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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-11549
---------
BLOUNT INTERNATIONAL, INC.
-------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0780521
------------------------------ ----------------------
(State or other jurisdiction of (I.R.S employer
incorporation or organization) Identification No.)
4909 SE International Way
Portland, Oregon 97222-4679
------------------------------ ----------------------
(Address of principal executive offices) (Zip Code)
(503) 653-8881
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.01 par value New York Stock Exchange
- ------------------------------------- -------------------------
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934)
Yes No X
------ ------
Page 1
Indicate the number of shares outstanding of each of the issued classes of
common stock, as of the latest practicable date.
Class of Common Stock Outstanding at June 30, 2003
--------------------- ----------------------------
$ .01 Par Value 30,814,073
Page 2
BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
Page No.
------------
Part I Financial Information
Item 1 - Financial Statements
Unaudited Consolidated Statements of Income (Loss) -
three and six months ended June 30, 2003 and 2002 4
Unaudited Consolidated Balance Sheets -
June 30, 2003 and December 31, 2002 5
Unaudited Consolidated Statements of Cash Flows -
six months ended June 30, 2003 and 2002 6
Unaudited Consolidated Statements of Changes in
Stockholders' Deficit - three and six months ended
June 30, 2003 and 2002 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis 24
Item 4 - Controls and Procedures 31
Part II Other Information
Item 6 - Exhibits and Reports on Form 8-K 31
Signature 33
Page 3
ITEM 1 - FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Blount International, Inc. and Subsidiaries
Three Months Six Months
ended June 30, ended June 30,
(Dollar amounts in millions, -------------------- --------------------
except per share data) 2003 2002 2003 2002
- ----------------------------------- --------- --------- --------- ---------
Sales $ 131.2 $ 123.3 $ 254.1 $ 229.9
Cost of Sales 86.5 81.2 166.6 150.9
- ----------------------------------- --------- --------- --------- ---------
Gross Profit 44.7 42.1 87.5 79.0
Selling, general and
administrative expenses 25.4 23.0 49.7 45.4
Restructuring expenses 0.0 (0.1) 0.2 5.5
- ----------------------------------- --------- --------- --------- ---------
Income from operations 19.3 19.2 37.6 28.1
Interest expense (17.7) (18.1) (35.3) (36.3)
Interest income 0.2 0.2 0.5 0.5
Other expense (3.0) (0.5) (3.1) (1.2)
- ----------------------------------- --------- --------- --------- ---------
Income (loss) before income taxes (1.2) 0.8 (0.3) (8.9)
Provision (benefit) for income
taxes (0.5) 0.3 (0.1) (2.9)
- ----------------------------------- --------- --------- --------- ---------
Net income (loss) $ (0.7) $ 0.5 $ (0.2) $ (6.0)
- ----------------------------------- ========= ======== ========= =========
Net income (loss) per common share:
Basic $ (0.02) $ 0.02 $ (0.01) $ (0.19)
Diluted (0.02) 0.02 (0.01) (0.19)
- ----------------------------------- ========= ======== ========= =========
The accompanying notes are an integral part of these financial statements.
Page 4
UNAUDITED CONSOLIDATED BALANCE SHEETS
Blount International, Inc. and Subsidiaries
June 30, December 31,
--------- ----------
(Dollar amounts in millions, except share and per share data) 2003 2002
- ------------------------------------------------------------- --------- ---------
Assets
- ------------------------------------------------------------- --------- ---------
Current assets:
Cash and cash equivalents $ 24.7 $ 26.4
Accounts receivable, net of allowance for
doubtful accounts of $3.5 and $4.3 58.7 58.5
Inventories 64.3 64.8
Deferred income taxes 30.5 30.5
Other current assets 11.6 11.0
- ------------------------------------------------------------- --------- ---------
Total current assets 189.8 191.2
Property, plant and equipment, net of accumulated
depreciation of $185.0 and $180.5 90.9 90.7
Goodwill 76.9 76.9
Other assets 49.5 69.2
- ------------------------------------------------------------- --------- ---------
Total Assets $ 407.1 $ 428.0
- ------------------------------------------------------------- ========= =========
Liabilities and Stockholders' Equity (Deficit)
- ------------------------------------------------------------- --------- ---------
Current liabilities:
Notes payable and current maturities of long-term debt $ 5.0 $ 3.4
Accounts payable 22.7 25.5
Accrued expenses 65.4 71.3
- ------------------------------------------------------------- --------- ---------
Total current liabilities 93.1 100.2
Long-term debt, exclusive of current maturities 606.2 624.1
Deferred income taxes, exclusive of current portion 1.1
Other liabilities 74.6 72.6
- ------------------------------------------------------------- --------- ---------
Total Liabilities 775.0 796.9
- ------------------------------------------------------------- --------- ---------
Stockholders' equity (deficit):
Common stock: par value $0.01 per share, 100,000,000 shares
authorized, 30,814,073 outstanding 0.3 0.3
Capital in excess of par value of stock 424.5 424.3
Accumulated deficit (786.6) (786.3)
Accumulated other comprehensive income (6.1) (7.2)
- ------------------------------------------------------------- --------- ---------
Total Stockholder's Deficit (367.9) (368.9)
- ------------------------------------------------------------- --------- ---------
Total Liabilities and Stockholders' Equity (Deficit) $ 407.1 $ 428.0
- ------------------------------------------------------------- ========= =========
The accompanying notes are an integral part of these financial statements.
Page 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Blount International, Inc. and Subsidiaries
Six Months Ended June 30,
-------------------------
(Dollar amounts in millions) 2003 2002
- ------------------------------------------------------------- ---------- ----------
Cash flows from operating activities:
Net loss $ (0.2) $ (6.0)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Early extinguishment of debt 2.8 0.3
Depreciation, amortization and other non-cash charges 10.5 11.0
Deferred income taxes 0.5 (9.1)
Loss on disposals of property, plant & equipment 0.2 0.9
Changes in assets and liabilities, net of effects of
businesses acquired and sold:
Increase in accounts receivable (0.2) (2.2)
Decrease (increase) in inventories 0.5 (0.5)
Decrease in other assets 24.1 2.5
(Decrease) increase in accounts payable (2.7) 3.5
Decrease in accrued expenses (5.5) (1.6)
Increase in other liabilities 2.8 10.0
- ------------------------------------------------------------- ------ ------
Net cash provided by operating activities 32.8 8.8
- ------------------------------------------------------------- ------ ------
Cash flows from investing activities:
Proceeds (payments) from sales of property, plant & equipment (0.4) 2.4
Purchases of property, plant & equipment (6.8) (9.4)
Expenses from sale of discontinued operations (14.3)
- ------------------------------------------------------------- ------ ------
Net cash used in investing activities (7.2) (21.3)
- ------------------------------------------------------------- ------ ------
Cash flows from financing activities:
Net increase in short-term borrowing 1.6
Issuance of long-term debt 113.0
Reduction of long-term debt (132.4) (4.2)
Other financing activities (9.5) (0.3)
- ------------------------------------------------------------- ------ ------
Net cash used in financing activities (27.3) (4.5)
- ------------------------------------------------------------- ------ ------
Net decrease in cash and cash equivalents (1.7) (17.0)
Cash and cash equivalents at beginning of period 26.4 47.6
- ------------------------------------------------------------- ------ ------
Cash and cash equivalents at end of period $ 24.7 $ 30.6
- ------------------------------------------------------------- ====== ======
The accompanying notes are an integral part of these financial statements.
Page 6
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Blount International, Inc. and Subsidiaries
Accumulated
Capital Retained Other
(Dollar amounts in millions, Common In Excess Earnings Comprehensive
shares in thousands) Stock of Par (Deficit) Income Total
- ----------------------------------------- ------- --------- --------- --------- -------
THREE MONTHS AND SIX MONTHS
ENDED JUNE 30, 2003
Balance March 31, 2003 $0.3 $424.3 $(785.9) $(7.0) $(368.3)
Net loss (0.7) (0.7)
Exercised stock options 0.2 0.2
Other comprehensive income, net:
Foreign currency translation adjustment 0.7 0.7
Unrealized gains 0.2 0.2
-------
Comprehensive income 0.4
- ----------------------------------------- ---- ------ ------- ----- -------
Balance June 30, 2003 $0.3 $424.5 $(786.6) $(6.1) $(367.9)
==== ====== ======= ===== =======
Balance December 31, 2002 $0.3 $424.3 $(786.3) $(7.2) $(368.9)
Net loss (0.2) (0.2)
Exercised stock options 0.2 0.2
Other comprehensive income, net:
Foreign currency translation adjustment 0.8 0.8
Unrealized gains 0.2 0.2
-------
Comprehensive income 1.0
- ----------------------------------------- ---- ------ ------- ----- -------
Balance June 30, 2003 $0.3 $424.5 $(786.6) $(6.1) $(367.9)
==== ====== ======= ===== =======
THREE MONTHS AND SIX MONTHS
ENDED JUNE 30, 2002:
Balance March 31, 2002 $0.3 $424.3 $(787.1) $6.0 $(356.5)
Net income 0.5 0.5
Other comprehensive loss, net:
Foreign currency translation adjustment 1.0 1.0
Unrealized losses (0.5) (0.5)
-------
Comprehensive loss 1.0
- ----------------------------------------- ---- ------ ------- ---- -------
Balance June 30, 2002 $0.3 $424.3 $(786.6) $6.5 $(355.5)
==== ====== ======= ==== =======
Balance December 31, 2001 $0.3 $424.3 $(780.6) $6.1 $(349.9)
Net loss (6.0) (6.0)
Other comprehensive loss, net:
Foreign currency translation adjustment 0.9 0.9
Unrealized losses (0.5) (0.5)
-------
Comprehensive loss (5.6)
- ----------------------------------------- ---- ------ ------- ----- -------
Balance June 30, 2002 $0.3 $424.3 $(786.6) $6.5 $(355.5)
==== ====== ======= ===== =======
The accompanying notes are an integral part of these financial statements.
Page 7
BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated financial
statements of Blount International, Inc. and Subsidiaries ("the Company")
contain all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position at June 30, 2003 and the
results of operations and cash flows for the periods ended June 30, 2003 and
2002. These financial statements should be read in conjunction with the notes
to the financial statements included in the Company's Annual Report on Form 10-
K for the year ended December 31, 2002.
Certain amounts in the prior year's financial statements have been reclassified
to conform to the current year's presentation, including the reclassification
of an extraordinary loss in accordance with the Company's adoption of SFAS No.
145, "Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections," and the realignment of business
segments. The reclassification of an extraordinary expense recognized in the
first quarter of 2002 for penalties on extinguishment of debt resulted in
increases in other expense of $0.3 million and benefit for income taxes of $0.1
million. The Company has realigned its business segments effective January 1,
2003 and now reports results in three segments: Outdoor Products, Lawnmower,
and Industrial and Power Equipment.
Effective January 1, 2003, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement
Obligations." The adoption of SFAS No. 143 has not had a material impact on
the 2003 financial statements.
Effective January 1, 2003, the Company adopted SFAS No. 145, "Rescission of
FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." This Statement addresses, among several items, the
reporting of debt extinguishments. As a result of the adoption of SFAS No.
145, the Company has reclassified prior years' extraordinary items attributable
to debt extinguishment to other income (expense) in this and all subsequent
reports.
Effective January 1, 2003, the Company's method of accounting for initial
recognition and measurement of guarantees changed as a result of the adoption
of FASB Interpretation No. 45 ("FIN 45") "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." The interpretation expands on the accounting guidance of FASB
Statements No. 5, 57 and 107 and incorporates without change the provisions of
FASB Interpretation No. 34, which is being superseded. Under the provisions of
FIN 45, at the time a guarantee is issued, the Company will recognize an
initial liability for the fair value or market value of the obligation it
assumes. The adoption of FIN 45 has not had a material impact on the 2003
financial statements.
The Company's internet home page is http://www.blount.com.
NOTE 2:
STOCK BASED COMPENSATION
As permitted by SFAS No. 123 "Accounting for Stock-Based Compensation," the
Company continues to apply intrinsic value accounting for its stock option
plans. Compensation cost for stock options, if any, is measured as the excess
of the quoted market price of the stock at the date of grant less the amount an
employee must pay to acquire the stock. The Company has adopted disclosure-
only provisions
Page 8
of SFAS No. 123 and SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure-an Amendment of FASB Statement No. 123". If the
Company had elected to recognize compensation expense based upon the fair value
at the grant dates for awards under these plans, the Company's net earnings
(loss) and net earnings (loss) per share would have been as follows:
Three months Six months
ended June 30, ended June 30,
(Dollars in millions, ------------------ -----------------
except per share amounts) 2003 2002 2003 2002
- ------------------------------------ -------- -------- -------- -------
Net income (loss), as reported $(0.7) $0.5 $(0.2) $(6.0)
Add: Stock-based employee compensation
cost, net of tax, included in net
income (loss) 0.1 0.1
Deduct: total stock-based employee
compensation cost, net of tax, that would
have been included in net income (loss)
under fair value method 0.3 0.4 0.7 1.2
----- ---- ----- -----
Proforma net income (loss) $(0.9) $0.1 $(0.8) $(7.2)
===== ==== ===== =====
Basic earnings (loss) per share
As reported $(0.02) $0.02 $(0.01) $(0.19)
Pro forma (0.03) 0.00 (0.03) (0.23)
Diluted earnings (loss) per share
As reported (0.02) 0.02 (0.01) (0.19)
Pro forma (0.03) 0.00 (0.03) (0.23)
NOTE 3:
RESTRUCTURING EXPENSES
In the first quarter of 2002, the Company incurred a restructuring charge
related to the closure and relocation of the Company's headquarters from
Montgomery, Alabama to Portland, Oregon. An initial charge of $5.6 million was
recorded and was subsequently adjusted to reflect transition expenses and a
revision of estimates. In the fourth quarter of 2002, the Company recorded a
$1.4 million charge related to the closure of a portion of a facility and
relocation of that equipment between its plants within its Oregon Cutting
Systems Group. In the first quarter of 2003, the Company reported an
additional $0.2 million in restructuring expenses associated with this Oregon
Cutting Systems Group relocation project for severance expenses affecting 19
hourly employees and 4 salaried employees. The following table outlines the
classification of the original expenses, and the subsequent charge against the
restructuring liability for these restructuring actions. Previous actions
represent a 2001 plant closure, benefit modification, and reduction in
headcount. These expenses are included in accrued expenses.
Page 9
Restructuring Actions
-----------------------------------------------------
Previous Corporate Office Asset
Recognition date Actions Relocation Relocation
----------------- ---------------- ----------------
Balance at January 1, 2002 $3.1
Expense/Adjustments (0.3) $ 5.2
Charges against liability (0.1) (0.4)
----- ----- -----
Balance at June 30, 2002 $ 2.7 $ 4.8 $ 0.0
===== ===== =====
Balance at January 1, 2003 $ 1.1 $ 0.4 $ 1.4
Expense/Adjustments 0.2
Charges against liability (0.3) (0.2) (0.3)
----- ----- -----
Balance at June 30, 2003 $ 0.8 $ 0.2 $ 1.3
===== ===== =====
NOTE 4:
INVENTORIES
Inventories consist of the following (in millions):
June 30, December 31,
2003 2002
--------------------------------- ------------ ------------
Finished goods $ 32.5 $ 31.8
Work in process 9.0 9.3
Raw materials and supplies 22.8 23.7
--------------------------------- ------ ------
Total Inventories $ 64.3 $ 64.8
--------------------------------- ====== ======
NOTE 5:
SEGMENT INFORMATION
Effective January 1, 2003, the Company realigned its business segments and
began reporting results in three business segments: Outdoor Products,
Lawnmower, and Industrial and Power Equipment. The Lawnmower segment consists
of the Company's Dixon subsidiary that historically was included in the Outdoor
Products segment. Inter-segment sales are now eliminated on a separate line
and historical amounts have been adjusted to reflect this change.
Page 10
Three months Six months
ended June 30, ended June 30,
(Dollars in millions) ------------------ -----------------
2003 2002 2003 2002
- ------------------------------------ -------- -------- -------- -------
Sales:
Outdoor Products $ 87.9 $ 77.0 $173.1 $150.1
Lawnmower 10.2 13.5 18.1 21.3
Industrial and Power Equipment 33.2 32.8 63.1 59.3
Elimination (0.1) (0.2) (0.8)
- ------------------------------------ ------ ------ ------ ------
Total Sales $131.2 $123.3 $254.1 $229.9
- ------------------------------------ ====== ====== ====== ======
Operating income (loss):
Outdoor Products $ 21.1 $ 17.3 $ 42.9 $ 33.7
Lawnmower 0.4 1.6 (0.3) 1.3
Industrial and Power Equipment 0.9 1.4 0.9 1.7
Corporate expense/Elimination (3.1) (1.2) (5.7) (3.1)
Restructuring expenses 0.1 (0.2) (5.5)
- ------------------------------------ ------ ------ ------ ------
Income from operations 19.3 19.2 37.6 28.1
Interest expense (17.7) (18.1) (35.3) (36.3)
Interest income 0.2 0.2 0.5 0.5
Other income (expense), net (3.0) (0.5) (3.1) (1.2)
- ------------------------------------ ------ ------ ------ ------
Income (loss) from continuing
Operations before income taxes $ (1.2) $ 0.8 $(0.3) $ (8.9)
- ------------------------------------ ====== ====== ===== ======
NOTE 6:
COMMITMENTS AND CONTINGENT LIABILITIES
Blount was named a potentially liable person ("PLP") by the Washington State
Department of Ecology ("WDOE") in connection with the Pasco Sanitary Landfill
Site ("Site"). This site has been monitored by WDOE since 1988. From
available records, the Company believes that it sent 26 drums of chromic
hydroxide sludge in a non-toxic, trivalent state to the site. It further
believes that the site contains more than 50,000 drums in total and millions of
gallons of additional wastes, some potentially highly toxic in nature.
Accordingly, based both on volume and on nature of the waste, the Company
believes that it is a de minimis contributor.
The current on-site monitoring program is being conducted with the WDOE by, and
being funded by certain PLPs, excluding the Company and several other PLPs. It
is estimated that this study will cost between $7 million and $10 million.
Depending upon the results of this study, further studies or remediation could
be required. The Company may or may not be required to pay a share of the
current study, or to contribute to the cost of subsequent studies or
remediation, if any. The Company is unable to estimate such costs, or the
likelihood of being assessed any portion thereof. However, during the most
recent negotiations with those PLPs that are funding the work at the Site, the
Company's potential share ranged from approximately $20,000 to $250,000, with
estimates of approximately $90,000 being the "reasonably most probable".
The Company had accrued $75,000 at December 31, 2002 and June 30, 2003 for the
potential costs of any clean-up. The Company spent $3,000 and $5,600 in the
years ended December 31, 2001 and 2002 respectively for expenses that are
primarily the cost of outside counsel to provide updates on the Site status.
Page 11
In July 2001, the Company's former Federal Cartridge Company subsidiary
("Federal") received notice from the Region 5 Office of the United States
Environmental Protection Agency ("EPA") that it intended to file an
administrative proceeding for civil penalties in connection with alleged
violations of applicable statutes, rules, and regulations or permit conditions
at Federal's Anoka, Minnesota ammunition manufacturing plant. The alleged
violations include (i) unpermitted treatment of hazardous wastes, (ii) improper
management of hazardous wastes, (iii) permit violations and (iv) improper
training of certain responsible personnel. Blount retained the liability for
this matter under the terms of the sale of its Sporting Equipment Group ("SEG")
segment (including Federal) to Alliant Techsystems, Inc. ("ATK") as discussed
in Note 5 of the 2002 Annual Report on Form 10-K.
To the knowledge of the Company, Federal has corrected the alleged violations.
The Company has tendered this matter for partial indemnification to a prior
owner of Federal.
In March 2002, EPA served an Administrative Complaint and Compliance Order
("Complaint") on Federal. The Complaint proposes civil penalties in the amount
of $258,593. Federal answered the Complaint, denied liability and opposed the
proposed penalties. In August 2002, Federal and the EPA filed cross motions
for Accelerated Decision on both liability and penalties issues with the
assigned Administrative Law Judge. On December 6, 2002 the Administrative Law
Judge issued an Order Granting in Part and Denying in Part the EPA's Motion for
Accelerated Decision and Denying Federal's Motion for Accelerated Decision
("Order"). The Order established that Federal is liable for $6,270 in civil
penalties and stated the remaining issues of liability and proposed penalties
totaling $252,323 would be ruled on after an administrative hearing. On
January 28, 2003, EPA and Federal held an administrative hearing on both
liability and penalties issues not resolved by the Order. The Administrative
Law Judge will make a decision on liability and penalties following submission
by EPA and Federal of Findings of Fact and Conclusions of Law ("Findings").
The EPA and Federal submitted proposed findings to the Administrative Law Judge
on May 7, 2003. It is anticipated that a ruling will be made in the near
future. Nonetheless, at the current time the Company does not believe payment
of the civil penalties sought by the EPA will have a materially adverse effect
on its consolidated financial condition or operating results.
The Company is a defendant in a number of product liability lawsuits, some of
which seek significant or unspecified damages, involving serious personal
injuries for which there are retentions or deductible amounts under the
Company's insurance policies. One such suit resulted in the Company paying its
self-insured retention of $1.0 million during the second quarter. In addition,
the Company is a party to a number of other suits arising out of the normal
course of its business. While there can be no assurance as to their ultimate
outcome, management does not believe these lawsuits will have a material
adverse effect on consolidated financial condition or operating results.
NOTE 7:
OTHER INFORMATION
During the six months ended June 30, 2003 net tax payments of $3.6 million were
made compared to $4.9 million last year. The Company has settled its issues
with the Internal Revenue Service through the 1997 fiscal year with no material
adverse effect. The periods from fiscal 1998 through 2002 are still open for
review. Interest paid during the six months ended June 30, 2003 and 2002 was
$32.9 million and $32.4 million, respectively. Included in this year's amounts
are $5.6 million of taxes and $1.3 million of interest paid in Canada for
settlement of returns through 1999.
The Company's "Other Income (Expense)" includes the gains and losses on
disposed assets and liabilities. Included in the results for the second
quarter and six
Page 12
months ended June 30, 2003 is a $3.1 million loss on deferred financing costs
related to the extinguishment of its term loans and revolving credit facilities.
This is partially offset by a gain of $0.3 million on the extinguishment of a
portion of its 13% Senior Subordinated notes. In the first quarter of 2002, the
Company sold a storage warehouse in Montgomery, Alabama that resulted in a gain
of $0.2 million and also recorded an anticipated loss on the sale of corporate
assets of $0.4 million in conjunction with the closure of the corporate
headquarters. An expense of $0.3 million was also recorded in the first quarter
of 2002 for penalties related to the early repayment of debt. In the second
quarter of 2002 the Company sold a fractional interest in an aircraft and
realized a loss of $0.6 million.
On December 7, 2001, the Company sold its Sporting Equipment Group ("SEG") to
Alliant Techsystems, Inc. ("ATK"). The sale included the establishment of a
$25.0 million escrow account as required by the Stock Purchase Agreement
between the Company and ATK to cover certain potential indemnification matters
in connection with the SEG sale. As of December 31, 2002 this amount was
included in other assets, but was reclassified into other current assets as of
March 31, 2003. These funds were returned to the Company on May 21, 2003.
NOTE 8:
EARNINGS PER SHARE DATA
For the three months and six months ended June 30, 2003 and 2002, net income
(loss) and shares used in the earnings per share ("EPS") computations were the
following amounts:
Three months Six months
ended June 30, ended June 30,
(Dollars in millions, --------------------- -------------------
except per share amounts) 2003 2002 2003 2002
- -------------------------------- ------- ------- ------- -------
Net income (loss), as reported $(0.7) $0.5 $(0.2) $(6.0)
- -------------------------------- ========== ========== ========== ==========
Shares:
Basic EPS - weighted average 30,808,010 30,795,882 30,801,946 30,795,882
Common shares outstanding
Dilutive effect of stock
options 1,049,871
- -------------------------------- ---------- ---------- ---------- ----------
Diluted EPS 30,808,010 31,845,753 30,801,946 30,795,882
- -------------------------------- ========== ========== ========== ==========
NOTE 9:
CONSOLIDATING FINANCIAL INFORMATION
Blount, Inc., a wholly-owned subsidiary of the Company, has two registered debt
securities that have different guarantees: 1) 7% Senior notes due June 15,
2005, and 2) 13% Senior Subordinated notes due August 1, 2009. The 7% Senior
notes are fully and unconditionally, jointly and severally, guaranteed by the
Company. Holders have first priority interest in all the shares or other
equity interest of all domestic subsidiaries and other entities, first priority
mortgage on all principal domestic properties, and the pledge of 65% of
outstanding shares of first tier foreign subsidiaries. These interests are
held in parri passu, ratably, with the Company's secured lenders. The 13%
Senior Subordinated notes are unconditionally guaranteed by the Company and all
of the Company's domestic subsidiaries ("guarantor subsidiaries"). All
guarantor subsidiaries of the 13% Senior Subordinated notes are 100% owned,
directly or indirectly, by the Company. While the Company and all of the
Company's domestic subsidiaries guarantee the 13% Senior Subordinated notes,
none of Blount's existing foreign subsidiaries ("non-
Page 13
guarantor subsidiaries") guarantee the 13% Senior Subordinated notes. The
following consolidating financial information sets forth condensed consolidating
financial information, statements of operation and the balance sheets and cash
flows of Blount International, Inc., Blount, Inc., the Guarantor Subsidiaries
and the Non- Guarantor Subsidiaries (in millions).
BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING FINANCIAL INFORMATION
For the Six Months
Ended June 30, 2003
Blount Non-
International, Blount, Guarantor Guarantor
Inc. Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------- ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS
- -----------------------
Sales $164.4 $ 60.0 $ 97.3 $(67.6) $254.1
Cost of sales 115.9 47.0 71.8 (68.1) 166.6
------ ------- ------ ------ ------
Gross profit 48.5 13.0 25.5 0.5 87.5
Selling, general and administrative 29.5 8.2 12.0 49.7
expenses
Restructuring expenses 0.2 0.2
----- ------ ------- ------ ------ ------
Income (loss) from operations 19.0 4.6 13.5 0.5 37.6
Interest expense $(9.9) (23.7) (0.3) (1.4) (35.3)
Interest income 0.3 0.2 0.5
Other income (expense), net (2.6) (0.5) (3.1)
----- ------ ------- ------ ------ ------
Income (loss) before income taxes (9.9) (7.0) 4.3 11.8 0.5 (0.3)
Provision (benefit) for income
taxes (4.0) (6.8) 1.7 9.0 (0.1)
----- ------ ------- ------ ------ ------
Income (loss) before earnings
(losses) of affiliated companies (5.9) (0.2) 2.6 2.8 0.5 (0.2)
Equity in earnings (losses) of
affiliated companies, net 5.7 5.9 0.2 (11.8)
----- ------ ------- ------ ------ ------
Net income (loss) $(0.2) $ 5.7 $ 2.8 $ 2.8 $(11.3) $ (0.2)
===== ====== ======= ====== ====== ======
Page 14
For the Three Months
Ended June 30, 2003
Blount Non-
International, Blount, Guarantor Guarantor
Inc. Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------- ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS
- -----------------------
Sales $ 83.6 $ 31.2 $ 49.5 $(33.1) $131.2
Cost of sales 59.9 24.3 36.3 (34.0) 86.5
------- ------- ------- ------ ------
Gross profit 23.7 6.9 13.2 0.9 44.7
Selling, general and 15.4 3.9 6.1 25.4
administrative expenses
Restructuring expenses
------- ------- ------- ------- ------ ------
Income (loss) from operations (0.0) 8.3 3.0 7.1 0.9 19.3
Interest expense (5.0) (11.2) (0.1) (1.4) (17.7)
Interest income 0.2 0.2
Other income (expense), net (2.7) (0.3) (3.0)
------- ------- ------- ------- ------ ------
Income (loss) before income taxes $ (5.0) (5.4) 2.9 5.4 0.9 (1.2)
Provision (benefit) for
income taxes (1.7) (7.0) 1.1 7.1 (0.5)
------- ------- ------- ------- ------ ------
Income (loss) before earnings
(losses) of affiliated companies (3.3) 1.6 1.8 (1.7) 0.9 (0.7)
Equity in earnings (losses) of
Affiliated companies, net 2.6 1.0 (3.6)
Net income (loss) $ (0.7) $ 2.6 $ 1.8 $ (1.7) $ (2.7) $ (0.7)
======= ======= ======= ======= ====== ======
Page 15
For the Six Months
Ended June 30, 2002
Blount Non-
International, Blount, Guarantor Guarantor
Inc. Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------- ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS
- -----------------------
Sales $ 144.2 $ 61.5 $ 80.0 $ (55.8) $229.9
Cost of sales 97.8 46.6 61.7 (55.2) 150.9
------ ------- ------- ------- ------- ------
Gross profit 46.4 14.9 18.3 (0.6) 79.0
Selling, general and administrative
expenses $ 0.3 26.1 8.8 10.2 45.4
Restructuring expenses 5.5 5.5
------ ------- ------- ------- ------- ------
Income (loss) from operations (0.3) 14.8 6.1 8.1 (0.6) 28.1
Interest expense (10.6) (34.6) (0.3) (0.2) 9.4 (36.3)
Interest income 9.7 0.2 (9.4) 0.5
Other income (expense), net (0.8) (0.4) (1.2)
------ ------- ------- ------- ------- ------
Income (loss) before income taxes (10.9) (10.9) 5.8 7.7 (0.6) (8.9)
Provision (benefit) for
income taxes (3.5) (4.2) 2.2 2.6 (2.9)
------ ------- ------- ------- ------- ------
Income (loss) before earnings
(losses) of affiliated companies (7.4) (6.7) 3.6 5.1 (0.6) (6.0)
Equity in earnings (losses) of
affiliated companies, net 1.4 8.1 (9.5)
------- ------- ------- ------- ------- ------
Net income (loss) $ (6.0) $ 1.4 $ 3.6 $ 5.1 $ (10.1) $ (6.0)
======= ======= ======= ======= ======= ======
Page 16
For the Three Months
Ended June 30, 2002
Blount Non-
International, Blount, Guarantor Guarantor
Inc. Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------- ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS
- -----------------------
Sales $ 62.7 $ 34.3 $ 38.5 $ (12.2) $123.3
Cost of sales 37.6 26.2 29.3 (11.9) 81.2
-------- -------- -------- ------- --------- -------
Gross profit 25.1 8.1 9.2 (0.3) 42.1
Selling, general and administrative
expenses $ 0.1 13.3 4.5 5.1 23.0
Restructuring expenses (0.1) (0.1)
-------- -------- -------- ------- --------- -------
Income (loss) from operations (0.1) 11.9 3.6 4.1 (0.3) 19.2
Interest expense (5.4) (17.2) (0.1) (0.1) 4.7 (18.1)
Interest income 4.8 0.1 (4.7) 0.2
Other income (expense), net (0.3) (0.2) (0.5)
-------- -------- -------- ------- --------- -------
Income (loss) before income taxes (5.5) (0.8) 3.5 3.9 (0.3) 0.8
Provision (benefit) for income
taxes (1.8) (0.1) 1.3 0.9 0.3
-------- -------- -------- ------- --------- -------
Income (loss) before earnings
(losses) of affiliated companies (3.7) (0.7) 2.2 3.0 (0.3) 0.5
Equity in earnings (losses) of
Affiliated companies, net (4.2) 4.9 (9.1)
-------- -------- -------- ------- --------- -------
Net income (loss) $ 0.5 $ 4.2 $ 2.2 $ 3.0 $ (9.4) $ 0.5
======== ======== ======== ======= ========= =======
Page 17
June 30, 2003
Blount Non-
International, Blount, Guarantor Guarantor
Inc. Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------- ------------ ------------ ------------ ------------
BALANCE SHEET
- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 11.7 $ (0.6) $ 13.6 $ 24.7
Accounts receivable, net 28.3 12.8 17.6 58.7
Intercompany receivables 265.9 48.6 10.9 $(325.4)
Inventories 23.5 19.9 20.9 64.3
Deferred income taxes 30.5 30.5
Other current assets 9.5 0.4 1.7 11.6
------- ------- ------- -------- -------
Total current assets 369.4 81.1 64.7 (325.4) 189.8
Investments in affiliated companies $ (19.0) 211.6 0.3 (192.9)
Property, plant and equipment, net 37.7 25.3 27.9 90.9
Cost in excess of net assets of
acquired businesses, net 30.2 40.1 6.6 76.9
Other assets 45.6 3.9 49.5
------- ------- ------- -------- -------
Total Assets $ (19.0) $ 694.5 $ 146.5 $ 103.4 $(518.3) $ 407.1
======== ======= ======= ======= ======== =======
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Notes payable and current
maturities of long-term debt $ 4.2 $ 0.8 $ 5.0
Accounts payable 12.6 $ 4.6 5.5 22.7
Intercompany payables $ 325.4 $(325.4)
Accrued expenses 48.9 6.4 10.1 65.4
------- ------- ------- ------- -------- -------
Total current liabilities 325.4 65.7 11.0 16.4 (325.4) 93.1
Long-term debt, exclusive of
current maturities 20.4 585.8 606.2
Deferred income taxes, exclusive of
current portion (1.2) 2.3 1.1
Other liabilities 3.1 63.1 2.3 6.1 74.6
-------- ------- ------- -------- -------- --------
Total Liabilities 348.9 713.4 13.3 24.8 (325.4) 775.0
-------- ------- ------- -------- -------- --------
Stockholders Equity (Deficit) (367.9) (18.9) 133.2 78.6 (192.9) (367.9)
Total Liabilities and -------- ------- ------- -------- -------- --------
Stockholders' Equity (Deficit) $(19.0) $694.5 $ 146.5 $ 103.4 $(518.3) $ 407.1
======== ======= ======= ======== ======== ========
Page 18
DECEMBER 31, 2002
Blount Non-
International, Blount, Guarantor Guarantor
Inc. Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------- ------------ ------------ ------------ ------------
BALANCE SHEET
- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 16.3 $ (0.1) $ 10.2 $ 26.4
Accounts receivable, net 26.2 15.1 17.2 58.5
Intercompany receivables 274.7 39.3 7.3 $(321.3)
Inventories 27.5 21.4 15.9 64.8
Deferred income taxes 30.4 0.1 30.5
Other current assets 9.2 0.5 1.3 11.0
-------- ------- --------- -------- --------
Total current assets 384.3 76.2 52.0 (321.3) 191.2
Investments in affiliated
companies $ (25.7) 201.6 0.2 (176.1)
Property, plant and
equipment, net 35.6 26.4 28.7 90.7
Cost in excess of net assets
of acquired businesses, net 30.2 40.2 6.5 76.9
Other assets 65.9 3.3 69.2
-------- -------- -------- --------- -------- --------
Total Assets $ (25.7) $ 717.6 $ 142.8 $ 90.7 $(497.4) $ 428.0
======== ======== ======== ========= ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Notes payable and current
maturities of long-term debt $ 3.4 $ 3.4
Accounts payable 14.0 $ 5.5 $ 6.0 25.5
Intercompany payables $ 321.3 $(321.3)
Accrued expenses 55.6 6.9 8.8 71.3
-------- -------- -------- --------- --------- --------
Total current liabilities 321.3 73.0 12.4 14.8 (321.3) 100.2
Long-term debt, exclusive of
current maturities 18.7 605.4 624.1
Deferred income taxes, exclusive
of current portion (1.9) 1.9
Other liabilities 3.2 66.9 1.6 0.9 72.6
-------- -------- -------- --------- --------- --------
Total Liabilities 343.2 743.4 14.0 17.6 (321.3) 796.9
-------- -------- -------- --------- --------- --------
Stockholders Equity (Deficit) (368.9) (25.8) 128.8 73.1 (176.1) (368.9)
-------- -------- -------- --------- --------- --------
Total Liabilities and
Stockholders' Equity (Deficit) $ (25.7) $ 717.6 $ 142.8 $ 90.7 $(497.4) $ 428.0
======== ======== ======== ========= ========= ========
Page 19
For the Six Months
Ended June 30, 2003
Blount Non-
International, Blount, Guarantor Guarantor
Inc. Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------- ------------ ------------ ------------ ------------
STATEMENT OF CASH FLOWS
- -----------------------
Net cash provided by (used in)
operating activities $ (4.1) $ 30.2 $ 1.0 $ 5.7 $ 32.8
-------- ------- ------- -------- --------- --------
Cash flows from investing
activities:
Proceeds from sales of property,
plant and equipment (0.4) (0.4)
Purchases of property, plant and
equipment (4.3) (0.7) (1.8) (6.8)
-------- ------- ------- -------- --------- --------
Net cash (used in) investing
activities (4.7) (0.7) (1.8) (7.2)
-------- ------- ------- -------- --------- --------
Cash flows from financing
activities:
Net increase in short-term
borrowings 0.9 0.7 1.6
Issuance of long-term debt 113.0 113.0
Reduction of long-term debt (132.4) (132.4)
Advances from (to) affiliated
companies 4.1 (3.6) (0.5)
Other (9.5) (9.5)
-------- ------- ------- -------- --------- --------
Net cash provided by (used in)
financing activities 4.1 (31.6) (0.5) 0.7 (27.3)
-------- ------- ------- -------- --------- --------
Net increase (decrease) in cash
and cash equivalents (6.1) (0.2) 4.6 (1.7)
Cash and cash equivalents at
beginning of period 18.6 (0.2) 8.0 26.4
-------- ------- ------- -------- --------- --------
Cash and cash equivalents at end
of period $ 0.0 $ 12.5 $ (0.4) $ 12.6 $ 24.7
======== ======= ======= ======== ========= ========
Page 20
For the Six Months
Ended June 30, 2002
Blount Non-
International, Blount, Guarantor Guarantor
Inc. Inc. Subsidiaries Subsidiaries Eliminations Consolidated
-------------- ------- ------------ ------------ ------------ ------------
STATEMENT OF CASH FLOWS
- -----------------------
Net cash provided by (used in)
operating activities $ (2.7) $ (2.7) $ 3.1 $ 11.1 $ 8.8
------- ------- -------- -------- --------- --------
Cash flows from investing
activities:
Proceeds from sales of property,
plant and equipment 2.4 2.4
Purchases of property, plant and
equipment (3.4) (1.5) (4.5) (9.4)
Proceeds (expenses) from sale of
discontinued operations (14.3) (14.3)
-------- ------- ------- --------- --------- --------
Net cash (used in) investing
activities (15.3) (1.5) (4.5) (21.3)
-------- ------- ------- -------- --------- --------
Cash flows from financing
activities:
Reduction of long-term debt (4.2) (4.2)
Advances from (to) affiliated
companies 2.7 (2.2) (0.5)
Other (0.3) (0.3)
-------- ------- ------- -------- --------- --------
Net cash provided by (used in)
financing activities 2.7 (6.7) (0.5) (0.0) (4.5)
-------- ------- ------- -------- --------- --------
Net increase (decrease) in
cash and cash equivalents (24.7) 1.1 6.6 (17.0)
Cash and cash equivalents at
beginning of period 44.0 (1.1) 4.7 47.6
-------- ------- ------- -------- --------- --------
Cash and cash equivalents
at end of period $ 0.0 $ 19.3 $(0.0) $ 11.3 $30.6
======== ======= ======= ======== ========= ========
Page 21
NOTE 10:
DEBT AND FINANCING AGREEMENTS
On January 31, 2001, the Company amended the terms of its credit facilities
related to $400 million in term loans. The amendment was entered into, in
part, to avoid a possible default under the covenants for the leverage and
interest coverage ratios of the credit facilities. The amendment eased the
financial covenants through March 31, 2002, increased the interest rate on
outstanding amounts under the credit facilities until more favorable financial
ratios are achieved, and required an amendment fee. The amendment also
required an infusion of $20 million in the form of equity capital or mezzanine
financing. On March 2, 2001, an affiliate of Lehman Brothers, Inc., the
Company's principal shareholder, invested $20 million in the Company in the
form of a convertible preferred equivalent security, together with warrants for
1,000,000 shares of Blount common stock (or approximately 3% of the outstanding
shares of common stock of the Company) that are exercisable immediately at a
price of $0.01 per share. The security can be converted into convertible
preferred stock at the option of the holder as a result of the Company's
stockholders passing an amendment to the Certificate of Incorporation
authorizing the issuance of a class, or classes, of preferred stock at the
Annual Meeting of Stockholders held on April 19, 2001. The Company has
recorded the fair value of the warrants at $7 million as a credit to additional
paid-in capital and a debt discount to the $20 million security.
On December 7, 2001, the Company amended the terms of its credit agreement to
incorporate the sale of SEG to ATK. The amendment addressed, among other
things, the SEG sale, revisions to the consolidated leverage and interest
coverage ratios, a reduction in the revolving credit facility to $75.0 million,
and certain prepayment and amendment fees. The agreement also cured any event
of default under the credit agreement that had been communicated to the lenders
on October 31, 2001.
During 2001, the Company would not have been in compliance with certain of its
debt covenants except for the fact that, in connection with the sale of SEG,
the Company and its lenders amended the covenants; as a result, the Company was
in compliance with all debt covenants as of and for the year ended December 31,
2002 and the first quarter ended March 31, 2003.
On May 15, 2003 the Company entered into a new senior credit facility replacing
a previous credit facility. The new credit facility consists of a $67.0 million
revolving credit facility, a Term A loan of up to $38.0 million and a Term B
loan of up to $85.0 million. These loans are collateralized by certain Company
assets, some of which are held in trust in parri passu, ratably with the
Company's 7% Senior notes. The new credit facility is subject to certain
reporting and financial covenant compliance requirements. Specifically the
Company must meet minimum EBITDA thresholds and maintain a certain fixed
coverage ratio which is defined as EBITDA divided by the sum of cash interest
paid, capital spending and cash income taxes paid. The Company was in
compliance with these covenants as of June 30, 2003.
The term of the credit facility is for five years with scheduled quarterly
repayments as follows: the Term A loan requires quarterly repayments of
$1,250,000 beginning July 1, 2003 until April 1, 2004 and then increasing to
$2,062,500 per quarter on July 1, 2004 until the last payment on May 14, 2008;
Term B requires quarterly payments of $1,250,000 beginning July 1,2005 until
April 1,2006 and then increasing to $1,875,000 per quarter until January 1,
2008 with the final payment of $66,875,000 due on May 14, 2008. The term loans
can be repaid at anytime but are subject to a prepayment premium during the
initial two years of the credit agreement. There can also be additional
mandatory repayment amounts due related to sale of Company assets under certain
circumstances and upon the Company's annual excess cash flow as determined by
the credit agreement.
The Company utilized $149.5 million of the facility, including $31.8 million on
the revolver, on May 15 to extinguish $133.5 million of the existing senior
credit facility, pay $8.3 million towards fees and expenses for the loan agent
and others,
Page 22
and provide $7.7 million to temporarily cash collateralize outstanding letters
of credit. Prior to the end of the second quarter the company paid off the
revolver balance in full, in part, with $25.0 million returned to the Company
that was previously held in escrow as part of the sale of the Company's
Sporting Equipment segment in 2001. As of June 30, 2003 the outstanding
balances on the new credit facility were $38.0 million of Term A, $80.0
million of Term B and no amounts drawn on the revolving facility.
Long-term debt at June 30, 2003 and December 31, 2002 consisted of the
following:
June 30, December 31,
(Dollars in millions) 2003 2002
- --------------------------------- -------- --------
13% Senior subordinated notes $ 323.2 $ 325.0
7% Senior notes 149.6 149.4
Term loans 118.0 134.4
Revolver credit agreements
12% preferred equivalent security 20.4 18.7
- --------------------------------- -------- --------
Total Debt 611.2 627.5
Less current maturities (5.0) (3.4)
- --------------------------------- -------- --------
Total long-term debt $ 606.2 $ 624.1
- --------------------------------- ======== ========
NOTE 11:
GOODWILL AND OTHER INTANGIBLE ASSETS
Effective January 1, 2002, the Company adopted the provisions of SFAS No. 142,
"Goodwill and Other Intangible Assets." Under the provisions of SFAS No. 142,
amortization of goodwill and indefinite-lived intangible assets is prohibited.
Also, SFAS No. 142 established two broad categories of intangible assets:
definite-lived intangible assets which are subject to amortization and
indefinite-lived intangible assets which are not subject to amortization. For
additional information on the impact to the Company of the adoption of SFAS No.
142, see Note 7 to the 2002 Annual Report on Form 10-K .
As of January 1, 2002 the Company's goodwill balance of $76.9 million was
comprised of $43.8 million related to the Outdoor Products segment, $28.1
million related to the Industrial and Power Equipment segment, and $5.0 million
related to the Lawnmower segment. There have been no adjustments to the
goodwill balance since adoption.
NOTE 12:
NEW ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued Financial Accounting Standards Board
Interpretation No. 46, "Consolidation of Variable Interest Entities." FIN 46
clarifies the application of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," to certain entities in which equity investors do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 applies
immediately to variable interest entities ("VIEs")created after January 31,
2003, and to VIEs in which an enterprise obtains an interest after that date.
It applies in the first fiscal year or interim period beginning after June 15,
2003, to VIEs in which an enterprise holds a variable interest that it acquired
before February 1, 2003. FIN 46 applies to public enterprises as of the
beginning of the applicable interim or
Page 23
annual periods. Management has evaluated the Company for possible VIEs and
believes that FIN 46 will not have a material impact on the Company's
financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 amends SFAS No. 133 to require contracts with comparable
characteristics to be accounted for similarly. SFAS No. 149 clarifies the
circumstances under which a contract with an initial net investment meets the
characteristic of a derivative and clarifies when a derivative contains a
financing component that warrants special reporting in the statement of cash
flows. This statement is effective for contracts entered into or modified
after June 30, 2003, except for hedging relationships designated after June 30,
2003, where the guidance should be applied prospectively. The Company is
currently evaluating the effect that the adoption of SFAS No. 149 will have on
its results of operations and financial condition.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, by requiring
those instruments to be classified as liabilities (or assets in some
circumstances) in the statement of financial position. SFAS No. 150 requires
disclosure regarding the terms of those instruments and settlement
alternatives. This statement is effective for all financial instruments
entered into or modified after May 31, 2003, and is otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. The
Company is currently evaluating the effect that the adoption of SFAS No. 150
will have on its financial statements.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATING RESULTS
Results for the three months and six months ended June 30, 2003 showed
improvement from last year in sales and income from operations, but were
partially offset by costs during the second quarter related to the refinancing
of a portion of the Company's debt.
Sales for the second quarter of 2003 were $131.2 million, compared to $123.3
million for the same period last year. The increase of $7.9 million or 6% is
the result of a 14% year-over-year increase for Outdoor Products and a 1%
increase for Industrial and Power Equipment, partially offset by a 24% decrease
in Lawnmowers. Currency rates continue to be favorable for foreign markets
with the effect on unit prices estimated to yield $2.8 million in additional
sales revenue.
Sales for the six months ended June 30, 2003 were $254.1 million compared to
$229.9 million for the same period last year. The increase of $24.2 million or
11% is driven by a 15% increase for Outdoor Products and a 6% increase in the
Industrial and Power Equipment segment partially offset by a 15% decline in
Lawnmower sales. Compared to last year, sales in the first six months have
generally improved for many of the Company's products and, in foreign markets,
currency rates continue to be favorable with the effect on unit prices yielding
an estimated $4.6 million in additional sales revenue.
Income from operations for the second quarter of 2003 was $19.3 million
compared to $19.2 million for the same period last year. This increase
reflected a $2.6 million increase in gross profit, driven by higher sales
volume, largely offset by higher SG&A expense. Total SG&A expense in the
second quarter of 2003 of $25.4 million compared to $23.0 million reported in
2002. This increase of $2.4 million,
Page 24
or 10%, included $0.8 million due to the
weaker US Dollar, $0.8 million increase in pension and post retirement expense,
and $0.4 million increase for insurance.
Income from operations for the six months ended June 30, 2003 of $37.6 million
compares to $28.1 million for the same period last year. The increase of $9.5
million or 34% is primarily due to a $8.5 million increase in gross profit and
a $5.3 million reduction in restructuring expense partially offset by a $4.3
million increase in SG&A expense. The increase in gross profit is due to the
higher sales volume, supported by the effect of currency rates. Total SG&A
expense for the six months ended June 30, 2003 was $49.7 million compared to
$45.4 million for the same period last year. This increase includes the
effect of currency rates estimated at $1.7 million, $1.5 million increase for
pension and post retirement expense, and $0.7 million increase for insurance.
Restructuring expense of $0.2 million was incurred in the six months ended June
30, 2003 for severance associated with the relocation of a production process
within the Outdoor Products segment. Restructuring expense of $5.5 million was
incurred in the same period last year for the relocation of corporate
headquarters from Montgomery, Alabama to Portland, Oregon.
Net loss for the second quarter of 2003 was $0.7 million or $0.02 per share
compared to net income of $0.5 million or $0.02 per share for the same period
in 2002. The change in net income is due to higher other expense of $2.5
million partially offset by higher operating income of $0.1 million, lower
interest expense of $0.3 million and reduced income tax expense of $0.8
million. The increase in other expense reflects $2.8 million of expense related
to the early extinguishment of debt in conjunction with the Company's
refinancing in May of this year. Last year's results included $0.6 million in
expense related to the sale of a fractional interest in an aircraft. A tax
benefit of $0.5 million in the second quarter of 2003 is $0.8 million higher
than the $0.3 million provision reported in the same period last year. The
lower taxes were primarily due to lower income.
Net loss for the six months ended June 30, 2003 of $0.2 million or $0.01 per
share compares to a net loss of $6.0 million or $0.19 per share for the same
period in 2002.The decrease in net loss reflects the $9.5 improvement in
operating income and a $1.0 million decrease in interest expense partially
offset by a $2.8 million reduction in income tax benefit and a $1.9 million
increase in other expense. Interest expense, was 3% lower than the previous
year due to lower interest rates and a lower level of debt. Other expense of
$3.1 million in 2003 compares to $1.2 million in 2002 with the increase
primarily the result of this year's debt extinguishment expense and offset
somewhat by a $0.8 million loss on the sale of Company assets during 2002. A
tax benefit of $0.1 million in 2003 compares to a benefit of $2.9 million in
2002. The change in tax benefit is due to reduction in pretax loss.
SEGMENT RESULTS
Effective January 1, 2003, the Company realigned its business and now reports
results in three business segments: Outdoor Products, Lawnmower, and
Industrial and Power Equipment. The Lawnmower segment consists of the
Company's Dixon subsidiary that historically was included in the Outdoor
Products segment. Inter-segment sales are now eliminated on a separate line and
historical amounts have been adjusted to reflect this change.
Sales for the Outdoor Products segment in the second quarter of 2003 were $87.9
million compared to $77.0 million in 2002, a 14% increase. The increase in
sales was driven by stronger demand in all major geographical markets and in
both original equipment manufacturer ("OEM") and replacement channels. Growth
in demand was especially strong for the European market. A weaker US Dollar
contributed to this increase and the effect on translation estimated at $2.8
million.
Page 25
Sales for the six months ended June 30, 2003 were $173.1 million compared to
$150.1 million in the same period of 2002. The increase of $23.0 million or
15% continues to show a recovery from last year's performance that was a 6%
decline compared to 2001 results. As with the quarter results, the six month
comparison shows an increase driven by stronger demand in all major
geographical markets and in both OEM and replacement channels. Growth in
demand occurred in all product lines led by chain saw components and is
particularly strong in the European market. A weaker US Dollar contributed to
this increase and the effect on translation is estimated at $4.6 million.
Operating profit increased to $21.1 million from $17.3 million in the second
quarter of 2002. The increase is the result of an increase in gross profit,
offset, in part, by higher SG&A costs. Gross profit increased to $35.8 million
from $31.2 million due to higher sales volume and the net favorable effect of
currency rates of $2.2 million. SG&A increased to $14.7 million from $13.9
million in 2002 due to a $0.8 million due to the weaker US Dollar as well as
rising insurance and benefit expense, but was partially offset by a reduction
resulting from the reassignment of certain positions to the corporate office.
For the six months ended June 30, 2003 operating profit increased to $42.9
million compared to $33.7 million for the same period in 2002. As with the
quarter's results the six month year-over-year comparison reflects an increase
in gross profit, offset, in part, by higher SG&A costs. Gross profit increased
to $71.5 million from $60.7 million due to higher sales volume and the net
favorable effect of currency rates of $3.9 million. SG&A increased to $28.6
million from $27.0 million in 2002 due to a $1.7 million due to the weaker US
Dollar as well as rising insurance and benefit expense, but partially offset by
a reduction resulting from the reassignment of certain positions to the
corporate office.
Sales for the Lawnmower segment in the second quarter of 2003 were $10.2
million compared to $13.5 million for the same period of 2002, a 24% decrease.
Sales for six months ended June 30, 2003 were $18.1 million compared to $21.3
million for the same period last year, a 15% decrease. For the second quarter
and six month period, the decline in sales is due primarily to a decline in
unit volume reflecting the increased competition that resulted in a decline of
market share of the zero-turning-radius lawnmower products. This decline in
volume is partially offset by a new entry-level model called the "Zeeter",
introduced in the middle of 2002, and which provided one-fifth of unit sales
for both the second quarter and six month period ended June 30, 2003.
The segment's operating income for the second quarter was $0.4 million compared
to $1.6 million for the same period in 2002. For the six months ended June 30,
2003 the segment had an operating loss of $0.3 million compared to an operating
profit of $1.3 million for the same period last year. Lower profitability is
due primarily to a decline in sales volume, but also higher employee benefit
costs and a shift in product mix to smaller and lower margin units.
Sales of the Company's Industrial and Power Equipment segment in the second
quarter of 2003 were $33.2 million compared to $32.8 million in 2002. This
$0.4 million, or 1% increase was driven by stronger sales of timber harvesting
and loading equipment, including a new product line, a skidder, introduced in
mid-2002. The year over year growth rate for these products declined from the
first quarter, however, and results continue to be offset partially by lower
demand for the segment's power transmission components business as construction
and utility equipment markets remain weak. Sales for the six months ended June
30, 2003 were $63.1 million compared to $59.3 million for the same period last
year, a $3.8 million or 6% increase.
The segment's operating income in the second quarter of 2003 was $0.9 million
compared to $1.4 million in 2002. Results for the six months ended June 30,
2003 were $0.9 million compared to $1.7 million for the same period last year.
For both the second quarter and the six months ended June 30, 2003, the
decrease from
Page 26
comparable periods last year reflects the decline in power transmission
components business and lower margins in the timber harvesting and loading
equipment business due to higher discounting on product sales.
On March 11, 2003 the Company announced marketing and supply agreements with
Caterpillar, Inc. These agreements will expand the line of purpose-built
forestry equipment currently available to dealers and customers of the
Company's Forestry & Industrial Equipment Division ("FIED"). The long-term
agreements with Caterpillar leverage both companies' capabilities in specific
areas of the forestry business and expand the Prentice brand of track feller-
bunchers and Hydro-Ax brand of wheel feller-bunchers already distributed by
FIED dealers.
Corporate office expense was $3.1 million for the second quarter compared to
$1.2 million in 2002. For the six months ended June 30, 2003, corporate office
expense was $5.7 million compared to $3.1 million in 2002. The increase
reflects the reassignment of certain positions from the Outdoor Products
segment from 2002. The estimated impact of this reassignment is $0.7 million in
the second quarter and $1.4 million for the six months. Other year-over year-
increases include higher pension and post retirement benefits of $0.3 million
for the quarter and $0.5 million for six months; accrued performance bonus of
$0.3 million for the quarter and $0.4 million year for six months; and higher
insurance costs of $0.2 million for the quarter and $0.4 million for six
months.
The Company's total backlog increased to $86.5 million at June 30, 2003 from
$56.3 million at December 31, 2002 and from $48.4 million at June 30, 2002 as
follows (in millions):
Backlog
---------------------------------------
June 30, December 31, June 30,
2003 2002 2002
- ------------------------------------ ------------ ------------ -----------
Outdoor Products $ 57.9 $ 42.9 $ 33.0
Lawnmower 0.1 3.1 0.1
Industrial and Power Equipment 28.5 10.3 15.3
- ------------------------------------ ------- ------- --------
Total segment backlog $ 86.5 $ 56.3 $ 48.4
- ------------------------------------ ======= ======= ========
Backlog for the Outdoor Products segment has increased over the past year due
to improved customer inventory positions and current product demand. It should
be noted however that during significant increases in demand for chain saw
product, the backlog may be somewhat overstated as some customers place
duplicate orders to ensure order fulfillment. The Lawnmower segment's backlog
is typically low at this time of year. The Industrial and Power Equipment
segment backlog has increased largely due to a new program encouraging dealers
to order with greater lead time. This program is being implemented during the
second and third quarters of 2003 and accounts for about half of the segment's
increase.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company continues to be substantially leveraged which may adversely affect
its operations. This could have important consequences, including the
following:
1. a substantial portion of cash flows available from operations are required
to be dedicated to the payment of interest expense and principal, which will
reduce the funds that would otherwise be available for operations and future
business opportunities;
2. a substantial decrease in net income and cash flows or an increase in
expenses may make it difficult to meet debt service requirements or force the
Company to modify operations;
Page 27
3. substantial leverage may make the Company more vulnerable to economic
downturns and competitive pressure; and
4. the ability to obtain additional financing to fund the Company's
operational needs may be impaired or may not be available on favorable terms.
Total debt at June 30, 2003 was $611.2 million compared to $627.5 million at
December 31, 2002. On May 15, 2003 the Company entered into a new senior credit
facility. The new credit facility consists of a $67.0 million revolving credit
facility, a Term A loan of up to $38.0 million and a Term B loan of up to $85.0
million. These loans are collateralized by certain Company assets and interest
and principal payments continue to represent significant obligations. Interest
on certain loan and credit facilities are payable in arrears according to
varying interest rates and periods. The Company's remaining liquidity needs
relate to working capital and capital expenditures.
The Company intends to fund working capital, capital expenditures and debt
service requirements through cash flows generated from operations and from the
revolving credit facility. Furthermore, the Company expects these resources
will be sufficient to cover any additional increases in working capital and
capital expenditures. The new revolving credit facility, with availability of
up to $67.0 million, replaced a previously available facility of up to $75.0
million, and none was drawn as of June 30, 2003. Letters of credit issued
under the new revolving credit facility, which reduce the amount available,
were $7.9 million as of June 30, 2003 compared to $11.4 million under the
previous facility at December 31, 2002. The new revolving credit facility will
mature in May of 2008.
Cash balances at June 30, 2003 were $24.7 million compared to $26.4 million at
December 31, 2002. The decline in cash balance in the first six months of 2003
is $1.7 million compared to a decline of $17.0 million for the same period in
2002. In addition the Company had $0.5 million of temporary collateralization
of letters of credit that will be returned in the third quarter.
Cash generated from operating activities was $32.8 million in the first six
months of 2003 compared to $8.7 million for the same period in 2002. The $24.0
million increase in cash provided includes an increase in pretax income of $6.1
million, after adjusting to exclude the non-cash decrease in restructuring
expense of $5.1 million and an increase in non-cash debt extinguishment costs
of $2.5 million, a $9.6 million increase in net deferred tax assets, and the
receipt of $25.0 million in escrowed funds associated with the sale of the
Company's "Sporting Equipment Group" ("SEG") in 2001. These increases are
partially offset by a higher use of funds for accounts payable of $6.2 million,
accrued expense of $3.9 million, and other liabilities of $7.2 million.
Accounts receivable at June 30, 2003 and December 31, 2002 and sales by segment
for the second quarter of 2003 compared to the fourth quarter of 2002 were as
follows:
June 30, December 31, Increase
(Dollars in millions) 2003 2002 (Decrease)
- ------------------------------------ ------------ ------------ -----------
Accounts Receivable:
Outdoor Products $ 41.2 $ 37.9 $ 3.3
Lawnmower 2.5 3.4 (0.9)
Industrial and Power Equipment 15.2 16.1 (0.9)
- ------------------------------------ ------ ------- -------
Total segment receivables $ 58.9 $ 57.4 $ 1.5
- ------------------------------------ ====== ======= ======
Page 28
Three Months Ended
June 30, December 31, Increase
2003 2002 (Decrease)
- ------------------------------------ ------------- ------------ -----------
Sales:
Outdoor Products $ 87.9 $ 83.1 $ 4.8
Lawnmower 10.2 9.2 1.0
Industrial and Power Equipment 33.2 35.8 (2.6)
Elimination (0.1) (0.1)
- ------------------------------------ -------- ------ ------
Total segment sales $131.2 $ 128.1 $ 3.1
- ------------------------------------ ======== ====== ======
The $1.5 million increase in segment accounts receivable from December 31, 2002
is in line with the increase in sales. In addition the Company received $0.4
million on a receivable related to discontinued operations, and reduced the
allowance for doubtful accounts $0.8 million from $3.5 million reported at
December 31, 2002.
Net cash used for investing activities for the first six months of 2003 was
$7.2 million compared to $21.3 million for the same period of 2002. Purchases
for property, plant and equipment during this period of 2003 were $6.8 million
compared to $9.4 million for the same period last year which was higher due to
the purchase of certain equipment from a company that was exiting one of its
businesses. Payments associated with the sales of assets during the first six
months of 2003 are $0.4 million and are related to the 2002 sale of an office
building in Montgomery, Alabama. This is $2.8 million lower than receipts of
$2.4 million in the same period of 2002 that were due primarily to the sale of
a storage warehouse and a fractional interest in an aircraft. In the first six
months of 2003 there were less than $0.1 million in expenses associated with
the sale of discontinued operations compared to $14.3 million in the first six
months of 2002.
Cash used in financing activities for the first six months of 2003 was $27.3
million compared to $4.5 million for the same period last year. In the second
quarter the Company, utilizing $149.5 million of its new credit facility,
extinguished its Tranche B term loan with an outstanding balance of $133.5
million. The borrowings on the new facility consisted of $118.0 million from
new term loans, and $31.8 million from the new revolver facility. Included in
other financing activities are $9.7 million for fees and expenses paid as part
of the transaction. The revolver was subsequently fully paid down, in part,
with $25.0 million returned to the Company that was previously held in escrow
as part of the sale of the Company's Sporting Equipment segment in 2001. Cash
used in 2002 for financing activities included scheduled debt payment of $1.7
million and additional payment resulting from the application of proceeds
generated from sale of assets to the reduction of long term debt.
Due to a decline in asset values of the Company's sponsored defined benefit
plan during the past two years, the Company's annual cash contributions to the
pension fund will increase in 2003 and 2004. The decline in asset value is due
to overall weakness in the stock and bond markets. The estimated amount of
incremental cash contributions over 2002 is estimated to be $3.7 million and
$8.7 million respectively for 2003 and 2004. Furthermore, the Company adjusted
its balance sheet at the end of 2002 to record a minimum pension liability in
accordance with SFAS 87 "Employers' Accounting for Pensions". The adjustment
resulted in a non-cash reduction of shareholder's equity by $14.2 million. The
Company believes that cash flow from operations and amounts available under its
revolving credit agreement will be sufficient to cover the higher pension
contribution levels.
Page 29
NEW ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued Financial Accounting Standards Boards
Interpretation No. 46, "Consolidation of Variable Interest Entities." FIN 46
clarifies the application of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," to certain entities in which equity investors do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 applies
immediately to variable interest entities ("VIEs")created after January 31,
2003, and to VIEs in which an enterprise obtains an interest after that date.
It applies in the first fiscal year or interim period beginning after June 15,
2003, to VIEs in which an enterprise holds a variable interest that it acquired
before February 1, 2003. FIN 46 applies to public enterprises as of the
beginning of the applicable interim or annual periods. Management has
evaluated the Company for possible VIEs and believes that FIN 46 will not have
a material impact on the Company's financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 amends SFAS No. 133 to require contracts with comparable
characteristics be accounted for similarly. SFAS No. 149 clarifies the
circumstances under which a contract with an initial net investment meets the
characteristic of a derivative and clarifies when a derivative contains a
financing component that warrants special reporting in the statement of cash
flows. This statement is effective for contracts entered into or modified
after June 30, 2003, except for hedging relationships designated after June 30,
2003, where the guidance should be applied prospectively. The Company is
currently evaluating the effect that the adoption of SFAS No. 149 will have on
its results of operations and financial condition.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, by requiring
those instruments to be classified as liabilities (or assets in some
circumstances) in the statement of financial position. SFAS No. 150 requires
disclosure regarding the terms of those instruments and settlement
alternatives. This statement is effective for all financial instruments
entered into or modified after May 31, 2003, and is otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. The
Company is currently evaluating the effect that the adoption of SFAS No. 150
will have on its financial statements.
FORWARD LOOKING STATEMENTS
Forward-looking statements in this release, including without limitation the
Company's "expectations," "beliefs," "indications," "estimates," and their
variants, as defined by the Private Securities Litigation Reform Law of 1995,
involve certain risks and actual results subsequent to the date of this
announcement may differ materially.
Page 30
ITEM 4 - CONTROLS AND PROCEDURES
We maintain a set of disclosure controls and procedures designed to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. Within the 90-day period prior to the
filing of this report, an evaluation was carried out under the supervision and
with the participation of the Company's management, including the Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the
effectiveness of our disclosure controls and procedures. Based on that
evaluation, the CEO and CFO have concluded that the Company's disclosure
controls and procedures are effective.
Subsequent to the date of their evaluation, there were no significant changes
in the Company's internal controls or in the factors that could significantly
affect these controls.
PART II Other Information
Item 6(a) Exhibits
* 4(a) Credit Agreement, dated as of May 15, 2003 among Blount, Inc., the
other parties named therein as credit parties, the several banks and
financial institutions or entities named therein as lenders, General
Electric Capital Canada, Inc., as Canadian agent, and General
Electric Capital Corporation, as agent and collateral agent, which
was filed as Exhibit 99.2 to the report on Form 8-K filed by Blount
International, Inc., on May 19, 2003.
** 4(b) Collateral Agency Agreement, dated as of May 15, 2003, among Blount
International, Inc., Blount, Inc., each of the Subsidiaries of
Blount, Inc. signatory thereto, and General Electric Capital
Corporation, as collateral agent.
** 4(c) Shared Pledge Agreement, dated as of May 15, 2003, among Blount
International, Inc., Blount, Inc., each of the Subsidiaries of
Blount, Inc. signatory thereto, and General Electric Capital
Corporation, as collateral agent.
** 4(d) US Guaranty Agreement, dated as of May 15, 2003, among the
guarantors signatory thereto and General Electric Capital
Corporation.
** 4(e) US Security Agreement, dated as of May 15, 2003, among the grantors
signatory thereto and General Electric Capital Corporation.
** 4(f) Copyright Security Agreement, dated as of May 15, 2003, among Blount
International, Inc., Blount, Inc., each of the Subsidiaries of
Blount, Inc. signatory thereto, and General Electric Capital
Corporation.
** 4(g) Trademark Security Agreement, dated as of May 15, 2003, among Blount
International, Inc., Blount, Inc., each of the Subsidiaries of
Blount, Inc. signatory thereto, and General Electric Capital
Corporation.
** 4(h) Patent Security Agreement, dated as of May 15, 2003, among Blount
International, Inc., Blount, Inc., each of the Subsidiaries of
Blount, Inc. signatory thereto, and General Electric Capital
Corporation.
Page 31
Electric Capital Canada Inc. and each of the lenders signatory
thereto, as amended.
** 4(i) Canadian Security Agreement, dated as of May 15, 2003, between
Blount Canada Ltd. and General Electric Capital Canada Inc., as
Canadian agent.
** 4(j) Canadian Security Agreement, dated as of May 15, 2003, between
Blount Holdings Ltd. and General Electric Capital Canada Inc., as
Canadian agent.
** 4(k) Canadian Security Agreement, dated as of May 15, 2003, between
Oregon Distribution Ltd. and General Electric Capital Canada Inc.,
as Canadian agent.
** 4(l) Canadian Guaranty, dated as of May 15, 2003, between Blount Holdings
Ltd., as guarantor, and General Electric Capital Canada Inc., as
Canadian agent.
** 4(m) Canadian Guaranty, dated as of May 15, 2003, between Oregon
Distribution Ltd., as guarantor, and General Electric Capital Canada
Inc., as Canadian agent.
** 99(.1) Certification pursuant to section 302 of the Sarbanes-Oxley Act of
2002 by James S. Osterman, Chief Executive Officer for the quarter
ended June 30, 2003.
** 99(.2) Certification pursuant to section 302 of the Sarbanes-Oxley Act of
2002 by Calvin E. Jenness, Chief Financial Officer for the quarter
ended June 30, 2003.
** 99(.3) Certification pursuant to section 906 of the Sarbanes-Oxley Act of
2002 by James S. Osterman, Chief Executive Officer for the quarter
ended June 30, 2003.
** 99(.4) Certification pursuant to section 906 of the Sarbanes-Oxley Act of
2002 by Calvin E. Jenness, Chief Financial Officer for the quarter
ended June 30, 2003.
Item 6(b) Reports on Form 8-K
On May 19, 2003 the Company filed a Form 8-K regarding the closing
of a $190 million senior credit facility.
On August 11, 2003 the Company released on Form 8-K its financial
results and public release for the second quarter 2003.
* Incorporated by reference.
** Filed electronically herewith.
Page 32
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLOUNT INTERNATIONAL, INC.
- ----------------------------------
Registrant
Date: August 14, 2003 /s/ Calvin E. Jenness
---------------------------------------
Calvin E. Jenness
Senior Vice President, Chief Financial
Officer and Treasurer
Page 33