UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
{ } ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
OR
{X} TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from March 1, 1996 to December 31, 1996
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, Montgomery, Alabama 36116-1602
- ---------------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (334) 244-4000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Class A Common Stock, $.01 par value New York Stock Exchange
Class B Common Stock, $.01 par value New York Stock Exchange
- ------------------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act: None
----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained, and will not be contained, to the best of
registrant's knowledge, in the definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
-------
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
------- -------
Page 1
<PAGE>
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
Aggregate market value of voting stock held by nonaffiliates as of January 31,
- ------------------------------------------------------------------------------
1997: $516,074,146
- --------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock $.01 par value, as of January 31, 1997: 13,467,608 shares
----------
Class B Common Stock $.01 par value, as of January 31, 1997: 5,876,978 shares
----------
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes.
Portions of proxy statement for the annual meeting of stockholders to be held
April 21, 1997, are incorporated by reference in Part III.
Page 2
<PAGE>
PART I
ITEM 1. BUSINESS
Blount International, Inc. ("the Company") was incorporated on October 5, 1979,
to act as a holding company for businesses to be acquired by the Company, and to
hold shares of Blount, Inc. Common Stock owned by the family of Winton M.
Blount. After incorporation, the Company acquired and operated several
businesses, the last of which was sold in February, 1993. Except for the equity
interest in Blount, Inc. (an approximate 62% voting interest and 38% total
interest at November 3, 1995), the Company had no significant assets or business
from February, 1993, until November, 1995. On November 3, 1995, through a
merger approved by the stockholders of Blount, Inc., Blount, Inc. became a
wholly-owned subsidiary of the Company and the equity ownership of the Company
was the same as that which previously existed for Blount, Inc. Blount
International, Inc. and its subsidiaries are hereinafter referred to as the
"Company."
The Company is an international manufacturing company with operations in three
business segments: Outdoor Products, Industrial and Power Equipment and
Sporting Equipment. The Company's current manufacturing operations date largely
to the acquisition of Omark Industries, Inc. by Blount, Inc. in 1985. The
predecessor to Blount, Inc. was founded in 1946 as a general construction
company and, over the succeeding years, grew into one of the largest
construction companies in the United States. In February, 1994, the
construction business was discontinued. See "Business - Acquisitions and
Dispositions" on page 6.
The following text contains various trademarks of Blount, Inc. and its
subsidiaries.
OUTDOOR PRODUCTS
The Company's Outdoor Products segment is comprised of the Oregon Cutting
Systems Division ("Oregon") and Dixon Industries, Inc. ("Dixon"). Oregon
produces a wide variety of saw chain, chain saw guide bars, saw chain drive
sprockets and maintenance tools for use primarily on portable gasoline and
electric chain saws, and mechanical timber harvesting equipment. The Oregon
trademark is well known to end-users and the Company believes that it is the
world leader in the production of saw chain. Oregon's saw chain and related
products are used primarily by professional loggers, construction workers,
farmers, arborists and homeowners. Oregon markets an Industrial Cutting System
("ICS"). ICS, a diamond-segmented chain cutting system for concrete (including
steel-reinforced concrete), is a faster and more flexible concrete cutting
method than others currently employed in the construction and demolition
industries.
Oregon sells to distributors, dealers and mass merchandisers serving the retail
replacement market. In addition, Oregon currently sells its products to more
than 50 original equipment manufacturers ("OEMs"). Due to the high level of
technical expertise and capital investment required to manufacture saw chain and
guide bars, the Company believes that it is able to produce durable, high-
quality saw chain and guide bars more efficiently than most of its competitors.
The use of Oregon cutting chain as original equipment on chain saws is also
promoted through cooperation with OEMs in improving the design and
specifications of chain and saws. Sales of saw chain for replacement use, which
accounted for approximately three-quarters of the Company's saw chain sales in
the ten months ended December 31, 1996, are generally more profitable than sales
of saw chain to OEMs.
Page 3
<PAGE>
The Company has Oregon marketing personnel throughout the United States and in a
number of foreign countries. Sales derived from operations outside the United
States accounted for 42%, and export sales accounted for an additional 25%, of
Oregon's sales during the ten months ended December 31, 1996. Oregon
manufactures saw chain and related products in Milwaukie, Oregon; Guelph,
Ontario, Canada; and Curitiba, Parana, Brazil.
Oregon's products compete with other saw chain manufacturers as well as a small
number of international chain saw manufacturers, some of whom are also
customers. This segment's principal raw material, strip steel, is generally
purchased from two vendors, and can be obtained from other sources.
Dixon, acquired in early fiscal 1991, has manufactured ZTR (zero turning radius)
lawn mowers and related attachments since 1973. Dixon pioneered the development
of ZTR and is the only manufacturer to offer a full line of ZTR lawn mowers for
both homeowner and commercial applications.
The key element which differentiates Dixon from its competitors is its unique
mechanical transaxle. The transaxle transmits power independently to the rear
drive wheels and enables the operator to move the back wheels at different
speeds and turn the mower in a circle no larger than the machine, a "zero radius
turn". This unique transmission enables the Dixon mower to out-maneuver
conventional ride-on products available in the market today and provides a cost
advantage over the more expensive hydrostatic drives used by competitors in the
market. The latest addition to the line is Dixon's first ever walk-behind
mower. This new commercial model is available in 36-inch, 42-inch, and 50-inch
cutting widths and features the same mechanical transaxle used in the riding
models. Other features include a simple, convenient control system, laser-cut
steel frame with "A" frame handles for strength and durability and a single
point deck lift system for quick mowing height adjustment.
Dixon sells its products through distribution channels comprised of full-service
dealers, North American distributors and export distributors. Sales by Dixon
accounted for 14% of Outdoor Products sales in the ten months ended December 31,
1996.
INDUSTRIAL AND POWER EQUIPMENT
The Company's Industrial and Power Equipment segment manufactures equipment for
timber harvesting and log loading, industrial tractors and loaders, rotation
bearings and mechanical power transmission components. The Company believes
that it is a world leader in the manufacture of hydraulic timber harvesting
equipment, which includes a line of self-propelled and truck-mounted loaders and
feller bunchers (tractors with hydraulic attachments for felling timber) under
the Prentice brand name; a line of tractors, feller bunchers and related
attachments under the Hydro-Ax brand name; and a line of delimbers, slashers and
firewood processors under the CTR brand name. Major users of these products
include timber harvesters, land reclamation companies, contractors and scrap
yard operators.
The Company sells its products through a network of approximately 160 dealers in
over 200 locations in the United States and currently has an additional 15
dealers overseas, primarily in South America and Southeast Asia. Over 80% of
this segment's sales in the ten months ended December 31, 1996 were in the
United States, primarily in the southeastern and south central states.
The Company places a strong emphasis on the quality, safety, comfort, durability
and productivity of its products and on the after-market service provided by its
distribution and support network. The Company's Industrial and Power Equipment
segment competes primarily on the basis of quality with a number of domestic and
Page 4
<PAGE>
foreign manufacturers of log loaders and feller bunchers.
The Company attempts to capitalize on its technological and manufacturing
expertise as a means of increasing its participation in the market for
replacement parts for products which it manufactures, as well as of developing
new product applications both within and beyond the timber, scrap and
construction industries. The Company is committed to continuing research and
development in this segment to respond quickly to increasing mechanization and
environmental awareness in the timber harvesting industry.
The Company's Industrial and Power Equipment segment has manufacturing
facilities in Owatonna, Minnesota; Prentice and Spencer, Wisconsin; Tulsa,
Oklahoma; and Zebulon and Union Grove, North Carolina. A majority of the
components used in the Company's products are obtained from a number of domestic
manufacturers.
Segment results during the ten months ended December 31, 1996, include sales of
$36 million from Gear Products, Inc. ("Gear"), acquired by the Company early in
fiscal 1992, and CTR Manufacturing, Inc. ("CTR"), acquired by the Company in
early fiscal 1995. Gear designs, manufactures and distributes rotation bearings
and mechanical power transmission components for manufacturers of equipment that
serve the utility, man-lift, construction, forestry and marine industries. CTR
designs, manufactures and distributes a line of slashers, delimbers, firewood
processors and self-propelled carriers that serve the forest products industry.
SPORTING EQUIPMENT
The Company's Sporting Equipment segment manufactures small arms ammunition,
reloading equipment, primers, gun care products and accessories, and is a
distributor of imported sports optical products under the Simmons and Weaver
brand names. Principal products include CCI and Speer ammunition sold for use by
hunters, sportsmen and law enforcement and military personnel; RCBS reloading
equipment for use by hunters and sportsmen who prefer to reload their own
ammunition; Outers gun care and trap-shooting products; Ram-Line synthetic
stocks, Polar Cap scope covers and other shooting sports accessories; Weaver
shooting mounts and scopes; and Simmons binoculars, scopes and telescopes and
other optical and hunting accessories. The Company believes that it is a market
leader in the domestic gun care and reloading markets with high levels of brand
name recognition in each of these areas. The Sporting Equipment segment also
produces industrial powerloads which are used in the construction industry to
drive fastening pins into metal or concrete.
The market for Sporting Equipment products is characterized by a high degree of
customer loyalty to brand names and historically has not been affected by
adverse economic conditions. A continuing focus on new and better technologies
has enabled the Company to introduce a number of new and improved products in
recent years. These products include Nitrex, the segment's new rifle
ammunition, which was previously available only to handloaders. One of the
segment's successful products in recent years has been Blazer aluminum-case
ammunition. Up to 15% less expensive than traditional brass-case ammunition,
Blazer aluminum-case ammunition is used as training ammunition by numerous law
enforcement agencies located throughout the world. The Company has been
successful with the introduction of Gold Dot pistol ammunition, a high
performance service round that is used by many major law enforcement agencies.
The Company developed its Non-Toxic ammunition, which has a total copper bullet
and utilizes a Clean-Fire lead-free primer, in response to concern in the
shooting community about exposure to lead and other heavy metals, particularly
in indoor ranges. As a result of its acquisition of Simmons Outdoor Corporation
in December 1995 (see Business - Acquisitions and Dispositions), the Company
added over 250 models of binoculars, scopes, telescopes and other optical
Page 5
<PAGE>
accessories to its product line. Sales by Simmons accounted for 32% of Sporting
Equipment sales in the ten months ended December 31, 1996.
Principal raw materials include brass, lead, aluminum and powder, which are
purchased from several suppliers. The Company manufactures ammunition in
Lewiston, Idaho; reloading equipment in Oroville, California; mounts, shooting
accessories and gun care equipment in Onalaska, Wisconsin. The Company imports
substantially all its optical products from foreign suppliers and does not rely
on long-term agreements, although it does have long-term relationships with some
of its suppliers.
In the market for small arms ammunition and primers, the Company competes with
several larger manufacturers with well established brand names and market share
positions. In the segment's other product lines, the Company competes with a
number of smaller competitors, none of whom has a dominant market share.
CAPACITY UTILIZATION
Based on an 80-hour work week, the Outdoor Products, Industrial and Power
Equipment and Sporting Equipment segments utilized approximately 94%, 66% and
65%, respectively, of their production capacity in the ten months ended December
31, 1996.
BACKLOG
The backlog for each of the Company's business segments as of the end of each of
its last four reporting periods was as follows:
Last day of February,
December 31, ---------------------------
1996 1996 1995 1994
------------ ------- ------- -------
(In millions)
Outdoor Products $ 35.5 $ 33.7 $ 44.4 $ 36.5
Industrial and Power Equipment 29.2 63.6 74.4 93.8
Sporting Equipment 9.5 15.5 15.6 16.8
------- ------- ------- -------
$ 74.2 $ 112.8 $ 134.4 $ 147.1
======= ======= ======= =======
The total backlog as of December 31, 1996, is expected to be completed and
shipped within twelve months.
ACQUISITIONS AND DISPOSITIONS
In February 1992 and 1993, the Company sold substantially all of the assets of
its Waterbury Felt and Lindsay Wire operations, respectively.
In fiscal 1993, the Company sold its remaining agri/industrial sites for cash of
$0.9 million.
In February 1994, the Company adopted a plan to discontinue its construction
business through the orderly completion and close-out of the Company's principal
domestic and foreign construction projects and the sale of Pozzo Construction
Co. ("Pozzo"), a subsidiary headquartered in Los Angeles, California. During
the first quarter of fiscal 1996, Pozzo was sold with no material effect on the
Company's financial condition. At December 31, 1996, all construction projects
were complete.
Page 6
<PAGE>
In fiscal 1995, the Company acquired all the outstanding capital stock of CTR
Manufacturing, Inc., a manufacturer of automated forestry harvesting equipment,
and the operating assets of Ram-Line, Inc., a manufacturer of stocks, magazines,
lens caps and other products for the shooting sports markets. The purchase
price paid for the two businesses was approximately $18.2 million, including
notes issued of $7.2 million.
In December 1995, the Company acquired all the outstanding capital stock of
Simmons Outdoor Corporation, a sports optics distributor, for cash of
approximately $38 million.
See Note 4 of Notes to Consolidated Financial Statements on page 27.
EMPLOYEES
At December 31, 1996, the Company employed approximately 4,400 individuals.
None of the Company's employees are unionized. The Company believes its
relations with its employees are satisfactory.
ENVIRONMENTAL MATTERS
For information regarding certain environmental matters, see Note 8 of Notes to
Consolidated Financial Statements on pages 32 and 33.
From time to time the Company may be identified as a potentially responsible
party with respect to a Superfund site. EPA (or a state) can either (a) allow
such a party to conduct and pay for a remedial investigation and feasibility
study and remedial action or (b) conduct the remedial investigation and action
and then seek reimbursement from the parties. Each party can be held jointly,
severally and strictly liable for all costs, but the parties can then bring
contribution actions against each other. As a result of the Superfund Act, the
Company may be required to expend amounts on remedial investigations and actions
which amounts cannot be determined at the present time but may ultimately prove
to be significant.
The Company expects to spend approximately $0.7 million, $1.1 million and $0.9
million during 1997, 1998 and 1999, respectively, on environmental compliance
costs.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS AND FOREIGN AND DOMESTIC
OPERATIONS
For information about industry segments and foreign and domestic operations, see
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 11 through 15 and Note 10 of Notes to Consolidated Financial
Statements on pages 34 through 36.
ITEM 2. PROPERTIES
The corporate headquarters of the Company occupy executive offices at 4520
Executive Park Drive, Montgomery, Alabama.
The other principal properties of the Company and its subsidiaries are as
follows:
Cutting chain and accessories manufacturing plants are located in Milwaukie,
Oregon; Guelph, Ontario, Canada; and Curitiba, Parana, Brazil and sales and
distribution offices are located in Europe and Japan. Lawn mowers and related
attachments are manufactured at a plant in Coffeyville, Kansas. Log loaders,
Page 7
<PAGE>
feller-bunchers and accessories for automated forestry equipment are
manufactured at plants in Prentice and Spencer, Wisconsin; Zebulon and Union
Grove, North Carolina; and Owatonna, Minnesota. Rotation bearings and
mechanical power transmission components are manufactured at a plant in Tulsa,
Oklahoma. Sporting ammunition, reloading equipment products, gun care
equipment, industrial powerloads and shooting sports accessories are
manufactured at plants in Lewiston, Idaho; Oroville, California; and Onalaska,
Wisconsin. The Company's sporting optics and hunting accessory distributor
maintains executive offices in Tallahassee, Florida and a warehouse facility in
Thomasville, Georgia.
All of these facilities are in good condition, are currently in normal operation
and are generally suitable and adequate for the business activity conducted
therein. Approximate square footage of principal properties is as follows:
Area in Square Feet
---------------------
Owned Leased
--------- --------
Outdoor Products 918,000 170,000
Industrial and Power Equipment 757,000 0
Sporting Equipment 698,000 114,000
Corporate Office 192,000 13,000
--------- -------
Total 2,565,000 297,000
========= =======
ITEM 3. LEGAL PROCEEDINGS
For information regarding legal proceedings see Note 8 of Notes to Consolidated
Financial Statements on pages 32 and 33.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Page 8
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table presents for the Company's last two reporting periods, the
quarterly high and low prices and cash dividends declared for the Company's
Common Stock. The Company had approximately 9,300 shareholders as of January
31, 1997.
Class A Common Stock Class B Common Stock
------------------------ ------------------------
High Low Dividend High Low Dividend
- -------------------------- ------ ------ -------- ------ ------ --------
Ten Months Ended
December 31, 1996
Month Ended March 31, 1996 $ 32.0 $ 29.8 $ .110 $ 32.0 $ 30.9 $ .102
Second quarter 33.8 30.1 .110 33.8 31.0 .102
Third quarter 34.5 28.3 .110 34.4 29.5 .102
Fourth quarter 38.9 32.9 .127 37.9 34.1 .118
Twelve Months Ended
February 29, 1996
First quarter $ 31.1 $ 25.2 $ .095 $ 31.0 $ 25.8 $ .087
Second quarter 33.4 24.5 .095 33.0 25.2 .087
Third quarter 35.2 26.5 .095 35.2 28.0 .087
Fourth quarter 31.1 25.0 .110 31.5 30.5 .102
For information regarding restrictions on the Company's ability to pay cash
dividends, see Note 3 of Notes to Consolidated Financial Statements on pages 25
and 26.
For information regarding restrictions on the net assets of foreign
subsidiaries, see Note 11 of Notes to Consolidated Financial Statements on pages
37 and 38.
Page 9
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
Twelve Months Ten Months
Ended Ended Twelve Months Ended
Dollar amounts in millions, December 31, December 31, the last day of February,
except per share data 1996 (1) 1995 (1) 1996(1) 1996 1995 1994 1993
- ---------------------------------------- -------- -------- ------------ -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Results:
Sales $649.3 $621.4 $526.7 $644.3 $588.4 $488.0 $426.5
Operating income from segments 113.1 104.9 91.2 112.8 101.9 73.6 43.4
Income from continuing operations 53.8 49.4 44.0 53.6 40.7 21.6 10.3
Net income 55.2 49.4 45.4 53.6 40.7 11.3 14.4
Per share:
Income from continuing operations 2.75 2.53 2.25 2.75 2.10 1.13 .56
Net income 2.82 2.53 2.32 2.75 2.10 .59 .78
- ---------------------------------------- -------- -------- -------- -------- -------- -------- --------
End of Period Financial Position:
Total assets $533.8 $522.4 $533.8 $546.5 $520.8 $499.6 $459.4
Working capital 166.2 122.2 166.2 136.2 123.3 105.1 58.2
Property, plant and equipment-gross 301.9 293.8 301.9 295.5 279.9 276.2 270.4
Property, plant and equipment-net 131.7 136.7 131.7 135.5 134.4 140.5 149.1
Long-term debt 84.6 95.9 84.6 95.9 98.3 106.2 82.0
Total debt 85.8 108.7 85.8 107.6 106.0 112.2 94.8
Net debt to total capitalization (2) 5.9% 24.8% 5.9% 23.6% 16.8% 20.5% 26.8%
Stockholders' equity 290.8 244.6 290.8 255.0 207.7 171.0 156.6
Current ratio 2.4 to 1 1.9 to 1 2.4 to 1 1.9 to 1 1.7 to 1 1.6 to 1 1.3 to 1
- ---------------------------------------- -------- -------- -------- -------- -------- -------- --------
Other Data:
Property, plant and equipment additions(3) $ 21.3 $ 19.8 $ 18.7 $ 19.3 $ 14.7 $ 14.7 $ 20.7
Depreciation and amortization 23.3 22.3 19.2 22.2 22.9 22.8 23.4
Interest expense, net of interest income 7.5 6.8 5.6 7.4 8.5 9.5 10.4
Stock price: Class A high 38.9 35.2 38.9 35.2 32.8 21.7 11.3
Class A low 25.4 24.5 28.3 24.5 18.8 8.1 4.7
Stock price: Class B high 37.9 35.2 37.9 35.2 32.6 21.7 11.3
Class B low 29.5 25.2 29.5 25.2 19.3 8.5 4.8
Per common share dividends: Class A .457 .395 .457 .395 .345 .308 .300
Class B .423 .362 .423 .362 .312 .275 .267
Weighted average common and common
equivalent shares outstanding (in millions) 19.6 19.5 19.6 19.5 19.4 19.1 18.4
Employees (approximate) 4,400 4,400 4,400 4,400 4,600 4,700 4,800
- ---------------------------------------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
(1) In April 1996, the Company changed its fiscal year from one ending on the
last day of February to one ending on December 31. See Note 1 of Notes to
Consolidated Financial Statements. Unaudited financial data for the twelve
months ended December 31, 1996 and 1995 is also presented in the table above.
(2) Total debt less cash, cash equivalents and unexpended industrial
development revenue bond proceeds.
(3) Includes property, plant and equipment of acquired companies at date of
purchase of $0.6 million and $5.0 million in the twelve months ended the last
day of February, 1996 and 1995.
Page 10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This discussion and analysis should be read in conjunction with the consolidated
financial statements and related notes.
OPERATING RESULTS
In April 1996, the Company changed its fiscal year from one ending on the last
day of February to one ending on December 31. See Note 1 of Notes to
Consolidated Financial Statements. As a result of the change in fiscal year,
the audited financial statements include the results for the ten-month
transition period ended December 31, 1996 ("transition period"). This
discussion and analysis includes a discussion of both the twelve months and ten
months ended December 31, 1996 compared to similar periods for the prior
calendar year, and the fiscal year ended February 29, 1996 compared to the
fiscal year ended February 28, 1995.
TWELVE MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED) COMPARED TO TWELVE MONTHS
ENDED DECEMBER 31, 1995 (UNAUDITED)
Sales for the twelve months ended December 31, 1996 ("calendar 1996") were
$649.3 million compared to $621.4 million for the twelve months ended December
31, 1995 ("calendar 1995"). Income from continuing operations was $53.8 million
($2.75 per share) compared to $49.4 million ($2.53 per share) in calendar 1995.
Net income of $55.2 million ($2.82 per share) in calendar 1996 includes income
of $1.4 million ($.07 per share) from discontinued operations, principally due
to favorable claim settlements and improved international job profits. These
operating results reflect continued strong performance by the Outdoor Products
segment and improved performance by the Sporting Equipment segment, offset by
lower sales and earnings from the Industrial and Power Equipment segment,
primarily due to unfavorable market conditions.
Selling, general and administrative expenses were 20% of sales in both calendar
1996 and calendar 1995. Total selling, general and administrative expenses were
higher during calendar 1996, principally due to the inclusion of Simmons Outdoor
Corporation ("Simmons"), acquired in December 1995, in the consolidated
financial statements for the entire twelve-month period.
The Outdoor Products segment consists of the Company's Oregon Cutting Systems
Division ("Oregon") and Dixon Industries, Inc. ("Dixon"). Sales and operating
income for the Outdoor Products segment for calendar 1996 were $292.7 million
and $61.4 million, respectively, compared to $282.0 million and $53.5 million
during calendar 1995. The improved results for this segment were due to an
increase in sales and operating income at Oregon. This reflects a 7% increase
in the sales volume of saw chain and a 12% increase in the sales volume of saw
bars, Oregon's two principal products, principally to foreign markets, partially
offset by lower average selling prices. During calendar 1996, operating income
from Oregon's operations in Brazil was $0.3 million compared to an operating
loss of $0.8 million during calendar 1995 (see discussion of Brazil operations
below). As a result of unfavorable weather conditions in the spring, Dixon's
operating results were flat in calendar 1996 with sales and operating income of
$44.9 million and $8.4 million, respectively, compared to $44.8 million and $8.4
million during calendar 1995.
Market conditions adversely affected the Industrial and Power Equipment segment
during calendar 1996. Sales and operating income were $209.5 million and $31.9
million, respectively, in calendar 1996 compared to $232.2 million and $39.6
million during calendar 1995. The sales reduction resulted principally from
lower sales of forestry harvesting equipment as a result of the adverse effect
Page 11
<PAGE>
of depressed pulp prices and high mill inventories. The volume of loaders and
tractors sold by this segment during calendar 1996 was approximately 20% lower
than calendar 1995. The reduction in operating income is due to the effect of
the sales decline, partially offset by an increase in sales and operating income
at the Company's Gear Products, Inc. subsidiary, resulting primarily from a
higher sales volume of rotation bearings.
The operating results for the Sporting Equipment segment improved significantly
during calendar 1996, reflecting the favorable impact of including Simmons,
acquired in December 1995, for the entire twelve-month period in 1996. Total
segment sales and operating income were $147.1 million and $19.8 million,
respectively, in calendar 1996 compared to $107.2 million and $11.8 million
during calendar 1995. Simmons added sales of $45.6 million and operating income
of $5.0 million in 1996. Sales at the remaining Sporting Equipment operations
were approximately 5.2% lower during calendar 1996 due to a continued market
slowdown. Operating income increased by $2.9 million at these Sporting
Equipment operations in calendar 1996 principally due to reduced selling,
general and administrative expenses and income of $1.9 million resulting from
the resolution of an environmental matter during calendar 1996 at the Company's
Lewiston, Idaho facility.
TEN MONTHS ENDED DECEMBER 31, 1996 (AUDITED) COMPARED TO TEN MONTHS ENDED
DECEMBER 31, 1995 (UNAUDITED)
Sales during the transition period were $526.7 million compared to $521.6
million in the comparable period of the prior year. Income from continuing
operations was flat at $44.0 million ($2.25 per share) compared to $43.8 million
($2.25 per share) for the same period last year. Net income of $45.4 million
($2.32 per share) in the transition period includes income of $1.4 million ($.07
per share) from discontinued operations, principally due to favorable claim
settlements and improved international job profits. These operating results
reflect continued strong performance by the Outdoor Products segment and
improved performance by the Sporting Equipment segment, offset by lower sales
and earnings from the Industrial and Power Equipment segment, primarily due to
unfavorable market conditions.
Selling, general and administrative expenses were 20% of sales in the transition
period compared to 20% in same period of the prior year. Total selling, general
and administrative expenses were higher during the transition period,
principally due to the inclusion of Simmons, acquired in December 1995, in the
consolidated financial statements for the entire ten-month period of the current
year. Total backlog was $74.2 million at December 31, 1996 compared to $112.8
million at February 29, 1996 as depressed pulp prices and excessively high mill
inventories contributed to a significant reduction in order backlog for forestry
harvesting equipment, and sporting equipment backlog declined as the market
slowdown which began last year continued to affect this segment.
Sales and operating income for the Outdoor Products segment for the transition
period were $239.3 million and $50.7 million, respectively, compared to $238.2
million and $46.8 million during the same period in 1995. The operating results
for this segment reflect an increase in sales and operating income of $3.5
million and $5.3 million, respectively, at Oregon, partially offset by lower
sales and operating income from Dixon. Oregon's results reflect a 4% increase
in the sales volume of saw chain and an 8% increase in the sales volume of saw
bars, Oregon's two principal products, partially offset by lower average selling
prices. Lower foreign exchange expenses and improved manufacturing costs
contributed to higher margins during the current year. A significant part of
Oregon's operations are conducted in foreign countries and, as a result,
fluctuations in foreign exchange rates impact the amount of reported sales,
operating margins and the amount of foreign exchange adjustments reflected in
Page 12
<PAGE>
income. Oregon has manufacturing facilities in Brazil whose operations have
historically been significantly affected by high inflation, currency devaluation
and resulting governmental policies. During the transition period, operating
income from Brazil was $0.7 million compared to an operating loss of $0.7
million during the comparable period of the prior year. Unfavorable weather
conditions in the spring adversely affected the lawncare market. As a result,
the volume of mowers sold by Dixon was approximately 9% less during the
transition period as compared to the same period last year. Dixon's sales and
operating income were $34.4 million and $5.4 million, respectively, in the
transition period compared to $36.8 million and $6.7 million during the
comparable period of the prior year. In 1997, management expects another good
year for both Oregon and Dixon, assuming normal market and weather conditions.
Market conditions adversely affected the Industrial and Power Equipment segment
during the transition period. Sales and operating income were $165.7 million
and $24.0 million, respectively, compared to $196.8 million and $34.2 million
during the comparable period of the prior year. The sales reduction resulted
principally from lower sales of forestry harvesting equipment as a result of the
adverse effect of depressed pulp prices and high mill inventories. The number
of units of loaders and tractors sold by this segment during the ten months
ended December 31, 1996, was approximately 24% lower than the comparable period
in 1995. The Company expects the trend of lower than normal sales to continue
into 1997 until pulp prices and mill inventories return to more normal levels.
The reduction in operating income is due to the effect of the sales decline,
partially offset by an increase in sales and operating income at the Company's
Gear Products, Inc. subsidiary, resulting primarily from a higher sales volume
of rotation bearings.
The operating results for the Sporting Equipment segment improved significantly
during the ten months ended December 31, 1996, reflecting the favorable impact
of including Simmons, acquired in December 1995, for the entire ten-month period
in 1996. Total segment sales and operating income were $121.7 million and $16.5
million, respectively, during the transition period compared to $86.6 million
and $9.9 million during the same period in 1995. Simmons added sales of $39.1
million and operating income of $4.6 million in the transition period. Sales at
the remaining Sporting Equipment operations were approximately 4.6% lower during
the current ten-month period due to a continued market slowdown. Operating
income increased by $1.9 million at these Sporting Equipment operations in the
transition period principally due to reduced selling, general and administrative
expenses and income of $1.9 million resulting from the resolution of an
environmental matter at the Company's Lewiston, Idaho facility. The Company is
currently experiencing, in select product areas of the Sporting Equipment
segment, a slow return to normal market levels.
TWELVE MONTHS ENDED FEBRUARY 29, 1996 (AUDITED) COMPARED TO TWELVE MONTHS ENDED
FEBRUARY 28, 1995 (AUDITED)
On November 3, 1995, a merger agreement ("the merger") was approved in which
Blount, Inc. became a wholly-owned subsidiary of Blount International, Inc. The
Company reported record sales and income from continuing operations for fiscal
1996. The Outdoor Products and Industrial and Power Equipment segments
continued their excellent performance during fiscal 1996, while the results from
the Sporting Equipment segment were adversely affected by a general industry
slowdown. Overall, operating income from segments increased by 11% during
fiscal 1996. Sales for fiscal 1996 were $644.3 million compared to $588.4
million for fiscal 1995. Net income was $53.6 million ($2.75 per share) for
fiscal 1996 compared to $40.7 million ($2.10 per share) for the prior year.
Selling, general and administrative expenses were 20% of sales in fiscal 1996
compared to 21% in fiscal 1995. Total selling, general and administrative
Page 13
<PAGE>
expenses increased during fiscal 1996, reflecting the increased sales activity
partially offset by lower corporate overhead expenses. Corporate overhead
expenses for the prior year included litigation and settlement costs of $7.1
million related to the sale of a former subsidiary. Corporate overhead expenses
for fiscal 1996 include transaction costs of $2.2 million associated with the
merger. The provision for income taxes for fiscal 1996 has been reduced by $1.7
million as a result of charitable contribution carryovers associated with the
merger. Total backlog at February 29, 1996, was approximately $112.8 million
compared to $134.4 million at February 28, 1995.
The Company's Outdoor Products segment established record levels of sales and
operating income again in fiscal 1996. Sales for the Outdoor Products segment
were $291.6 million in fiscal 1996 compared to $268.1 million during fiscal
1995. Operating income increased to $57.4 million during fiscal 1996 from $49.6
million in fiscal 1995. The improved results for this segment were primarily
due to an increase in sales and operating income of $20.2 million and $5.2
million, respectively, at Oregon. This reflects a 9% increase in the sales
volume of saw chain and a 19% increase in the sales volume of saw bars, Oregon's
two principal products, principally to foreign markets. Due to a deteriorating
financial climate and the discontinuance of a local product line, operations in
Brazil incurred an operating loss of $0.6 million in fiscal 1996 compared to
operating income of $2.4 million in fiscal 1995. Sales and operating income at
other units of the Outdoor Products segment, principally Dixon, were up by 8% to
$45.3 million and 38% to $9.7 million, respectively, in fiscal 1996, principally
as a result of a 17% increase in the sales volume of riding lawn mowers.
During fiscal 1996, the Industrial and Power Equipment segment continued its
impressive performance. Sales and operating income were $240.6 million and
$42.2 million, respectively, during fiscal 1996 compared to $207.5 million and
$33.0 million during the prior year. The improved operating results reflect
higher average selling prices and a better sales mix for timber harvesting
equipment, and improved sales and operating income at the Company's CTR
Manufacturing, Inc. and Gear Products, Inc. subsidiaries, primarily due to
higher volume.
The Sporting Equipment segment experienced a downturn during fiscal 1996. In
the aftermath of the prior year's booming domestic market, an industry slowdown
occurred. Sales for the Sporting Equipment segment were $112.1 million for
fiscal 1996, including $6.5 million from the late year acquisition of Simmons,
compared to $112.8 million during the prior year. Operating income was down to
$13.2 million for fiscal 1996 as compared to $19.3 million during 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.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company continues to be in a strong financial position. Growth has been
funded through cash generated by operations, and recent acquisitions have been
made through use of the Company's cash reserves. At December 31, 1996, the
Company had 9% senior subordinated notes ("the 9% notes") outstanding in the
principal amount of $68.8 million which are due in 2003 and has had no amounts
outstanding under its $100 million or prior revolving credit agreement since
August 1992. In July 1996, approximately $10.6 million of the 9% notes were
purchased and retired with no material gain or loss. As of December 31, 1996,
the Company has not used, since July 1993, the financial facility under which it
can sell up to $25 million in eligible receivables to certain financial
organizations. Additionally, the Company has approximately $4.9 million in
unexpended proceeds from industrial development revenue bonds issued in fiscal
Page 14
<PAGE>
1995 to fund future capital expenditures of certain operations. At December 31,
1996, the Company's long-term debt to equity ratio was 0.3 to 1 compared to a
ratio of 0.4 to 1 at February 29, 1996. See Note 3 of Notes to Consolidated
Financial Statements for a description of the terms and conditions of the 9%
notes, the $100 million revolving credit agreement, the receivable sale
agreement and the industrial development revenue bonds.
Working capital increased to $166.2 million at December 31, 1996, compared to
$136.2 million at February 29, 1996, reflecting an increase in cash provided by
operations during the period. Accounts receivable and inventories decreased by
$33.9 million and $12.1 million, while accounts payable decreased by $15.2
million since February 29, 1996. The primary reasons for the decrease in
receivables and accounts payable are the collection of receivables attributable
to the discontinued construction segment and payment of related liabilities, and
lower income taxes receivable. The inventory decrease resulted primarily from
reductions in inventory levels at Simmons since its acquisition in December
1995. The Company's operating cash flows for the ten months ended December 31,
1996 were $83.2 million compared to $35.9 million in the comparable period of
1995. The improved operating cash flows for the current period reflect lower
receivable and inventory levels, an increase in cash flows from the discontinued
construction segment and lower estimated income tax payments as a prior year tax
refund was utilized to reduce current year estimates. Cash and cash equivalent
balances were $58.7 million at December 31, 1996, compared to $14.6 million at
February 29, 1996, as the Company's operating cash flows exceeded cash
expenditures for investing and financing activities. Subsequent to December 31,
1996, the Company acquired all the outstanding capital stock of Frederick
Manufacturing Corporation and Orbex, Inc. for cash of $19 million (see Note 4 of
Notes to Consolidated Financial Statements). The Company believes that its
operating cash flows, working capital and unused credit facilities will provide
both short-term and long-term liquidity. The ability of the Company to pay
dividends is dependent upon Blount, Inc.'s ability to pay dividends to the
Company. Restrictions on the ability of Blount, Inc. to pay cash dividends are
contained in the indenture related to the 9% notes and in certain financial
covenants of the $100 million revolving credit agreement. Under the most
restrictive requirement, retained earnings of approximately $78.9 million were
available for the payment of dividends at December 31, 1996.
During the fourth quarter of 1996, the Company announced a $50 million Class A
Common Stock buyback program. Shares totaling $4.3 million had been purchased
as of December 31, 1996.
The Company and its operations are subject to various environmental laws and
regulations. See Note 8 of Notes to Consolidated Financial Statements for a
description of certain environmental matters.
Management believes that the impact of domestic inflation on the Company has not
been material in recent years as inflation rates have remained low.
Page 15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders, Blount International, Inc.:
We have audited the consolidated financial statements and the financial
statement schedules of Blount International, Inc. and subsidiaries listed in
Item 14(a) of this Form 10-K. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Blount
International, Inc. and subsidiaries as of December 31, 1996 and February 29,
1996, and the consolidated results of their operations and their cash flows for
the ten-month period ended December 31, 1996, and each of the two years in the
period ended February 29, 1996 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
January 28, 1997
Page 16
<PAGE>
MANAGEMENT RESPONSIBILITY
All information contained in the consolidated financial statements of Blount,
International, Inc., has been prepared by management, which is responsible for
the accuracy and internal consistency of the information. Generally accepted
accounting principles have been followed. Reasonable judgments and estimates
have been made where necessary.
Management is responsible for establishing and maintaining a system of internal
accounting controls designed to provide reasonable assurance as to the integrity
and reliability of financial reporting. The system of internal accounting
controls is tested by the internal audit department as part of its normal
responsibilities and by the independent auditors to the extent deemed necessary
in accordance with generally accepted auditing standards. Management believes
the system of internal controls has been effective during the Company's most
recent reporting period and that no matters have arisen which indicate a
material weakness in the system. Management follows the policy of responding to
the recommendations concerning the system of internal controls made both by the
independent auditors and by the internal audit department. Management implements
those recommendations that it believes would improve the system of internal
controls and be cost justified.
Seven directors of the Company, not members of management, serve as the Audit
Committee of the Board and are the principal means through which the Board
discharges its financial reporting responsibility. The Audit Committee meets
with management personnel, the internal auditors and the Company's independent
auditors each year to consider the results of internal and external audits of
the Company and to discuss internal accounting control, auditing and financial
reporting matters. At these meetings, the Audit Committee also meets privately
with the independent auditors and the General Auditor of the Company to ensure
free access by the independent auditors and internal auditors to the committee.
The Company's independent auditors, Coopers & Lybrand L.L.P., audited the
financial statements prepared by the Company. Their opinion on these statements
is presented on page 16.
JOHN M. PANETTIERE HAROLD E. LAYMAN
President and Senior Vice President and
Chief Executive Officer Chief Financial Officer
Page 17
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Blount International, Inc. and Subsidiaries
<CAPTION>
Twelve months
Twelve months ended Ten months ended ended the last
(Amounts in millions, December 31, December 31, day of February,
except per share data) 1996 1995 1996 1995 1996 1995
- --------------------------------------- ------ ------ ------ ------ ------ ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Sales $649.3 $621.4 $526.7 $521.6 $644.3 $588.4
Cost of sales 426.9 412.8 346.5 346.0 427.3 390.8
- --------------------------------------- ------ ------ ------ ------ ------ ------
Gross profit 222.4 208.6 180.2 175.6 217.0 197.6
Selling, general and administrative
expenses 130.0 124.2 105.2 102.6 126.5 121.0
- --------------------------------------- ------ ------ ------ ------ ------ ------
Income from operations 92.4 84.4 75.0 73.0 90.5 76.6
Interest expense (9.9) (10.6) (7.9) (8.9) (10.8) (11.1)
Interest income 2.4 3.8 2.3 3.4 3.4 2.6
Other income (expense), net 0.5 (0.4) 0.2 0.4 0.6 (0.7)
- --------------------------------------- ------ ------ ------ ------ ------ ------
Income before income taxes 85.4 77.2 69.6 67.9 83.7 67.4
Provision for income taxes 31.6 27.8 25.6 24.1 30.1 26.7
- --------------------------------------- ------ ------ ------ ------ ------ ------
Income from continuing operations 53.8 49.4 44.0 43.8 53.6 40.7
Discontinued operations -
Income on disposal, net 1.4 1.4
- --------------------------------------- ------ ------ ------ ------ ------ ------
Net income $ 55.2 $ 49.4 $ 45.4 $ 43.8 $ 53.6 $ 40.7
- --------------------------------------- ------ ------ ------ ------ ------ ------
Net income per share of common stock:
Income from continuing operations $ 2.75 $ 2.53 $ 2.25 $ 2.25 $ 2.75 $ 2.10
Discontinued operations .07 .07
- --------------------------------------- ------ ------ ------ ------ ------ ------
Net income $ 2.82 $ 2.53 $ 2.32 $ 2.25 $ 2.75 $ 2.10
- --------------------------------------- ------ ------ ------ ------ ------ ------
Weighted average number of common and
common equivalent shares outstanding 19.6 19.5 19.6 19.5 19.5 19.4
- --------------------------------------- ------ ------ ------ ------ ------ ------
Cash dividends per share of common stock:
Class A $ .457 $ .395 $ .457 $ .395 $ .395 $ .345
Class B .423 .362 .423 .362 .362 .312
- --------------------------------------- ------ ------ ------ ------ ------ ------
</TABLE>
The accompanying notes are an integral part of the audited financial statements.
In April 1996, the Company changed its fiscal year from one ending on the last
day of February to one ending on December 31. See Note 1 of Notes to
Consolidated Financial Statements. Unaudited financial information for the
twelve months ended December 31, 1996 and 1995 and the ten months ended
December 31, 1995 is also presented above.
Page 18
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Blount International, Inc. and Subsidiaries
<CAPTION>
December 31, December 31, February 29,
(Dollar amounts in millions, except share data) 1996 1995 1996
- ---------------------------------------------------------------- ------------ ------------ ------------
(Unaudited)
Assets
- ---------------------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents, including short-term
investments of $55.3, $11.0 and $11.4 $ 58.7 $ 12.5 $ 14.6
Accounts receivable, net of allowance for
doubtful accounts of $3.0, $3.4 and $3.9 115.9 115.9 149.8
Inventories 82.0 96.8 94.1
Deferred income taxes 20.9 25.9 23.5
Other current assets 3.5 11.1 3.5
- ---------------------------------------------------------------- ------------ ------------ -----------
Total current assets 281.0 262.2 285.5
Property, plant and equipment, net of accumulated
depreciation of $170.2, $157.1 and $160.0 131.7 136.7 135.5
Cost in excess of net assets of acquired businesses, net 85.4 88.6 88.1
Other assets 35.7 34.9 37.4
- ---------------------------------------------------------------- ------------ ------------ -----------
Total Assets $533.8 $522.4 $546.5
- ---------------------------------------------------------------- ------------ ------------ -----------
Liabilities and Stockholders' Equity
- ---------------------------------------------------------------- ------------ ------------ -----------
Current liabilities:
Notes payable and current maturities of long-term debt $ 1.2 $ 12.8 $ 11.7
Accounts payable 36.2 42.7 51.4
Accrued expenses 77.4 84.5 86.2
- ---------------------------------------------------------------- ------------ ------------ -----------
Total current liabilities 114.8 140.0 149.3
Long-term debt, exclusive of current maturities 84.6 95.9 95.9
Deferred income taxes, exclusive of current portion 15.8 18.7 20.6
Other liabilities 27.8 23.2 25.7
- ---------------------------------------------------------------- ------------ ------------ -----------
Total liabilities 243.0 277.8 291.5
- ---------------------------------------------------------------- ------------ ------------ -----------
Commitments and Contingent Liabilities
- ---------------------------------------------------------------- ------------ ------------ -----------
Stockholders' equity:
Common stock: par value $.01 per share (see
Note 5 for voting rights by class);
Class A: 13,409,092, 13,124,699 and 13,176,357 shares issued 0.1 0.1 0.1
Class B, convertible: 5,877,078, 5,923,358 and
5,923,358 shares issued 0.1 0.1 0.1
Capital in excess of par value of stock 34.8 30.6 31.3
Retained earnings 252.2 205.5 215.3
Accumulated translation adjustment 7.9 8.3 8.2
Less Class A treasury stock at cost, 118,180 shares (4.3)
- ---------------------------------------------------------------- ------------ ------------ -----------
Total stockholders' equity 290.8 244.6 255.0
- ---------------------------------------------------------------- ------------ ------------ -----------
Total Liabilities and Stockholders' Equity $533.8 $522.4 $546.5
- ---------------------------------------------------------------- ------------ ------------ -----------
</TABLE>
The accompanying notes are an integral part of the audited financial statements.
In April 1996, the Company changed its fiscal year from one ending on the last
day of February to one ending on December 31. See Note 1 of Notes to
Consolidated Financial Statements. Unaudited financial information as of
December 31, 1995 is also presented above.
Page 19
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Blount International, Inc. and Subsidiaries
<CAPTION>
Twelve months Ten months Twelve months
ended ended ended the last
December 31, December 31, day of February,
(Dollar amounts in millions) 1996 1995 1996 1995 1996 1995
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 55.2 $ 49.4 $ 45.4 $ 43.8 $ 53.6 $ 40.7
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and other
noncash charges 23.6 22.4 19.6 18.3 22.3 23.5
Deferred income taxes 2.1 (1.4) (2.1) (0.6) 3.7 (1.2)
Loss (gain) on disposals of property, plant
and equipment (0.2) 0.3 (0.9) 0.3 1.0 0.4
Changes in assets and liabilities, net
of effects of businesses acquired and sold:
(Increase) decrease in accounts receivable (0.6) 18.0 34.0 16.2 (18.4) 8.2
(Increase) decrease in inventories 13.2 (10.5) 11.4 (2.1) (0.3) (13.0)
(Increase) decrease in other assets 1.9 (8.3) (1.8) (6.5) (2.8) (2.6)
Decrease in accounts payable (6.7) (11.3) (15.5) (15.7) (7.0) (9.8)
Increase (decrease) in accrued expenses (4.3) (19.2) (6.8) (11.5) (8.9) 1.6
Increase (decrease) in other liabilities 3.3 (6.3) (0.1) (6.3) (3.0) (13.1)
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
Net cash provided by operating activities 87.5 33.1 83.2 35.9 40.2 34.7
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
Cash flows from investing activities:
Proceeds from sales of businesses and property,
plant and equipment 1.9 5.0 1.8 5.0 5.1 3.0
Purchases of property, plant and equipment (21.2) (19.2) (18.7) (16.0) (18.5) (9.8)
Acquisitions of businesses (37.4) (37.4) (37.4) (10.2)
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
Net cash used in investing activities (19.3) (51.6) (16.9) (48.4) (50.8) (17.0)
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
Cash flows from financing activities:
Net increase (reduction) in short-term borrowings (2.7) 1.8 (1.6) 1.9 0.8 (4.5)
Issuance of long-term debt 3.1 0.8 0.8 11.8
Reduction of long-term debt (13.9) (15.7) (13.9) (15.6) (15.7) (20.5)
(Increase) decrease in restricted funds 3.7 (0.2) 2.7 1.5 2.6 (10.1)
Dividends paid (8.5) (10.7) (8.5) (8.9) (8.9) (6.4)
Purchase of treasury stock (4.3) (4.3)
Other 3.7 2.3 3.4 1.9 2.2 1.3
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
Net cash used in financing activities (22.0) (19.4) (22.2) (18.4) (18.2) (28.4)
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
Net increase (decrease) in cash and cash equivalents 46.2 (37.9) 44.1 (30.9) (28.8) (10.7)
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
Cash and cash equivalents at beginning of period 12.5 50.4 14.6 43.4 43.4 54.1
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
Cash and cash equivalents at end of period $ 58.7 $ 12.5 $ 58.7 $ 12.5 $ 14.6 $ 43.4
- --------------------------------------------------- ------ ------ ------ ------ ------ ------
</TABLE>
The accompanying notes are an integral part of the audited financial statements.
In April 1996, the Company changed its fiscal year from one ending on the last
day of February to one ending on December 31. See Note 1 of Notes to
Consolidated Financial Statements. Unaudited financial information for the
twelve months ended December 31, 1996 and 1995 and the ten months ended
December 31, 1995 is also presented above.
Page 20
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Blount International, Inc. and Subsidiaries
<CAPTION>
Common Stock Capital Accumulated
---------------- In Excess Retained Translation Treasury
(Dollar amounts in millions) Class A Class B of Par Earnings Adjustment Stock
- --------------------------- ------- ------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 28, 1994 $ 0.1 $ 0.1 $27.1 $136.3 $ 7.4
Exercise of employee stock
options 1.2
Issuance of shares under
dividend reinvestment plan 0.1
Aggregate adjustment resulting
from translation of foreign
currency statements 0.9
Other shares issued 0.2
Net income 40.7
Dividends (6.4)
- --------------------------- ------- ------- --------- -------- ---------- --------
Balance, February 28, 1995 0.1 0.1 28.6 170.6 8.3
Exercise of employee stock
options 2.6
Issuance of shares under
dividend reinvestment plan 0.1
Aggregate adjustment resulting
from translation of foreign
currency statements (0.1)
Net income 53.6
Dividends (8.9)
- --------------------------- ------- ------- --------- -------- ---------- --------
Balance, February 29, 1996 0.1 0.1 31.3 215.3 8.2
Exercise of employee stock
options 3.4
Issuance of shares under
dividend reinvestment plan 0.1
Aggregate adjustment resulting
from translation of foreign
currency statements (0.3)
Purchase of treasury stock $(4.3)
Net income 45.4
Dividends (8.5)
- --------------------------- ------- ------- --------- -------- ----------- --------
Balance, December 31, 1996 $ 0.1 $ 0.1 $34.8 $252.2 $ 7.9 $(4.3)
- --------------------------- ------- ------- --------- -------- ----------- --------
</TABLE>
The accompanying notes are an integral part of the audited financial statements.
In April 1996, the Company changed its fiscal year from one ending on the last
day of February to one ending on December 31. See Note 1 of Notes to
Consolidated Financial Statements.
Page 21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Blount International, Inc. and Subsidiaries
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation:
The consolidated financial statements include the accounts of Blount
International, Inc. and its subsidiaries ("the Company"). All significant
intercompany balances and transactions are eliminated in consolidation.
Change in fiscal year:
In April 1996, the Company changed its fiscal year from one ending on the last
day of February to one ending on December 31. Accordingly, the audited
financial statements include the results for the ten-month period ended December
31, 1996 ("transition period"), and the prior two fiscal years ended February
29, 1996 ("fiscal 1996"), and February 28, 1995 ("fiscal 1995"). In addition to
the basic audited financial statements and related notes, unaudited financial
information for the twelve-month periods ended December 31, 1996 and 1995, and
the ten-month period ended December 31, 1995, has been presented to enhance
comparability. The Company also believes that the twelve-month results are more
comparable to its peer group, most of whom are on a calendar year basis.
Reclassifications:
Certain amounts in the fiscal 1996 and fiscal 1995 financial statements and
notes to consolidated financial statements have been reclassified to conform
with the transition period presentation.
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 disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Estimates are used when accounting for the allowance for doubtful accounts,
inventory obsolescence, long-lived assets, product warranty expenses, casualty
insurance costs, employee benefit plans, income taxes, discontinued operations
and contingencies. It is reasonably possible that actual results could differ
significantly from those estimates and significant changes to estimates could
occur in the near term.
Cash and cash equivalents:
The Company considers all highly liquid temporary cash investments that are
readily convertible to known amounts of cash and present minimal risk of changes
in value because of changes in interest rates to be cash equivalents.
Checks in transit are classified as accounts payable to the extent the aggregate
of such checks exceeds available cash balances not temporarily invested. Checks
classified as accounts payable were $2.8 million and $7.0 million as of December
31, 1996, and February 29, 1996. All other checks in transit are recorded as
reductions of cash.
Inventories:
Inventories are stated at the lower of first-in, first-out cost or market.
Property, plant and equipment:
These assets are stated at cost and are depreciated principally on the straight-
line method over the estimated useful lives of the individual assets. Gains or
losses on disposal are reflected in income. Property, plant and equipment held
under leases which are essentially installment purchases are capitalized with
Page 22
<PAGE>
the related obligations stated at the principal portion of future lease
payments. Depreciation charged to costs and expenses was $16.4 million, $19.3
million and $19.8 million in the transition period, fiscal 1996 and fiscal 1995.
Interest cost incurred during the period of construction of plant and equipment
is capitalized. No material amounts of interest were capitalized on plant and
equipment during the three reporting periods ended December 31, 1996.
Cost in excess of net assets of acquired businesses:
The excess cost is being amortized by the straight-line method over periods
ranging from 30 to 40 years. Accumulated amortization was $21.7 million and
$19.5 million as of December 31, 1996, and February 29, 1996. The excess cost
is evaluated for impairment based on the historic and estimated future
profitability and cash flows of the business units to which it relates.
Adjustments to carrying value are made if required.
Insurance accruals:
It is the Company's policy to retain a portion of expected losses related to
workers' compensation and general, product and vehicle liability through large
retentions or deductibles under its insurance programs. Provisions for losses
expected under these programs are recorded based on estimates of the
undiscounted aggregate liabilities for claims incurred.
Foreign currency:
For foreign subsidiaries which have a majority of transactions denominated in
U.S. dollars or conduct operations in a highly inflationary economy, monetary
assets and liabilities are translated into U.S. dollars at the current exchange
rate, while other assets (principally property, plant and equipment and
inventories) and related costs and expenses are generally translated at historic
exchange rates. Sales and other costs and expenses are translated at the average
exchange rate for the period and the resulting foreign exchange adjustments are
recognized in income. Assets and liabilities of the remaining foreign operations
are translated into U.S. dollars at the current exchange rate and their
statements of income are translated at the average exchange rate for the period.
Gains and losses resulting from translation of the financial statements of these
operations are accumulated in a separate component of stockholders' equity. The
amount of income taxes allocated to this translation adjustment is not
significant. Foreign exchange adjustments reduced pretax income by $0.1
million, $1.9 million and $0.7 million in the transition period, fiscal 1996 and
fiscal 1995.
Revenue recognition:
The Company's policy is to record sales as orders are shipped.
Research and development:
Expenditures for research and development are expensed as incurred. These costs
were $6.0 million, $8.8 million and $7.7 million for the transition period,
fiscal 1996 and fiscal 1995.
Net income per common share:
Net income per common share is based on the weighted average number of common
and common equivalent shares (stock options) outstanding in each period.
Page 23
<PAGE>
NOTE 2:
INCOME TAXES
The provision for income taxes attributable to continuing operations is as
follows:
Twelve months
Ten months ended ended the last
December 31, day of February,
(Dollar amounts in millions) 1996 1996 1995
- --------------------------------------- ---------------- ------ ------
Current provision:
Federal $ 24.5 $ 20.2 $ 19.4
State 0.8 2.1 3.7
Foreign 2.4 4.0 5.2
Deferred provision (benefit):
Federal (3.6) 4.4 (1.0)
State 0.4 0.5
Foreign 1.1 (1.1) (0.6)
- --------------------------------------- ------ ------ ------
$ 25.6 $ 30.1 $ 26.7
- --------------------------------------- ------ ------ ------
A reconciliation of the provision for income taxes attributable to continuing
operations to the amount computed by applying the statutory federal income tax
rate to income from continuing operations before income taxes is as follows:
Twelve months
Ten months ended ended the last
December 31, day of February,
(Dollar amounts in millions) 1996 1996 1995
- --------------------------------------- ---------------- ------ ------
Income before income taxes:
Domestic $ 61.1 $ 77.6 $ 57.5
Foreign 8.5 6.1 9.9
- --------------------------------------- ------ ------ ------
$ 69.6 $ 83.7 $ 67.4
- --------------------------------------- ------ ------ ------
% % %
Statutory tax rate 35.0 35.0 35.0
Impact of earnings of foreign operations 0.7 0.2 (1.0)
State income taxes, net of federal
tax benefit 1.5 2.3 3.7
Charitable contribution carryover (2.0)
Permanent differences between book
bases and tax bases 1.5 1.0 1.7
Other items, net (1.9) (0.5) 0.2
- --------------------------------------- ------ ------ ------
Effective income tax rate 36.8 36.0 39.6
- --------------------------------------- ------ ------ ------
All years reflect the allocation of substantially all corporate office expenses
and interest expense to domestic operations.
Page 24
<PAGE>
As of December 31, 1996, and February 29, 1996, deferred income tax assets were
$34.7 million and $37.6 million and deferred income tax liabilities were $29.6
million and $34.6 million. Deferred income taxes applicable to principal
temporary differences are as follows:
December 31, February 29,
(Dollar amounts in millions) 1996 1996
- -------------------------------------------------- ------------ ------------
Property, plant and equipment basis differences $ 19.7 $ 20.2
Employee benefits (13.0) (12.4)
Other accrued expenses (18.6) (19.2)
Other - net 6.8 8.5
- -------------------------------------------------- --------- ---------
$ (5.1) $ (2.9)
- -------------------------------------------------- --------- ---------
Deferred income taxes of approximately $2.8 million have not been provided on
undistributed earnings of foreign subsidiaries in the amount of $34.7 million as
the earnings are considered to be permanently reinvested.
Blount, Inc. has settled its issues with the Internal Revenue Service through
the 1990 fiscal year with no material adverse effect. The periods from fiscal
1991 through the transition period are still open for review. Blount
International, Inc.'s separate tax years from 1993 through 1995 are open for
review.
NOTE 3:
DEBT AND FINANCING AGREEMENTS
Long-term debt consists of the following:
December 31, February 29,
(Dollar amounts in millions) 1996 1996
- -------------------------------------------------- ------------ ------------
9% subordinated notes $ 68.8 $ 79.4
Industrial development revenue bonds payable,
maturing between 1997 and 2013, interest at varying
rates (principally 4.5% at December 31, 1996) 16.1 16.4
Other long-term debt, interest at 8% 2.5
Lease purchase obligations, interest at varying
rates, payable in installments to 2001 0.6 0.8
- -------------------------------------------------- --------- ---------
85.5 99.1
Less current maturities (0.9) (3.2)
- -------------------------------------------------- --------- ---------
$ 84.6 $ 95.9
- -------------------------------------------------- --------- ---------
Page 25
<PAGE>
Maturities of long-term debt and the principal and interest payments on long-
term capital leases are as follows:
Capital Leases
--------------------- Total
(Dollar amounts in millions) Debt Principal Interest Payments
- ------------------------------- --------- --------- --------- ---------
1997 $ 0.4 $ 0.5 $ 0.1 $ 1.0
1998 0.4 0.1 0.5
1999 0.3 0.3
2000 0.3 0.3
2001 0.3 0.3
2002 and beyond 83.2 83.2
- ------------------------------- --------- --------- --------- ---------
$ 84.9 $ 0.6 $ 0.1 $85.6
- ------------------------------- --------- --------- --------- ---------
At December 31, 1996, no amounts were outstanding under the Company's $100
million revolving credit agreement with a group of five banks. The $100 million
agreement expires December 1999 and provides for interest rates to be determined
at the time of borrowings based on a choice of formulas as specified in the
agreement. The interest rates may vary based on cash flow and leverage ratios.
In addition, a commitment fee which varies to a maximum of 1/2% is charged on
the total commitment. The agreement contains covenants relating to liens,
subsidiary debt, transactions with affiliates, acquisitions, consolidations,
mergers and sales of assets, and requires the Company to maintain certain
specified debt-to-equity and fixed charge coverage ratios.
The proceeds from industrial development revenue bonds of $11.8 million issued
in fiscal 1995 are held in trust and released as qualified capital expenditures
are made. As of December 31, 1996, and February 29, 1996, $4.9 million and $7.6
million were held in trust and are included in "Other assets" in the Company's
consolidated balance sheets.
The Company has 9% senior subordinated notes ("the 9% notes") outstanding in the
principal amount of $68.8 million maturing on June 15, 2003. In July 1996, the
Company repurchased approximately $10.6 million of the 9% notes with no material
gain or loss. During fiscal 1995, approximately $20 million of the 9% notes
were repurchased with no material gain or loss. The 9% notes are redeemable at
the election of the Company, in whole or in part, at any time on or after June
15, 1998, initially at 103 3/8% of the principal amount and thereafter at prices
declining to par on June 15, 2001. The 9% notes were issued under an indenture
("the indenture") between the Company and a major bank as trustee. The
indenture restricts the Company's ability to incur additional debt, pay
dividends, make certain investments, dispose of assets, create liens on assets
and merge or consolidate with another entity.
In August 1995, the Company entered into an agreement 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. No
receivables have ever been sold under this agreement.
Under the most restrictive debt requirement, retained earnings of approximately
$78.9 million were available for the payment of dividends at December 31, 1996.
As of December 31, 1996 and February 29, 1996, the weighted average interest
rate on short-term borrowings was 9.2% and 8.4%, respectively.
Page 26
<PAGE>
NOTE 4:
ACQUISITIONS AND DISPOSALS
In January 1997, the Company acquired the outstanding capital stock of the
Frederick Manufacturing Corporation and Orbex, Inc. for approximately $19
million, subject to post-closing adjustments. The principal products of the
acquired companies are accessories for lawn mowers and sporting goods. The
combined sales and pretax income of the acquired companies for their most recent
year was $19.8 million and $2.5 million, respectively.
In the transition period, income of $1.4 million, net of income taxes of $0.9
million, was recognized for disposal of the discontinued construction segment,
primarily due to favorable claim settlements and improved international job
profits.
In December 1995, the Company acquired the outstanding capital stock of Simmons
Outdoor Corporation ("Simmons"), a sports optics distributor. The purchase
price was approximately $38 million. The acquisition has been accounted for by
the purchase method, and the net assets and results of operations of Simmons
have been included in the Company's consolidated financial statements since the
date of acquisition. The excess of the purchase price over the fair value of
the net assets acquired is being amortized on a straight-line basis over 40
years. Sales and pretax income for Simmons for 1995 were $40.9 million and $1.6
million, respectively.
During fiscal 1996, Pozzo Construction Co., Inc. was sold with no material
effect on the Company's financial condition.
In April 1994, the Company acquired all the outstanding capital stock of CTR
Manufacturing, Inc. ("CTR"). CTR manufactures automated forestry harvesting
equipment. In November 1994, the Company acquired the operating assets of Ram-
Line, Inc. ("Ram-Line"), a manufacturer of stocks, magazines, lens caps and
other products for the shooting sports market. The purchase price paid for the
two businesses was approximately $18.2 million, including notes issued of $7.2
million. Both transactions have been accounted for by the purchase method. The
combined sales and pretax income of CTR and Ram-Line for their most recent
fiscal years prior to acquisition were approximately $17.1 million and $1.6
million, respectively.
NOTE 5:
CAPITAL STOCK
The Company has authorized 60 million shares of Class A Common Stock, 14 million
shares of Class B Common Stock and 4,456,855 shares of Preferred Stock. As of
December 31, 1996, no Preferred Stock was outstanding. The Class A Common Stock
is entitled to elect 25% of the Company's Board of Directors, is entitled to
one-tenth of one vote per share on all other matters and will receive an
additional dividend of $.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 the Company'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 Company has granted options to purchase its Class A Common Stock to certain
officers and key employees under three fixed stock option plans. Under these
plans, options may be granted up to the following amounts: 1995 non-qualified
plan - 1,050,000 shares; 1994 non-qualified plan - 600,000 shares; and the 1992
incentive stock option plan - 1,125,000 shares. Each plan terminates ten years
from inception and provides for the granting of options with an option price per
Page 27
<PAGE>
share not less than the fair market value of one share of Class A Common Stock
on the date of grant. The options granted are exercisable for a period of up to
ten years under each plan and vest in installments over periods determined by
the Compensation and Management Development Committee of the Board of Directors.
As of December 31, 1996, and February 29, 1996, there were options for 474,500
shares and 1,050,000 shares available for grant under the 1995 non-qualified
plan, no shares available for grant under the 1994 non-qualified plan, and
71,245 shares and 56,250 shares available for grant under the 1992 incentive
stock option plan.
A summary of the status of the Company's three fixed stock option plans as of
December 31, 1996, February 29, 1996, and February 28, 1995, and changes during
the periods ending on those dates is presented below:
<TABLE>
<CAPTION>
Ten months ended Twelve months ended
December 31, the last day of February,
1996 1996 1995
---------------------- ---------------------- ----------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(in 000's) Price (in 000's) Price (in 000's) Price
- -------------------- ---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of period 1,081 $18.10 1,306 $15.86 1,422 $11.12
Granted 586 30.95 86 28.30 223 30.18
Exercised (183) 13.57 (207) 10.26 (198) 5.62
Forfeited (25) 21.55 (104) 13.93 (141) 5.08
---------- --------- ---------- --------- ---------- ---------
Outstanding at
end of period 1,459 $23.77 1,081 $18.10 1,306 $15.86
---------- --------- ---------- --------- ---------- ---------
Options exercisable
at end of period 425 572 207
- -------------------- ---------- ---------- ----------
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ ----------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Remaining Exercise Shares Exercise
Range of Exercise Prices (in 000's) Contractual Life Price (in 000's) Price
- ------------------------ ---------- ---------------- --------- ---------- ---------
<C> <C> <C> <S> <C> <C> <C>
$5.08 to $5.46 181 5.5 years $ 5.24 23 $ 5.08
$8.96 to $9.13 45 6.0 years 8.98 21 8.96
$18.42 to $27.04 409 7.2 years 19.50 206 19.22
$28.67 to $33.06 824 9.0 years 30.77 175 30.58
- ------------------------ ---------- ---------------- --------- ---------- ---------
Total 1,459 7.9 years $23.77 425 $22.60
- ------------------------ ---------- ---------------- --------- ---------- ---------
</TABLE>
Page 28
<PAGE>
The Company applies APB Opinion 25 and related interpretations in accounting for
fixed stock option plans. Accordingly, no compensation cost has been recognized
for the three fixed stock option plans. Had compensation cost been determined
based on the estimated fair value at the grant dates for awards under those
plans since March 1, 1995, consistent with the method of FASB Statement 123, the
Company's net income and earnings per share would have been the pro forma
amounts indicated below:
Twelve months
Ten months ended ended the last
(Dollar amounts in millions, December 31, day of February,
except per share data) 1996 1996
- --------------------------------------- ---------------- ----------------
Net income:
As reported $ 45.4 $ 53.6
Pro forma 44.5 53.5
Earnings per share:
As reported 2.32 2.75
Pro forma 2.27 2.75
- --------------------------------------- ------ ------
For purposes of computing the pro forma amounts above, the Black-Scholes option-
pricing model was used with the following weighted-average assumptions:
Twelve months
Ten months ended ended the last
December 31, day of February,
1996 1996
- --------------------------------------- ---------------- ----------------
Estimated lives of plan options 6 years 6 years
Risk-free interest rates 6.2% 5.9%
Expected volatility 24.0% 23.0%
Dividend yield 1.5% 1.5%
- --------------------------------------- ------- -------
The weighted-average estimated fair value of options granted during the
transition period and fiscal 1996 was $9.74 and $8.56, respectively.
Page 29
<PAGE>
NOTE 6:
PENSION PLANS
The Company maintains a funded, non-contributory, trusteed, defined benefit
pension plan covering the majority of domestic employees. In addition, the
Company sponsors certain supplemental defined benefit plans and employees of
certain foreign operations participate in local plans.
The formulas of defined benefit plans generally base pension benefits paid to
retired employees upon their length of service and a percentage of average
compensation during certain years of employment. The plans' assets are invested
principally in equity funds, bond funds and temporary cash investments. The
actuarial method used for financial reporting purposes is the projected unit
credit method. The components of pension expense for Company-sponsored defined
benefit plans were:
Twelve months
Ten months ended ended the last
December 31, day of February,
(Dollar amounts in millions) 1996 1996 1995
- --------------------------------------- ---------------- ------ ------
Service cost - benefits earned $ 3.7 $ 3.4 $ 3.8
Interest cost 5.5 5.8 5.1
Actual return on plan assets (7.3) (11.1) (0.7)
Net amortization and deferral 2.4 6.8 (2.4)
- ----------------------------------------- ------ ------ ------
$ 4.3 $ 4.9 $ 5.8
- ----------------------------------------- ------ ------ ------
The Company's general funding policy for qualified plans is to fund amounts
deductible for income tax purposes. A Rabbi Trust has been established for the
purpose of funding certain non-qualified benefits. The funded status of
qualified and non-qualified defined benefit plans was as follows:
<TABLE>
<CAPTION>
December 31, 1996 February 29, 1996
--------------------------- ---------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
(Dollar amounts in millions) Benefits Exceed Assets Benefits Exceed Assets
- ------------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of projected
benefit obligation:
Vested $ 50.8 $ 4.2 $ 50.9 $ 3.8
Nonvested 3.1 0.1 2.7 0.4
- ------------------------------------------- -------- -------- -------- --------
Accumulated benefit obligation 53.9 4.3 53.6 4.2
Effect of projected compensation increases 22.5 1.1 23.6 1.0
- ------------------------------------------- -------- -------- -------- --------
Projected benefit obligation 76.4 5.4 77.2 5.2
Plan assets at fair value 82.0 79.9
- ------------------------------------------- -------- -------- -------- --------
Plan assets greater (less) than
projected benefit obligation 5.6 (5.4) 2.7 (5.2)
Unrecognized transition (asset) obligation (1.0) 0.3 (1.3) 0.4
Unrecognized prior service liability 1.0 0.3 2.1 0.4
Unrecognized net loss 5.2 0.7 8.0 0.8
- ------------------------------------------- -------- -------- -------- --------
Net prepaid (accrued) pension cost $ 10.8 $ (4.1) $ 11.5 $ (3.6)
- ------------------------------------------- -------- -------- -------- --------
</TABLE>
Page 30
<PAGE>
During the transition period, the domestic funded defined benefit plan settled
the pension obligation to certain retirees of discontinued operations for
approximately $8.4 million. The weighted average rate assumptions used in the
transition period, fiscal 1996 and fiscal 1995 to determine pension expense and
related pension obligations for domestic and foreign defined benefit plans were
as follows:
Twelve months
Ten months ended ended the last
December 31, day of February,
1996 1996 1995
- --------------------------------------- ---------------- ------ ------
Discount rate 7.6% 7.6% 8.5%
Rate of increase in compensation levels 4.2% 4.1% 4.3%
Expected long-term rate of return on
plan assets 8.7% 8.7% 8.7%
- --------------------------------------- ------ ------ ------
The Company's share of unfunded liability, if any, related to multi-employer
pension plans is not determinable.
The Company provides a defined contribution 401(k) plan to the majority of
domestic employees and matches a portion of employee contributions. The expense
was $2.4 million, $2.8 million and $2.1 million in the transition period, fiscal
1996 and fiscal 1995.
NOTE 7:
POSTRETIREMENT INSURANCE BENEFITS
The Company sponsors plans which provide postretirement health care and life
insurance benefits ("postretirement benefits") to eligible domestic retirees.
The Company has funded the estimated liability for retirees of a certain
operation sold in a prior year. Other postretirement benefit plans are not
funded and benefit payments are made as they become due.
Net periodic postretirement benefit expense consisted of the following
components:
Twelve months
Ten months ended ended the last
December 31, day of February,
(Dollar amounts in millions) 1996 1996 1995
- --------------------------------------- ---------------- ------ ------
Service cost - benefits earned $ 0.3 $ 0.3 $ 0.3
Interest cost 0.9 1.3 1.3
Actual return on plan assets (0.2) (0.3) (0.1)
Net amortization and deferral 0.1 0.1 (0.1)
- ---------------------------------------- ------ ------ ------
$ 1.1 $ 1.4 $ 1.4
- ---------------------------------------- ------ ------ ------
Page 31
<PAGE>
The accumulated postretirement benefit obligation for the funded plan was $2.2
million and $2.3 million as of December 31, 1996 and February 29, 1996. A
reconciliation of the accumulated postretirement benefit obligation to the
accrued liability included in the Company's balance sheets follows:
December 31, February 29,
(Dollar amounts in millions) 1996 1996
- -------------------------------------------------- ------------ ------------
Accumulated postretirement benefit obligation:
Retirees $ 10.6 $ 10.5
Fully eligible active plan participants 2.5 2.2
Other active plan participants 2.6 2.0
- -------------------------------------------------- --------- ---------
15.7 14.7
Plan assets at fair value 2.1 2.1
- -------------------------------------------------- --------- ---------
Postretirement benefits in excess of assets (13.6) (12.6)
Unrecognized net loss 1.3 0.8
- -------------------------------------------------- --------- ---------
Accrued postretirement benefit cost $ (12.3) $ (11.8)
- -------------------------------------------------- --------- ---------
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7 1/2% in the transition period and fiscal
1996, and 8 1/2% in fiscal 1995. The expected long-term rate of return on plan
assets was 8 3/4% in the transition period, fiscal 1996 and fiscal 1995. A 9%
annual rate of increase in the cost of health care benefits was assumed for the
transition period; the rate was assumed to decrease 1% per year until 4% is
reached, remain at that level for ten years and then decrease to the ultimate
trend rate of 3%. The health care cost trend rate assumption has a significant
effect on the amounts reported. Increasing the assumed health care cost trend
rate by 1% in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1996, by 10.0% and the aggregate of the service
and interest cost components of net periodic expense for the transition period
by 11.5%.
NOTE 8:
COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office space and equipment under operating leases expiring in
one to nine years. Most leases include renewal options and some contain
purchase options and escalation clauses. Future minimum rental commitments
required under operating leases having initial or remaining noncancelable lease
terms in excess of one year as of December 31, 1996, are as follows (in
millions): 1997--$3.7; 1998--$2.3; 1999--$1.2; 2000--$0.8; 2001--$0.8 and 2002
and beyond--$1.3. Rentals charged to costs and expenses under cancelable and
noncancelable lease arrangements were $5.0 million, $6.3 million and $5.2
million for the transition period, fiscal 1996 and fiscal 1995, respectively.
In 1989, the United States Environmental Protection Agency ("EPA") designated a
predecessor of the Company as one of four potentially responsible parties
("PRPs") 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 later purchased by a predecessor of
the Company. It is the view of management that because the Company's
predecessor corporation purchased assets rather than stock, the Company is not
liable and is not properly a PRP. Although management believes the EPA is wrong
on the successor liability issue, with other PRPs, the Company made a good faith
Page 32
<PAGE>
offer to the EPA to pay a portion of the Site clean-up costs. The offer was
rejected and the EPA and State of Wisconsin ("the State") proceeded with the
clean-up at a cost of approximately $12 million. The EPA and the State brought
suit in 1996 against the Town of Onalaska ("the Town") and a second PRP,
Metallics, Inc., to recover response costs. On December 18, 1996, the United
States District Court for the Western District of Wisconsin approved and entered
Consent Decrees pursuant to which the Town and Metallics, Inc. settled the suit
and will pay a total of over $1.8 million to the EPA and the State. The Company
continues to maintain that it is not a liable party. The EPA has not taken
action against the Company, nor has the EPA accepted the Company's position.
The Company does not know the financial status of the other named and unnamed
PRPs who 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.
Under the provisions of Washington State environmental laws, the Washington
State Department of Ecology ("WDOE") has notified the Company 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 clean-up
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, the Company's waste
volume compared to that total waste volume should cause the Company to be
classified as a "de minimis" PLP. In July 1992, the Company and thirty-eight
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. The Company 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, the Company's potential response costs
associated with the Site will not have a material adverse effect on 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 large 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 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.
At December 31, 1996, there were outstanding bank letters of credit in the
approximate amount of $7.4 million issued principally in connection with various
foreign construction contracts of the discontinued construction segment for
which there is contingent liability to the issuing banks in the event payment is
demanded by the holder.
Page 33
<PAGE>
NOTE 9:
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
At December 31, 1996, substantially all of the Company's trade and other
accounts receivable of $116.0 million (see Note 11) arose from manufacturing
operations. The Company has manufacturing or distribution operations in Brazil,
Canada, Europe, Japan and the United States. The Company sells to customers in
these locations, primarily in the United States, and other countries throughout
the world (see Note 10). At December 31, 1996, approximately 66% of
manufacturing receivables were from customers within the United States.
Accounts receivable from manufacturing customers are principally from service
and dealer groups, distributors, and chain saw and other original equipment
manufacturers, and are generally not collateralized.
The estimated fair values of certain financial instruments are as follows:
December 31, 1996 February 29, 1996
-------------------- --------------------
Carrying Fair Carrying Fair
(Dollar amounts in millions) Amount Value Amount Value
- ---------------------------------- --------- --------- --------- ---------
Cash and short-term investments $ 58.7 $ 58.7 $ 14.6 $ 14.6
Other assets (restricted trust
funds and notes receivable) 14.8 15.8 17.1 18.1
Notes payable and long-term debt
(see Note 3) (85.8) (88.9) (107.6) (111.6)
- ---------------------------------- --------- --------- --------- ---------
The carrying amount of cash and short-term investments approximates fair value
because of the short maturity of those instruments. The fair value of notes
receivable is estimated based on the discounted value of estimated future cash
flows. The fair value of restricted trust funds approximates fair value for
short-term instruments and is estimated by obtaining market quotes for longer
term instruments. The fair value of long-term debt is estimated based on recent
market transaction prices or on current rates available for debt with similar
terms and maturities.
NOTE 10:
SEGMENT INFORMATION
The Company's business consists of three segments: Outdoor Products, Industrial
and Power Equipment and Sporting Equipment. The Outdoor Products segment
manufactures and markets saw chain, bars and sprockets for chain saws,
maintenance accessories, industrial cutting products and home and garden
products such as pruning tools and lawn mowers. The Outdoor Products segment
sells to original equipment manufacturers and to a diverse distribution and
dealer network. The Industrial and Power Equipment segment manufactures and
markets large mechanical timber harvesting and processing equipment as well as
power transmission, hydraulic and gear components for use in the timber
harvesting, materials handling, construction and utility businesses. The
Sporting Equipment segment manufactures and markets small arms ammunition,
reloading equipment and components, gun care accessories, shooting sports
accessories and industrial powerloads, and markets and distributes sports
optical products. Major markets include two-step distributors, cooperative
buying groups, mass merchants and government agencies. Identifiable assets
consist of those assets used by the segments; corporate assets consist
principally of cash and temporary investments, deferred income taxes and
property, plant and equipment used by the corporate office.
Page 34
<PAGE>
In the transition period, fiscal 1996 and fiscal 1995, no customer accounted for
more than 10% of consolidated sales. In the transition period, approximately
15.5% of sales by the Outdoor Products segment were to one customer. While the
Company expects this business relationship to continue, the loss of this
customer could affect the operations of the Outdoor Products segment. Each of
the Company's segments purchase certain important materials from a limited
number of suppliers that meet quality criteria. Although alternative sources of
supply are available, the sudden elimination of certain suppliers could result
in manufacturing delays, a reduction in product quality and a possible loss of
sales in the near term.
<TABLE>
Information on Geographic Areas:
<CAPTION>
Twelve months
Twelve months ended Ten months ended ended the last
December 31, December 31, day of February,
(Dollar amounts in millions) 1996 1995 1996 1995 1996 1995
- --------------------------------------- ------ ------ ------ ------ ------ ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Sales:
United States $541.0 $518.1 $439.7 $434.6 $536.0 $493.3
Outside United States 108.3 103.3 87.0 87.0 108.3 95.1
- --------------------------------------- ------ ------ ------ ------ ------ ------
$649.3 $621.4 $526.7 $521.6 $644.3 $588.4
- --------------------------------------- ------ ------ ------ ------ ------ ------
Operating income:
United States $104.0 $ 99.7 $ 83.4 $ 86.9 $106.2 $ 92.0
Outside United States 9.1 5.2 7.8 4.0 6.6 9.9
- --------------------------------------- ------ ------ ------ ------ ------ ------
Operating income from segments $113.1 $104.9 $ 91.2 $ 90.9 $112.8 $101.9
- --------------------------------------- ------ ------ ------ ------ ------ ------
Identifiable assets:
United States $458.2 $435.2 $458.2 $435.2 $461.2 $425.0
Outside United States 75.6 87.2 75.6 87.2 85.3 95.8
- --------------------------------------- ------ ------ ------ ------ ------ ------
$533.8 $522.4 $533.8 $522.4 $546.5 $520.8
- --------------------------------------- ------ ------ ------ ------ ------ ------
</TABLE>
Included in United States sales were export sales of $89.7 million, $106.2
million and $94.3 million in the transition period, fiscal 1996 and fiscal 1995.
Total sales from international activities, including those in the above table
and export sales, provided 33.6% of consolidated sales in the transition period,
33.3% in fiscal 1996 and 32.2% in fiscal 1995. In the transition period, fiscal
1996 and fiscal 1995, approximately 57.5%, 56.4% and 54.3%, respectively, of
sales by the Outdoor Products segment were from international sources.
Page 35
<PAGE>
<TABLE>
Information on Segments:
<CAPTION>
Twelve months
Twelve months ended Ten months ended ended the last
December 31, December 31, day of February,
(Dollar amounts in millions) 1996 1995 1996 1995 1996 1995
- --------------------------------------- ------ ------ ------ ------ ------ ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Sales:
Outdoor products $292.7 $282.0 $239.3 $238.2 $291.6 $268.1
Industrial and power equipment 209.5 232.2 165.7 196.8 240.6 207.5
Sporting equipment 147.1 107.2 121.7 86.6 112.1 112.8
- --------------------------------------- ------ ------ ------ ------ ------ ------
$649.3 $621.4 $526.7 $521.6 $644.3 $588.4
- --------------------------------------- ------ ------ ------ ------ ------ ------
Operating income:
Outdoor products $ 61.4 $ 53.5 $ 50.7 $ 46.8 $ 57.4 $ 49.6
Industrial and power equipment 31.9 39.6 24.0 34.2 42.2 33.0
Sporting equipment 19.8 11.8 16.5 9.9 13.2 19.3
- --------------------------------------- ------ ------ ------ ------ ------ ------
Operating income from segments 113.1 104.9 91.2 90.9 112.8 101.9
Corporate office expenses (20.7) (20.5) (16.2) (17.9) (22.3) (25.3)
- --------------------------------------- ------ ------ ------ ------ ------ ------
Income from operations 92.4 84.4 75.0 73.0 90.5 76.6
Interest expense (9.9) (10.6) (7.9) (8.9) (10.8) (11.1)
Interest income 2.4 3.8 2.3 3.4 3.4 2.6
Other income (expense), net 0.5 (0.4) 0.2 0.4 0.6 (0.7)
- --------------------------------------- ------ ------ ------ ------ ------ ------
Income before income taxes $ 85.4 $ 77.2 $ 69.6 $ 67.9 $ 83.7 $ 67.4
- --------------------------------------- ------ ------ ------ ------ ------ ------
Identifiable assets:
Outdoor products $196.2 $195.4 $196.2 $195.4 $202.1 $199.5
Industrial and power equipment 102.6 90.5 102.6 90.5 95.9 83.0
Sporting equipment 107.7 85.6 107.7 85.6 118.4 71.8
Corporate office 121.0 124.7 121.0 124.7 103.5 103.7
Discontinued operations 6.3 26.2 6.3 26.2 26.6 62.8
- --------------------------------------- ------ ------ ------ ------ ------ ------
$533.8 $522.4 $533.8 $522.4 $546.5 $520.8
- --------------------------------------- ------ ------ ------ ------ ------ ------
Depreciation and amortization:
Outdoor products $ 12.8 $ 12.9 $ 10.6 $ 10.6 $ 12.7 $ 13.8
Industrial and power equipment 3.9 3.7 3.2 3.0 3.6 3.8
Sporting equipment 4.8 4.3 4.0 3.5 4.3 3.8
Corporate office 1.8 1.4 1.4 1.1 1.6 1.5
- --------------------------------------- ------ ------ ------ ------ ------ ------
$ 23.3 $ 22.3 $ 19.2 $ 18.2 $ 22.2 $ 22.9
- --------------------------------------- ------ ------ ------ ------ ------ ------
Capital expenditures:
Outdoor products $ 11.4 $ 7.8 $ 10.2 $ 5.5 $ 6.8 $ 4.9
Industrial and power equipment 6.0 2.4 5.6 1.8 2.2 4.9
Sporting equipment 3.3 2.9 2.5 2.7 3.5 4.6
Corporate office 0.6 6.7 0.4 6.6 6.8 0.3
- --------------------------------------- ------ ------ ------ ------ ------ ------
$ 21.3 $ 19.8 $ 18.7 $ 16.6 $ 19.3 $ 14.7
- --------------------------------------- ------ ------ ------ ------ ------ ------
</TABLE>
Page 36
<PAGE>
NOTE 11:
OTHER INFORMATION
The following balance sheet captions are comprised of the items specified below:
December 31, February 29,
(Dollar amounts in millions) 1996 1996
- ----------------------------------------------- ------------ ------------
Accounts receivable:
Trade accounts and other $ 116.0 $ 121.1
Billings on construction contracts:
Current 2.6 20.8
Retainage estimated to be collected
within one year 0.3 2.1
Income taxes receivable 9.7
Allowance for doubtful accounts (3.0) (3.9)
- ----------------------------------------------- --------- ---------
$ 115.9 $ 149.8
- ----------------------------------------------- --------- ---------
Inventories:
Finished goods $ 42.4 $ 50.8
Work in process 14.5 14.9
Raw materials and supplies 25.1 28.4
- ----------------------------------------------- --------- ---------
$ 82.0 $ 94.1
- ----------------------------------------------- --------- ---------
Property, plant and equipment:
Land $ 6.4 $ 6.4
Buildings and improvements 84.3 82.9
Machinery and equipment 161.9 154.6
Furniture, fixtures and office equipment 23.2 22.3
Transportation equipment 16.6 23.6
Construction in progress 9.5 5.7
Accumulated depreciation (170.2) (160.0)
- ----------------------------------------------- --------- ---------
$ 131.7 $ 135.5
- ----------------------------------------------- --------- ---------
Accrued expenses:
Salaries, wages and related withholdings $ 21.8 $ 24.4
Employee benefits 8.4 7.9
Casualty insurance costs 14.1 15.9
Income taxes payable 4.6 4.2
Other 28.5 33.8
- ----------------------------------------------- --------- ---------
$ 77.4 $ 86.2
- ----------------------------------------------- --------- ---------
Other liabilities:
Employee benefits $ 25.6 $ 23.9
Casualty insurance costs 0.4 0.4
Other 1.8 1.4
- ----------------------------------------------- --------- ---------
$ 27.8 $ 25.7
- ----------------------------------------------- --------- ---------
Page 37
<PAGE>
At December 31, 1996, the Company's manufacturing operation in Canada had net
assets of $15.9 million which were subject to withdrawal restrictions resulting
from a financing agreement. The majority of this amount was invested in
property, plant and equipment.
Advertising costs were $10.1 million, $11.9 million and $10.6 million for the
transition period, fiscal 1996 and fiscal 1995.
Supplemental cash flow information is as follows:
Twelve months
Ten months ended ended the last
December 31, day of February,
(Dollar amounts in millions) 1996 1996 1995
- --------------------------------------- ---------------- ------ ------
Interest paid $ 9.1 $ 10.5 $ 10.4
Income taxes paid 16.9 35.5 28.9
Capital lease obligations incurred
(terminated) (6.4) 7.1 0.1
Acquisitions of businesses (see Note 4):
Assets acquired 49.9 22.6
Liabilities assumed and incurred (12.5) (12.4)
Cash paid 37.4 10.2
- --------------------------------------- ------ ------ ------
Page 38
<PAGE>
SUPPLEMENTARY DATA
QUARTERLY RESULTS OF OPERATIONS
(unaudited)
The following table sets forth a summary of the unaudited quarterly results of
operations for the twelve-month periods ended December 31, 1996 and December 31,
1995.
<TABLE>
<CAPTION>
(Dollar amounts 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
in millions, except Ended Ended Ended Ended
per share data) March 31, 1996 June 30, 1996 September 30, 1996 December 31, 1996 Total
- ----------------- -------------- ------------- ------------------ ----------------- -------
Twelve months ended
December 31, 1996
<S> <C> <C> <C> <C> <C>
Sales $173.2 $142.0 $160.0 $174.1 $649.3
Gross profit 58.5 48.8 55.9 59.2 222.4
Net income 13.4 10.6 13.8 17.4 55.2
Net income per share .69 .54 .71 .88 2.82
</TABLE>
The second quarter includes net income of $1.2 million ($.06 per share)
resulting from revised product liability estimates for the Industrial and Power
Equipment segment. The third quarter includes net income of $1.2 million ($.06
per share) from resolution of an environmental matter at the Company's Lewiston,
Idaho facility. The fourth quarter includes net income of $1.4 million ($.07
per share) recognized for disposal of construction operations which were
discontinued in a prior year.
<TABLE>
<CAPTION>
(Dollar amounts 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
in millions, except Ended Ended Ended Ended
per share data) March 31, 1995 June 30, 1995 September 30, 1995 December 31, 1995 Total
- ----------------- -------------- ------------- ------------------ ----------------- -------
Twelve months ended
December 31, 1995
<S> <C> <C> <C> <C> <C>
Sales $155.3 $154.4 $153.0 $158.7 $621.4
Gross profit 53.2 48.9 52.7 53.8 208.6
Net income 11.7 9.7 12.5 15.5 49.4
Net income per share .60 .50 .64 .79 2.53
</TABLE>
The first quarter includes after-tax charges of $1.3 million ($.07 per share) to
increase its accrual for an environmental matter at the Company's Lewiston,
Idaho facility to $4.3 million pretax. The second, third and fourth quarters
include after-tax charges of $0.3 million ($.01 per share), $0.9 million ($.05
per share) and $0.2 million ($.01 per share) for costs associated with the
merger. The fourth quarter includes net income of $1.7 million ($.09 per share)
from the use of charitable contribution carryovers resulting from the merger to
reduce the provision for income taxes.
Page 39
<PAGE>
The following table sets forth a summary of the quarterly results of operations
for the ten-month transition period ended December 31, 1996, and the fiscal year
ended February 29, 1996.
<TABLE>
<CAPTION>
(Dollar amounts One Month 2nd Quarter 3rd Quarter 4th Quarter
in millions, except Ended Ended Ended Ended
per share data) March 31, 1996 June 30, 1996 September 30, 1996 December 31, 1996 Total
- ----------------- -------------- ------------- ------------------ ----------------- -------
Transition Period
<S> <C> <C> <C> <C> <C>
Sales $ 50.6 $142.0 $160.0 $174.1 $526.7
Gross profit 16.3 48.8 55.9 59.2 180.2
Net income 3.6 10.6 13.8 17.4 45.4
Net income per share .19 .54 .71 .88 2.32
</TABLE>
The second quarter includes net income of $1.2 million ($.06 per share)
resulting from revised product liability estimates for the Industrial and Power
Equipment segment. The third quarter includes net income of $1.2 million ($.06
per share) from resolution of an environmental matter at the Company's Lewiston,
Idaho facility. The fourth quarter includes net income of $1.4 million ($.07
per share) recognized for disposal of construction operations which were
discontinued in a prior year.
<TABLE>
<CAPTION>
(Dollar amounts 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
in millions, except Ended Ended Ended Ended
per share data) May 31, 1995 August 31, 1995 November 30, 1995 February 29, 1996 Total
- ----------------- ------------ --------------- ----------------- ----------------- -------
Fiscal 1996
<S> <C> <C> <C> <C> <C>
Sales $164.2 $147.1 $158.0 $175.0 $644.3
Gross profit 55.1 48.8 55.0 58.1 217.0
Net income 13.8 10.5 16.8 12.5 53.6
Net income per share .71 .54 .86 .64 2.75
</TABLE>
The second and third quarters include after-tax charges of $1.0 million ($.05
per share) and $0.4 million ($.02 per share) for costs associated with the
merger. The third quarter includes net income of $1.7 million ($.09 per share)
from the use of charitable contribution carryovers resulting from the merger to
reduce the provision for income taxes.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 40
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the "Directors", "Executive Officers" and "Filing Disclosure" sections of
the proxy statement for the April 21, 1997, Annual Meeting of Stockholders of
Blount International, Inc., which sections are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
See the "Executive Compensation" section of the proxy statement for the April
21, 1997, Annual Meeting of Stockholders of Blount International, Inc., which
section is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the "Principal Stockholders" section of the proxy statement for the April
21, 1997, Annual Meeting of Stockholders of Blount International, Inc., which
section is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the "Certain Transactions and Other Matters" section of the proxy statement
for the April 21, 1997, Annual Meeting of Stockholders of Blount International,
Inc., which section is incorporated herein by reference.
Page 41
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
Reference
---------
(a) Certain documents filed as part of Form 10-K
(1) Financial Statements and Supplementary Data
Report of Independent Accountants 16
Consolidated Statements of Income for the ten-month
period ended December 31, 1996 and the years
ended the last day of February 1996 and 1995 18
Consolidated Balance Sheets as of
December 31, 1996 and February 29, 1996 19
Consolidated Statements of Cash Flows for the ten-month
period ended December 31, 1996 and the years ended the
last day of February 1996 and 1995 20
Consolidated Statements of Changes in Stockholders' Equity
for the ten-month period ended December 31, 1996 and the
years ended the last day of February 1996 and 1995 21
Notes to Consolidated Financial Statements 22 - 38
Supplementary Data 39 - 40
(2) Schedules for the ten-month period ended
December 31, 1996 and the years ended
the last day of February 1996 and 1995 *
II. Valuation and qualifying accounts 47
* All other schedules have been omitted because they are not required or
because the information is presented in the Notes to Consolidated Financial
Statements.
(b) Reports on Form 8-K in the Fourth Quarter
The Registrant filed reports on Form 8-K during the fourth quarter of the
transition period as follows:
(1) A report on Form 8-K filed on October 25, 1996 reporting under Item 5
the authorization by the Company's Board of Directors of the
repurchase of up to $50 million of the Company's Class A Common Stock.
(c) Exhibits required to be filed by Item 601 of Regulation S-K:
*2 Plan and Agreement of Merger among Blount International, Inc.,
HBC Transaction Subsidiary, Inc. and Blount, Inc., dated August 17, 1995 filed
as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of Blount
International, Inc., including amendments and exhibits, which became effective
on October 4, 1995 (Commission File No. 33-63141).
Page 42
<PAGE>
*3(a) Restated Certificate of Incorporation of Blount International,
Inc. filed as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of
Blount International, Inc., including amendments and exhibits, which became
effective on October 4, 1995 (Commission File No. 33-63141).
*3(b) By-Laws of Blount International, Inc. filed as part of
Registration Statement on Form S-4 (Reg. No. 33-63141) of Blount International,
Inc., including amendments and exhibits, which became effective on October 4,
1995 (Commission File No. 33-63141).
*4(a) Registration Rights and Stock Transfer Restriction agreement
filed as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of
Blount International, Inc., including amendments and exhibits, which became
effective on October 4, 1995 (Commission File No. 33-63141).
*4(b) Registration Statement on Form S-2 (Reg. No. 33-62728) of
Blount, Inc. with respect to the 9% subordinated notes due June 2003 of Blount,
Inc., including amendments and exhibits, which became effective on June 30, 1993
(Commission File No. 1-7002).
*10(a) Form of Indemnification Agreement between Blount International,
Inc. and The Blount Holding Company, L.P. filed as part of Registration
Statement on Form S-4 (Reg. No. 33-63141) of Blount International, Inc.,
including amendments and exhibits, which became effective on October 4, 1995
(Commission File No. 33-63141).
*10(b) Insurance Agreement between Blount, Inc. and Winton M. Blount
which was filed as an exhibit to the Annual Report of Blount, Inc. on Form 10-K
for the fiscal year ended February 28, 1983.
*10(c) Supplemental Retirement and Disability Plan of Blount, Inc.
which was filed as Exhibit 10(e) to the Annual Report of Blount, Inc. on Form
10-K for the fiscal year ended February 29, 1992 (Commission File No. 1-7002).
*10(d) Written description of the Management Incentive Plan of Blount,
Inc. which was included within the Proxy Statement of Blount, Inc. for the
Annual Meeting of Stockholders held June 27, 1994 (Commission File No. 1-7002).
*10(e) Supplemental Retirement Savings Plan of Blount, Inc. which was
filed as Exhibit 10(i) to the Annual Report of Blount, Inc. on Form 10-K for the
fiscal year ended February 29, 1992 (Commission File No. 1-7002).
*10(f) Insurance Agreement between Blount, Inc. and D. Joseph McInnes
which was filed as Exhibit 10(y) to the Annual Report of Blount, Inc. on Form
10-K for the fiscal year ended February 28, 1991 (Commission File No. 1-7002).
*10(g) Supplemental Executive Retirement Plan between Blount, Inc. and
Winton M. Blount which was filed as Exhibit 10(z) to the Annual Report of
Blount, Inc. on Form 10-K for the fiscal year ended February 28, 1991
(Commission File No. 1-7002).
*10(h) 1992 Blount Incentive Stock Option Plan of Blount, Inc. filed
as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of Blount
International, Inc., including amendments and exhibits, which became effective
on October 4, 1995 (Commission File No. 33-63141).
*10(i) Supplemental Executive Retirement Plan between Blount, Inc. and
John M. Panettiere which was filed as Exhibit 10(t) to the Annual Report of
Blount, Inc. on Form 10-K for the fiscal year ended February 28, 1993
(Commission File No. 1-7002).
Page 43
<PAGE>
*10(j) 1994 Blount Executive Stock Option Plan of Blount, Inc. filed
as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of Blount
International, Inc., including amendments and exhibits, which became effective
on October 4, 1995 (Commission File No. 33-63141).
*10(k) Executive Management Target Incentive Plan of Blount, Inc.
which was filed as Exhibit B to the Proxy Statement of Blount, Inc. for the
Annual Meeting of Stockholders held June 27, 1994 (Commission File No. 1-7002).
*10(l) 1995 Blount Long-Term Executive Stock Option Plan of Blount,
Inc. filed as part of Registration Statement on Form S-4 (Reg. No. 33-63141) of
Blount International, Inc., including amendments and exhibits, which became
effective on October 4, 1995 (Commission File No. 33-63141).
*10(m) Employment Agreement between Blount, Inc. and John M.
Panettiere which was filed as Exhibit 10(p) to the Annual Report of Blount, Inc.
on Form 10-K for the fiscal year ended February 28, 1995 (Commission File No.
1-7002).
*10(n) Employment Agreement between Blount, Inc. and Harold E. Layman
which was filed as Exhibit 10(q) to the Annual Report of Blount, Inc. on Form
10-K for the fiscal year ended February 28, 1995 (Commission File No. 1-7002).
*10(o) Employment Agreement between Blount, Inc. and D. Joseph McInnes
which was filed as Exhibit 10(r) to the Annual Report of Blount, Inc. on Form
10-K for the fiscal year ended February 28, 1995 (Commission File No. 1-7002).
*10(p) Employment Agreement between Blount, Inc. and James S. Osterman
which was filed as Exhibit 10(s) to the Annual Report of Blount, Inc. on Form
10-K for the fiscal year ended February 28, 1995 (Commission File No. 1-7002).
*10(q) Employment Agreement between Blount, Inc. and Donald B. Zorn
which was filed as Exhibit 10(t) to the Annual Report of Blount, Inc. on Form
10-K for the fiscal year ended February 28, 1995 (Commission File No. 1-7002).
*10(r) Supplemental Executive Retirement Plan between Blount, Inc. and
Donald B. Zorn which was filed as Exhibit 10(v) to the Annual Report of Blount,
Inc. on Form 10-K for the fiscal year ended February 28, 1995 (Commission File
No. 1-7002).
*10(s) $100 Million Revolving Credit Agreement of Blount, Inc. which
was filed as Exhibit 10(w) to the Annual Report of Blount, Inc. on Form 10-K for
the fiscal year ended February 28, 1995 (Commission File No. 1-7002).
**10(t) Employment Agreement between Blount, Inc. and Richard H. Irving
III.
*10(u) Blount, Inc. Non-Employee Directors' Stock Compensation Plan
which was filed as Exhibit 10(u) to the Annual Report of Blount International,
Inc. on Form 10-K for the fiscal year ended February 29, 1996 (Commission File
No. 001-11549).
*10(v) Agreement and Plan of Merger By and Among Simmons Outdoor
Corporation, Blount, Inc., and S.O.C. Corporation filed as part of Schedule 14D-
1 and Schedule 13D of Simmons Outdoor Corporation, S.O.C. Corporation, Blount,
Inc., and Blount International, Inc., which was filed on November 17, 1995.
Page 44
<PAGE>
*10(w) Amendments to and Assumptions of Employment Agreements with the
following individuals which were filed as Exhibit 10(w) to the Annual Report of
Blount International, Inc. on Form 10-K for the fiscal year ended February 29,
1996 (Commission File No. 001-11549):
John M. Panettiere
Harold E. Layman
D. Joseph McInnes
James S. Osterman
Donald B. Zorn
*10(x) Blount, Inc. Executive Benefit Plans Trust Agreement and
Amendment to and Assumption of Blount, Inc. Executive Benefit Plans Trust which
were filed as Exhibits 10(x)(i) and 10(x)(ii) to the Annual Report of Blount
International, Inc. on Form 10-K for the fiscal year ended February 29, 1996
(Commission File No. 001-11549).
*10(y) Blount, Inc. Benefits Protection Trust Agreement and Amendment
To and Assumption of Blount, Inc. Benefits Protection Trust which were filed as
Exhibits 10(y)(i) and 10(y)(ii) to the Annual Report of Blount International,
Inc. on Form 10-K for the fiscal year ended February 29, 1996 (Commission File
No. 001-11549).
**10(z) Employment Agreement between Blount, Inc. and Leonard C. Hale.
**10(aa) Employment Agreement between Simmons Outdoor Corporation and
Larry W. Bridgman.
11. Computation of net income per common share included herein on page 48.
21. A list of the significant subsidiaries of Blount International, Inc.
included herein on page 49.
23. Consent of Independent Accountants included herein on page 50.
27. Financial Data Schedule.
* Incorporated by reference.
** Filed electronically herewith. Copies of such exhibits may be obtained
upon written request from:
Corporate Communications
Blount International, Inc.
P.O. Box 949
Montgomery, AL 36101-0949
Page 45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BLOUNT INTERNATIONAL, INC.
By: /s/ Harold E. Layman
Harold E. Layman
Senior Vice President and
Chief Financial Officer
Dated: March 3, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
is signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Dated: March 3, 1997
/s/ Winton M. Blount /s/ Emory M. Folmar
Winton M. Blount Emory M. Folmar
Chairman of the Board Director
and Director
/s/ W. Houston Blount /s/ Mary D. Nelson
W. Houston Blount Mary D. Nelson
Director Director
/s/ R. Eugene Cartledge /s/ John M. Panettiere
R. Eugene Cartledge John M. Panettiere
Director President and Chief Executive
Officer and Director
/s/ C. Todd Conover /s/ Arthur P. Ronan
C. Todd Conover Arthur P. Ronan
Director Director
/s/ H. Corbin Day /s/ Joab L. Thomas
H. Corbin Day Joab L. Thomas
Director Director
/s/ Herbert J. Dickson /s/ Rodney W. Blankenship
Herbert J. Dickson Rodney W. Blankenship
Director Chief Accounting Officer
Page 46
<PAGE>
<TABLE>
BLOUNT INTERNATIONAL, INC. & SUBSIDIARIES
SCHEDULE II
CONSOLIDATED SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
(Dollar amounts in millions)
- ----------------------------
Column A Column B Column C Column D Column E
-------- ------------ ------------------------- ----------- ----------
Additions
-------------------------
Balance at Charged to Charged to Balance at
Beginning of Cost and Other End of
Description Period Expenses Accounts Deductions Period
----------- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <S> <C> <S> <C>
Twelve months ended
February 28, 1995
- -------------------
Allowance for doubtful
accounts receivable $ 2.2 $ 0.8 $ 0.1 $ 0.5 (1) $ 2.6
======= ======= ======= ======= =======
Twelve months ended
February 29, 1996
- -------------------
Allowance for doubtful
accounts receivable $ 2.6 $ 1.1 $ 0.6 (2) $ 0.4 (1) $ 3.9
======= ======= ======= ======= =======
Ten months ended
December 31, 1996
- -----------------
Allowance for doubtful
accounts receivable $ 3.9 $ 0.6 $ 1.5 (1) $ 3.0
======= ======= ======= =======
</TABLE>
(1) Principally amounts written-off less recoveries of amounts previously
written-off.
(2) Allowance established for company acquired by purchase.
Page 47
<PAGE>
EXHIBIT 11
<TABLE>
BLOUNT INTERNATIONAL, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(DOLLAR AMOUNTS IN MILLIONS EXCEPT SHARE DATA)
<CAPTION>
Ten months ended Twelve months ended Twelve months ended
December 31, 1996 February 29, 1996 February 28, 1995
---------------------- ---------------------- ----------------------
Primary Diluted Primary Diluted Primary Diluted
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Weighted average common
shares outstanding 19,265,726 19,265,726 19,098,566 19,098,566 18,885,426 18,885,426
Incremental shares for
stock options 341,049 440,162 372,060 382,148 511,104 562,260
---------- ---------- ---------- ---------- ---------- ----------
Total number of shares used
in per share calculations 19,606,775 19,705,888 19,470,626 19,480,714 19,396,530 19,447,686
========== ========== ========== ========== ========== ==========
Income from continuing
operations $ 44.0 $ 44.0 $ 53.6 $ 53.6 $ 40.7 $ 40.7
Discontinued operations -
Income on disposal, net 1.4 1.4
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 45.4 $ 45.4 $ 53.6 $ 53.6 $ 40.7 $ 40.7
========== ========== ========== ========== ========== ==========
Income per common share:
Continuing operations $ 2.25 $ 2.24 $ 2.75 $ 2.75 $ 2.10 $ 2.09
Discontinued operations .07 .07
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 2.32 $ 2.31 $ 2.75 $ 2.75 $ 2.10 $ 2.09
========== ========== ========== ========== ========== ==========
</TABLE>
Page 48
<PAGE>
EXHIBIT 21
SIGNIFICANT SUBSIDIARIES OF THE REGISTRANT
At December 31, 1996, consolidated, directly or indirectly, significant wholly-
owned subsidiaries of Blount International, Inc. were as follows:
NAME OF PLACE OF
SUBSIDIARY INCORPORATION
- ---------- -------------
Blount, Inc. Delaware
BI Holdings Corp. Delaware
Blount Holdings, Ltd. Canada
Blount Canada, Ltd. Canada
Blount Europe, SA Belgium
Blount Japan, Inc. Japan
Blount Industrial de Correntes LTDA Brazil
Omark Properties, Inc. Oregon
Dixon Industries, Inc. Kansas
Gear Products, Inc. Oklahoma
Simmons Outdoor Corporation Delaware
CTR Manufacturing, Inc. North Carolina
The names of particular subsidiaries have been omitted because when considered
in the aggregate or as a single subsidiary they would not constitute a
significant subsidiary as of December 31, 1996.
Page 49
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Blount International, Inc. on Form S-3 (File No. 33-46543), Form S-8 (File No.
33-51580), Form S-8 (File No. 33-56801) and Form S-8 (File No. 333-14261) of our
report dated January 28, 1997, on our audits of the consolidated financial
statements and financial statement schedules of Blount International, Inc. and
subsidiaries as of December 31, 1996 and February 29, 1996, and for the ten
months ended December 31, 1996 and each of the two years in the period ended
February 29, 1996, which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
January 28, 1997
Page 50
<PAGE>
Exhibit 10(t)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of May 15,
1995, by and between BLOUNT, INC., a Delaware corporation (the
"Company"), and Richard H. Irving III ("Executive").
W I T N E S S E T H:
WHEREAS, effective May 15, 1995, the Company and
Executive entered into an agreement ("Initial Agreement")
providing for Executive's employment by Company and specifying
the terms and conditions of such employment; and
WHEREAS, Executive has diligently performed his duties
under the Initial Agreement and has contributed to the success of
the Company; and
WHEREAS, the Company desires to recognize Executive's
value to the Company and its shareholders by amending certain
provisions of the Initial Agreement and restating such agreement
in a single document as hereinafter provided; and
WHEREAS, Executive desires to continue his employment
with the Company on the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements contained herein, the parties
hereby agree as follows:
1. Purpose. The purpose of this Agreement is to amend
the Initial Agreement to recognize Executive's contributions to
the overall success of the Company. In order to provide a
single, integrated document, the Initial Agreement and the
amendments are hereby incorporated into this restated Employment
Agreement, which shall provide the basis for Executive's
continued employment by the Company.
2. Employment and Term. (a) Subject to the terms and
conditions of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts employment, as Senior
Vice President and General Counsel of the Company or other
similar positions to which, with his consent, he may be assigned
and shall have such responsibilities, duties and authority that
are consistent with such positions as may from time to time be
assigned to Executive. Executive hereby agrees that during the
Term of this Agreement he will devote substantially all his
working time, attention and energies to the diligent performance
of his duties, provided that the Executive may also serve on
boards of directors or trustees of other companies and
organizations, as long as such service does not materially
interfere with the performance of his duties hereunder and is
with the prior approval of the President and Chief Executive
Officer.
(b) Unless earlier terminated as provided herein,
Executive's employment under this Agreement shall be for a
rolling, two year term (the "Term") commencing on May 15, 1995,
and shall be deemed to automatically, without further action by
either the Company or Executive, extend each day for an
additional day, such that the remaining term of the Agreement
shall continue to be two years; provided, however, that (i)
either party may, by written notice to the other, cause this
Agreement to cease to extend automatically and, upon such notice,
the "Term" of this Agreement shall be the two years following the
date of such notice and this Agreement shall terminate upon the
expiration of such Term, and (ii) the Term of this Agreement
shall not extend beyond the date Executive attains age 65, unless
the parties otherwise agree in writing. If no such notice to
cease to extend has been given and this Agreement is terminated
pursuant to Section 5.1 or Section 5.2 hereof, for the purposes
of calculating and assessing the damages to Executive as a result
of such termination, the remaining Term of this Agreement shall
be deemed to be two years from the date of such termination (or,
if earlier, the date Executive attains age 65).
3. Compensation and Benefits. As compensation for his
services during the Term of this Agreement, Executive shall be
paid and receive the amounts and benefits set forth in
subsections (a) through (f) below:
(a) An annual base salary ("Base Salary") of Two
Hundred Forty-Five Thousand Dollars ($245,000.00), prorated for
any partial year of employment. Executive's Base Salary shall be
subject to annual review for increases at such time as the
Company conducts salary reviews for its executive officers
generally. Executive's salary shall be payable bi-monthly, or in
accordance with the Company's regular payroll practices in effect
from time to time for executive officers of the Company.
(b) Executive shall be eligible to participate in the
Target Incentive Plan and such other annual incentive plans as
may be established by the Company from time to time for its
executive officers. The President and Chief Executive Officer
will establish individual performance goals each year under the
incentive plans, and Executive's annual Target Bonus shall be 45%
of Base Salary; the maximum award for exceeding the performance
goals shall be 90% of Base Salary. For FY 96, Executive would
have a guaranteed bonus of not less than $100,000. The annual
incentive bonus payable under this subsection (b) shall be
payable as a lump sum no later than fifteen (15) business days
after approval of the bonus by the Compensation Committee of the
Board, unless Executive elects to defer all or a portion of such
amount to any deferral plan established by the Company for such
purpose.
(c) Executive shall be entitled to participate in, or
receive benefits under, any "employee benefit plan" (as defined
in Section 3(3) of ERISA) or employee benefit arrangement made
available by the Company to its executive officers, including
plans providing retirement, 401(k) benefits, deferred
compensation, health care, life insurance, disability and similar
benefits.
(d) The Company will provide membership initiation
fees and dues at the Wynlakes Country Club and the Capital City
Club for Executive and his family. Executive will be provided an
automobile per company policy, and the Company will pay all
insurance, maintenance, fuel, oil and related operational
expenses for such automobile. Executive is eligible for vacation
under the Company's standard vacation policy. Executive will be
provided an annual physical examination and a financial/tax
consultant for personal financial and tax planning.
(e) Executive shall participate in the Company's
Executive Life Insurance Program, which will provide a $250,000
death benefit. This insurance policy will be paid-up on the date
Executive attains 65 (assuming his employment continues until
that date) and will be delivered to Executive as a paid-up
insurance policy upon his retirement from the Company at or after
age 65. The life insurance provided to Executive under the
Executive Life Insurance Program shall be in addition to any life
insurance he receives under the Company's group term policy under
subsection (c) above.
(f) Executive will be paid a tax gross-up amount by
the Company to cover any additional federal or state income taxes
he incurs as a result of being required to include in taxable
income the amount of the premiums or costs for, or personal usage
of, the items described in subsections (d) and (e) above.
4. Confidentiality and Noncompetition. (a) Executive
acknowledges that, prior to and during the Term of this
Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by
Executive on behalf of a competitor of the Company to the
Company's substantial detriment. Moreover, the parties recognize
that Executive during the course of his employment with the
Company may develop important relationships with customers and
others having valuable business relationships with the Company.
In view of the foregoing, Executive acknowledges and agrees that
the restrictive covenants contained in this Section are
reasonably necessary to protect the Company's legitimate business
interests and good will.
(b) Executive agrees that he shall protect the
Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties
performed in accordance with this Agreement, any Confidential
Information; provided, however, that Executive may make
disclosures required by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction, in
which event Executive will promptly notify the Company of such
order or subpoena to provide the Company an opportunity to
protect its interests. Executive's obligations under this
Section 4(b) shall survive any expiration or termination of this
Agreement, provided that Executive may after such expiration or
termination disclose Confidential Information with the prior
written consent of the Chairman of the Board.
(c) Upon the termination or expiration of his
employment hereunder, Executive agrees to deliver promptly to the
Company all Company files, customer lists, management reports,
memoranda, research, Company forms, financial data and reports
and other documents supplied to or created by him in connection
with his employment hereunder (including all copies of the
foregoing) in his possession or control, and all of the Company's
equipment and other materials in his possession or control.
Executive's obligations under this Section 4(c) shall survive any
expiration or termination of this Agreement.
(d) Upon the termination or expiration of his
employment under this Agreement, Executive agrees that he shall
not enter into or engage in the design, manufacture, marketing or
sale of any products similar to those produced or offered by the
Company or its affiliates in the area of North America, either as
an individual, partner or joint venturer, or as an employee,
agent or salesman, or as an officer, director, or shareholder of
a corporation for a period of two (2) years from the date of his
termination of employment.
(e) Executive acknowledges that if he breaches or
threatens to breach this Section 4, his actions may cause
irreparable harm and damage to the Company which could not be
compensated in damages. Accordingly, if Executive breaches or
threatens to breach this Section 4, the Company shall be entitled
to seek injunctive relief, in addition to any other rights or
remedies of the Company. The existence of any claim or cause of
action by Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of Executive's agreement under
this Section 4(d).
5. Termination.
5.1 By Executive. Executive shall have the right to
terminate his employment hereunder by Notice of Termination (as
described in Section 7) if (i) the Company materially breaches
this Agreement and such breach is not cured within thirty (30)
days after written notice of such breach is given by Executive to
the Company; or (ii) Executive determines that his termination is
for Good Reason (as defined in Section 6.7). If Executive
terminates his employment hereunder pursuant to clauses (i) or
(ii) of this Section 5.1, Executive shall be entitled to receive,
as damages payable as a result of, and arising from, a breach of
this Agreement, the compensation and benefits set forth in
subsections (a) through (i) below. The time periods in (a)
through (i) below shall be 12 months if termination occurs before
May 15, 1997 and 18 months if termination occurs after May 15,
1997. If Executive terminates his employment other than pursuant
to clauses (i) or (ii) of this Section 5.1, the Company's
obligations under this Agreement shall cease as of the date of
such termination. Except as provided in Section 5.4(a), the
Company agrees that if Executive terminates employment and is
entitled to benefits under this Section 5.1, he shall not be
required to mitigate damages by seeking other employment, nor
shall any amount he earns reduce the amount payable by the
Company hereunder.
(a) Base Salary - Executive will continue to receive
his Base Salary as then in effect (subject to
withholding of all applicable taxes) for a period of
twelve (12) months or eighteen (18) months from his
date of termination in the same manner as it was being
paid as of the date of termination; provided, however,
that the salary payments provided for hereunder shall
be paid in a single lump sum payment, to be paid not
later than 30 days after his termination of employment;
provided, further, that the amount of such lump sum
payment shall be determined by taking the salary
payments to be made and discounting them to their
Present Value (as defined in Section 5.4(e)) on the
date Executive's employment under this Agreement is
terminated.
(b) Bonuses and Incentives - Executive shall receive
bonus payments from the Company for the twelve (12)
months or eighteen (18) months following the month in
which his employment under this Employment is
terminated in an amount for each such month equal to
one-twelfth of the average of the bonuses earned by
him, if any, for the two fiscal years in which bonuses
were paid immediately preceding the year in which such
termination occurs. Any bonus amounts that Executive
had previously earned from the Company but which may
not yet have been paid as of the date of termination
shall not be affected by this provision. Executive
shall also receive a prorated bonus for any uncompleted
fiscal year at the date of termination (assuming the
Target Award level has been achieved), based upon the
number of days that he was employed during such fiscal
year. The bonus amounts determined herein shall be
paid in a single lump sum payment, to be paid not later
than 30 days after termination of employment; provided,
that the amount of such lump sum payment shall be
determined by taking the bonus payments (as of the
payment date) to be made and discounting them to their
Present Value (as defined in Section 5.4(e)) on the
date Executive's employment under this Agreement is
terminated.
(c) Health and Life Insurance Coverage - The health
and group term life insurance benefits coverage
provided to Executive at his date of termination shall
be continued at the same level and in the same manner
as if his employment under this Agreement had not
terminated (subject to the customary changes in such
coverages if Executive retires, reaches age 65 or
similar events), beginning on the date of such
termination and ending on the date twelve (12) months
or eighteen (18) months from the date of such
termination. Any additional coverages Executive had at
termination, including dependent coverage, will also be
continued for such period on the same terms, to the
extent permitted by the applicable policies or
contracts. Any costs Executive was paying for such
coverages at the time of termination shall be paid by
Executive by separate check payable to the Company each
month in advance. If the terms of any benefit plan
referred to in this Section, or the laws applicable to
such plan, do not permit continued participation by
Executive, then the Company will arrange for other
coverage at its expense providing substantially similar
benefits.
(d) Employee Retirement Plans - To the extent
permitted by the applicable plan, Executive will be
entitled to continue to participate, consistent with
past practices, in all employee retirement plans
maintained by the Company in effect as of his date of
termination, including, to the extent such plans are
still maintained by the Company, the Blount Retirement
Plan, the Blount 401(k) Plan, and, if applicable, the
Blount, Inc. and Subsidiary Supplemental Retirement
Plan. Executive's participation in such retirement
plans shall continue for a period of twelve (12) months
or eighteen (18) months from the date of termination of
his employment under this Agreement (at which point he
will be considered to have terminated employment within
the meaning of the plans) and the compensation payable
to Executive under (a) and (b) above shall be treated
(unless otherwise excluded) as compensation under the
plan. For purposes of the Blount 401(k) Plan, he will
receive an amount equal to the Company's contributions
to the plan, assuming Executive had participated in
such plan at the maximum permissible contributions
level. If continued participation in any plan is not
permitted by the plan or by applicable law, the Company
shall pay to Executive and, if applicable, his
beneficiary, a supplemental benefit equal to the
present value on the date of termination of employment
under this Agreement (calculated as provided in the
plan) of the excess of (i) the benefit Executive would
have been paid under such plan if he had continued to
be covered for the twelve (12) month or eighteen (18)
month period (less any amounts Executive would have
been required to contribute), over (ii) the benefit
actually payable under such plan. The Company shall
pay such additional benefits (if any) in a lump sum.
(e) Effect of Lump Sum Payment. The lump sum payment
under (a) or (b) above shall not alter the amounts
Executive is entitled to receive under the benefit
plans described in this section. Benefits under such
plans shall be determined as if Executive had remained
employed and received such payments over a period of
twelve (12) months or eighteen (18) months, whichever
is applicable.
(f) Effect of Death or Retirement. The benefits
payable or to be provided under subsections (c) or (d)
above shall cease or be modified in the event of the
Executive's death or election to commence retirement
benefits under the Company's retirement plan, provided
that nothing in this subsection (f) shall limit
Executive's rights to receive Company benefits as a
retiree.
(g) Executive Life Insurance Program. On Executive's
date of termination, the Company will pay an amount
into the policy as if Executive had continued in
employment for eighteen (18) additional months at the
same total compensation and was eighteen (18) months
older. At Executive's option, the policy shall be
delivered to Executive or he shall be paid the cash
value thereof (after the payment referred to in the
preceding sentence).
(h) Stock Options. For purposes of the 1994 Plan and
other stock option programs of the Company in which the
Executive may participate, Executive shall be deemed to
have completed eighteen (18) additional months of
service with the Company.
(i) Office Space; Secretarial. Executive will be
provided appropriate office space, secretarial
assistance and related expenses for a period of twelve
(12) months from his date of termination.
5.2 By Company. The Company shall have the right to
terminate Executive's employment under this Agreement at any time
during the Term by Notice of Termination (as described in Section
7), (i) for Cause, as defined herein, (ii) if Executive becomes
Disabled, or (iii) upon Executive's death. If the Company
terminates Executive's employment under this Agreement pursuant
to clauses (i) through (iii) of this Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of
termination; provided, however, that if Executive's employment
terminates as a result of death or Disability, the benefits
payable under this Agreement and the other benefit plans of the
Company upon Executive's death or Disability shall be provided by
the Company. If the Company terminates Executive during the Term
of this Agreement other than pursuant to clauses (i) through
(iii) of this Section 5.2, Executive shall be entitled to
receive, as damages payable as a result of, and arising from, a
breach of this Agreement, the compensation and benefits provided
in subsections (a) through (i) of Section 5.1 above for the time
periods, and subject to the provisions (including the
nonmitigation provision) and limitations therein.
5.3 Additional Agreements Upon Termination. In the
event Executive's employment is terminated by Executive under
clause (ii) of Section 5.1, or by the Company other than under
clauses (i) through (iii) of Section 5.2 within twenty-four (24)
months following the date of a Change in Control or the death of
Winton M. Blount, Jr., the provisions set forth below shall
apply, provided that such provisions shall only apply in each
case to the extent that the damages payable to Executive for
termination of his employment under Sections 5.1 or 5.2 do not
already provide such benefits under the plan or program.
(a) Stock Options. As of his date of termination, all
outstanding stock options granted to Executive under the 1994
Plan or any other stock option program in which Executive
participates shall become 100% vested and immediately
exercisable. Notwithstanding the other provisions of Executive's
stock options, Executive shall have a period of not less than 3
months from his date of termination to exercise such options.
(b) Executive Life Insurance Program. The life
insurance policy described in Section 3(h) shall be delivered to
Executive as a fully paid-up policy within thirty (30) days after
his date of termination, regardless of Executive's age at such
time.
5.4 Limitation on Benefits Upon Termination. (a)
Notwithstanding anything in this Agreement to the contrary, any
benefits payable or to be provided to Executive by the Company or
its affiliates, whether pursuant to this Agreement or otherwise,
which are treated as Severance Payments shall be modified or
reduced in the manner provided in (b) below to the extent
necessary so that the benefits payable or to be provided to
Executive under this Agreement that are treated as Severance
Payments, as well as any payments or benefits provided outside of
this Agreement that are so treated, shall not cause the Company
to have paid an Excess Severance Payment. In computing such
amount, the parties shall take into account all provisions of
Code Section 280G, and the regulations thereunder, including
making appropriate adjustments to such calculation for amounts
established to be Reasonable Compensation. If Executive becomes
entitled to compensation and benefits under Section 5.1 or
Section 5.2 and such payments are considered to be Severance
Payments contingent upon a Change in Control, Executive shall be
required to mitigate damages (but only with respect to amounts
that would be treated as Severance Payments) by reducing the
amount of Severance Payments he is entitled to receive by any
compensation and benefits he earns from subsequent employment
(but shall not be required to seek such employment) during the
twelve (12) month or eighteen (18) month period after termination
(or such lesser period as he is entitled to extended benefits).
(b) In the event that the amount of any Severance
Payments which would be payable to or for the benefit of
Executive under this Agreement must be modified or reduced to
comply with this Section 5.4, Executive shall direct which
Severance Payments are to be modified or reduced; provided,
however, that no increase in the amount of any payment or change
in the timing of the payment shall be made without the consent of
the Company.
(c) This Section 5.4 shall be interpreted so as to
avoid the imposition of excise taxes on Executive under Section
4999 of the Code or the disallowance of a deduction to the
Company pursuant to Section 280G(a) of the Code with respect to
amounts payable under this Agreement or otherwise.
Notwithstanding the foregoing, in no event will any of the
provisions of this Section 5.4 create, without the consent of
Executive, an obligation on the part of Executive to refund any
amount to the Company following payment of such amount.
(d) In addition to the limits otherwise provided in
this Section 5.4, to the extent permitted by law, Executive may
in his sole discretion elect to reduce any payments he may be
eligible to receive under this Agreement to prevent the
imposition of excise taxes on Executive under Section 4999 of the
Code.
(e) For purposes of this Section 5.4, the following
definitions shall apply:
(i) "Excess Severance Payment" - The term "Excess
Severance Payment" shall have the same meaning as the term
"excess parachute payment" defined in Section 280G(b)(1) of the
Code.
(ii) "Severance Payment" - The term "Severance
Payment" shall have the same meaning as the term "parachute
payment" defined in Section 280G(b)(2) of the Code.
(iii) "Reasonable Compensation" - The term
"Reasonable Compensation" shall have the same meaning as provided
in Section 280G(b)(4) of the Code. The parties acknowledge and
agree that, in the absence of a change in existing legal
authorities or the issuance of contrary authorities, amounts
received by Executive as damages under or as a result of a breach
of this Agreement shall be considered Reasonable Compensation.
(iv) "Present Value" - The term "Present Value"
shall have the same meaning as provided in Section 280G(d)(4) of
the Code.
6. Definitions. For purposes of this Agreement the
following terms shall have the meanings specified below:
6.1 "Board" or "Board of Directors" - The Board of
Directors of the Company.
6.2 "Cause" - Either
(a) Any act that constitutes, on the part of
Executive, (i) fraud, a felony or gross malfeasance of duty and
(ii) that results in material injury to the Company; or
(b) Executive's willful and continued failure to
devote his full business time and efforts to the performance of
duties for the Company; provided, however, that in the case of
(b) above, such conduct shall not constitute Cause unless the
notice delivered to Executive pursuant to Section 7 sets forth
with specificity (A) the conduct deemed to qualify as Cause, (B)
reasonable action that would remedy such objection, and (C) a
reasonable time (not less than thirty days) within which
Executive may take such remedial action, and Executive shall not
have taken such specified remedial action within such specified
reasonable time.
6.3 "Change in Control" - Either
(i) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as
amended) within any twelve (12) month period of
securities of the Company representing an aggregate of
fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities
(excluding the acquisition by persons who own such
amount of securities on the date hereof, or
acquisitions by persons who acquire such amount through
inheritance), provided, however, that the threshold
percentage in this subparagraph (i) shall be
automatically reduced to an aggregate of twenty-five
percent (25%) or more of the combined voting power of
the Company's then outstanding securities at such time
that either of the following events occurs:
(a) Winton M. Blount's ownership of the combined voting
power of HBC, Incorporated's then outstanding
securities is less than 50.1%, or (B) HBC,
Incorporated's ownership of the combined voting power
of the Company's then outstanding securities is less
than 50.1%.; or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board, cease for any reason to
constitute at least a majority thereof, unless the
election of each new director was approved in advance
by a vote of at least a majority of the directors then
still in office who were directors at the beginning of
the period; or
(iii) consummation of (a) a merger, consolidation or
other business combination of the Company with any
other "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended) or affiliate thereof, other than a merger,
consolidation or business combination which would
result in the outstanding common stock of the Company
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into common stock of the surviving entity or a parent
or affiliate thereof) at least fifty percent (50%) of
the outstanding common stock of the Company or such
surviving entity or parent or affiliate thereof
outstanding immediately after such merger,
consolidation or business combination, or (b) a plan of
complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or
substantially all of the Company's assets; or
(iv) the occurrence of any other event or circumstance
which is not covered by (i) through (iii) above which
the Board determines affects control of the Company and
adopts a resolution that such event or circumstance
constitutes a Change in Control for the purposes of
this Agreement.
6.4 "Code" - The Internal Revenue Code of 1986, as it
may be amended from time to time.
6.5 "Confidential Information" - All technical,
business, and other information relating to the business of the
Company or its subsidiaries or affiliates, including, without
limitation, technical or nontechnical data, formulae,
compilations, programs, devices, methods, techniques, processes,
financial data, financial plans, product plans, and lists of
actual or potential customers or suppliers, which (i) derives
economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by,
other Persons, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or
confidentiality. Such information and compilations of
information shall be contractually subject to protection under
this Agreement whether or not such information constitutes a
trade secret and is separately protectable at law or in equity as
a trade secret. Confidential Information does not include
confidential business information which does not constitute a
trade secret under applicable law two years after any expiration
or termination of this Agreement.
6.6 "Disability" or "Disabled". Executive's inability
as a result of physical or mental incapacity to substantially
perform his duties for the Company on a full-time basis for a
period of six (6) months.
6.7 "Good Reason" A "Good Reason" for termination by
Executive of Executive's employment shall mean the occurrence
(without the Executive's express written consent) within the
twenty-four (24) month period following the date of (a) a Change
in Control, or (b) the death of Winton M. Blount, Jr., of any one
of the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act
described in paragraph (i), (v), (vi) or (vii) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the assignment to Executive without his consent of
any duties inconsistent with Executive's status as the Senior
Vice President and General Counsel of the Company, or a
substantial adverse alteration in the nature or status of the
Executive's responsibilities from those in effect immediately
prior to the Change in Control or death of Mr. Blount (other than
any such alteration primarily attributable to the fact that the
Company may no longer be a public company);
(ii) a reduction by the Company in Executive's Base
Salary as in effect on the date hereof or as the same may be
increased from time to time;
(iii) the relocation of Executive without his consent
to a location more than fifty (50) miles from the work location
immediately prior to the Change in Control or death of Mr.
Blount, or the Company's requiring Executive without his consent
to be based anywhere other than the Company's principal executive
offices, except for required travel on the Company's business to
an extent substantially consistent with Executive's present
business travel obligations;
(iv) the failure by the Company, without Executive's
consent, to pay to Executive any portion of Executive's current
compensation (including Base Salary and bonus), or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect
any compensation plan in which Executive participates immediately
prior to the Change in Control or death of Mr. Blount, which is
material to Executive's total compensation, including but not
limited to the Company's Target Incentive Plan, stock option
plan, or any substitute plans adopted prior to the Change in
Control or death of Mr. Blount, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to
continue the Executive's participation in such plan (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of Executive's participation relative to other
participants, as existed at the time of the Change in Control or
death of Mr. Blount;
(vi) the failure by the Company to continue to provide
Executive with benefits substantially similar to those enjoyed by
Executive under any of the Company's pension, life insurance
(including the Executive Life Insurance Program), medical, health
and accident or disability plans in which Executive was
participating at the time of the Change in Control or death of
Mr. Blount, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive Executive of any material fringe benefit enjoyed by
Executive at the time of the Change in Control or death of Mr.
Blount, or the failure by the Company to provide Executive with
the number of paid vacation days to which the Executive is
entitled under this Agreement; or
(vii) any purported termination of Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall
be effective.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
6.8 "Person". Any individual, corporation, bank,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or other entity.
7. Termination Procedures.
7.1 Notice of Termination. During the Term of this
Agreement, any purported termination of Executive's employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party
hereto in accordance with Section 11. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include a copy of the written reasons for such
termination (after reasonable notice to Executive and an
opportunity for Executive, together with Executive's counsel, to
be heard) finding that, in good faith opinion, Executive was
guilty of conduct set forth in clause (a) or (b) of the
definition of Cause herein, and specifying the particulars
thereof in detail.
7.2 Date of Termination. "Date of Termination," with
respect to any purported termination of Executive's employment
during the Term of this Agreement, shall mean (i) if Executive's
employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that Executive shall not have returned to the full-time
performance of Executive's duties during such thirty (30) day
period), and (iii) if Executive's employment is terminated for
any other reason, the date specified in the Notice of Termination
(which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is
given).
8. Contract Non-Assignable. The parties acknowledge
that this Agreement has been entered into due to, among other
things, the special skills of Executive, and agree that this
Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of the
Company.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and
agree to perform this Agreement, in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
9.2 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive shall die while any amount
would still be payable to Executive hereunder (other than amounts
which, by their terms, terminate upon the death of Executive) if
Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal
representatives or administrators of Executive's estate.
10. Other Agents. Nothing in this Agreement is to be
interpreted as limiting the Company from employing other
personnel on such terms and conditions as may be satisfactory to
the Company.
11. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if delivered
or seven days after mailing if mailed, first class, certified
mail, postage prepaid:
To the Company: Blount, Inc.
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
Attention: D. Joseph McInnes
To the Executive: Richard H. Irving III
8596 Old Marsh Way
Montgomery, Alabama 36117
Any party may change the address to which notices, requests,
demands and other communications shall be delivered or mailed by
giving notice thereof to the other party in the same manner
provided herein.
12. Provisions Severable. If any provision or
covenant, or any part thereof, of this Agreement should be held
by any court to be invalid, illegal or unenforceable, either in
whole or in part, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of the
remaining provisions or covenants, or any part thereof, of this
Agreement, all of which shall remain in full force and effect.
13. Waiver. Failure of either party to insist, in one
or more instances, on performance by the other in strict
accordance with the terms and conditions of this Agreement shall
not be deemed a waiver or relinquishment of any right granted in
this Agreement or the future performance of any such term or
condition or of any other term or condition of this Agreement,
unless such waiver is contained in a writing signed by the party
making the waiver.
14. Amendments and Modifications. This Agreement may
be amended or modified only by a writing signed by both parties
hereto.
15. Governing Law. The validity and effect of this
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Alabama.
16. Arbitration of Disputes; Expenses. All claims by
Executive for compensation and benefits under this Agreement
shall be in writing. Any denial of a claim for benefits under
this Agreement shall be delivered to Executive in writing and
shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Company
shall afford a reasonable opportunity to Executive for a review
of a decision denying a claim and shall further allow Executive
to appeal a decision within sixty (60) days after notification
that Executive's claim has been denied. To the extent permitted
by applicable law, any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Montgomery, Alabama, in accordance
with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction. In the event the Executive incurs
legal fees and other expenses in seeking to obtain or to enforce
any rights or benefits provided by this Agreement and is
successful, in whole or in part, in obtaining or enforcing any
such rights or benefits through settlement, arbitration or
otherwise, the Company shall promptly pay Executive's reasonable
legal fees and expenses incurred in enforcing this Agreement and
the fees of the arbitrator. Except to the extent provided in the
preceding sentence, each party shall pay its own legal fees and
other expenses associated with any dispute.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
EXECUTIVE:
_____________________________
RICHARD H. IRVING III
Senior Vice President
& General Counsel
COMPANY:
BLOUNT, INC.
By: ___________________________
JOHN M. PANETTIERE
President
& Chief Executive Officer
Witness:_____________________
_____________________________
Notary Public
Exhibit 10(z)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 17th
day of June, 1996, by and between BLOUNT, INC., a Delaware
corporation (the "Company"), and Leonard C. Hale ("Executive").
W I T N E S S E T H:
WHEREAS, effective May 2, 1996, the Company and
Executive entered into an agreement ("Initial Agreement")
providing for Executive's employment by Company and outlining the
terms and conditions of such employment; and
WHEREAS, the Company desires to recognize Executive's
value to the Company and its shareholders by amending certain
provisions of the Initial Agreement and restating such agreement
in a single document as hereinafter provided; and
WHEREAS, Executive desires to commence his employment
with the Company on the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements contained herein, the parties
hereby agree as follows:
1. Purpose. The purpose of this Agreement is to amend
the Initial Agreement to recognize Executive's value to the
success of the Company. In order to provide a single, integrated
document, the Initial Agreement and any amendment(s) (attached
hereto as Exhibit A) are hereby incorporated into this restated
Employment Agreement, which shall provide the basis for
Executive's continued employment by the Company.
2. Employment and Term. (a) Subject to the terms and
conditions of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts employment, as President
of the Sporting Equipment Group of the Company or other similar
positions to which, with his consent, he may be assigned and
shall have such responsibilities, duties and authority that are
consistent with such positions as may from time to time be
assigned to Executive. Executive hereby agrees that during the
Term of this Agreement he will devote substantially all his
working time, attention and energies to the diligent performance
of his duties, provided that the Executive may also serve on
boards of directors or trustees of other companies and
organizations, as long as such service does not materially
interfere with the performance of his duties hereunder and is
with the prior approval of the President and Chief Executive
Officer of Blount.
(b) Unless earlier terminated as provided herein,
Executive's employment under this Agreement shall be for a
rolling, two year term (the "Term") commencing on June 17, 1996,
and shall be deemed to automatically, without further action by
either the Company or Executive, extend each day for an
additional day, such that the remaining term of the Agreement
shall continue to be two years; provided, however, that (i)
either party may, by written notice to the other, cause this
Agreement to cease to extend automatically and, upon such notice,
the "Term" of this Agreement shall be the two years following the
date of such notice and this Agreement shall terminate upon the
expiration of such Term, and (ii) the Term of this Agreement
shall not extend beyond the date Executive attains age 65, unless
the parties otherwise agree in writing. If no such notice to
cease to extend has been given and this Agreement is terminated
pursuant to Section 5.1 or Section 5.2 hereof, for the purposes
of calculating and assessing the damages to Executive as a result
of such termination, the remaining Term of this Agreement shall
be deemed to be two years from the date of such termination (or,
if earlier, the date Executive attains age 65).
3. Compensation and Benefits. As compensation for his
services during the Term of this Agreement, Executive shall be
paid and receive the amounts and benefits set forth in
subsections (a) through (f) below:
(a) An annual base salary ("Base Salary") of Two
Hundred Fifty Thousand Dollars ($250,000.00), prorated for any
partial year of employment. Executive's Base Salary shall be
subject to annual review for increases at such time as the
Company conducts salary reviews for its executive officers
generally. Executive's salary shall be payable bi-monthly, or in
accordance with the Company's regular payroll practices in effect
from time to time for executive officers of the Company.
(b) Executive shall be eligible to participate in the
Target Incentive Plan and such other annual incentive plans as
may be established by the Company from time to time for its
executive officers. The President and Chief Executive Officer
will establish individual performance goals each year under the
incentive plans, and Executive's annual Target Bonus shall be 45%
of Base Salary; the maximum award for exceeding the performance
goals shall be 90% of Base Salary. For CY 96, Executive would
have a guaranteed bonus of not less than $100,000. The annual
incentive bonus payable under this subsection (b) shall be
payable as a lump sum no later than fifteen (15) business days
after approval of the bonus by the Compensation Committee of the
Board, unless Executive elects to defer all or a portion of such
amount to any deferral plan established by the Company for such
purpose.
(c) Executive shall be entitled to participate in, or
receive benefits under, any "employee benefit plan" (as defined
in Section 3(3) of ERISA) or employee benefit arrangement made
available by the Company to its executive officers, including
plans providing retirement, 401(k) benefits, deferred
compensation, health care, life insurance, disability and similar
benefits. A Supplemental Executive Retirement Plan (SERP), as
detailed in Exhibit A, will be provided to the Executive.
(d) The Company will provide membership initiation
fees and dues at a country club and a luncheon club (the specific
clubs to be agreed upon by the Executive and the President &
Chief Executive Officer)for Executive and his family. Executive
will be provided an automobile per company policy, and the
Company will pay all insurance, maintenance, fuel, oil and
related operational expenses for such automobile. Executive is
eligible for vacation under the Company's standard vacation
policy. Executive will be provided an annual physical
examination and a financial/tax consultant for personal financial
and tax planning.
(e) Executive shall participate in the Company's
Executive Life Insurance Program, which will provide a $250,000
death benefit. This insurance policy will be paid-up on the date
Executive attains 65 (assuming his employment continues until
that date) and will be delivered to Executive as a paid-up
insurance policy upon his retirement from the Company at or after
age 65. The life insurance provided to Executive under the
Executive Life Insurance Program shall be in addition to any life
insurance he receives under the Company's group term policy under
subsection (c) above.
(f) Executive will be paid a tax gross-up amount by
the Company to cover any additional federal or state income taxes
he incurs as a result of being required to include in taxable
income the amount of the premiums or costs for, or personal usage
of, the items described in subsections (d) and (e) above.
4. Confidentiality and Noncompetition. (a) Executive
acknowledges that, prior to and during the Term of this
Agreement, the Company has furnished and will furnish to
Executive Confidential Information which could be used by
Executive on behalf of a competitor of the Company to the
Company's substantial detriment. Moreover, the parties recognize
that Executive during the course of his employment with the
Company may develop important relationships with customers and
others having valuable business relationships with the Company.
In view of the foregoing, Executive acknowledges and agrees that
the restrictive covenants contained in this Section are
reasonably necessary to protect the Company's legitimate business
interests and good will.
(b) Executive agrees that he shall protect the
Company's Confidential Information and shall not disclose to any
Person, or otherwise use, except in connection with his duties
performed in accordance with this Agreement, any Confidential
Information; provided, however, that Executive may make
disclosures required by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction, in
which event Executive will promptly notify the Company of such
order or subpoena to provide the Company an opportunity to
protect its interests. Executive's obligations under this
Section 4(b) shall survive any expiration or termination of this
Agreement, provided that Executive may after such expiration or
termination disclose Confidential Information with the prior
written consent of the Chairman of the Board.
(c) Upon the termination or expiration of his
employment hereunder, Executive agrees to deliver promptly to the
Company all Company files, customer lists, management reports,
memoranda, research, Company forms, financial data and reports
and other documents supplied to or created by him in connection
with his employment hereunder (including all copies of the
foregoing) in his possession or control, and all of the Company's
equipment and other materials in his possession or control.
Executive's obligations under this Section 4(c) shall survive any
expiration or termination of this Agreement.
(d) Upon the termination or expiration of his
employment under this Agreement, Executive agrees that he shall
not enter into or engage in the design, manufacture, marketing or
sale of any products similar to those produced or offered by the
Company or its affiliates in the area of North America, either as
an individual, partner or joint venturer, or as an employee,
agent or salesman, or as an officer, director, or shareholder of
a corporation for a period of two (2) years from the date of his
termination of employment.
(e) Executive acknowledges that if he breaches or
threatens to breach this Section 4, his actions may cause
irreparable harm and damage to the Company which could not be
compensated in damages. Accordingly, if Executive breaches or
threatens to breach this Section 4, the Company shall be entitled
to seek injunctive relief, in addition to any other rights or
remedies of the Company. The existence of any claim or cause of
action by Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of Executive's agreement under
this Section 4(d).
5. Termination.
5.1 By Executive. Executive shall have the right to
terminate his employment hereunder by Notice of Termination (as
described in Section 7) if (i) the Company materially breaches
this Agreement and such breach is not cured within thirty (30)
days after written notice of such breach is given by Executive to
the Company; or (ii) Executive determines that his termination is
for Good Reason (as defined in Section 6.7). If Executive
terminates his employment hereunder pursuant to clauses (i) or
(ii) of this Section 5.1, Executive shall be entitled to receive,
as damages payable as a result of, and arising from, a breach of
this Agreement, the compensation and benefits set forth in
subsections (a) through (i) below. The time periods in (a)
through (i) below shall be twelve (12) months if termination
occurs before June 17, 1998 and eighteen (18) months if
termination occurs on or after June 17, 1998. If Executive
terminates his employment other than pursuant to clauses (i) or
(ii) of this Section 5.1, the Company's obligations under this
Agreement shall cease as of the date of such termination. Except
as provided in Section 5.4(a), the Company agrees that if
Executive terminates employment and is entitled to benefits under
this Section 5.1, he shall not be required to mitigate damages by
seeking other employment, nor shall any amount he earns reduce
the amount payable by the Company hereunder.
(a) Base Salary - Executive will continue to receive
his Base Salary as then in effect (subject to
withholding of all applicable taxes) for a period, as
determined in Section 5.1, from his date of termination
in the same manner as it was being paid as of the date
of termination; provided, however, that the salary
payments provided for hereunder shall be paid in a
single lump sum payment, to be paid not later than 30
days after his termination of employment; provided,
further, that the amount of such lump sum payment shall
be determined by taking the salary payments to be made
and discounting them to their Present Value (as defined
in Section 5.4(e)) on the date Executive's employment
under this Agreement is terminated.
(b) Bonuses and Incentives - Executive shall receive
bonus payments from the Company for the period, as
determined in Section 5.1, following the month in which
his employment under this Employment is terminated in
an amount for each such month equal to one-twelfth of
the average of the bonuses earned by him, if any, for
the two fiscal years in which bonuses were paid
immediately preceding the year in which such
termination occurs. Any bonus amounts that Executive
had previously earned from the Company but which may
not yet have been paid as of the date of termination
shall not be affected by this provision. Executive
shall also receive a prorated bonus for any uncompleted
fiscal year at the date of termination (assuming the
Target Award level has been achieved), based upon the
number of days that he was employed during such fiscal
year. The bonus amounts determined herein shall be
paid in a single lump sum payment, to be paid not later
than 30 days after termination of employment; provided,
that the amount of such lump sum payment shall be
determined by taking the bonus payments (as of the
payment date) to be made and discounting them to their
Present Value (as defined in Section 5.4(e)) on the
date Executive's employment under this Agreement is
terminated.
(c) Health and Life Insurance Coverage - The health
and group term life insurance benefits coverage
provided to Executive at his date of termination shall
be continued at the same level and in the same manner
as if his employment under this Agreement had not
terminated (subject to the customary changes in such
coverages if Executive retires, reaches age 65 or
similar events), beginning on the date of such
termination and ending on the date, as determined in
Section 5.1, from the date of such termination. Any
additional coverages Executive had at termination,
including dependent coverage, will also be continued
for such period on the same terms, to the extent
permitted by the applicable policies or contracts. Any
costs Executive was paying for such coverages at the
time of termination shall be paid by Executive by
separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to
in this Section, or the laws applicable to such plan,
do not permit continued participation by Executive,
then the Company will arrange for other coverage at its
expense providing substantially similar benefits.
(d) Employee Retirement Plans - To the extent
permitted by the applicable plan, Executive will be
entitled to continue to participate, consistent with
past practices, in all employee retirement plans
maintained by the Company in effect as of his date of
termination, including, to the extent such plans are
still maintained by the Company, the Blount Retirement
Plan, the Blount 401(k) Plan, and, if applicable, the
Blount, Inc. and Subsidiary Supplemental Retirement
Plan. Executive's participation in such retirement
plans shall continue for a period, as determined in
Section 5.1, from the date of termination of his
employment under this Agreement (at which point he will
be considered to have terminated employment within the
meaning of the plans) and the compensation payable to
Executive under (a) and (b) above shall be treated
(unless otherwise excluded) as compensation under the
plan. For purposes of the Blount 401(k) Plan, he will
receive an amount equal to the Company's contributions
to the plan, assuming Executive had participated in
such plan at the maximum permissible contributions
level. If continued participation in any plan is not
permitted by the plan or by applicable law, the Company
shall pay to Executive and, if applicable, his
beneficiary, a supplemental benefit equal to the
present value on the date of termination of employment
under this Agreement (calculated as provided in the
plan) of the excess of (i) the benefit Executive would
have been paid under such plan if he had continued to
be covered for the period, as determined in Section
5.1, (less any amounts Executive would have been
required to contribute), over (ii) the benefit actually
payable under such plan. The Company shall pay such
additional benefits (if any) in a lump sum.
(e) Effect of Lump Sum Payment. The lump sum payment
under (a) or (b) above shall not alter the amounts
Executive is entitled to receive under the benefit
plans described in this section. Benefits under such
plans shall be determined as if Executive had remained
employed and received such payments over the period, as
determined in Section 5.1, whichever is applicable.
(f) Effect of Death or Retirement. The benefits
payable or to be provided under subsections (c) or (d)
above shall cease or be modified in the event of the
Executive's death or election to commence retirement
benefits under the Company's retirement plan, provided
that nothing in this subsection (f) shall limit
Executive's rights to receive Company benefits as a
retiree.
(g) Executive Life Insurance Program. On Executive's
date of termination, the Company will pay an amount
into the policy as if Executive had continued in
employment for the additional months, as determined in
Section 5.1, at the same total compensation and was
older by the number of months as determined in Section
5.1. At Executive's option, the policy shall be
delivered to Executive or he shall be paid the cash
value thereof (after the payment referred to in the
preceding sentence).
(h) Stock Options. For purposes of the Stock Option
Plan of the Company in which the Executive may
participate, Executive shall be deemed to have
completed the number of additional months of service
with the Company, as determined in Section 5.1.
(i) Office Space; Secretarial. Executive will be
provided appropriate office space, secretarial
assistance and related expenses for a period not to
exceed six (6) months from his date of termination.
5.2 By Company. The Company shall have the right to
terminate Executive's employment under this Agreement at any time
during the Term by Notice of Termination (as described in Section
7), (i) for Cause, as defined herein, (ii) if Executive becomes
Disabled, or (iii) upon Executive's death. If the Company
terminates Executive's employment under this Agreement pursuant
to clauses (i) through (iii) of this Section 5.2, the Company's
obligations under this Agreement shall cease as of the date of
termination; provided, however, that if Executive's employment
terminates as a result of death or Disability, the benefits
payable under this Agreement and the other benefit plans of the
Company upon Executive's death or Disability shall be provided by
the Company. If the Company terminates Executive during the Term
of this Agreement other than pursuant to clauses (i) through
(iii) of this Section 5.2, Executive shall be entitled to
receive, as damages payable as a result of, and arising from, a
breach of this Agreement, the compensation and benefits provided
in subsections (a) through (i) of Section 5.1 above for the time
periods, and subject to the provisions (including the
nonmitigation provision) and limitations therein.
5.3 Additional Agreements Upon Termination. In the
event Executive's employment is terminated by Executive under
clause (ii) of Section 5.1, or by the Company other than under
clauses (i) through (iii) of Section 5.2 within twenty-four (24)
months following the date of a Change in Control or the death of
Winton M. Blount, Jr., the provisions set forth below shall
apply, provided that such provisions shall only apply in each
case to the extent that the damages payable to Executive for
termination of his employment under Sections 5.1 or 5.2 do not
already provide such benefits under the plan or program.
(a) Stock Options. As of his date of termination, all
outstanding stock options granted to Executive under any Company
Plan or any other stock option program in which Executive
participates shall become 100% vested and immediately
exercisable. Notwithstanding the other provisions of Executive's
stock options, Executive shall have a period of not less than 3
months from his date of termination to exercise such options.
(b) Executive Life Insurance Program. The life
insurance policy described in Section 3(h) shall be delivered to
Executive as a fully paid-up policy within thirty (30) days after
his date of termination, regardless of Executive's age at such
time.
5.4 Limitation on Benefits Upon Termination. (a)
Notwithstanding anything in this Agreement to the contrary, any
benefits payable or to be provided to Executive by the Company or
its affiliates, whether pursuant to this Agreement or otherwise,
which are treated as Severance Payments shall be modified or
reduced in the manner provided in (b) below to the extent
necessary so that the benefits payable or to be provided to
Executive under this Agreement that are treated as Severance
Payments, as well as any payments or benefits provided outside of
this Agreement that are so treated, shall not cause the Company
to have paid an Excess Severance Payment. In computing such
amount, the parties shall take into account all provisions of
Code Section 280G, and the regulations thereunder, including
making appropriate adjustments to such calculation for amounts
established to be Reasonable Compensation. If Executive becomes
entitled to compensation and benefits under Section 5.1 or
Section 5.2 and such payments are considered to be Severance
Payments contingent upon a Change in Control, Executive shall be
required to mitigate damages (but only with respect to amounts
that would be treated as Severance Payments) by reducing the
amount of Severance Payments he is entitled to receive by any
compensation and benefits he earns from subsequent employment
(but shall not be required to seek such employment) during the
period, as determined in Section 5.1, after termination (or such
lesser period as he is entitled to extended benefits).
(b) In the event that the amount of any Severance
Payments which would be payable to or for the benefit of
Executive under this Agreement must be modified or reduced to
comply with this Section 5.4, Executive shall direct which
Severance Payments are to be modified or reduced; provided,
however, that no increase in the amount of any payment or change
in the timing of the payment shall be made without the consent of
the Company.
(c) This Section 5.4 shall be interpreted so as to
avoid the imposition of excise taxes on Executive under Section
4999 of the Code or the disallowance of a deduction to the
Company pursuant to Section 280G(a) of the Code with respect to
amounts payable under this Agreement or otherwise.
Notwithstanding the foregoing, in no event will any of the
provisions of this Section 5.4 create, without the consent of
Executive, an obligation on the part of Executive to refund any
amount to the Company following payment of such amount.
(d) In addition to the limits otherwise provided in
this Section 5.4, to the extent permitted by law, Executive may
in his sole discretion elect to reduce any payments he may be
eligible to receive under this Agreement to prevent the
imposition of excise taxes on Executive under Section 4999 of the
Code.
(e) For purposes of this Section 5.4, the following
definitions shall apply:
(i) "Excess Severance Payment" - The term "Excess
Severance Payment" shall have the same meaning as the term
"excess parachute payment" defined in Section 280G(b)(1) of the
Code.
(ii) "Severance Payment" - The term "Severance
Payment" shall have the same meaning as the term "parachute
payment" defined in Section 280G(b)(2) of the Code.
(iii) "Reasonable Compensation" - The term
"Reasonable Compensation" shall have the same meaning as provided
in Section 280G(b)(4) of the Code. The parties acknowledge and
agree that, in the absence of a change in existing legal
authorities or the issuance of contrary authorities, amounts
received by Executive as damages under or as a result of a breach
of this Agreement shall be considered Reasonable Compensation.
(iv) "Present Value" - The term "Present Value"
shall have the same meaning as provided in Section 280G(d)(4) of
the Code.
6. Definitions. For purposes of this Agreement the
following terms shall have the meanings specified below:
6.1 "Board" or "Board of Directors" - The Board of
Directors of the Company.
6.2 "Cause" - Either
(a) Any act that constitutes, on the part of
Executive, (i) fraud, a felony or gross malfeasance of duty and
(ii) that results in material injury to the Company; or
(b) Executive's willful and continued failure to
devote his full business time and efforts to the performance of
duties for the Company; provided, however, that in the case of
(b) above, such conduct shall not constitute Cause unless the
notice delivered to Executive pursuant to Section 7 sets forth
with specificity (A) the conduct deemed to qualify as Cause, (B)
reasonable action that would remedy such objection, and (C) a
reasonable time (not less than thirty days) within which
Executive may take such remedial action, and Executive shall not
have taken such specified remedial action within such specified
reasonable time.
6.3 "Change in Control" - Either
(i) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as
amended) of securities of the Company representing an
aggregate of fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities (excluding the acquisition by persons who
own such amount of securities on the date hereof, or
acquisitions by persons who acquire such amount through
inheritance); or
(a) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) of securities of the
Company representing an aggregate of fifty percent (50%) or more
of the combined voting power of the Company's then outstanding
securities (excluding the acquisition by persons who own such
amount of securities on the date hereof, or acquisitions by
persons who acquire such amount through inheritance); or
(b) Winton M. Blount (i) ceases to own at least 50.1%
of the combined voting power of the then outstanding securities
of the sole general partner of Blount Holding Company, L.P.
("Blount Partnership"), a limited partnership which holds and
owns voting securities of the Company, or counsel to the Blount
Partnership is unable at any time to provide a legal opinion that
ownership of at least 50.1% of the combined voting power of the
then outstanding securities is sufficient to control the sole
general partner, or (ii) ceases to direct personally (and not
through a representative) by his ownership of the voting power of
the sole general partner of the Blount Partnership, the voting
and dispositive power of all of the shares of the Company's
voting securities owned by the Blount Partnership; or
(c) Winton M. Blount personally and the Blount
Partnership in the aggregate cease to own at least 50.1% of the
combined voting power of the Company's then outstanding
securities; or
(d) During any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board of the Company, cease for any reason to constitute at least
a majority thereof, unless the election of each new director was
approved in advance by a vote of at least a majority of the
directors then still in office who were directors at the
beginning of the period; or
(e) consummation of (i) a merger, consolidation or
other business combination of the Company with any other "person"
(as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) or affiliate
thereof, other than a merger, consolidation or business
combination which would result in the outstanding common stock of
the Company immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
common stock of the surviving entity or a parent or affiliate
thereof) at least fifty percent (50%) of the outstanding common
stock of the Company (or such surviving entity or parent or
affiliate thereof) that is outstanding immediately after such
merger, consolidation or business combination, or (ii) a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets; or
(f) the occurrence of any other event or circumstance
which is not covered by (a) through (e) above which the Board of
the Company determines affects control of the Company and adopts
a resolution that such event or circumstance constitutes a Change
in Control for the purposes of this Agreement."
6.4 "Code" - The Internal Revenue Code of 1986, as it
may be amended from time to time.
6.5 "Confidential Information" - All technical,
business, and other information relating to the business of the
Company or its subsidiaries or affiliates, including, without
limitation, technical or nontechnical data, formulae,
compilations, programs, devices, methods, techniques, processes,
financial data, financial plans, product plans, and lists of
actual or potential customers or suppliers, which (i) derives
economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by,
other Persons, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or
confidentiality. Such information and compilations of
information shall be contractually subject to protection under
this Agreement whether or not such information constitutes a
trade secret and is separately protectable at law or in equity as
a trade secret. Confidential Information does not include
confidential business information which does not constitute a
trade secret under applicable law two years after any expiration
or termination of this Agreement.
6.6 "Disability" or "Disabled". Executive's inability
as a result of physical or mental incapacity to substantially
perform his duties for the Company on a full-time basis for a
period of six (6) months.
6.7 "Good Reason" A "Good Reason" for termination by
Executive of Executive's employment shall mean the occurrence
(without the Executive's express written consent) within the
twenty-four (24) month period following the date of (a) a Change
in Control, or (b) the death of Winton M. Blount, Jr., of any one
of the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act
described in paragraph (i), (v), (vi) or (vii) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the assignment to Executive without his consent of
any duties inconsistent with Executive's status as the President
of the Sporting Equipment Group of the Company, or a substantial
adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control or death of Mr. Blount (other than any such
alteration primarily attributable to the fact that the Company
may no longer be a public company);
(ii) a reduction by the Company in Executive's Base
Salary as in effect on the date hereof or as the same may be
increased from time to time;
(iii) the relocation of Executive without his consent
to a location more than fifty (50) miles from the work location
immediately prior to the Change in Control or death of Mr.
Blount, except for required travel on the Company's business to
an extent substantially consistent with Executive's business
travel obligations;
(iv) the failure by the Company, without Executive's
consent, to pay to Executive any portion of Executive's
compensation (including Base Salary and bonus), or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect
any compensation plan in which Executive participates immediately
prior to the Change in Control or death of Mr. Blount, which is
material to Executive's total compensation, including but not
limited to the Company's Target Incentive Plan, stock option
plan, or any substitute plans adopted prior to the Change in
Control or death of Mr. Blount, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to
continue the Executive's participation in such plan (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of Executive's participation relative to other
participants, as existed at the time of the Change in Control or
death of Mr. Blount;
(vi) the failure by the Company to continue to provide
Executive with benefits substantially similar to those enjoyed by
Executive under any of the Company's pension, life insurance
(including the Executive Life Insurance Program), medical, health
and accident or disability plans in which Executive was
participating at the time of the Change in Control or death of
Mr. Blount, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive Executive of any material fringe benefit enjoyed by
Executive at the time of the Change in Control or death of Mr.
Blount, or the failure by the Company to provide Executive with
the number of paid vacation days to which the Executive is
entitled under this Agreement; or
(vii) any purported termination of Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; for
purposes of this Agreement, no such purported termination shall
be effective.
The right to terminate the Executive's employment for
Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued
employment shall not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good
Reason hereunder.
6.8 "Person". Any individual, corporation, bank,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or other entity.
7. Termination Procedures.
7.1 Notice of Termination. During the Term of this
Agreement, any purported termination of Executive's employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party
hereto in accordance with Section 11. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include a copy of the written reasons for such
termination (after reasonable notice to Executive and an
opportunity for Executive, together with Executive's counsel, to
be heard) finding that, in good faith opinion, Executive was
guilty of conduct set forth in clause (a) or (b) of the
definition of Cause herein, and specifying the particulars
thereof in detail.
7.2 Date of Termination. "Date of Termination," with
respect to any purported termination of Executive's employment
during the Term of this Agreement, shall mean (i) if Executive's
employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that Executive shall not have returned to the full-time
performance of Executive's duties during such thirty (30) day
period), and (iii) if Executive's employment is terminated for
any other reason, the date specified in the Notice of Termination
(which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is
given).
8. Contract Non-Assignable. The parties acknowledge
that this Agreement has been entered into due to, among other
things, the special skills of Executive, and agree that this
Agreement may not be assigned or transferred by Executive, in
whole or in part, without the prior written consent of the
Company.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and
agree to perform this Agreement, in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
9.2 This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive shall die while any amount
would still be payable to Executive hereunder (other than amounts
which, by their terms, terminate upon the death of Executive) if
Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal
representatives or administrators of Executive's estate.
10. Other Agents. Nothing in this Agreement is to be
interpreted as limiting the Company from employing other
personnel on such terms and conditions as may be satisfactory to
the Company.
11. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given if delivered
or seven days after mailing if mailed, first class, certified
mail, postage prepaid:
To the Company: Blount International, Inc.
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
Attention: D. Joseph McInnes
To the Executive: Leonard C. Hale
c/o Blount International, Inc.
4520 Executive Park Drive
Montgomery, Alabama 36116-1602
Any party may change the address to which notices, requests,
demands and other communications shall be delivered or mailed by
giving notice thereof to the other party in the same manner
provided herein.
12. Provisions Severable. If any provision or
covenant, or any part thereof, of this Agreement should be held
by any court to be invalid, illegal or unenforceable, either in
whole or in part, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of the
remaining provisions or covenants, or any part thereof, of this
Agreement, all of which shall remain in full force and effect.
13. Waiver. Failure of either party to insist, in one
or more instances, on performance by the other in strict
accordance with the terms and conditions of this Agreement shall
not be deemed a waiver or relinquishment of any right granted in
this Agreement or the future performance of any such term or
condition or of any other term or condition of this Agreement,
unless such waiver is contained in a writing signed by the party
making the waiver.
14. Amendments and Modifications. This Agreement may
be amended or modified only by a writing signed by both parties
hereto.
15. Governing Law. The validity and effect of this
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Alabama.
16. Arbitration of Disputes; Expenses. All claims by
Executive for compensation and benefits under this Agreement
shall be in writing. Any denial of a claim for benefits under
this Agreement shall be delivered to Executive in writing and
shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Company
shall afford a reasonable opportunity to Executive for a review
of a decision denying a claim and shall further allow Executive
to appeal a decision within sixty (60) days after notification
that Executive's claim has been denied. To the extent permitted
by applicable law, any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Montgomery, Alabama, in accordance
with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction. In the event the Executive incurs
legal fees and other expenses in seeking to obtain or to enforce
any rights or benefits provided by this Agreement and is
successful, in whole or in part, in obtaining or enforcing any
such rights or benefits through settlement, arbitration or
otherwise, the Company shall promptly pay Executive's reasonable
legal fees and expenses incurred in enforcing this Agreement and
the fees of the arbitrator. Except to the extent provided in the
preceding sentence, each party shall pay its own legal fees and
other expenses associated with any dispute.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
EXECUTIVE:
_____________________________
LEONARD C. HALE
President
Sporting Equipment Group
COMPANY:
BLOUNT INTERNATIONAL, INC. and
BLOUNT, INC.
By: ___________________________
JOHN M. PANETTIERE
President
& Chief Executive Officer
Witness:_____________________
_____________________________
Notary Public
Exhibit 10(aa)
EMPLOYMENT AGREEMENT
by
and
between
SIMMONS OUTDOOR CORPORATION
and
LARRY W. BRIDGMAN
dated
March 1, 1996
This EMPLOYMENT AGREEMENT (the "Agreement") made as of
March 1, 1996, by and between SIMMONS OUTDOOR CORPORATION, a
Delaware corporation (the "Company"), located at 2120 Killearney
Way, Tallahassee, Florida 32308, and LARRY W. BRIDGMAN
("Employee").
ARTICLE I
TERMINATION AND WAIVER
The parties hereto hereby acknowledge and agree that,
upon the execution and delivery of this Agreement, any and all
previous agreements between the Company and Employee relating to
Employee's employment with the Company (the "Prior Agreements"),
shall be and hereby are terminated and superseded, and this
Agreement supersedes and replaces all prior Agreements in all
respects. Each of the parties hereto releases the other party from
any and all liabilities or obligations arising under or relating to
the Prior Agreements, and each of the parties hereto waives any
breach or default by the other party under the Prior Agreements
occurring prior to the date hereof.
ARTICLE II
EMPLOYMENT
Section 2.1 Employment. The Company shall employ
Employee, and Employee shall serve at the Company's direction,
initially as President of the Company, subject to the right of the
Company to change the position and duties of Employee, during the
Employment Term (as defined in Section 2.2). The Employee shall
perform such services primarily at the Company's principal place of
business.
Section 2.2 Term. The initial term of Employee's
employment under Section 2.1 of this Agreement (the "Employment
Term") shall commence on March 1, 1996 and shall be a period of one
(1) year, unless sooner terminated pursuant to the provisions of
Article V, and will automatically be extended one day for each day
worked until the Employee's 64th birthday.
Section 2.3 Employee Responsibilities. Employee agrees
to perform the responsibilities of his position to the best of his
ability. In the discharge of his duties on behalf of the Company,
Employee shall be subject to the direction of the Chief Executive
Officer of Blount International, Inc. or his designee. Any change
in Employee's position, duties or place of employment shall not
affect the provisions of this Agreement unless the Employee and
Company mutually agree in writing to modify the Agreement.
ARTICLE III
COMPENSATION
Section 3.1 Base Salary. During the Employment Term,
the Company shall pay to Employee, in installments in accordance
with the Company's regular payroll practices, a salary of not less
than $161,250.00 per annum (the "Salary").
Section 3.2 Incentive Compensation. Employee will
participate in the company's Management Incentive Plan with an
annual target bonus of 45% of base salary. Participation in any
long term incentive plan, including stock options, will be provided
on the same basis as other similarly situated employees reporting
to the Chief Executive Officer of Blount International, Inc.
ARTICLE IV
ADDITIONAL BENEFITS
Section 4.1 Vacation. During the Employment Term,
Employee will be entitled to paid vacation and sick leave in
accordance with the Company's regular policies as applicable to
management personnel.
Section 4.2 Benefit Plans. During the Employment Term,
Employee will be entitled to participate, on a basis comparable to
that on which other management personnel of the Company
participate, in any insurance, medical, disability or similar plan
and in any pension plan, savings plan or other benefit plan
provided by the Company, or established hereafter for the benefit
generally of the employees of the Company, including management
employees. In addition, Employee shall be entitled to participate
in the Exec-U-Care Plan.
The Company will provide membership dues reimbursement
for the Golden Eagle Country Club. Employee will be provided an
automobile and the Company will pay all covered insurance,
maintenance, fuel, oil and related operational expenses for such
automobile all in accordance with Company policy. Employee will be
provided an annual physical examination and a financial/tax
consultant for personal financial and tax planning.
ARTICLE V
TERMINATION OF EMPLOYMENT
Section 5.1 Termination Date. The "Termination Date"
for Employee's employment with the Company shall be the earliest
of:
(a) the date upon which the Company has given notice
pursuant to Section 5.2 of this Agreement if Employee's employment
with the Company is terminated by the Company for cause;
(b) the last day of the month in which Employee has
died;
(c) the date selected by Employee pursuant to Section
5.3 of this Agreement; or
(d) the date upon which the Company has given notice
pursuant to Section 5.5 of this Agreement if Employee's employment
with the Company is terminated by the Company for disability;
(e) the date upon which the Company has given notice to
Employee if Employee's employment is terminated for any reason not
specified in subsection (a) through (d) of this section.
Section 5.2 Termination For Cause. For the purposes of
this Agreement, "cause" shall be defined as any of the following
acts by Employee: (a) embezzlement or misappropriation of Company
funds; (b) fraud against, or disloyalty to, the Company; (c)
intentional or reckless misconduct resulting in material injury or
damage to the Company; (d) competition with the Company; (e)
willful disclosure of trade secrets; (f) a breach or threatened
breach of this Agreement for a period of thirty (30) days after
written notice by the Company to the Employee of such breach and
the failure of the Employee to cure such breach within such period;
or (g) willful refusal to carry out the policies and directives of
the Chief Executive Officer of Blount International, Inc. or his
designee if said refusal persists for one (1) month after the Chief
Executive Officer gives written notice to Employee requesting him
to end such refusal. Upon termination for cause, the Company shall
pay to Employee only that portion of Employee's Salary which has
accrued to Employee to the date of termination but which has not
been paid.
Section 5.3 Termination By Employee. Employee shall
have the right to terminate his employment with the Company at any
time upon providing written notice to the Company sixty (60) days
prior to the Termination Date selected by Employee, who shall be
entitled to all benefits available to employees who are not
terminated for cause; provided, however, that Employee shall not be
entitled to such benefits, except for those provided by law, if any
fact or circumstance exists which would allow the Company to
terminate Employee for cause on the Notice Date (as defined in
Section 8.1 of this Agreement).
Section 5.4 Termination by Employer. The Employer shall
have the right to terminate Employee's employment under this
Agreement at any time during the Term (i) by giving a written
Notice of Termination for cause, (ii) if Employee becomes Disabled,
(iii) upon Employee's death, or (iv) for any reason not set out in
clauses (i) through (iii). If the Company terminates Employee's
employment under this Agreement pursuant to any of clauses (i)
through (iii) of this Section, the Company's obligations under this
Agreement shall cease as of the date of termination; provided,
however, that if Employee's employment terminates as a result of
death or Disability, the benefits payable under this Agreement and
the other benefit plans of the Company upon Employee's death or
Disability shall be provided by the Company. If the Company
terminates Employee during the Term of this Agreement pursuant to
clause (iv) of this Section, Employee shall be entitled to receive
severance payments, including benefits plus earned but unpaid
incentive compensation, for the twelve consecutive months following
termination. Each of the twelve payments will be equal to the
monthly base salary Employee earned during the month immediately
preceding termination.
Section 5.5 Disability. The Company may terminate
Employee's employment by giving notice of termination to Employee
during a period of disability, but such termination shall not
affect the right, if any, of Employee to payments under any long or
short term disability plan in which Employee is a participant;
provided, however, that the Company may offset any salary amounts
payable to Employee by the amount of any long or short term
benefits provided pursuant to a Company-sponsored plan or from
Company that Employee receives before the Termination Date.
Notwithstanding the foregoing, if the Company seeks to terminate
Employee because he is disabled, it shall first secure, and
Employee shall cooperate in securing, a competent medical opinion
regarding such termination. For purposes of this Agreement,
Employee shall be considered "disabled" if, due to physical or
mental impairment, he is unable to perform his duties hereunder for
a continuous period of sixty (60) days.
ARTICLE VI
COVENANTS OF EMPLOYEE
Section 6.1. Non-Competition. During the term of this
Agreement and for a period of two (2) years following termination
of Employee's employment with the Company, Employee shall not,
anywhere in the United States of America, Canada or Mexico, engage
in any business that is competitive to the Company (the
"Business"), for his own account, or enter the employ of, or render
any services to, any individual, corporation, partnership, firm,
joint venture, association, joint stock company, trust,
unincorporated organization, governmental or regulatory body or
other entity (a "Person"), engaged in the Business (other than the
Company), or become affiliated with any Person engaged in the
Business (other than the Company) in any capacity, including,
without limitation, as an individual, partner, shareholder,
officer, director, principal, agent, trustee, lender or a
consultant; provided, however, that Employee may own, directly or
indirectly, solely as an investment, securities of any Person
(other than the Company) engaged in the Business traded on any
national securities exchange or over-the- counter exchange if
Employee is not a controlling person of or a member of a group
which controls, such Person, and Employee does not, directly or
indirectly, own five percent (5%) or more of any class of
securities of such Person.
Section 6.2 Non-Solicitation. During the term of this
Agreement and for a period of three (3) years following termination
of Employee's employment with the Company, Employee shall not hire
or solicit any employees of the Company or any Person that
controls, is controlled by, or is under common control with the
Company (an "Affiliate"), to work for any other Person then in
competition with the Company or Blount International, Inc.'s
manufacturing companies, or, directly or indirectly, solicit or
attempt in any manner to persuade or influence any present, future
or prospective customer or client of the Company or Blount
International, Inc. or to divert his or its purchases of products
from the Company or Blount International, Inc. or to any Person
then in competition with the Company or Blount International, Inc.
Section 6.3 Confidentiality. During the Employment
Term, and for all times thereafter, Employee shall not, directly or
indirectly, make known, divulge, furnish or reveal to any Person
any documents or information concerning trade secrets and other
proprietary and confidential business information, including, but
not limited to, formulae, patterns, devices, secret inventions,
processes, unique business methods, sales, pricing techniques,
operating and production costs, distribution networks and contacts,
operating techniques and practices, corporate financial
information, customer requirements, customer and supplier lists,
customer locations and purchase histories, and financial data and
other confidential matters relating to the Company, any Affiliate
of the Company, or any customer of the Company (the "Confidential
Information"), or any knowledge of Confidential Information, except
to the extent that the disclosure of such information can be shown
to have been: (i) necessary to carry out Employee's employment
responsibilities under this Agreement; (ii) previously known by the
party to which it was furnished; (iii) in the public domain or
otherwise available or known to the general public through no fault
of Employee; (iv) lawfully acquired by the party to which it was
furnished from other sources not bound by a confidentiality
obligation with respect to such information; or (v) furnished to
other persons by the Company, its agents or employees on a non-
confidential basis; or (vi) independently developed by Employee's
employees or agents who did not have access to such information; or
(vii) compelled by law or judicial or administrative process to be
disclosed.
Section 6.4 Acknowledgment and Agreement. Employee
acknowledges and agrees that the geographical and temporal
restrictions contained in this Agreement are reasonable and valid
in all respects. Employee further acknowledges and agrees that the
Confidential Information is secret and not known in the industry,
has been developed by the Company through substantial expenditures
of time, effort, and money, gives the Company an opportunity to
obtain an advantage over competitors who do not know or use the
Confidential Information, is a valuable, special and unique asset
as to make it reasonable and necessary for the Company to protect
and preserve its confidentiality and secrecy, and the disclosure of
which would cause substantial injury and loss of profits and
goodwill to the Company and the Company will be deprived of the
benefit of its bargain unless the Confidential Information is
protected. Employee warrants and represents that he has reviewed
the covenants herein contained and will use his best efforts to
honor them in every respect.
ARTICLE VII
RIGHTS AND REMEDIES UPON BREACH
If Employee breaches or threatens to commit a breach of
any of the provisions of this Agreement, the Company shall have the
following rights and remedies, each of which rights and remedies
shall be independent of the others and severally enforceable, and
each of which is an addition to, and not in lieu of, any other
rights and remedies available to the Company at law or in equity
(including the right to recover damages):
(a) the right and remedy to have this Agreement
specifically enforced by any court of competent jurisdiction, it
being agreed that any breach or threatened breach of this Agreement
would cause irreparable harm to the Company and that money damages
would not provide an adequate remedy to the Company;
(b) the right and remedy to require Employee to
account for and pay over to the Company all compensation, profits
or other benefits derived or received by Employee or lost to the
Company as a result of any actions constituting a breach of this
Agreement;
(c) the right to terminate Employee's employment
for cause under Section 5.2 of this Agreement; and
(d) the right to recover from Employee all costs of
enforcing this Agreement, including, but not limited to, reasonable
attorneys' and expert witness' fees and expenses, court or
arbitration costs, and reporting fees.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices. All notices, requests, demands,
consents, and other communications, required or permitted
hereunder, shall be in writing and shall be delivered personally or
mailed by certified or registered mail (return receipt requested),
postage prepaid, provided that any notice delivered by certified or
registered mail shall also be delivered by facsimile at the time of
such delivery. When such facsimile is sent, notices shall be
deemed given upon dispatch of such facsimile. If the notice is
delivered personally, it shall be deemed given when delivered. The
date upon which notice is deemed given is herein referred to as the
"Notice Date." All communications hereunder shall be delivered to
the respective parties at the following addresses (or to such other
person or at such other address for a party as shall be specified
by like notice, provided that notices of a change of address shall
be effective only upon receipt thereof):
(a) If to the Company, Employee shall send notice
in the manner specified above to Simmons Outdoor Corporation, c/o
Blount International, Inc., 4520 Executive Park Drive, Montgomery,
Alabama 36116 (Facsimile 334-271-8177) Attention: Chief Executive
Officer.
(b) If to Employee, the Company shall send notice
in the manner outlined above to the home address set forth for
Employee on the personnel records of the Company. (Facsimile 918-234-3455)
Section 8.2 Assignment. This Agreement shall be binding
upon and shall inure to the benefit of, and be enforceable by, all
successors and assigns; provided, however, that this Agreement may
not be assigned by either party, without the prior written consent
of the other. In the event that the Company shall (with the
consent of the Employee) assign or otherwise transfer or convey
this Agreement, Employee shall continue to perform, on behalf of
such successor transferee or assignee, the services required of
Employee hereunder.
Section 8.3 Dispute Resolution Procedure. Subject to
the Company's rights under Article VII, if a dispute arises under
this Agreement which cannot be resolved by the personnel directly
involved, either party may invoke the dispute resolution procedure
set forth in this Section 8.3 by giving written notice to the other
party. The Company shall designate an executive officer or agent
with appropriate authority to be its representative in negotiations
relating to the dispute in any notice which it delivers to Employee
and which invokes this dispute resolution procedure. Upon the
receipt by the Company of notice from the Employee which invokes
this dispute resolution procedure, the Company shall, within five
(5) business days, designate an executive officer with appropriate
authority to be its representative. Employee and the executive
officer designated by the Company shall, following whatever
investigation each deems appropriate, promptly enter into
discussions concerning the dispute. If the dispute is not resolved
as a result of such discussions, then the parties agree that an
attempt will be made to resolve the matter by a formal nonbinding
mediation with an independent neutral mediator agreed to by the
parties. If the parties cannot agree on the mediator within a
period of thirty (30) days, then the Center for Public Resources in
New York, New York shall be asked to select a mediator and the
parties agree to be bound by this choice and to enter into a
mediation procedure with that mediator. Upon commencement of the
mediation process, the parties shall promptly through counsel
communicate with respect to procedure and schedule for the conduct
of the proceeding and for the exchange of documents and other
information related to the dispute. The place of mediation shall
be Atlanta, Georgia.
Section 8.4 Arbitration. Inasmuch as Employee is a
senior Executive of the Company whose responsibilities entail
matters in interstate commerce, any and all disputes between the
parties arising under this Agreement which are not resolved in
accordance with the provisions of Section 8.3 above (subject to the
Company's rights under Article VII), shall be conclusively
determined by final and binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association then obtaining by one or more arbitrators selected in
accordance with such rules. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction
thereof. The place of arbitration shall be Atlanta, Georgia.
Section 8.5 Applicable Law. This Agreement shall be
construed under and governed by the laws of the State of Florida.
Section 8.6 Severability. In case any one or more of
the provisions of this Agreement shall be found to be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
Section 8.7 Entire Agreement. This Agreement represents
the entire agreement between the parties and may be amended,
modified, or superseded only by a written agreement signed by both
of the parties.
Section 8.8 Counterparts. This Agreement may be
executed simultaneously and in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Section 8.9 Board Authority. All matters hereunder are
committed to the discretion of the Board of Directors, which shall
have final authority on the interpretation and application of this
Agreement. In exercising its discretion, however, the Board of
Directors will give every consideration to the interests of
Employee as well as to those of the Company.
Section 8.10. Inventions. Employee shall disclose fully
to the Company any and all inventions which he shall conceive or
make during his period of employment by the Company and all
inventions which he shall conceive or make during the period of six
months after the term of his employment with the Company that are
in whole or in part the result of his work with the Company. Such
disclosure is to be made promptly after the conception of each
invention, and the inventions are to become and remain the property
of the Company, whether or not patent applications are filed
thereon. Upon request and at the expense of the Company, Employee
is to make application through the patent lawyers of the Company
for letters patent of the United States and any and all other
countries at the discretion of the Company on such inventions and
to assign all such applications to the Company or its order
forthwith, all without additional payment during his period
employment by the Company and for reasonable compensation for time
actually spent by the employee at such work at the request of the
Company after the termination of the employment. Employee is to
give the Company and its lawyers all reasonable assistance in
preparing and prosecuting such applications and, on request of the
Company, to execute all papers and do all things that may be
reasonably necessary to protect the right of the Company and vest
in it or its assigns the inventions, applications, and letters
patent herein contemplated.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
SIMMONS OUTDOOR CORPORATION
By__________________________________
Its Chairman of the Board
__________________________________
LARRY W. BRIDGMAN
<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
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 59
<SECURITIES> 0
<RECEIVABLES> 119
<ALLOWANCES> 3
<INVENTORY> 82
<CURRENT-ASSETS> 281
<PP&E> 302
<DEPRECIATION> 170
<TOTAL-ASSETS> 534
<CURRENT-LIABILITIES> 115
<BONDS> 85
0
0
<COMMON> 0
<OTHER-SE> 291
<TOTAL-LIABILITY-AND-EQUITY> 534
<SALES> 527
<TOTAL-REVENUES> 527
<CGS> 347
<TOTAL-COSTS> 347
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 70
<INCOME-TAX> 26
<INCOME-CONTINUING> 44
<DISCONTINUED> 1
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45
<EPS-PRIMARY> 2.32
<EPS-DILUTED> 2.31
</TABLE>
