for a period of ten years commencing at retirement or death.

The Company's German subsidiaries have pension plans covering a majority of
their employees who qualify as to age and length of service. Entrance into the
plan is at age 30 with defined benefits payable at age 65. Vesting requirements
vary depending on employment category, contracts and years of service
requirements which range from five to fifteen years. The following table sets
forth the status of the Company's defined pension plan for certain employees in
Germany. Consistent with customary practice in Germany, this plan has not been
funded. Benefit payments are funded from current operations.

Change in benefit obligation December 31,
2000 1999
----------------- ----------------

Benefit obligation at beginning of year $ 1,503 $ 1,736
Service cost 20 23
Interest cost 88 100
Actuarial gains (25) (60)
Currency exchange rate gain (99) (248)
Benefits paid (41) (48)
================= ================
Benefit obligation at end of year $ 1,446 $ 1,503
================= ================

II-27

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

9. Employee Benefit Plans (continued)

Funded status at year-end December 31,
2000 1999
--------------- --------------
Projected benefit obligation $ 1,446 $ 1,503
Unrecognized net loss (75) (108)
Unrecognized net obligation (150) (177)
Additional minimum liability 193 252
=============== ==============
Accrued pension cost - included in
other liabilities $ 1,414 $ 1,470
=============== ==============

Components of net periodic benefit costs Year Ended December 31,
2000 1999 1998
---- ---- ----

Service cost $ 20 $ 24 $ 14
Interest cost on projected benefit obligation 88 100 92
Net amortization and deferral 14 19 12
==== ==== ====
Net periodic benefit cost $122 $143 $118
==== ==== ====

Weighted-average actuarial assumptions Year Ended December 31,
2000 1999 1998
---- ---- ----
Discount rate 6.5% 6.5% 6.5%
Rate of increase in future compensation levels 2.5% 2.5% 2.5%

10. Related Parties

The consolidated financial statements include the following transactions and
balances with companies which had been under common controlling ownership with
the Company prior to the Recapitalization. Such companies are, and have been
since the Recapitalization, controlled by a minority shareholder and board
member of IKS Corporation.
December 31,
2000 1999 1998
-----------------------------

Other payables to affiliated companies $ (42) $ (35) $ (62)
Purchased administrative and manufacturing services 590 670 712

II-28

International Knife & Saw, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(in thousands)

11. Disposition of Businesses and Other Non-recurring Charges

The operating loss for 2000 includes second quarter non-recurring charges of
$2,600, comprised primarily of a $1,981 loss on the sale of certain service
centers and $449 in severance costs related primarily to the resignation of the
Company's former CEO.

In May and June, 2000 the Company completed the sale of six service centers for
a combined selling price of $1,480, comprised of $1,290 in cash and a $190 note
receivable. These service centers were located in Illinois, Wisconsin, Oregon,
Virginia, Tennessee and Georgia. The decision to sell the service centers was
made in order to redeploy assets to the Company's strategic core initiatives.

On April 25, 2000, P. Daniel Miller, the Company's President and CEO, submitted
his resignation to the Board of Directors of the Company. As of that date, the
Board of Directors established an executive committee comprised of Messrs.
William M. Schult, Executive Vice President-CFO, Treasurer and Secretary;
Bradley H. Widmann, Vice President - Operations for the Americas; and Jeffrey H.
Welday, Vice President of Sales and Marketing for the Americas. This committee
is responsible for all North American operations of the Company and reports
directly to the Board of Directors. Thomas W.G. Meyer, Executive Vice President,
Europe and Asia, continued in his role with responsibility over those regions
and also reports directly to the Board of Directors.

12. Operating Leases

Future minimum rentals required under operating leases are as follows:

Year ending December 31 Buildings Other Total
- -----------------------------------------------------------------------------

2001 $ 481 $ 29 $ 510
2002 334 20 354
2003 96 6 102
2004 22 2 24
2005 9 1 10

Rent expense was $705 for 2000, $553 for 1999 and $566 for 1998.

II-29

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands)

13. Organization

The Company operates in one business segment - industrial knives and saws. The
Company manufactures, markets and services primarily industrial knives and saws
internationally, and its customers include distributors, original equipment
manufacturers and customers purchasing replacement parts and services. The
Company has a leading market share in each of the major sectors it serves: Paper
& Packaging; Wood; Metal; and Plastic & Recycling. The Company's operations are
principally in the United States, Germany and Austria, representing 49%, 21% and
12% of 2000 net sales, respectively. The Company plans to continue its
international growth. As a result of the Company's broad product range and
numerous applications, no customer accounts for more than 4% of net sales. The
Company performs periodic credit evaluations of its customers and generally does
not require collateral.

Sales attributable to German and Austrian operations are based on external sales
generated by subsidiaries located in those countries.

The following table summarizes the Company's United States, German, Austrian and
other operations.

Year Ended December 31,
2000 1999 1998
- -------------------------------------- -------- -------- --------
United States Operations:
Net sales - Customers $ 79,564 $ 87,476 $ 93,601
Long Lived Assets 19,607 22,111 22,479

German Operations:
Net sales - Customers $ 34,210 $ 35,757 $ 34,762
Long Lived Assets 12,624 13,428 14,457

Austrian Operations:
Net sales - Customers $ 18,850 $ -- $ --
Long Lived Assets 4,450 -- --

Other Operations:
Net sales - Customers $ 28,293 $ 29,900 $ 22,528
Long Lived Assets 10,617 11,452 12,976

Consolidated:
Net sales - Customers $160,917 $153,133 $150,891
Long Lived Assets 47,298 46,991 49,912

II-30

International Knife & Saw, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)
(in thousands, except per share data)

14. Operating Results by Quarter (Unaudited)

---------------------------------------------
2000
---------------------------------------------
Qtr 1 Qtr 2 Qtr 3 Qtr 4
-------- -------- --------- ---------

Net sales $ 44,512 $ 42,055 $ 37,652 $ 36,698

Gross profit 12,254 10,473 9,836 7,966

Net loss (1,117) (4,781) (2,334) (7,297)

Net loss per common share (2.32) (9.92) (4.84) (15.14)

--------------------------------------------
1999
--------------------------------------------
Qtr 1 Qtr 2 Qtr 3 Qtr 4
-------- -------- --------- ---------

Net sales $ 39,767 $ 37,785 $ 37,980 $ 37,601

Gross profit 11,660 10,346 11,174 11,476

Net income (loss) 116 (804) (289) (2,413)

Net income (loss) per common share .24 (1.67) (.60) (5.00)

II-31

PART III

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

None.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information with respect to the
persons who are members of the Board of directors or executive officers of the
Company. Directors serve for a term of one year or until their successors are
elected and qualified; officers serve at the discretion of the Board of
Directors.

Name Age Position
---- --- --------

Thomas W. G. Meyer 44 Executive Vice President-- Europe and Asia
William M. Schult 39 Executive Vice President-- Chief Financial
Officer, Treasurer and Secretary
Bradley H. Widmann 54 Vice President-- Operations/Americas
Jeffrey H. Welday 48 Vice President-- Sales and Marketing/Americas
W. Randolph Underhill 51 Vice President-- Operations
Paul A. Severt 38 Vice President-- Financial
Reporting/Controller
David M. Hofmeister 41 Chief Information Officer
W. Rayburn Connell 60 Vice President -- Service and Sales
Director, North America
Diether Klingelnberg 56 Director
James A. Urry 46 Director
Michael A. Delaney 46 Director

Thomas W. G. Meyer, Executive Vice President -- Europe and Asia. Mr. Meyer
has served as Executive Vice President since he joined the Company in 1993.
Prior thereto, Mr. Meyer worked in the textile industry for ten years, including
service as the head of marketing for Barmag AG from 1988 until 1991 and as a
director of A. Monforts GmbH & Co., from 1991 until 1992.

William M. Schult, Executive Vice President --Chief Financial Officer,
Treasurer and Secretary. Mr. Schult joined the Company as Vice President --
Finance in July 1996. Prior to joining the Company, he served as Controller of
IKS Corporation since 1995 and in several capacities at Siemens Corporation from
1987 until 1995. Prior to that, Mr. Schult held various accounting and auditing
positions with the Allen Group, Salomon Brothers and Coopers & Lybrand.

Bradley H. Widmann, Vice President - Operations/Americas. Mr. Widmann
joined the Company in November 1999 as Vice President - Operations/Americas.
From 1996 - 1999, he headed the global supply chain management for Magnetek,
Inc. Prior to working with Magnetek, Inc., Mr. Widmann held senior operations
positions with Textron, Inc., Gould, Inc. and General Electric Co. in both
aerospace and commercial products industries.

III-1

Jeffrey H. Welday, Vice President - Sales and Marketing/Americas. Mr.
Welday joined the Company in March of 2000 as Vice President Industrial
Division. He was promoted to Vice President - Sales and Marketing of both
Industrial and Wood Products in April 2000. From 1992 - 2000, he managed the
sales and marketing organization for the Consumable Products Division of
Cincinnati Milacron, Inc., a global manufacturer of Machine Tools and Industrial
Products.

W. Randolph Underhill, Vice President -- Operations. Mr. Underhill joined
the Company in 1977 as Product Manager. Mr. Underhill served in various
capacities, including purchasing agent and sales manager, from 1977 to 1990, and
became Vice President -- Operations in 1996.

Paul A. Severt, Vice President -- Financial Reporting/Controller. Mr.
Severt joined the Company as Vice President - Financial Reporting/Controller in
April 1997. Prior to joining the Company, Mr. Severt held various accounting and
auditing positions with Ernst & Young with which he was employed for 12 years.

David M. Hofmeister - Chief Information Officer. Mr. Hofmeister joined the
company as Chief Information officer in June 1997. From 1984 to 1997, Mr.
Hofmeister worked for E.I.Du Pont de Nemours, holding various management
positions in Du Pont's Consolidation Coal and Remington Arms subsidiaries. Prior
to working with Du Pont, Mr. Hofmeister worked as a Management Science Analyst
for the Gulf Oil Corporation.

W. Rayburn Connell, Vice President - Service and Sales Director, North
America. Mr. Connell joined the Company in 1991 as Vice President -- Service and
Sales Director. From 1990 to 1991, Mr. Connell was the owner of Connell
Distribution and prior to that was the part owner of Austin Saw and Knife, which
the Company acquired in 1991. Between 1974 and 1990, Mr. Connell was the
Company's sales manager.

Diether Klingelnberg, Director. Mr. Klingelnberg served as Chief Executive
Officer of the Company until March 1996. In addition, he served as Chairman of
the Board and Chief Executive Officer of IKS Corporation from its formation
until consummation of the Recapitalization. Mr. Klingelnberg is currently
Managing Director of Klingelnberg Beteiligungs-GmbH, Chairman of Oerlikon
Geartec AG and Eickhoff GmbH.

James A. Urry, Director. Mr. Urry has been with Citibank, N.A. since 1981,
serving as a Vice President since 1986. He has been a Vice President of CVC
since 1989. He is a Director of Intersil Corporation, Hancor Holding
Corporation, Airxcel, Inc., Palomar Technologies Corporation and York
International Corporation.

Michael A. Delaney, Director. Mr. Delaney has been a Vice President of CVC
since 1989. Mr. Delaney is a Director of AmeriSource Health Corporation, Clark
Material Handling Company, Chip PAC Inc., Delco Remy International, Inc., Great
Lakes Dock and Dredge Corporation, GVC Holdings, JAC Holdings, Palomar
Technologies Corporation, Paper Pak Products, Inc., SC Processing, Inc., MSX
International and Triumph Holdings, Inc.

III-2

Director Compensation and Arrangements

With the exception of Mr. Richard J. Puricelli, who received $4,000 per
quarter prior to his resignation effective February 26, 2001, other directors of
the Company do not currently receive compensation for their services as
directors. Members of the Board of Directors are elected pursuant to a
Securities Purchase and Holders Agreement (the "Stockholders' Agreement")
entered into in connection with the Recapitalization among IKS, IKS Corporation
and its stockholders. Pursuant to the Stockholders' Agreement, the Board of
Directors of the Company is composed at all times of five directors as follows:
the president of the Company, which position remained vacant after April 25,
2000; one individual designated by Diether Klingelnberg; two individuals
designated by CVC; and one independent director who shall be designated by CVC
subject to the right of holders of the majority of the outstanding shares of
Corp. Class A Stock (defined below) to veto the election of any such independent
director.

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth certain information concerning the
compensation received for services rendered in 2000 by (i) each person who
served as the Company's Chief Executive Officer during 2000 and, (ii) the four
most highly compensated executive officers of the Company (other than the
individuals who served as the Company`s Chief Executive Officer) in office on
December 31, 2000.

Summary Compensation Table

Annual Compensation
----------------------------------------------------------------------------
All Other
Salary Bonus Other Compensation
Name and Principal Position Year ($) ($) ($) ($)
- ---------------------------------- ------------ ------------ ------------ ------------ -------------

P. Daniel Miller (1) 2000 350,000 -- -- 3,602(2)
Former President and Chief 1999 216,705 302,400 -- 12,646(3)
Executive Officer 1998 -- -- -- --

Thomas W.G. Meyer 2000 180,811 139,942 -- --
Executive Vice President-- Europe 1999 201,251 159,006 -- --
and Asia 1998 184,600 165,430 -- --

William M. Schult 2000 191,700 47,925 -- 3,065(4)
Executive Vice President-- 1999 155,954 97,336 -- 7,899(5)
Chief Financial Officer, 1998 135,000 38,750 -- 11,036(6)
Treasurer and Secretary

Bradley H. Widmann 2000 175,000 43,750 -- 1,836
Vice President -- Operations/Americas 1999 23,558 -- -- --
1998 -- -- -- --

Jeffrey H. Welday 2000 114,692 24,850 25,021 739
Vice President-Sales & Marketing/ 1999 -- -- -- --
Americas 1998 -- -- -- --

III-3

(1) Mr. Miller's employment with the company terminated effective April 25,
2000.

(2) Includes $3,400 in Company 401(k) contributions and $202 in group term
life insurance premiums.

(3) Includes $5,418 in Company Profit Sharing Plan contributions, $7,154 in
car allowance, and $74 in group term life insurance premiums.

(4) Includes $2,979 in Company 401(k) contributions, and $86 in group term
life insurance premiums.

(5) Includes $4,818 in Company Profit Sharing Plan contributions, $2,911 in
Company 401(k) plan contributions, and $170 in group term life
insurance premiums.

(6) Includes $2,930 in Company 401(k) contributions, $8,000 in Company
Profit Sharing Plan contributions and $106 in group term life insurance
premiums.

(7) Includes $1,615 in Company 401(k) contributions and $221 in group term
life insurance premiums.

(8) Mr. Welday received a sign-on bonus when he joined the Company.

(9) Includes $655 in Company 401(k) contributions and $84 in group term
life insurance premiums

Employment Arrangements and Deferred Compensation Agreements

P. Daniel Miller was hired by the Company as President and Chief Executive
Officer pursuant to an Employment Agreement effective May 24, 1999. As
compensation, Mr. Miller received a predetermined annual salary ($350,000 in
2000). Following the termination of Mr. Miller's employment on April 25, 2000,
Mr. Miller continued and will continue to receive severance payments equal to
his annual salary through April 24, 2001.

Thomas Meyer was hired by IKS Klingelnberg GmbH as its Chief Executive
Officer pursuant to an Employment Agreement effective January 1, 1993 which,
following an extension on December 17, 1998, expires on December 31, 2003. As
compensation, Mr. Meyer receives a predetermined annual salary (DM 400,000 in
2000) and receives certain fringe benefits including a bonus, an automobile, and
insurance coverage. Following any termination of Mr. Meyer's employment, Mr.
Meyer will be subject to a non-competition covenant for up to two years, in
exchange for payment in each year of an amount equal to one-half of Mr. Meyer's
most recently agreed upon annual compensation.

William M. Schult was hired by IKS Corporation pursuant to an Employment
Agreement effective August 16, 1995. He joined the Company in 1996. Mr. Schult
was promoted to Chief Financial Officer on November 6, 1996 and to Executive
Vice President on October 15, 1999. As compensation, Mr. Schult receives a
predetermined annual salary ($191,700 in 2000) and receives certain fringe
benefits including a bonus, an automobile, and insurance coverage. Following any
termination of Mr. Schult's employment, Mr. Schult will be subject to a
non-competition covenant for one year. The Company or Mr. Schult may terminate
this employment agreement upon six months written notice.

Bradley H. Widmann was hired by the Company as Vice President - Operations
pursuant to an Employment Agreement effective November 1999. As compensation,
Mr. Widmann receives a predetermined annual salary ($175,000 in 2000) and
receives certain fringe benefits including a bonus and insurance coverage.
Following any termination of Mr. Widmann's employment, Mr. Widmann will be
subject to a non-competition covenant for one year. The Company may terminate
this employment agreement upon six months written notice.

Jeffrey H. Welday was hired by the Company as Vice President - Industrial
Division pursuant to an Employment agreement effective March 2000. Mr. Welday
was promoted to Vice President - Sales and Marketing on April 25, 2000. As
compensation, Mr. Welday receives a predetermined annual salary ($142,000 in
2000) and

III-4

receives certain fringe benefits including a one-time sign-on bonus, an annual
performance bonus and insurance coverage. Following any termination of Mr.
Welday's employment, Mr. Welday will be subject to a non-competition covenant
for one year. The Company may terminate this employment agreement upon six
months written notice.

401(k) and Profit Sharing Plan

In 1997, the Company's tax qualified profit sharing plan was merged into
the IKS Corporation 401(k) retirement plan. The combined plan was renamed the
International Knife & Saw, Inc. 401(k) and Profit Sharing Plan. All of the
Company's domestic non-unionized employees are eligible to participate after
completing one year of service and attaining age 20 1/2. Subject to certain
statutory limitations, employees may contribute up to 15 percent of their
compensation to the plan on a pre-tax basis. The Company may make discretionary
matching contributions equal to a percentage of the employees' pre-tax
contributions. However, in determining the amount of matching contributions,
only employee pre-tax contributions up to four percent of compensation are taken
into account. Employees are fully vested in their benefits under the plan after
two years of service.

In addition to discretionary matching contributions on employees' pre-tax
contributions, the Company may also make profit sharing contributions. These
contributions are allocated to the accounts of the eligible employees in the
same ratio that each eligible employee's compensation for the year bears to the
total compensation of all eligible employees for the year. For allocation
purposes, the compensation of any employee in excess of $170,000 is disregarded.
Employees are fully vested in their benefits under the plan after five years of
service. An employee may not receive a distribution of his benefits under the
plan until following his termination of employment.

Compensation Committee Interlocks and Insider Participation

Each of the four current members of the Company's Board of Directors also
serves on the compensation committee. See "Item 13. Certain Relationships and
Related Transactions" for disclosure with respect to certain relationships of
the some of the members of the compensation committee and the Company.

In the event that Messrs. Urry and Delaney are unwilling or unable to
serve, or otherwise cease to serve, CVC shall be entitled to select their
replacement on the Board of Directors. In addition, the Stockholders' Agreement
provides that Diether Klingelnberg or his designated representative shall serve
as a director.

III-5

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

All of the outstanding capital stock of the Company is currently owned by
IKS Corporation. The following table sets forth certain information with respect
to the beneficial ownership of IKS Corporation's preferred stock (the "Corp.
Preferred Stock"), voting common stock (the "Corp. Class A Stock") and
non-voting common stock (the "Corp. Class B Stock" and, together with the Corp.
Class A Stock, the "Corp. Common Stock") by (i) each person or entity who owns
five percent or more thereof, (ii) each director of the Company who is a
stockholder, (iii) the Chief Executive Officer of the Company and the other
executive officers named in the "Summary Compensation Table" above who are
stockholders, and (iv) the directors and executive officers of the Company as a
group. Unless otherwise specified, all shares are directly held.

Number and Percent of Shares

Corp. Corp. Corp. Class A Corp. Class B
Series A Preferred Stock Series B Preferred Stock Stock(2) Stock(3)
Name of Beneficial Owner (1) Number Percent Number Percent Percent Percent Number Percent
- ---------------------------- ------ ------- ------ ------- ------- ------- ------ -------

Citicorp Venture Capital Ltd 8,241 69.0% -- -- 31,453 35.3.% 11,234 76.5%
399 Park Avenue
New York, New York 10043

Haulux, AG 5 0.04% 5 0.5% 17,040 19.1% -- --
Centre Etoile
5,bd de la Foire
B.P. 351
L-2013 Luxembourg

Dualux, AG -- -- -- -- 17,000 19.1% -- --
Centre Etoile
5,bd de la Foire
B.P. 351
L-2013 Luxembourg

John E. Halloran 600 5.0% 600 68.5% 5,000 5.6% -- --
19 Jenkins Farm Way
Simpsonville, SC 29680

Thomas W.G. Meyer 242 2.0% 2 0.3% 4,534 5.1% -- --

William M. Schult 48 0.4% 48 5.5% 956 1.1% -- --

James A. Urry (4) 58 0.5% -- -- 221 0.2% 79 0.5%

Michael Delaney (4) 58 0.5% -- -- 221 0.2% 79 0.5%

All directors and executive
officers as a group 519 4.3% 163 18.6% 24,798 27.8% 157 1.1%
(9 persons) (4)

- ----------

(1) Unless otherwise indicated, the address of each shareholder listed
above is 1299 Cox Avenue, Erlanger, KY 41018.

(2) Does not include shares of Corp. Class A Stock issuable upon conversion
of Corp. Class B Stock. See "--- Corp. Common Stock" .

(3) Does not include shares of Corp. Class B Stock issuable upon conversion
of Corp. Class A Stock. See "---Corp. Common Stock".

(4) Does not include shares beneficially held by CVC, which may be deemed
beneficially owned by Messrs. Delaney and Urry. Messrs. Delaney and
Urry disclaim beneficial ownership of shares held by CVC.

III-6

Corp. Common Stock

The Certificate of Incorporation of IKS Corporation provides that IKS
Corporation may issue 400,000 shares of Corp. Common Stock, divided into two
classes consisting of 200,000 shares of Corp. Class A Stock and 200,000 shares
of Corp. Class B Stock. The holders of Corp. Class A Stock are entitled to one
vote for each share held of record on all matters submitted to a vote of the
stockholders. Except as required by law, the holders of Corp. Class B Stock have
no voting rights. Under the Certificate of Incorporation of IKS Corporation, a
holder of either class of Corp. Common Stock may convert any or all of his
shares into an equal number of shares of the other class of Corp. Common Stock;
provided that in the case of a conversion from Corp. Class B Stock, which is
nonvoting, into Corp. Class A Stock, which is voting, the holder of shares to be
converted would be permitted under applicable law to hold the total number of
shares of Corp. Class A Stock which would be held after giving effect to the
conversion.

Stockholders' Agreement

In connection with the Recapitalization, the stockholders of IKS
Corporation entered into the Stockholders' Agreement containing certain
agreements among such stockholders with respect to the capital stock and
corporate governance of IKS Corporation and the Company.

The Stockholders' Agreement contains certain provisions which, with certain
exceptions, restrict the ability of the stockholders from transferring any Corp.
Common Stock, Corp. Preferred Stock or Junior Subordinated Debentures of IKS
Corporation (the "Corp. Debentures"), except pursuant to the terms of the
Stockholders' Agreement. If holders of more than 50% of the Corp. Common Stock
approve the sale of the Company, each stockholder has agreed to consent to such
sale and, if such sale includes the sale of stock, each stockholder has agreed
to sell all of such stockholder's Corp. Common Stock on the terms and conditions
approved by holders of a majority of the Corp. Common Stock then outstanding. In
the event IKS Corporation proposes to issue and sell (other than in a public
offering pursuant to a registration statement) any shares of Corp. Common Stock
or any securities containing options or rights to acquire any shares of Corp.
Common Stock or any securities convertible into Corp. Common Stock to CVC or its
affiliates, IKS Corporation must first offer to each of the other shareholders a
pro rata portion of such shares. Such preemptive rights are not applicable to
the issuance of shares of Corp. Common Stock upon the conversion of shares of
one class of Corp. Common Stock into shares of the other class.

Pursuant to the Stockholders' Agreement, the Board of Directors of the
Company is composed at all times of five directors as follows: the President of
the Company, which position remained vacant after April 25, 2000; one individual
designated by Diether Klingelnberg; two individuals designated by CVC; and one
independent director who shall be designated by CVC subject to the right of
holders of the majority of the outstanding shares of Corp. Class A Stock to veto
the election of any such independent director.

The Stockholders' Agreement also provides for certain additional
restrictions on transfer of shares acquired by members of management pursuant to
certain employee stock purchase plans adopted by IKS Corporation in 1997
("Incentive Shares"), including the right of IKS Corporation to repurchase
Incentive Shares held by a member of management (a "Participant") upon
termination of such Participant's employment prior to 2001, at a formula price,
and the grant of a right of first refusal in favor of IKS Corporation in the
event a Participant elects to transfer such Incentive Shares of Corp. Common
Stock.

Registration Rights Agreement

In connection with their entry into the Stockholders' Agreement, IKS
Corporation, CVC and certain other stockholders of IKS Corporation entered into
a Registration Rights Agreement (the "Corp. Registration Rights Agreement").
Pursuant to the Corp. Registration Rights Agreement, upon the written request of
CVC, IKS Corporation has agreed to prepare and file a registration statement
with the Securities and Exchange Commission concerning the distribution of all
or part of the shares held by CVC and use its best efforts to cause such

III-7

registration statement to become effective. If at any time IKS Corporation files
a registration statement for the Corp. Common Stock pursuant to a request by CVC
or otherwise (other than a registration statement on Form S-8, Form S-4 or any
similar form, a registration statement filed in connection with a share exchange
or an offering solely to IKS Corporation' employees or existing stockholders, or
a registration statement registering a unit offering), IKS Corporation will use
its best efforts to allow the other parties to the Corp. Registration Rights
Agreement to have their shares of Corp. Common Stock (or a portion of their
shares under certain circumstances) included in such offering of Corp. Common
Stock if the registration form proposed to be used may be used to register such
shares. Registration expenses of the selling stockholders (other than
underwriting fees, brokerage fees and transfer taxes applicable to the shares
sold by such stockholders or the fees and expenses of any accountants or other
representatives retained by a selling stockholder) are to be paid by IKS
Corporation.

Employee Stock Purchase Plans

In 1997, IKS Corporation adopted a Restricted Stock Plan, pursuant to which
Participants were offered the opportunity to purchase Corp. Class A Stock. The
Participants were given the opportunity to acquire an aggregate of up to 10% of
the Corp. Class A Stock outstanding on a fully-diluted basis.

Also in 1997, IKS Corporation adopted an Equity Investment Plan, pursuant
to which Participants were offered the opportunity to purchase Corp. Class A
Stock, Series A 12% Cumulative Compounding Preferred Stock, par value $.01 per
share, and Series B 12% Cumulative Compounding Preferred Stock, par value $.01
per share. The Participants were given the opportunity to acquire an aggregate
of up to 1,020 shares of Corp. Class A Stock, 122.4 shares of Series A Preferred
Stock and 122.4 shares of Series B Preferred Stock.

Upon the Participants' purchase of securities under the Restricted Stock
Plan or the Equity Investment Plan (the "Plans"), such Participants became
subject to the terms and conditions of the Stockholders' Agreement. See
"--Stockholders' Agreement." In addition to the restrictions set forth above in
the discussion of the Stockholders Agreement, the Stockholders' Agreement also
provides the following restrictions with respect to the Participants: (i) the
Incentive Shares acquired by a Participant will be subject to repurchase by IKS
Corporation or its designee if such Participant's employment with the Company is
terminated within five years after acquiring such securities at formula prices
which vary based upon the time and circumstance of such termination, (ii) IKS
Corporation has a right of first refusal through such date on all securities
acquired by a Participant pursuant to a Plan, and (iii) if holders of a majority
of Corp. Class A Stock approve a sale of IKS Corporation, Participants will
consent to such sale.

Other

In connection with the Recapitalization, Arndt Klingelnberg, Diether
Klingelnberg and CVC entered into an agreement pursuant to which their ownership
percentages of the Corp. Preferred Stock and the Corp. Debentures may be
adjusted. Upon the occurrence of certain events, their respective ownership
percentages of Corp. Preferred Stock and Corp. Debentures will be adjusted so
that they will be pro rata with their respective ownership percentages of Corp.
Common Stock.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None

III-8

PART IV

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

(a)(1) List of Financial Statements.

The following Consolidated Financial Statements of the Company and the
Report of Independent Auditors set forth on pages II-9 through II-31
and II-8, respectively, are incorporated by reference into this item 14
of Form 10-K by item 8 hereof:

- Report of Independent Auditors
- Consolidated Balance Sheets as of December 31, 2000 and 1999.
- Consolidated Statements of Income for the years ended December 31,
2000, 1999 and 1998.
- Consolidated Statements of Changes in Shareholder's Deficit for
the years ended December 31, 2000, 1999 and 1998.
- Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998.
- Notes to Consolidated Financial Statements.

(a)(2) Financial Statement Schedule.

Schedule II - Valuation and Qualifying Accounts and Reserves is
attached hereto at page IV-6 and is incorporated by reference into this
Item 14 of Form 10-K. No other financial statement schedules have been
filed herewith since they are either not required, are not applicable,
or the required information is shown in the consolidated financial
statements or related notes.

IV-1

(a)(3) Exhibits.

Exhibit
No. Description
--- -----------
3.1 Restated Certificate of Incorporation, as amended, of the Company
(incorporated by reference to Exhibit 3.1 to the Company's Registra-
tion Statement on Form S-4, Registration No. 333-17305)
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-4, Registration
No. 333-17305)
4.1 Indenture dated as of November 6, 1996 between the Company and United
States Trust Company of New York, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement on
Form S-4, Registration No. 333-17305)
4.2 Registration Rights Agreement dated as of November 6, 1996 among
the Company, Schroder Wertheim & Co. Incorporated and Smith Barney
Inc. (incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-4, Registration No. 333-17305)
4.3 Form of 113/8% Senior Subordinated Notes due 2006 (included in
Exhibit 4.1) 10.1 Purchase Agreement dated October 31, 1996 among
the Company, Schroder Wertheim & Co. Incorporated and Smith Barney
Inc. (incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-4, Registration No. 333-17305)
10.2 Letter Agreement dated October 8, 1996 between Deutsche Bank and
the Company (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement on Form S-4, Registration
No. 333-17305)
10.3 Letter Agreement dated October 8, 1996 between Deutsche Bank and IKS
Klingelnberg GmbH (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-4, Registration
No. 333-17305)
10.4 Agreement and Plan of Recapitalization dated September 17, 1996
among Citicorp Venture Capital Ltd., IKS Corporation, the stock-
holders of IKS Corporation and certain stockholders of the
Company (incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-4, Registration No. 333-17305)
10.5 Commercial Lease Contract dated March 1, 1992 between Howard &
Howard Real Estate Partnership and IKS Service, Inc., as amended
(incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-4, Registration No. 333-17305)
10.6 Lease dated June 5, 1996 between Century Development Co. and the
Company (incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-4, Registration No. 333-17305)
10.7 Lease dated July 21, 1995 between 1st American Management Co.,
Inc. and the Company (incorporated by reference to Exhibit 10.7 to
the Company's Registration Statement on Form S-4, Registration
No. 333-17305)
10.8 Lease Agreement dated April 17, 1991 between Tate Engineering, Inc.
and IKS Eastern Services, Inc., as amended (incorporated by reference
to Exhibit 10.8 to the Company's Registration Statement on Form S-4,
Registration No. 333-17305)
10.9 Offer to Lease dated October 25, 1995 between Sigma Enterprises Ltd.
and IKS Canadian Knife & Saw Ltd. (incorporated by reference to
Exhibit 10.9 to the Company's Registration Statement on Form S-4,
Registration No. 333-17305)

IV-1

10.10 Industrial Multiple Tenancy Lease dated June 14, 1995 between Geary
Investments Limited "in Trust" and IKS Canadian Knife & Saw Ltd.
(incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-4, Registration No. 333-17305)
10.11 Lease dated March 12, 1992 between Gestion W. & L. Choiniere Inc. and
IKS Canadian Knife & Saw Ltd., as amended (incorporated by reference
to Exhibit 10.11 to the Company's Registration Statement on Form S-4,
Registration No. 333-17305)
10.12 Joint Venture Company Contract dated September 24, 1995 between IKS
Klingelnberg Far East GmbH and Shanghai Printing & Packaging
Machinery General Corporation (incorporated by reference to Exhibit
10.12 to the Company's Registration Statement on Form S-4,
Registration No. 333-17305)
10.13 Joint Venture Company Contract dated September 24, 1995 between IKS
Klingelnberg Far East GmbH and Shanghai Printing & Packaging
Machinery General Corporation (incorporated by reference to Exhibit
10.13 to the Company's Registration Statement on Form S-4,
Registration No. 333-17305)
10.14 Letter Agreement dated September 23, 1997 between Deutsche Bank and
IKS Klingelnberg GmbH (incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q, for the quarterly period
ended September 30, 1997, Registration No. 333-17305)
10.15 Summary of Permitted Indebtedness, Commitments from Banks, and
Availability at September 30, 2000 (incorporated by reference to
Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q, for the
quarterly period ended March 31, 2000, Registration No. 333-17305)
10.16 Letter agreement dated November 16, 1998 between Deutsche Bank and
IKS Klingelnberg GmbH (incorporated by reference to Exhibit 10.16 to
the Company's Quarterly Report on Form 10-Q, for the quarterly period
ended June 30, 2000, Registration No. 333-17305)
10.17 Letter agreement dated January 19, 1999 between Deutsche Bank and
the Company (incorporated by reference to Exhibit 10.17 to the
Company's Quarterly Report on Form 10-Q, for the quarterly period
ended June 30, 2000, Registration No. 333-17305)
10.18 Letter agreement dated May 12, 1999 between Deutsche Bank and the
Company (incorporated by reference to Exhibit 10.18 to the Company's
Quarterly Report on Form 10-Q, for the quarterly period ended
June 30, 2000, Registration No. 333-17305)
10.19 Letter agreement dated March 16, 2000 between Deutsche Bank and
IKS Klingelnberg GmbH (incorporated by reference to Exhibit 10.19 to
the Company's Quarterly Report on Form 10-Q, for the

IV-2

quarterly period ended June 30, 2000, Registration No. 333-17305)
10.20 Security Agreement dated December 11, 2000 between Deutsche Bank and
the Company (incorporated by reference to Exhibit 10.20 to the
Company's Current Report on Form 8-K, Registration No. 333-17305)
10.21 First Amendment to Security Agreement dated January 24, 2001
between Deutsche Bank and the Company (incorporated by reference
to Exhibit 10.21 to the Company's Current Report on Form 8-K,
Registration No. 333-17305)
10.22 Letter agreement dated December 11, 2000 between Deutsche Bank and
the Company
21.1 Subsidiaries of the Company

(b) Reports on Form 8-K. None.

IV-3

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.

INTERNATIONAL KNIFE & SAW, INC.

By: /s/ William M. Schult
---------------------------------------------
William M. Schult
Executive Vice President - Chief
Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting
Officer, and Executive Committee Member)

March 12, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 12, 2001.

Signature Title
--------- -----

/s/ William M. Schult Executive Vice President- Chief Financial
William M. Schult Officer, Treasurer and Secretary (Principal
Financial and Accounting Officer, and Executive
Committee Member)

/s/ Bradley H. Widmann Vice President- Operations/Americas and
Bradley H. Widmann Executive Committee Member

/s/ Jeffrey H. Welday Vice President- Sales & Marketing/
Jeffrey H. Welday Americas and Executive Committee Member

/s/ Diether Klingelnberg Director
Diether Klingelnberg

/s/ James A. Urry Director
James A. Urry

IV-4

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

The registrant has not sent the following to security holders: (i) any
annual report to security holders covering the registrant's last fiscal year; or
(ii) any proxy statements, forms of proxy or other proxy soliciting material
wither respect to any annual or other meeting of security holders.

IV-5

SCHEDULE II
INTERNATIONAL KNIFE & SAW, INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(DOLLARS IN THOUSANDS)

COL. C
COL. B ADDITIONS COL. E
BALANCE AT CHARGED TO COL. D BALANCE
COL. A BEGINNING COSTS AND OTHER DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD

YEAR ENDED 2000
Allowance for doubtful accounts $ 1,856 $ 1,013 $ $ 202(b) $ 572(a) 2,428
71(c)

Allowance for inventory obsolescence 2,118 2,083 655(b) 835(a) 3,898
123(c)

YEAR ENDED 1999
Allowance for doubtful accounts 1,780 1,005 -- 575(a) 1,856
354(c)

Allowance for inventory obsolescence ......... 1,001 -- 1,438(a) 2,118
233(c)

YEAR ENDED 1998
Allowance for doubtful accounts 1,480 231 261(b) 164(a) 1,780
28(c)

Allowance for inventory obsolescence .......... 768 170(b) 481(a) 2,788
50(c)

(a) Represents amounts charged against the reserves during the year.
(b) Consists of reserves of subsidiaries purchased during the year.
(c) Represents foreign currency translation adjustments during the year.

IV-6

EXHIBIT INDEX

Exhibit
No. Description
--- -----------

3.1 Restated Certificate of Incorporation, as amended, of the
Company (incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-4, Registration No. 333-17305)
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-4, Registration
No. 333-17305)
4.1 Indenture dated as of November 6, 1996 between the Company and United
States Trust Company of New York, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement on
Form S-4, Registration No. 333-17305)
4.2 Registration Rights Agreement dated as of November 6, 1996 among the
Company, Schroder Wertheim & Co. Incorporated and Smith Barney Inc.
(incorporated by reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-4, Registration No. 333-17305)
4.3 Form of 113/8% Senior Subordinated Notes due 2006 (included in
Exhibit 4.1) 10.1 Purchase Agreement dated October 31, 1996 among the
Company, Schroder Wertheim & Co. Incorporated and Smith Barney Inc.
(incorporated by reference to Exhibit 10.1 to the Company's Registra-
tion Statement on Form S-4, Registration No. 333-17305)
10.2 Letter Agreement dated October 8, 1996 between Deutsche Bank and the
Company (incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-4, Registration No. 333-17305)
10.3 Letter Agreement dated October 8, 1996 between Deutsche Bank and IKS
Klingelnberg GmbH (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-4, Registration
No. 333-17305)
10.4 Agreement and Plan of Recapitalization dated September 17, 1996 among
Citicorp Venture Capital Ltd., IKS Corporation, the stockholders of IKS
Corporation and certain stockholders of the Company (incorporated by
reference to Exhibit 10.4 to the Company's Registration Statement on
Form S-4, Registration No. 333-17305)
10.5 Commercial Lease Contract dated March 1, 1992 between Howard & Howard
Real Estate Partnership and IKS Service, Inc., as amended (incorporated
by reference to Exhibit 10.5 to the Company's Registration Statement
on Form S-4, Registration No. 333-17305)
10.6 Lease dated June 5, 1996 between Century Development Co. and the
Company (incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-4, Registration No. 333-17305)
10.7 Lease dated July 21, 1995 between 1st American Management Co., Inc.
and the Company (incorporated by reference to Exhibit 10.7 to the Com-
pany's Registration Statement on Form S-4, Registration No. 333-17305)
10.8 Lease Agreement dated April 17, 1991 between Tate Engineering, Inc. and
IKS Eastern Services, Inc., as amended (incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement on Form S-4,
Registration No. 333-17305)
10.9 Offer to Lease dated October 25, 1995 between Sigma Enterprises Ltd.
and IKS Canadian Knife & Saw Ltd. (incorporated by reference to
Exhibit 10.9 to the Company's Registration Statement on Form S-4,
Registration No. 333-17305)
10.10 Industrial Multiple Tenancy Lease dated June 14, 1995 between Geary
Investments Limited "in Trust" and IKS Canadian Knife & Saw Ltd.
(incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-4, Registration No. 333-17305)
10.11 Lease dated March 12, 1992 between Gestion W.& L. Choiniere Inc. and
IKS Canadian Knife & Saw Ltd., as amended (incorporated by reference
to Exhibit 10.11 to the Company's Registration Statement on Form S-4,
Registration No. 333-17305)
10.12 Joint Venture Company Contract dated September 24, 1995 between IKS
Klingelnberg Far East GmbH and Shanghai Printing & Packaging
Machinery General Corporation (incorporated by reference to Exhibit
10.12 to the Company's Registration Statement on Form S-4,
Registration No. 333-17305)
10.13 Joint Venture Company Contract dated September 24, 1995 between IKS
Klingelnberg Far East GmbH and Shanghai Printing & Packaging
Machinery General Corporation (incorporated by reference to Exhibit
10.13 to the Company's Registration Statement on Form S-4,
Registration No. 333-17305)

10.14 Letter Agreement dated September 23, 1997 between Deutsche Bank and IKS
Klingelnberg GmbH (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q, for the quarterly period
ended September 30, 1997, Registration No. 333-17305)
10.15 Summary of Permitted Indebtedness, Commitments from Banks, and
Availability at September 30, 2000 (incorporated by reference to
Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q, for the
quarterly period ended March 31, 2000, Registration No. 333-17305)
10.16 Letter agreement dated November 16, 1998 between Deutsche Bank and
IKS Klingelnberg GmbH (incorporated by reference to Exhibit 10.16 to
the Company's Quarterly Report on Form 10-Q, for the quarterly period
ended June 30, 2000, Registration No. 333-17305)
10.17 Letter agreement dated January 19, 1999 between Deutsche Bank and the
Company (incorporated by reference to Exhibit 10.17 to the
Company's Quarterly Report on Form 10-Q, for the quarterly period ended
June 30, 2000, Registration No. 333-17305)
10.18 Letter agreement dated May 12, 1999 between Deutsche Bank and the
Company (incorporated by reference to Exhibit 10.18 to the
Company's Quarterly Report on Form 10-Q, for the quarterly period
ended June 30, 2000, Registration No. 333-17305)
10.19 Letter agreement dated March 16, 2000 between Deutsche Bank and IKS
Klingelnberg GmbH (incorporated by reference to Exhibit 10.19 to the
Company's Quarterly Report on Form 10-Q, for the quarterly period ended
June 30, 2000, Registration No. 333-17305)
10.20 Security Agreement dated December 11, 2000 between Deutsche Bank and
the Company (incorporated by reference to Exhibit 10.20 to the
Company's Current Report on Form 8-K, Registration No. 333-17305)
10.21 First Amendment to Security Agreement dated January 24, 2001 between
Deutsche Bank and the Company (incorporated by reference to Exhibit
10.21 to the Company's Current Report on Form 8-K, Registration No.
333-17305)
10.22 Letter agreement dated December 11, 2000 between Deutsche Bank and the
Company
21.1 Subsidiaries of the Company

EXHIBIT 21.1
Subsidiaries

Name Jurisdiction
---- ------------

Hannaco Knives & Saws, Inc. Delaware
IKS Canadian Knife & Saw Ltd. Canada
IKS Klingelnberg GmbH Germany
IKS Klingelnberg Asia Pte. Ltd. Singapore
IKS Klingelnberg Far East GmbH Germany
Shanghai IKS Lida Mechanical Blade Co. Ltd. China
Shanghai IKS Mechanical Blade Co. Ltd. China
IKS Knives & Saws (M) Sdn. Bhd. Malaysia
PT. IKS Knife & Saw Indonesia Indonesia
IKS Messerfabrik Geringswalde GmbH Germany
Rolf Meyer GmbH Germany
A.K. van der Wijngaart Beheer B.V. the Netherlands
Diacarb B.V. the Netherlands
A.K. van der Wijngaart B.V. the Netherlands
Mayemyton Trading B.V. the Netherlands
Diacarb Stansvormen v.o.f. the Netherlands
Buland S.A. France
Boehler Miller Messer und Saegen GmbH Austria
IKS Mexican Holdings S.A. de C.V. Mexico
International Knife and Saw de Mexico S.A. de C.V. Mexico
International Knife and Saw Trading Corporation U.S. Virgin Islands
P.T. Bevenmas Jaya Indonesia

Exhibit 10.22

Translation of Letter from Deutsche Bank to International Knife & Saw, Inc.
C/O IKS Klingelnberg GmbH

December 11, 2000

Dear Mr. Meyer, Dear Mr. Schult:

We refer to our telephone discussion of December 7, 2000, in which you informed
us that the refinancing you were trying to obtain through U.S. banks will not
occur.

We confirm to you, that within the framework of General Conditions (AGB), we
will continue to make available to you a line of credit in the amount of US
$13,000,000 (in words: thirteen million US dollars). This line of credit is open
ended, assuming economic and financial conditions remain the same.

As we have already made clear in our previous correspondence, the agreed upon
covenants have been violated. As discussed in the meantime, you will now pledge
the following to us:

o All inventories and all accounts receivable and all existing rights
thereto, and
o All shares in IKS Klingelnberg GmbH, Remscheid, Germany

The details of these pledges will be agreed upon in separate contracts. Costs
incurred in connection with filing and perfecting our liens must be borne by
you.

In this connection you confirm to us, that the subsidiaries of IKS Klingelnberg
GmbH Remscheid are not being sold or pledged to third parties.

The agreements from September 21, 2000 and October 17, 2000 regarding the
maintenance of the equity ratios and shareholder relationship of International
Knife & Saw, Inc. with IKS Klingelnberg GmbH continues to remain in effect.

In addition, we reserve the right, in accordance with the previous and currently
in-effect agreements, to demand additional collateral in the form of fixed
assets. You hereby confirm to us that you will give us security interests in
these assets upon demand.

Drawdowns may occur in increments of at least $500,000 at Interbank rates plus a
margin of 2% per year. We will also charge a commitment fee on the unused
portion of the line equal to 0.25% per year, due and payable at the end of every
calendar quarter.

In consideration of the statutory regulations, in particular ss. 18 of the
(German) credit law, you will inform us in the future, as in the past, about the
economic and financial condition of International Knife & Saw, Inc. on a stand
alone and consolidated basis, and of IKS Klingelnberg GmbH and its subsidiaries,
by sending us audited financial statements within 6 months after the fiscal year
end as well as appropriate interim numbers (quarterly reports).

Every amount that is to be paid on the basis of this agreement must be made in
its entirety and without the deduction of any type of withholding taxes at
source. Such taxes are taxes, fees and public payments of any kind, which are
deducted from payments made in accordance with the contract, either in Germany
or the U.S. If such taxes are legally required, you must pay the additional
amount required, in order that the payment we receive after such deductions
corresponds to the full amount, that we would have received, if such a deduction
had not been required.

This loan agreement and all rights and obligations existing as a result thereof
are in accordance with German law. The court of jurisdiction is Wuppertal,
Germany.

Please indicate your legally binding agreement with the content of this
commitment by signing the enclosed copy and sending it back to us.

We look forward to continuing a cooperative and trustworthy relationship.

Regards,
Deutsche Bank AG
Remscheid Branch
Signed by Mr. Wolff and Mr. Jakobi

Agreed to and signed by William M. Schult, CFO of International Knife &
Saw, Inc.