FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1995
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 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.)
4520 Executive Park Drive 36116-1602
Montgomery, Alabama (Zip Code)
(Address of principal executive offices)
(334) 244-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding as of
Class of Common Stock November 30, 1995
--------------------- -----------------
Class A Common Stock $.01 Par Value 13,122,219 shares
Class B Common Stock $.01 Par Value 5,925,755 shares
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BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
Page No.
------------
Part I. Financial Information
Consolidated Balance Sheets -
November 30, 1995 and February 28, 1995 3
Consolidated Statements of Income -
three months and nine months ended
November 30, 1995 and 1994 4
Consolidated Statements of Cash Flows -
nine months ended November 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis 11
Exhibit 11 - Computation of Net Income
Per Common Share 14
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BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
November 30, February 28,
1995 1995*
------------ ------------
(Unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents, including short-term
investments of $75,197 and $40,266 $ 77,225 $ 43,390
Accounts receivable, net of allowances for doubtful
accounts of $3,065 and $2,611 106,955 130,774
Inventories 75,240 77,075
Deferred income taxes 25,050 25,068
Other current assets 8,131 16,153
-------- --------
Total current assets 292,601 292,460
Property, plant and equipment, net of accumulated
depreciation of $155,681 and $145,561 122,138 134,368
Cost in excess of net assets of acquired businesses, net 66,697 68,762
Other assets 27,587 25,202
-------- --------
Total Assets $509,023 $520,792
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable and current maturities of long-term debt $ 4,438 $ 7,791
Accounts payable 43,452 64,880
Accrued expenses 78,668 91,835
Other current liabilities 486 4,658
-------- --------
Total current liabilities 127,044 169,164
Long-term debt, exclusive of current maturities 95,984 98,254
Deferred income taxes, exclusive of current portion 18,617 19,214
Other liabilities 23,221 26,446
-------- --------
Total liabilities 264,866 313,078
-------- --------
Commitments and Contingent Liabilities
Shareholders' equity (Note 2):
Common Stock: par value $.01 per share
Class A: 13,122,219 and 12,844,179 shares issued 131 128
Class B, convertible: 5,925,755 and 6,045,636
shares issued 59 60
Capital in excess of par value of stock 30,582 28,681
Retained earnings 204,922 170,595
Accumulated translation adjustment 8,463 8,250
-------- --------
Total shareholders' equity 244,157 207,714
-------- --------
Total Liabilities and Shareholders' Equity $509,023 $520,792
======== ========
* Restated. See Note 2.
The accompanying notes are an integral part of these statements.
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BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
Three months ended Nine months ended
November 30, November 30,
---------------------- ----------------------
1995 1994* 1995* 1994*
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Sales $ 157,964 $ 157,459 $ 469,319 $ 441,924
Cost of sales 102,923 104,496 310,474 293,348
---------- ---------- ---------- ----------
Gross profit 55,041 52,963 158,845 148,576
Selling, general and
administrative expenses 31,011 30,061 90,674 89,797
---------- ---------- ---------- ----------
Income from operations 24,030 22,902 68,171 58,779
Interest expense (2,705) (2,699) (7,937) (8,313)
Interest income 1,127 668 2,891 1,837
Other income (expense), net (45) (487) 493 143
---------- ---------- ---------- ----------
Income before income taxes 22,407 20,384 63,618 52,446
Provision for income taxes 5,645 8,048 22,499 20,762
---------- ---------- ---------- ----------
Net income $ 16,762 $ 12,336 $ 41,119 $ 31,684
========== ========== ========== ==========
Net income per common share $ .86 $ .64 $ 2.11 $ 1.64
========== ========== ========== ==========
Weighted average number of
common and common equivalent
shares outstanding (as
adjusted for the effect of
the merger and the 3 for 2
common stock exchange ratio,
See Note 2) 19,475,336 19,417,313 19,466,676 19,365,867
========== ========== ========== ==========
Cash dividends paid
per share (as adjusted for
the effect of the merger and
the 3 for 2 common stock
exchange ratio, See Note 2)
Class A common stock $ .095 $ .083 $ .285 $ .250
========== ========== ========== ==========
Class B common stock $ .087 $ .075 $ .260 $ .225
========== ========== ========== ==========
* Restated. See Note 2.
The accompanying notes are an integral part of these statements.
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BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine months ended November 30,
-----------------------------
1995 1994
-------- --------
(Unaudited)
Cash Flows From Operating Activities:
Net income $ 41,119 $ 31,684
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and other
noncash charges 16,458 17,283
Deferred income taxes (579) 159
Loss on disposals of property, plant and equipment 242 473
Changes in assets and liabilities, net of effects
of businesses acquired and sold:
Decrease in accounts receivable 15,125 2,318
(Increase) decrease in inventories 1,655 (2,140)
(Increase) decrease in other assets 4,737 (1,650)
Decrease in accounts payable (13,622) (13,608)
Increase (decrease) in accrued expenses (12,082) 20,008
Decrease in other liabilities (5,993) (11,126)
-------- --------
Net cash provided by operating activities 47,060 43,401
-------- --------
Cash Flows From Investing Activities:
Proceeds from sales of businesses and property,
plant and equipment 4,910 2,947
Purchases of property, plant and equipment (8,977) (6,113)
Acquisitions of businesses (10,103)
-------- --------
Net cash used in investing activities (4,067) (13,269)
-------- --------
Cash Flows From Financing Activities:
Net increase (reduction) in short-term borrowings 582 (4,646)
Issuance of long-term debt 800 6,000
Reduction of long-term debt (7,061) (18,728)
Decrease (increase) in restricted funds 1,410 (5,020)
Dividends paid (6,792) (4,531)
Issuance of stock under stock option and dividend
reinvestment plans 1,903 871
-------- --------
Net cash used in financing activities (9,158) (26,054)
-------- --------
Net increase in cash and cash equivalents 33,835 4,078
Cash and cash equivalents at beginning of period 43,390 54,088
-------- --------
Cash and cash equivalents at end of period $ 77,225 $ 58,166
======== ========
The accompanying notes are an integral part of these statements.
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BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 In the opinion of management, the accompanying unaudited consolidated
financial statements, which include the accounts of Blount International, Inc.
("BII") and Blount, Inc. and its Subsidiaries, contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly the
financial position at November 30, 1995 and the results of operations and cash
flows for the periods ended November 30, 1995 and 1994. These financial
statements should be read in conjunction with the notes to BII's consolidated
financial statements for the year ended February 28, 1995, as included in BII's
registration statement on Form S-4 filed on October 3, 1995 (See Note 2). The
results of operations for the periods ended November 30, 1995 and 1994 are not
necessarily indicative of the results to be expected for the full fiscal year,
due to the seasonal nature of certain operations.
NOTE 2 On November 3, 1995, the stockholders of Blount, Inc. approved a merger
agreement dated August 17, 1995, among BII, Blount, Inc., and a wholly-owned
subsidiary of BII ("the subsidiary"). As a result, i) the subsidiary was merged
with and into Blount, Inc., ii)Blount, Inc. was the surviving corporation in the
merger and became a wholly-owned subsidiary of BII, iii) Blount, Inc.
stockholders received three shares of BII Class A common stock in exchange for
each two shares held of Blount, Inc. Class A common stock and three shares of
BII Class B common stock in exchange for each two shares held of Blount, Inc.
Class B common stock, and iv) BII assumed all Blount, Inc. stock option plans.
BII filed a Form S-4 registration statement with the Securities and Exchange
Commission on October 3, 1995, for the shares to be issued as a result of the
merger. Immediately following the merger, the equity ownership of BII was the
same as that which previously existed for Blount, Inc. Blount, Inc. was
delisted from the American Stock Exchange effective November 3, 1995, and BII
began trading on the New York Stock Exchange on November 6, 1995.
Prior to the merger, BII was owned 100% by Blount, Inc.'s Chairman of the Board,
Winton M. Blount, and members of his family, and BII owned an approximate 62%
voting interest and approximately 38% of the shares of Blount, Inc.'s Common
Stock outstanding. Except for the equity interest in Blount, Inc., BII has had
no other operations or business since February 1993.
The authorized capital stock of BII consists of 60 million shares of Class A
Common Stock, 14 million shares of Class B Common Stock and 4,456,855 shares of
Preferred Stock, each with a par value of $.01 per share. As of November 30,
1995, 13,122,219 shares of Class A Common Stock and 5,925,755 shares of Class B
Common Stock were issued and outstanding (reflecting the 3 for 2 common stock
exchange ratio), and no shares of Preferred Stock were outstanding. The Class A
Common Stock is entitled to elect 25% of BII's Board of Directors, is entitled
to one-tenth of one vote per share on all other matters and will receive an
additional dividend of $.00833 in any quarter that a cash dividend is declared
on the Class B Common Stock. The Class B Common Stock is entitled to elect 75%
of BII's Board of Directors and is entitled to one vote per share on all other
matters. Each share of Class B Common Stock is convertible at any time at the
option of the shareholder into one share of Class A Common Stock.
The merger has been accounted for in a manner similar to that in pooling of
interests accounting. The consolidated financial statements, and all related
share data, of BII and Subsidiaries for periods prior to November 3, 1995, have
been restated to reflect the merger and the 3 for 2 common stock exchange ratio.
The assets and liabilities of BII, Blount, Inc. and its Subsidiaries are stated
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at their historical recorded amounts. As of the date of the merger, the
consolidated assets and liabilities of BII and Subsidiaries did not differ
materially from those of Blount, Inc. and Subsidiaries. For the three months
and nine months ended November 30, 1995, BII incurred approximately $.7 million
and $2.2 million, respectively, of expenses associated with the merger. Such
expenses were borne by BII, not Blount, Inc. Additionally, as a result of the
merger, charitable contribution carryovers reduced BII's consolidated provision
for income taxes by approximately $1.7 million for the three months ended
November 30, 1995. The results of Blount, Inc.'s operations for the three
months and nine months ended November 30, 1995 and 1994 were as follows (in
thousands):
Three months ended Nine months ended
November 30, November 30,
---------------------- ----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Sales $ 157,964 $ 157,459 $ 469,319 $ 441,924
Cost of sales 102,923 104,496 310,474 293,348
---------- ---------- ---------- ----------
Gross profit 55,041 52,963 158,845 148,576
Selling, general and
administrative expenses 29,713 29,992 87,313 89,582
---------- ---------- ---------- ----------
Income from operations 25,328 22,971 71,532 58,994
Interest expense (2,731) (2,733) (8,030) (8,387)
Interest income 1,115 599 2,625 1,620
Other income (expense), net (76) (561) 466 (1,203)
---------- ---------- ---------- ----------
Income before income taxes 23,636 20,276 66,593 51,024
Provision for income taxes 8,449 7,940 25,305 19,981
---------- ---------- ---------- ----------
Net income $ 15,187 $ 12,336 $ 41,288 $ 31,043
========== ========== ========== ==========
NOTE 3 Inventories consist of the following (in thousands):
November 30, February 28,
1995 1995
------------ ------------
Finished goods $ 33,440 $ 35,769
Work in process 12,922 14,075
Raw materials and supplies 28,878 27,231
-------- --------
$ 75,240 $ 77,075
======== ========
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NOTE 4 The principal assets and liabilities of the discontinued construction
operations included in the consolidated balance sheets are as follows (in
thousands):
November 30, February 28,
1995 1995
------------ ------------
Accounts receivable $ 16,115 $ 45,706
Other current assets 5,337 11,911
Other assets 1,390 5,203
Accounts payable (9,205) (24,588)
Accrued expenses (6,540) (12,578)
Other current liabilities (486) (4,659)
Other liabilities (180) (2,849)
During the first quarter of fiscal 1996, Pozzo Construction Company, which was
part of the remaining discontinued construction operations, and the Injection
Molding Metal Products operations were sold. These transactions were not
material to the consolidated financial condition of BII and Subsidiaries.
NOTE 5 In August 1995, Blount, Inc. entered into agreements expiring August 31,
1998 with certain financial organizations under which it may sell up to $25
million of undivided interests in a pool of eligible accounts receivable in
which the purchasers retain a security interest. The purchasers' level of
investment may fluctuate based on the level of the eligible receivables in the
pool. As of November 30, 1995, no receivables have been sold under this
agreement.
At November 30, 1995 and February 28, 1995, $8.7 million and $10.1 million,
representing the unexpended proceeds from industrial development revenue bonds
issued in fiscal 1995, was held in trust and is included in "Other assets" in
the consolidated balance sheets.
NOTE 6 The United States Environmental Protection Agency ("EPA") has designated
a predecessor of Blount, Inc. as a potentially responsible party ("PRP") with
respect to the Onalaska Municipal Landfill in Onalaska, Wisconsin (the "Site").
The waste complained of was placed in the landfill prior to 1981 by a
corporation, some of whose assets were purchased in 1981 by a predecessor of
Blount, Inc. It is the view of management that because Blount, Inc.'s
predecessor corporation purchased assets rather than stock, Blount, Inc. does
not have successor liability and is not properly a PRP. However, the EPA has
indicated it does not accept this position. Management believes the EPA is
wrong on the successor liability issue. However, with other PRP's, Blount, Inc.
made a good faith offer to the EPA to pay a portion of the clean-up costs. The
offer was rejected and the EPA is proceeding with the clean-up. The estimated
past and future clean-up costs are approximately $12 million. In 1989 the EPA
named four PRP's. One of the PRP's, the Town of Onalaska (the "Town") and the
EPA and State of Wisconsin negotiated a consent decree under which the Town
would have been released from future liability in return for paying $110
thousand, granting access to the Site and adjacent properties and performing
some future maintenance work. The United States District Court for the District
of Wisconsin found, on December 21, 1994, that the settlement was not fair,
reasonable or in the public interest, and refused to approve and confirm it as
the order of the Court. Blount, Inc. denies that it is a PRP and is unable to
determine any other party's share of total remediation costs. Blount, Inc. does
not know the financial status of the other PRP's and other parties that, while
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not named by the EPA as PRP's, may have liability with respect to the Site.
Management does not expect the situation to have a material adverse effect on
consolidated financial condition or operating results.
Blount, Inc. is closing the Resource Conservation and Recovery Act ("RCRA") Part
B Storage Permit at its Sporting Equipment Division's CCI operations facility in
Lewiston, Idaho. As part of the closure process, Blount, Inc. is required by
the State of Idaho to undertake RCRA correction action at the facility. This
requires Blount, Inc. to investigate all areas at the facility where solid waste
and hazardous waste have historically been managed. The facility has been
operating since the 1950s. In order to effect the investigation, in March 1994,
Blount, Inc. and the State of Idaho Division of Environmental Quality ("IDEQ")
entered into an Administrative Consent Order which governs the completion of the
corrective action activities. The RCRA Facility Investigation has commenced and
the soils investigation is complete. Environmental sampling indicates the
presence of lead contamination in a limited number of shallow surface soils.
The IDEQ has approved Blount's proposal to excavate this limited lead
contamination and dispose of it at a RCRA permitted landfill. There is also
some trichloroethylene and perchloroethylene contamination of the uppermost
groundwater beneath the facility. This uppermost groundwater is not the
drinking water supply source and does not appear to be connected to the deeper
drinking water aquifer. Further groundwater investigation is ongoing. It is
expected that the range of remediation costs is from $2.8 million to $6.2
million. Management does not expect the situation to have a material adverse
effect on consolidated financial condition or operating results beyond amounts
accrued.
Under the provisions of Washington State environmental laws, the Washington
State Department of Ecology ("WDOE") has notified Blount, Inc. that it is one of
many companies named as a Potentially Liable Party ("PLP"), for the Pasco
Sanitary Landfill site, Pasco, Washington ("the Site"). Although the cleanup
costs are believed to be substantial, accurate estimates will not be available
until the environmental studies have been completed at the Site. However, based
upon the total documented volume of waste sent to the Site, Blount, Inc.'s waste
volume compared to that total waste volume should cause Blount, Inc. to be
classified as a "de minimis" PLP. In July, 1992, Blount, Inc. and thirty-eight
(38) other PLPs entered into an Administrative Agreed Order with WDOE to perform
a Phase I Remedial Investigation at the Site. In October 1994, WDOE issued an
administrative Unilateral Enforcement Order to all PLPs to complete a Phase II
Remedial Investigation and Feasibility Study ("RI/FS") under the Scope of Work
established by WDOE. The results of the RI/FS investigation are not expected
until after the first quarter of 1997. Blount, Inc. is unable to determine, at
this time, the level of clean-up demands that may be ultimately placed on it.
Management believes that, given the number of PLPs named with respect to the
Site and their financial condition, Blount, Inc.'s potential response costs
associated with the Site will not have a material adverse effect on Blount,
Inc.'s financial condition or operating results.
Blount, Inc. 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 large deductible amounts under insurance policies.
In addition, Blount, Inc. is a party to a number of other suits arising out of
the conduct of its business. While there can be no assurance as to their
ultimate outcome, management does not believe these lawsuits will have a
material adverse effect on consolidated financial condition or operating
results.
Contingencies include normal liabilities for performance and completion of its
remaining construction contracts. At November 30, 1995, there were outstanding
bank letters of credit in the approximate amount of $15.0 million issued
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principally in connection with various foreign construction contracts for which
Blount, Inc. is contingently liable to the issuing banks in the event payment is
demanded by the holder.
See Notes 4 and 8 to BII's Consolidated Financial Statements for the year ended
February 28, 1995, included in the Form S-4 registration statement filed on
October 3, 1995 (See Note 2), for other commitments and contingencies which have
not changed significantly since year-end.
NOTE 7 Segment information is as follows (in thousands):
Three Months Nine Months
Ended November 30, Ended November 30,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Sales:
Outdoor products $ 74,495 $ 73,938 $218,157 $204,337
Industrial and power equipment 59,264 52,685 173,529 154,391
Sporting equipment 24,205 30,836 77,633 83,196
-------- -------- -------- --------
$157,964 $157,459 $469,319 $441,924
======== ======== ======== ========
Operating income:
Outdoor products $ 15,623 $ 18,463 $ 44,232 $ 38,704
Industrial and power equipment 10,637 9,328 30,251 24,949
Sporting equipment 3,145 5,518 9,656 15,640
-------- -------- -------- --------
Operating income from segments 29,405 33,309 84,139 79,293
Corporate overhead expenses (5,375) (10,407) (15,968) (20,514)
-------- -------- -------- --------
Income from operations 24,030 22,902 68,171 58,779
Interest expense (2,705) (2,699) (7,937) (8,313)
Interest income 1,127 668 2,891 1,837
Other income, net (45) (487) 493 143
-------- -------- -------- --------
Income before income taxes $ 22,407 $ 20,384 $ 63,618 $ 52,446
======== ======== ======== ========
NOTE 8 Income taxes paid during the nine months ended November 30, 1995 and
1994 were $29.0 million and $16.2 million. Interest paid during the nine months
ended November 30, 1995 and 1994 was $6.1 million and $5.9 million.
NOTE 9 Net income per common share is based on the weighted average number of
common and common equivalent shares (stock options) outstanding in each period,
as adjusted for the merger and the 3 for 2 common stock exchange ratio (See Note
2).
NOTE 10 In December 1995, BII announced the successful completion of its tender
offer for the outstanding common stock of Simmons Outdoor Corporation
("Simmons"). The purchase price will be approximately $38 million and the
acquisition will be accounted for as a purchase. For its most recent fiscal
year, Simmons reported sales and operating income of approximately $52.0 million
and $5.4 million, respectively.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating Results
BII and Subsidiaries reported improved net income for the three months and nine
months ended November 30, 1995. Sales for the third quarter and first nine
months of fiscal 1996 were $158.0 million and $469.3 million compared to $157.5
million and $441.9 million for the comparable periods of fiscal 1995. Net
income was $16.8 million ($.86 per share) and $41.1 million ($2.11 per share)
for the third quarter and first nine months of fiscal 1996 compared to $12.3
million ($.64 per share) and $31.7 million ($1.64 per share) for the comparable
periods of the prior year. The principal reasons for these results and the
status of consolidated financial condition are set forth below and should be
read in conjunction with the consolidated financial statements of BII and
Subsidiaries for the year ended February 28, 1995, included in BII's Form S-4
registration statement filed on October 3, 1995 (See Note 2 of Notes to
Consolidated Financial Statements).
Sales for the Outdoor Products segment for the third quarter and first nine
months of fiscal 1996 were $74.5 million and $218.2 million compared to $73.9
million and $204.3 million during the third quarter and first nine months of
fiscal 1995. Operating income was $15.6 million and $44.2 million during the
third quarter and first nine months of fiscal 1996 compared to $18.5 million and
$38.7 million during the same periods of the prior fiscal year. While sales
were slightly higher in the current year's third quarter, operating income
declined by $2.9 million reflecting the effect of a stronger Canadian dollar on
costs and reduced earnings from operations in Brazil. Additionally, the prior
year's third quarter included income from the reduction of certain operating
accruals. The sales and operating income increases for the nine months ended
November 30, 1995, were principally attributable to a higher volume of saw chain
and saw bars sold in foreign markets by the Oregon Cutting Systems Division and
an increase in the volume of riding lawn mowers shipped by Dixon Industries,
Inc., partially offset by reduced income from operations in Brazil.
Sales for the Industrial and Power Equipment segment were $59.3 million and
$173.5 million during the third quarter and the first nine months of fiscal 1996
compared to $52.7 million and $154.4 million during the comparable periods of
fiscal 1995. Operating income increased to $10.6 million and $30.3 million for
the three months and nine months ended November 30, 1995 from $9.3 million and
$24.9 million during the same periods of the prior fiscal year. The improved
operating results were principally due to higher average selling prices for
timber harvesting equipment and a better sales mix of higher margin products,
partially offset by reduced volume; improved sales and operating income by CTR
Manufacturing, Inc., acquired on April 28, 1994, and its inclusion for the full
nine months in the current year; and improved sales and operating income by the
Gear Products, Inc. subsidiary, primarily due to higher volume.
The Sporting Equipment segment experienced a downturn during the second and
third quarters of fiscal 1996. In the aftermath of last year's booming domestic
market, a result of concern over the possibility of Congressional legislation
adverse to the shooting sports industry, an industry slowdown occurred. Sales
for the Sporting Equipment segment declined to $24.2 million for the third
quarter of fiscal 1996 from $30.8 million during the prior year's third quarter,
while current year-to-date sales of $77.6 million were $5.6 million less than
last year's level for the comparable period. Operating income was down to $3.1
million and $9.7 million for the third quarter and first nine months of fiscal
1996 as compared to $5.5 million and $15.6 million during the same periods of
fiscal 1995. These results reflect the reduced demand, higher raw material
costs, costs associated with temporary plant shutdowns during the second quarter
and a loss from the Ram-Line operation acquired late in fiscal 1995.
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Corporate overhead expenses were lower during the three months and nine months
ended November 30, 1995. The prior year included litigation and settlement
costs related to the sale of a former subsidiary. Selling, general and
administrative expenses for the third quarter and first nine months of fiscal
1996 include transaction costs of $.7 million and $2.2 million, respectively,
associated with the merger (See Note 2 of Notes to Consolidated Financial
Statements). The provision for income taxes has been reduced by $1.7 million
during the current year's third quarter as a result of contribution carryovers
associated with the merger. Total backlog at November 30, 1995 was
approximately $139.6 million compared to $125.5 million at August 31, 1995 and
$134.4 million at February 28, 1995.
Financial Condition, Liquidity and Capital Resources
At November 30,1995, no amounts were outstanding under the $100 million
revolving credit agreement. In August 1995, Blount, Inc. entered into new
receivable sales agreements under which up to $25 million in receivables may be
sold (See Note 5 of Notes to Consolidated Financial Statements). As of November
30, 1995, no receivables had been sold under these agreements. The total
capitalization at November 30, 1995 consists of $96.0 million long-term debt and
equity of $244.2 million for a long-term debt to equity ratio of .4 to 1 as
compared to a ratio of .5 to 1 at February 28, 1995. At November 30, 1995, 9%
subordinated notes were outstanding in the principal amount of $79.4 million
maturing in 2003. See Note 3 of Notes to the Consolidated Financial Statements
for BII and Subsidiaries for the year ended February 28, 1995 for the terms and
conditions of the $100 million revolving credit agreement and the 9%
subordinated notes.
Working capital was $165.6 million at November 30, 1995 compared to $123.3
million at February 28, 1995. The increase resulted principally from earnings
for the nine months ended November 30, 1995. Accounts receivable, accounts
payable and accrued expenses decreased by $23.8 million, $21.4 million and $13.2
million, respectively, since February 28, 1995. The primary reason for the
decrease in receivables is the reduction in balances attributable to the
discontinued construction segment as those operations either wind down or are
sold (See Note 4 of Notes to Consolidated Financial Statements). The reductions
in accounts payable and accrued expenses also reflect the reduced construction
activity, the sale of the Injection Molding Metal Products operations and higher
estimated tax payments resulting from the higher earnings. Operating cash flows
for the first nine months of fiscal 1996 were $47.1 million compared to $43.4
million in the first nine months of fiscal 1995, while cash and cash equivalent
balances increased by $33.8 million since February 28, 1995. The improved
operating cash flows reflect the improved year-to-date income from manufacturing
operations and cash flows of approximately $9.4 million from the discontinued
construction segment, partially offset by higher estimated income tax payments
and other corporate expenditures.
The ability of BII to pay dividends is dependent upon Blount, Inc.'s ability to
pay dividends to BII. Restrictions on the ability of Blount, Inc. to pay cash
dividends are contained in the indenture related to the 9% subordinated notes
and in certain financial covenants of the revolving credit agreement. Under the
most restrictive requirement, Blount, Inc. retained earnings of approximately
$57.6 million were available for the payment of dividends at November 30, 1995.
Page 12
<PAGE>
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: January 16, 1996 /s/ Harold E. Layman
---------------------------------
Harold E. Layman
Senior Vice President &
Chief Financial Officer
Page 13
<PAGE>
PART I - EXHIBIT 11
BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(In thousands, except share data)
(Unaudited)
Three Months Nine Months
Ended November 30, Ended November 30,
----------------------- -----------------------
1995 1994* 1995* 1994*
---------- ---------- ---------- ----------
Primary:
Net income $ 16,762 $ 12,336 $ 41,119 $ 31,684
========== ========== ========== ==========
Shares (See Note 2):
Weighted average common
shares outstanding 19,048,144 18,826,139 19,047,437 18,821,540
Dilutive effect of stock
options 427,192 591,174 419,239 544,327
---------- ---------- ---------- ----------
Average common shares
outstanding as adjusted 19,475,336 19,417,313 19,466,676 19,365,867
========== ========== ========== ==========
Primary net income per
common share $ .86 $ .64 $ 2.11 $ 1.64
========== ========== ========== ==========
Assuming Full Dilution:
Net income $ 16,762 $ 12,336 $ 41,119 $ 31,684
========== ========== ========== ==========
Shares (See Note 2):
Average common shares
as adjusted for primary
computation 19,475,336 19,417,313 19,466,676 19,365,867
Additional dilutive effect
of stock options 13,698 361 59,444
---------- ---------- ---------- ----------
Average common shares
outstanding as adjusted 19,475,336 19,431,011 19,467,037 19,425,311
========== ========== ========== ==========
Net income per common share
assuming full dilution $ .86 $ .63 $ 2.11 $ 1.63
========== ========== ========== ==========
* Restated. See Note 2.
Page 14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BLOUNT INTERNATIONAL, INC. FOR THE PERIOD ENDED NOVEMBER
30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> NOV-30-1995
<CASH> 77,225
<SECURITIES> 0
<RECEIVABLES> 110,020
<ALLOWANCES> 3,065
<INVENTORY> 75,240
<CURRENT-ASSETS> 292,601
<PP&E> 277,819
<DEPRECIATION> 155,681
<TOTAL-ASSETS> 509,023
<CURRENT-LIABILITIES> 127,044
<BONDS> 95,984
<COMMON> 190
0
0
<OTHER-SE> 243,967
<TOTAL-LIABILITY-AND-EQUITY> 509,023
<SALES> 469,319
<TOTAL-REVENUES> 469,319
<CGS> 310,474
<TOTAL-COSTS> 310,474
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,937
<INCOME-PRETAX> 63,618
<INCOME-TAX> 22,499
<INCOME-CONTINUING> 41,119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,119
<EPS-PRIMARY> 2.11
<EPS-DILUTED> 2.11
</TABLE>
