SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

 

 

OR

 

Commission file number 001-11549

 

BLOUNT INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

 

(503) 653-8881

(Registrant’s telephone number, including area code)

 

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

 

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

 

Indicate by check mark 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.

 

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

 

Indicate the number of shares outstanding of each of the issued classes of common stock, as of the latest practicable date.

 

 

1

 

BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES

 

Index

 

Part I  Consolidated Financial Information
	Item 1. Consolidated Financial Statements
		Unaudited Consolidated Statements of Income Three months ended March 31, 2005 and 2004
		Unaudited Consolidated Balance Sheets March 31, 2005 and December 31, 2004
		Unaudited Consolidated Statements of Cash Flows Three months ended March 31, 2005 and 2004
		Unaudited Consolidated Statement of Changes in Stockholders’ Equity (Deficit) Three months ended March 31, 2005
		Notes to Unaudited Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Controls and Procedures
Part II  Other Information
	Item 6. Exhibits
Signature

 

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PART I

 

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

 

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

Blount International, Inc. and Subsidiaries

 

		Three Months Ended March 31,
(Amounts in thousands, except per share data)		2005			2004
Sales		$	185,254		$	165,573
Cost of sales		125,285			108,619
Gross profit		59,969			56,954
Selling, general and administrative expenses		30,396			29,786
Operating income		29,573			27,168
Interest expense		(9,148		)	(17,413		)
Interest income		241			775
Other income (expense), net		(31		)	113
Income before income taxes		20,635			10,643
Provision for income taxes		3,405			3,021
Net income		$	17,230		$	7,622
Basic net income per share		$	0.38		$	0.25
Diluted net income per share		$	0.36		$	0.23
Shares used in per share calculations:
Basic		45,102			30,860
Diluted		47,292			32,803

 

 

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

 

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UNAUDITED CONSOLIDATED BALANCE SHEETS

Blount International, Inc. and Subsidiaries

 

		March 31,			December 31,
(Amounts in thousands, except share data)		2005			2004
Assets
Current assets:
Cash and cash equivalents		$	26,266		$	48,570
Accounts receivable, net of allowance for doubtful accounts of $2,460 and $2,371, respectively		96,022			74,975
Inventories		90,294			81,098
Other current assets		5,233			4,693
Total current assets		217,815			209,336
Property, plant and equipment, net		99,093			97,929
Goodwill		76,891			76,891
Deferred financing costs		23,176			23,883
Other assets		16,556			16,703
Total Assets		$	433,531		$	424,742
Liabilities and Stockholders’ Deficit
Current liabilities:
Current maturities of long-term debt		$	3,199		$	3,199
Accounts payable		40,881			39,309
Accrued expenses		58,486			68,842
Total current liabilities		102,566			111,350
Long-term debt, exclusive of current maturities		490,212			491,012
Deferred income taxes		5,182			4,913
Employee benefits		62,386			62,248
Other liabilities		11,335			11,373
Total liabilities		671,681			680,896
Commitments and contingent liabilities
Stockholders’ equity (deficit):
Common stock: par value $0.01 per share, 100,000,000 shares authorized, 45,195,102 and 44,969,886 outstanding		452			450
Capital in excess of par value of stock		555,419			553,640
Accumulated deficit		(792,935		)	(810,165		)
Accumulated other comprehensive loss		(1,086		)	(79		)
Total stockholders’ deficit		(238,150		)	(256,154		)
Total Liabilities and Stockholders’ Deficit		$	433,531		$	424,742

 

 

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

 

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Blount International, Inc. and Subsidiaries

(Amounts in thousands)		Three Months Ended March 31,
		2005			2004
Cash flows from operating activities:
Net income		$	17,230		$	7,622
Adjustments to reconcile net income to net cash Used in operating activities:
Depreciation, amortization and other non-cash charges		4,706			6,164
Deferred income taxes		302			(34		)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		(21,047		)	(17,123		)
(Increase) decrease in inventories		(9,196		)	(6,247		)
(Increase) decrease in other assets		(612		)	(637		)
Increase (decrease) in accounts payable		1,572			7,041
Increase (decrease) in accrued expenses		(6,545		)	(9,670		)
Increase (decrease) in other liabilities		(681		)	767
Net cash used in operating activities		(14,271		)	(12,117		)
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment		21			5
Purchases of property, plant and equipment		(5,038		)	(3,488		)
Net cash used in investing activities		(5,017		)	(3,483		)
Cash flows from financing activities:
Reduction of long-term debt		(800		)	(1,250		)
Issuance costs related to debt		(2,536		)	(110		)
Issuance costs related to stock		(1,425		)
Exercise of stock options		1,745			213
Net cash used in financing activities		(3,016		)	(1,147		)
Net decrease in cash and cash equivalents		(22,304		)	(16,747		)
Cash and cash equivalents at beginning of period		48,570			35,194
Cash and cash equivalents at end of period		$	26,266		$	18,447

 

 

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

 

5

 

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

Blount International, Inc. and Subsidiaries

 

(Amounts in thousands)		Shares		Common Stock			Capital in Excess of Par			Retained Earnings Deficit			Accumulated Other Compre-hensive Loss			Total
Balance December 31, 2004		44,970		$	450		$	553,640		$	(810,165	)	$	(79	)	$	(256,154	)
Net income										17,230						17,230
Other comprehensive income (loss):
Foreign currency translation Adjustment													(826		)	(826		)
Unrealized losses													(181		)	(181		)
Comprehensive income, net																16,223
Exercise of stock options		225		2			1,743									1,745
Stock compensation expense							36									36
Balance March 31, 2005		45,195		$	452		$	555,419		$	(792,935	)	$	(1,086	)	$	(238,150	)

 

 

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

 

6

 

BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1:  BASIS OF PRESENTATION

 

Basis of Presentation.  The unaudited consolidated financial statements include the accounts of Blount International, Inc. (“Blount” or the “Company”) and its subsidiaries and are prepared in conformity with accounting principles generally accepted in the United States of America.  All significant intercompany balances and transactions have been eliminated.  In the opinion of management, the consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the financial position at March 31, 2005 and December 31, 2004 and the results of operations, cash flows and changes in stockholders’ equity for the three months ended March 31, 2005 and 2004.

 

The accompanying financial data as of March 31, 2005 and for the three months ended March 31, 2005 and March 31, 2004 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The December 31, 2004 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

 

Use of Estimates.  The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods.  It is reasonably possible that actual results could differ materially from those estimates and significant changes to estimates could occur in the near term.

 

Income Taxes.  United States income taxes have not been provided on undistributed earnings of international subsidiaries. Management’s intention is to reinvest these earnings and repatriate the earnings only when it is tax efficient to do so.   The American Jobs Creation Act of 2004 (the “Act”), signed into law October 22, 2004, includes a one-time election to deduct 85 percent of certain foreign earnings that are repatriated, as defined in the act.  Any repatriation of foreign earnings must be completed by December 31, 2005.  The Company is evaluating the effects of repatriating a portion of its undistributed earnings of foreign subsidiaries and is awaiting further regulatory guidance concerning the Act.  Accordingly, the Company cannot yet reasonably estimate the tax effects of such potential repatriation.  The Company expects to complete its evaluation during 2005.

 

The Company’s income tax provision primarily consists of foreign, state and local taxes.  The Company has a domestic net operating loss carryforward which is fully reserved with a valuation allowance as of December 31, 2004 and March 31, 2005.

 

Reclassifications.  Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.  Such reclassifications had no impact on net income or net stockholders’ deficit.

 

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NOTE 2:  INVENTORIES

 

Inventories consisted of the following:

 

		March 31,			December 31,
(Amounts in thousands)		2005			2004
Raw materials and supplies		$	33,313		$	28,914
Work in progress		12,414			13,708
Finished Goods		44,567			38,476
Total inventories		$	90,294		$	81,098

 

 

NOTE 3:  PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consisted of the following:

		March 31,			December 31,
(Amounts in thousands)		2005			2004
Land		$	5,316		$	4,939
Buildings and improvements		65,736			65,411
Machinery and equipment		185,193			182,626
Furniture, fixtures and office equipment		30,817			31,264
Transportation equipment		964			967
Construction in progress		16,765			15,243
Accumulated depreciation		(205,698		)	(202,521		)
Total property, plant and equipment, net		$	99,093		$	97,929

 

 

NOTE 4:  ACCRUED EXPENSES

 

Accrued expenses consisted of the following:

 

		March 31,			December 31,
(Amounts in thousands)		2005			2004
Salaries, wages and related withholdings		$	26,298		$	34,135
Accrued interest		6,775			7,001
Warranty reserve		5,117			4,923
Accrued taxes		2,730			4,036
Other		17,566			18,747
Total accrued expenses		$	58,486		$	68,842

 

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NOTE 5:  DEBT AND FINANCING AGREEMENTS

 

Long-term debt consisted of the following:

		March 31,			December 31,
(Amounts in thousands)		2005			2004
Term loans		$	318,411		$	319,211
8 7/8% Senior subordinated notes		175,000			175,000
Total debt		493,411			494,211
Less current maturities		(3,199		)	(3,199		)
Total long-term debt		$	490,212		$	491,012

 

The weighted average interest rate on outstanding debt as of March 31, 2005 was 6.57%, exclusive of the effect of amortization expense for deferred financing costs.

 

2004 Refinancing Transactions.  On August 9, 2004, the Company executed a series of refinancing transactions.  These three transactions, referred to as the “2004 Refinancing Transactions,” included:

 

•                  The issuance of 13,800,000 shares of common stock, which generated gross proceeds of $138.0 million and net proceeds to the Company of $127.2 million;

 

•                  The issuance of 8 7/8% senior subordinated notes due in 2012 (the “8 7/8% Senior Subordinated Notes”), which generated gross proceeds of $175.0 million and net proceeds to the Company of $167.1 million; and

 

•                  The amendment and restatement of the Company’s existing senior credit facilities, including an increase in amounts available, with the total amounts drawn increasing by $246.6 million.

 

The amendment and restatement of the senior credit facilities included, among other things, a reduction in interest rates, revisions to financial compliance ratios, the addition of maximum leverage ratios and the revision of certain repayment terms.  The amended and restated credit facilities consisted of a revolving credit facility of up to $100.0 million and term loans that included a $4.9 million Canadian term loan facility, a $265.0 million Term B loan facility and a $50.0 million Second Collateral Institutional Loan (‘‘SCIL’’) facility.

 

The Company used the net proceeds of the 2004 Refinancing Transactions as follows:

 

•                  The redemption of its 7% Senior Notes with $150.0 million principal outstanding;

 

•                  The redemption of its 13% Senior Subordinated Notes with $323.2 million principal outstanding;

 

•                  The repayment of its 12% Convertible Preferred Equivalent Security principal and premium in the amount of $29.6 million plus accrued interest outstanding; and

 

•                  The payment of related fees and expenses of $27.1 million.

 

On December 1, 2004, the Company again amended its senior credit facilities to, among other things, provide for the repayment and elimination of the $50.0 million SCIL established in August 2004 with the proceeds from an increase in the Term Loan B limit, an adjustment to certain financial covenants and a lower borrowing rate.

 

With the amendment and restatement of the senior credit facilities, the term of the revolving credit facility is five years, and the terms of the Canadian term loan facility and Term B loan facility are six years, in each case, from August 9, 2004.   The Term B loan facility requires quarterly payments of $0.8 million, with a final payment of $296.2 million due on the maturity date. The Canadian term loan facility requires quarterly payments of

 

9

 

$12 thousand, with a final payment of $4.6 million due on the maturity date.  Once repaid, principal under the Term loan facilities may not be re-borrowed by the Company.

 

The amended and restated senior credit facilities may be prepaid at any time.  There can also be additional mandatory repayment amounts related to the sale of Company assets under certain circumstances, the issuance of stock and upon the Company’s annual generation of excess cash flow as determined under the credit agreement. The credit facility provides for term loan interest rate margins to vary based on the Company’s credit facility leverage ratio. The credit facility leverage ratio is defined as the ratio of total outstanding debt under the credit facility (including outstanding letters of credit) to adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). Interest rates also change based upon changes in LIBOR or prime rates and changes in ratings by rating agencies. The amount available on the revolving credit facility is reduced by outstanding letters of credit and is further restricted by a specific leverage ratio and first lien credit facilities leverage ratio. As of March 31, 2005, the Company had the ability to borrow $92.2 million under the terms of the revolving credit agreement.

 

The Company and all of its domestic subsidiaries other than Blount, Inc. guarantee Blount, Inc.’s obligations under the senior credit facilities.  The obligations under the senior credit facilities are collateralized by a first priority security interest in substantially all of the assets of Blount, Inc. and its domestic subsidiaries, as well as a pledge of all of Blount, Inc.’s capital stock held by Blount International, Inc. and all of the stock of domestic subsidiaries held by Blount, Inc.  In addition, Blount, Inc. has pledged 65% of the stock of its non-domestic subsidiaries as further collateral.

 

The amended and restated senior credit facilities contain financial covenant calculations relating to maximum capital expenditures, minimum fixed charge coverage ratio, maximum leverage ratio and maximum first lien credit facilities leverage ratio.  In addition, there are covenants in areas such as investments, loans and advances, indebtedness, and the sale of stock and assets.  The Company was in compliance with all debt covenants as of March 31, 2005.

 

As a result of the 2004 Refinancing Transactions, the Company has one registered debt security, the 8 7/8% Senior Subordinated Notes. These notes are fully and unconditionally, jointly and severally, guaranteed by the Company and all of its domestic subsidiaries (“guarantor subsidiaries”).  All guarantor subsidiaries of these 8 7/8% Senior Subordinated Notes are 100% owned, directly or indirectly, by the Company.  While the Company and all of its domestic subsidiaries guarantee these 8 7/8% Senior Subordinated Notes, none of Blount’s existing foreign subsidiaries (“non-guarantor subsidiaries”) guarantee these notes.  See also Note 12.

 

 

NOTE 6:  EARNINGS PER SHARE DATA

The number of shares used in the denominators of the basic and diluted earnings per share computations was as follows:

		Three Months Ended March 31,
(Shares in thousands)		2005		2004
Shares for basic income per share computation — weighted average common shares outstanding		45,102		30,860
Dilutive effect of stock options and warrants		2,190		1,943
Shares for diluted income per share computation		47,292		32,803
Options excluded from computation as anti-dilutive		7		1,255

 

In August 2004, the Company issued 13,800,000 new shares of common stock and received $127.2 million net of related issuance fees and costs.  In December 2004, Lehman Brothers Merchant Banking Partners II L.P. and certain of its affiliates (“Lehman Brothers”) sold 11,225,492 shares of the Company’s common stock in a secondary public stock offering for which the Company did not receive any proceeds.

 

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An affiliate of Lehman Brothers holds warrants to acquire 1,000,000 shares of Blount common stock that are exercisable immediately at $0.01 a share through March 2, 2013.

 

 

NOTE 7:  STOCK-BASED COMPENSATION

 

As permitted by Statement of Financial Accounting Standards (“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 or modification over the amount an employee must pay to acquire the stock.  The Company has adopted the disclosure-only provisions 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 income and net income per share would have been as follows:

 

		Three Months Ended March 31,
(Amounts in thousands, except per share amounts)		2005			2004
Net income as reported		$	17,230		$	7,622
Add: stock-based employee compensation cost, netof tax, included in the reported results		30			125
Deduct: total stock-based employee compensation cost, net of tax, that would have been included in net income under fair value method		(198		)	(296		)
Pro forma net income		$	17,062		$	7,451
Basic earnings per share as reported		$	0.38		$	0.25
Pro forma basic earnings per share		$	0.38		$	0.24
Diluted earnings per share as reported		$	0.36		$	0.23
Pro forma diluted earnings per share		$	0.36		$	0.23

 

 

NOTE 8:  PENSION AND POST-RETIREMENT BENEFIT PLANS

 

The components of net periodic benefit cost for funded and unfunded pension and other post-retirement benefits for the quarter ended March 31 are as follows:

 

		Three Months Ended March 31,
		Pension Benefits						Other Post-Retirement Benefits
(Amounts in thousands)		2005			2004			2005			2004
Service cost		$	1,483		$	1,167		$	107		$	103
Interest cost		2,394			2,083			514			498
Expected return on plan assets		(2,419		)	(1,815		)	(11		)
Amortization of prior service cost		93			100			2			2
Amortization of net loss		652			542			271			232
Total net periodic benefit cost		$	2,203		$	2,077		$	883		$	835

 

The Company expects to contribute approximately $10.1 million to its funded pension plans in 2005 and does not expect to make any contributions to the post-retirement medical plan during 2005.

 

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NOTE 9:  COMMITMENTS AND CONTINGENT LIABILITIES

 

Guarantees and other commercial commitments are summarized in the following table:

 

		March 31,
(Amounts in thousands)		2005
Warranty reserve		$	5,117
Letters of credit outstanding		7,752
Third party financing agreements(1)		4,000
Accounts receivable securitization(2)		365
Total guarantees and other commercial commitments		$	17,234

 

(1)  Applicable to third party financing agreements for customer equipment purchases.

 

(2)  Includes guarantees to a third party financing company of certain accounts receivable.

 

The warranty reserve is included in accrued expenses on the consolidated balance sheet.  In addition to these amounts, the Company also guarantees certain debt of its subsidiaries (see Note 5 to Unaudited Consolidated Financial Statements).

 

Changes in the warranty reserve are as follows:

 

(Amounts in thousands)		Warranty Reserve
Balance at beginning of period		$	4,923
Accrued		1,593
Payments made (in cash or in-kind)		(1,399		)
Balance at end of period		$	5,117

 

The Company 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.  The Company 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 the nature of the waste, the Company believes that it is a de minimis contributor.

 

The current on-site monitoring program is being conducted and funded by certain PLPs, excluding the Company and several other PLPs, under the supervision of WDOE. 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 costs 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 of the estimated cost ranged from approximately $20 thousand to $0.3 million.

 

The Company has accrued $0.1 million at March 31, 2005 and December 31, 2004 for the potential costs of any clean-up at the Site. The Company spent zero during the three months ended March 31, 2005 and 2004 to administer compliance in regards to the Site.

 

On September 12, 2003, the Company received a General Notice Letter as a Potentially Responsible De Minimis Party from Region IX of the EPA regarding the Operating Industries, Inc. Superfund Site in Monterey Park, California. The notice stated that the EPA would submit an offer to settle and an explanation as to why it believes the

 

12

 

Company or a predecessor unit is a de minimis participant at the site.  The Company was subsequently informed by the EPA that its report would be delayed, and on September 17, 2004, was notified of further delay in the process until late 2004 at the earliest.  The EPA has indicated that its de minimis settlement offer will be based on volume of waste at a uniform per gallon price among all de minimis parties.  The site was operated as a landfill from 1948 to 1984, and received wastes from over 4,000 generators. At the present time, the Company has no knowledge of which of its units, if any, was involved at the site, or the amounts, if any, that were sent there. However, based upon its current knowledge, and its alleged status as a Potentially Responsible De Minimis Party, the Company does not believe that any settlement or participation in any remediation will have a material adverse effect on its consolidated financial position, operating results or cash flows.  The Company has received no further notice or explanation from Region IX of the EPA as of March 31, 2005.

 

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. 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 the Company’s consolidated financial position, operating results or cash flows.

 

The Company accrues, by a charge to income, an amount related to a matter deemed by management and its counsel as a probable loss contingency in light of all of the then known circumstances. The Company does not accrue a charge to income for a matter deemed by management and its counsel to be a reasonably possible loss contingency in light of all of the current circumstances.

 

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NOTE 10:  SEGMENT INFORMATION

 

The Company identifies operating segments primarily based on management responsibility. The Company has three reportable segments: Outdoor Products, Industrial and Power Equipment and Lawnmower. Outdoor Products manufactures and markets cutting chain, bars, sprockets and accessories for chainsaw use, concrete cutting equipment, and lawnmower blades and accessories for outdoor care. Industrial and Power Equipment manufactures and markets timber harvesting equipment, industrial tractors and loaders, rotation bearings and mechanical power transmission units. The Lawnmower segment manufactures and markets riding lawnmowers and related accessories.

 

Certain financial information by segment is presented in the table below:

 

		Three Months Ended March 31,
(Amounts in thousands)		2005			2004
Sales:
Outdoor Products		$	116,801		$	102,101
Industrial and Power Equipment		56,016			54,024
Lawnmower		12,742			9,619
Inter-Segment Elimination		(305		)	(171		)
Total Sales		$	185,254		$	165,573
Operating income (loss):
Outdoor Products		$	28,486		$	26,321
Industrial and Power Equipment		4,747			4,741
Lawnmower		241			(227		)
Inter-Segment Elimination		(39		)	3
Contribution from segments		33,435			30,838
Corporate expenses		(3,862		)	(3,670		)
Operating income		29,573			27,168
Interest expense		(9,148		)	(17,413		)
Interest income		241			775
Other income (expense), net		(31		)	113
Income before income taxes		$	20,635		$	10,643

 

 

NOTE 11:  SUPPLEMENTAL CASH FLOWS INFORMATION

 

		Three Months Ended March 31,
(Amounts in thousands)		2005			2004
Interest paid		$	8,459		$	22,822
Income taxes paid, net		4,798			1,525

 

 

NOTE 12:  CONSOLIDATING FINANCIAL INFORMATION

 

See Note 5 to Unaudited Consolidated Financial Statements for a discussion of the Company’s guarantor subsidiaries.  The following consolidating financial information sets forth condensed consolidating financial information, statements of operations and the balance sheets and cash flows of Blount International, Inc., Blount, Inc., the guarantor subsidiaries and the non-guarantor subsidiaries.

 

14

 

BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

Statement of Operations Information

 

(Amounts in thousands)		Blount International, Inc.			Blount, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
For the Three Months Ended March 31, 2005
Sales					$	121,931		$	42,000		$	71,688		$	(50,365	)	$	185,254
Cost of sales					92,439			34,253			51,343			(52,750		)	125,285
Gross profit					29,492			7,747			20,345			2,385			59,969
Selling, general and administrative expenses					18,129			4,024			8,243						30,396
Operating income					11,363			3,723			12,102			2,385			29,573
Other, net		$	(4,032	)	(4,777		)	(131		)	2						(8,938		)
Income (loss) before income taxes		(4,032		)	6,586			3,592			12,104			2,385			20,635
Provision (benefit) for income taxes		(665		)	(726		)	180			4,616						3,405
Income (loss)		(3,367		)	7,312			3,412			7,488			2,385			17,230
Equity in earnings (losses) of affiliated companies, net		20,597			13,285			69						(33,951		)
Net income (loss)		$	17,230		$	20,597		$	3,481		$	7,488		$	(31,566	)	$	17,230
For the Three Months Ended March 31, 2004
Sales					$	113,434		$	36,893		$	57,880		$	(42,634	)	$	165,573
Cost of sales					81,555			29,044				42,284		(44,264		)	108,619
Gross profit					31,879			7,849			15,596			1,630			56,954
Selling, general and administrative Expenses					17,886			4,764			7,136						29,786
Operating income					13,993			3,085			8,460			1,630			27,168
Other, net		$	(5,119	)	(11,038		)	(103		)	(265		)				(16,525		)
Income (loss) before income taxes		(5,119		)	2,955			2,982			8,195			1,630			10,643
Provision for income taxes					14			149			2,858						3,021
Income (loss)		(5,119		)	2,941			2,833			5,337			1,630			7,622
Equity in earnings (losses) of affiliated companies, net		12,741			9,800			36						(22,577		)
Net income (loss)		$	7,622		$	12,741		$	2,869		$	5,337		$	(20,947	)	$	7,622

 

15

 

BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

Balance Sheet Information

 

(Amounts in thousands)		Blount International, Inc.			Blount, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
March 31, 2005
Assets
Cash and cash equivalents					$	3,283					$	22,983					$	26,266
Accounts receivable, net					48,594			$	21,371		26,057						96,022
Intercompany receivables					180,864			56,583			17,822			$	(255,269	)
Inventories					33,993			30,100			26,201						90,294
Other current assets					2,771			584			1,878						5,233
Total current assets					269,505			108,638			94,941			(255,269		)	217,815
Investments in affiliated companies		$	19,309		265,535						(1,110		)	(283,734		)
Property, plant and equipment, net					26,758			32,779			39,556						99,093
Goodwill and other assets					72,504			31,461			12,658						116,623
Total Assets		$	19,309		$	634,302		$	172,878		$	146,045		$	(539,003	)	$	433,531
Liabilities and Stockholders’ Equity (Deficit)
Current maturities of long-term debt					$	3,150					$	49					$	3,199
Accounts payable					21,591			$	9,942		9,348						40,881
Intercompany payables		$	255,269											$	(255,269	)
Accrued expenses					35,730			9,685			13,071						58,486
Total current liabilities		255,269			60,471			19,627			22,468			(255,269		)	102,566
Long-term debt, excluding current portion					484,363						5,849						490,212
Other liabilities		2,190			70,159			4,233			2,321						78,903
Total liabilities		257,459			614,993			23,860			30,638			(255,269		)	671,681
Stockholders equity (deficit)		(238,150		)	19,309			149,018			115,407			(283,734		)	(238,150		)
Total Liabilities and Stockholders’ Equity (Deficit)		$	19,309		$	634,302		$	172,878		$	146,045		$	(539,003	)	$	433,531

 

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