UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 001-11549
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BLOUNT INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 63-0780521
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4520 Executive Park Drive, Montgomery, Alabama 36116-1602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (334) 244-4000
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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
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Securities registered pursuant to Section 12(g) of the Act: None
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in 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.
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State the aggregate market value of the voting common stock held by
nonaffiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the common stock was sold, or the average bid
and asked prices of such common stock, as of a specified date within 60 days
prior to the date of filing.
Aggregate market value of voting common stock held by nonaffiliates as of
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February 1, 1999: $593,569,000
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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 February 1, 1999: 25,580,571 shares
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Class B Common Stock $.01 par value, as of February 1, 1999: 11,479,471 shares
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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 19, 1999, are incorporated by reference in Part III.
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PART I
ITEM 1. BUSINESS
The Company is an international manufacturing and marketing company with sales
in over 130 countries and operations in three business segments: Outdoor
Products, Sporting Equipment, and Industrial and Power Equipment. The Company
was founded in 1946 as a general construction company. In 1994, the
construction business was discontinued. See "Business - Acquisitions and
Dispositions" on pages 6 and 7.
The following text contains various trademarks of Blount, Inc., a wholly-owned
subsidiary of the Company, and its subsidiaries.
OUTDOOR PRODUCTS
The Company's Outdoor Products segment is comprised of the Oregon Cutting
Systems Division ("Oregon"), Dixon Industries, Inc. ("Dixon") and Frederick
Manufacturing Corporation ("Frederick"). Oregon produces a wide variety of
cutting chain, chain saw guide bars, cutting 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 cutting chain. Oregon's cutting 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 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"). In 1998, approximately 16%
of the sales by the Outdoor Products segment were to one customer. Due to the
high level of technical expertise and capital investment required to manufacture
cutting chain and guide bars, the Company believes that it is able to produce
durable, high-quality cutting 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.
The Company has Oregon marketing personnel throughout the United States and in a
number of foreign countries. Oregon manufactures cutting chain and related
products in Milwaukie, Oregon; Guelph, Ontario, Canada; and Curitiba, Parana,
Brazil.
Oregon's products compete with other cutting 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, located in Coffeyville, Kansas, was acquired in 1990 and has manufactured
ZTR (zero turning radius) lawn mowers and related attachments since 1974. 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
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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 product additions are in the hydrostatic portion of the
product line. In late 1997, Dixon introduced the "Estate Line" featuring mowers
which are designed for large, homeowner lawns and are lower priced than
commercial hydrostatic units. Models are available in 42-inch, 50-inch and 60-
inch sizes. Expanding on the Estate Line, Dixon introduced a low-cost hydro
line, IZT (integrated zero turn), in 1998. The IZT is positioned between
Dixon's normal hydros and transaxle models geared for the residential user. It
features models with cut widths of 42 inches, 50 inches and 60 inches. Dixon
sells its products through distribution channels comprised of full-service
dealers, North American distributors and export distributors.
Frederick, located in Kansas City, Missouri, was acquired in January 1997. See
"Business - Acquisitions and Dispositions" on pages 6 and 7. Frederick is a
well-known and highly respected manufacturer that supplies quality Silver Streak
brand accessories for lawn mowers and other outdoor products. Frederick fits
well into the Company's operations and is provided international sales
opportunities through Oregon's worldwide distribution outlets.
SPORTING EQUIPMENT
On November 4, 1997, the Company acquired the Federal Cartridge Company
("Federal"). See "Business - Acquisitions and Dispositions" on pages 6 and 7.
Federal manufactures and markets shotshell, centerfire and rimfire cartridges,
ammunition components, and clay targets. These products are distributed
throughout the United States through a network of distributors and directly to
large retail chains, the U.S. government and federal, state, local and
international law enforcement agencies. The Federal acquisition both
complemented and significantly expanded the Sporting Equipment segment's product
offerings. Shotgun shells, a product not manufactured or sold by the Company
prior to this acquisition, represented approximately 22% of Sporting Equipment's
sales for 1998. Federal is also a significant producer and marketer of
centerfire rifle ammunition, products as to which the Company's market share had
been much smaller. Federal markets its products under the brand names of
"Premium," "Gold Medal," "American Eagle," "Classic," "BallistiClean" and
"Tactical." The acquisition of Federal placed the Company among the leading
United States producers of ammunition products.
The Company's other Sporting Equipment segment operations manufacture small arms
ammunition, reloading equipment, primers, gun care products and accessories, and
distribute imported sports optical products. 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; Redfield scope mounting systems;
Outers gun care and trap-shooting products; Ram-Line gun accessories; Weaver
scope mounting systems; and Simmons and Weaver optics. The Company believes
that it is a market leader in the domestic gun care and ammunition reloading
markets with high levels of brand name recognition in each of these areas. The
Company believes that the Sporting Equipment segment is also a world leader in
the production of 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 Speer Gold Dot high performance pistol
ammunition which is used by law enforcement agencies around the world, as well
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as Clean-Fire and non-toxic ammunition used extensively for indoor training.
The Company's aluminum case technology continues to provide low cost Blazer
ammunition to consumers and for law enforcement training applications. New for
1998 is a series of fully automatic electric traps specifically designed for
commercial trap, skeet and sporting clays applications.
Principal raw materials include brass, lead, aluminum and powder, which are
purchased from several suppliers. The Company manufactures ammunition and
powerloads in Lewiston, Idaho; shotshell, ammunition and ammunition components
in Anoka, Minnesota; reloading equipment in Oroville, California; mounts,
shooting accessories and gun care equipment in Onalaska, Wisconsin; and clay
targets in Richmond, Indiana. 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.
Optical products are distributed from a warehouse in Thomasville, Georgia.
In the market for small arms ammunition and primers, the Company competes with
several other 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.
In 1998, approximately 20% of the Sporting Equipment segment's sales were to one
customer.
INDUSTRIAL AND POWER EQUIPMENT
The Company's Industrial and Power Equipment segment manufactures equipment for
the timber harvesting industry and for industrial use, industrial tractors for
land and utility right-of-way clearing, and components for the gear industry.
Major users of these products include logging contractors, harvesters, land
reclamation companies, utility contractors, building materials distributors,
scrap yard operators and original equipment manufacturers of hydraulic
equipment.
The Company believes that it is a world leader in the manufacture of hydraulic
timber harvesting equipment, which includes a line of truck-mounted, trailer-
mounted, stationary-mounted and self-propelled loaders and crawler feller
bunchers (tractors with hydraulic attachments for felling timber) under the
Prentice brand name; a line of rubber-tired 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.
The Company is a competitive force in the gear industry, selling power
transmissions and gear components under the Gear Products brand name.
The Company sells its timber harvesting products through a network of
approximately 250 dealers in over 400 locations in the United States and
currently has an additional 20 offshore dealers, primarily in the timber
harvesting regions of South America and Southeast Asia. Gear Products, Inc.
sells its products to over 350 original equipment manufacturers servicing the
utility, construction, forestry and marine industries. Over 85% of this
segment's sales in 1998 were in the United States, primarily in the southeastern
and south central states. In 1998, approximately 27% of the sales by the
Industrial and Power Equipment segment were to two customers.
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
foreign manufacturers.
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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, material handling,
scrap, land clearing and gear 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.
CAPACITY UTILIZATION
Based on an 80-hour work week, the Outdoor Products, Sporting Equipment, and
Industrial and Power Equipment segments utilized approximately 82%, 61% and 65%,
respectively, of their production capacity in the year ended December 31, 1998.
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 (in millions):
December 31,
------------------------ February 29,
1998 1997 1996 1996
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Outdoor Products $ 30.2 $ 42.0 $ 35.5 $ 33.7
Sporting Equipment 15.1 19.7 9.5 15.5
Industrial and Power Equipment 16.0 56.2 29.2 63.6
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$ 61.3 $117.9 $ 74.2 $112.8
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The total backlog as of December 31, 1998, is expected to be completed and
shipped within twelve months.
ACQUISITIONS AND DISPOSITIONS
In September 1998, the Company purchased certain operating assets of the
Redfield line for approximately $3 million. The operating assets consisted of
inventory (primarily rifle scopes, mounting systems and related items),
machinery and equipment, trademarks, sales literature and patents.
On November 4, 1997, the Company acquired Federal Cartridge Company (formerly
Federal-Hoffman, Inc.), a manufacturer of shotshell, centerfire and rimfire
cartridges, ammunition components and clay targets. The purchase price was
approximately $129 million, including a post-closing adjustment and acquisition
expenses.
In January 1997, the Company acquired the outstanding capital stock of the
Frederick Manufacturing Corporation and Orbex, Inc. for approximately $19
million and paid existing debt of the acquired companies in the amount of $5.8
million. The principal products of the acquired companies are accessories for
lawn mowers and sporting goods. Orbex, Inc. was subsequently merged into
Frederick Manufacturing Corporation.
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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.
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 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. All construction projects are complete.
See Note 4 of Notes to Consolidated Financial Statements on page 28.
EMPLOYEES
At December 31, 1998, the Company employed approximately 5,300 individuals.
None of the Company's employees is unionized. The Company believes its
relations with its employees are satisfactory.
ENVIRONMENTAL MATTERS
For information regarding certain environmental matters, see Note 7 of Notes to
Consolidated Financial Statements on pages 33 and 34.
From time to time the Company may be identified as a potentially responsible
party with respect to a Superfund site. The United States Environmental
Protection Agency (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, where available. As a result of the Superfund Act, the Company may be
required to expend amounts on such 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 $1.4 million, $1.0 million and $0.7
million during 1999, 2000 and 2001, 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 9 of Notes to Consolidated Financial
Statements on pages 35 through 37.
SEASONALITY
Only the Company's Sporting Equipment segment experiences significant
seasonality with higher sales and operating income in the second half of the
year than the first half of the year.
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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, Japan and Russia. Lawn mowers and
related accessories are manufactured at plants in Coffeyville, Kansas and Kansas
City, Missouri. Sporting ammunition, reloading equipment products, gun care
equipment, industrial powerloads and shooting sports accessories are
manufactured at plants in Anoka, Minnesota; Lewiston, Idaho; Oroville,
California; Onalaska, Wisconsin; and Richmond, Indiana. The Company maintains a
warehouse facility in Thomasville, Georgia for distribution of sports optics and
hunting accessories. Log loaders, 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.
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
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Outdoor Products 1,015,000 209,000
Sporting Equipment 1,583,000 116,000
Industrial and Power Equipment 798,000
Corporate Office 192,000 13,000
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Total 3,588,000 338,000
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ITEM 3. LEGAL PROCEEDINGS
For information regarding legal proceedings see Note 7 of Notes to Consolidated
Financial Statements on pages 33 and 34.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange. The
following table presents for the Company's last two years, the quarterly high
and low prices and cash dividends declared for the Company's Common Stock. The
Company had approximately 10,100 shareholders as of February 1, 1999.
Class A Common Stock Class B Common Stock
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High Low Dividend High Low Dividend
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Year Ended
December 31, 1998
First quarter $29.75 $23.00 $.071 $29.88 $23.50 $.067
Second quarter 34.38 26.50 .071 32.25 26.44 .067
Third quarter 29.50 19.94 .071 28.50 22.06 .067
Fourth quarter 24.94 18.94 .071 24.63 19.50 .067
Year Ended
December 31, 1997
First quarter $21.63 $18.81 $.063 $21.25 $18.75 $.059
Second quarter 22.75 19.00 .063 22.25 19.63 .059
Third quarter 25.25 20.75 .063 23.69 21.13 .059
Fourth quarter 26.88 23.00 .071 27.00 25.28 .067
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For information regarding restrictions on the net assets of foreign
subsidiaries, see Note 11 of Notes to Consolidated Financial Statements on pages
39 and 40.
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<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
Twelve Months Ended
Twelve Months Ended Ten Months The Last Day
December 31, Ended of February,
Dollar amounts in millions, -------------------------------------- December 31, -------------------
except per share data 1998 1997 1996(1) 1995(1) 1996(1) 1996 1995
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(Unaudited)
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<S> <C> <C> <C> <C> <C> <C> <C>
Operating Results:
Sales $ 831.9 $ 716.9 $ 649.3 $ 621.4 $ 526.7 $ 644.3 $ 588.4
Operating income from segments 132.4 117.9 113.1 104.9 91.2 112.8 101.9
Income from continuing operations
before extraordinary loss 63.3 59.1 53.8 49.4 44.0 53.6 40.7
Net income 61.3 59.1 55.2 49.4 45.4 53.6 40.7
Earnings per share:
Basic:
Income from continuing operations
before extraordinary loss 1.69 1.57 1.40 1.30 1.14 1.41 1.08
Net income 1.64 1.57 1.44 1.30 1.18 1.41 1.08
Diluted:
Income from continuing operations
before extraordinary loss 1.65 1.53 1.38 1.27 1.13 1.38 1.05
Net income 1.60 1.53 1.41 1.27 1.16 1.38 1.05
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End of Period Financial Position:
Total assets $ 668.8 $ 637.8 $ 533.8 $ 522.4 $ 533.8 $ 546.5 $ 520.8
Working capital 232.2 171.1 166.2 122.2 166.2 136.2 123.3
Property, plant and equipment-gross 392.8 376.8 301.9 293.8 301.9 295.5 279.9
Property, plant and equipment-net 182.9 188.5 131.7 136.7 131.7 135.5 134.4
Long-term debt 161.6 138.8 84.6 95.9 84.6 95.9 98.3
Total debt 162.3 140.3 85.8 108.7 85.8 107.6 106.0
Net debt to total capitalization (2) 22.0% 28.8% 5.9% 24.8% 5.9% 23.6% 16.8%
Stockholders' equity 354.6 316.1 290.8 244.6 290.8 255.0 207.7
Current ratio 3.4 to 1 2.3 to 1 2.4 to 1 1.9 to 1 2.4 to 1 1.9 to 1 1.7 to 1
- ---------------------------------------- -------- -------- -------- -------- -------- -------- --------
Other Data:
Property, plant and equipment additions(3) $ 21.7 $ 78.5 $ 21.3 $ 19.8 $ 18.7 $ 19.3 $ 14.7
Depreciation and amortization 30.9 25.0 23.3 22.3 19.2 22.2 22.9
Interest expense, net of interest income 11.8 7.0 7.5 6.8 5.6 7.4 8.5
Stock price: Class A high 34.38 26.88 19.44 17.58 19.44 17.58 16.38
Class A low 18.94 18.81 12.69 12.25 14.13 12.25 9.38
Stock price: Class B high 32.25 27.00 18.94 17.58 18.94 17.58 16.29
Class B low 19.50 18.75 14.75 12.58 14.75 12.58 9.67
Per common share dividends: Class A .285 .261 .228 .198 .228 .198 .173
Class B .268 .244 .212 .181 .212 .181 .156
Shares used in earnings per share
computations (in millions):
Basic 37.4 37.6 38.4 37.9 38.4 38.0 37.8
Diluted 38.4 38.5 39.1 38.9 39.2 38.9 38.8
Employees (approximate) 5,300 5,700 4,400 4,400 4,400 4,400 4,600
- ---------------------------------------- -------- -------- -------- -------- -------- -------- --------
</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) Net debt is defined as 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 $59.8 million in the twelve months ended December 31, 1997, and
$0.6 million and $5.0 million in the twelve months ended the last day of
February, 1996 and 1995.
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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. All references to earnings per share
included in this discussion are to diluted earnings per share.
OPERATING RESULTS
TWELVE MONTHS ENDED DECEMBER 31, 1998 (AUDITED) COMPARED TO TWELVE MONTHS ENDED
DECEMBER 31, 1997 (AUDITED)
Despite economic problems in some markets, the Company achieved record results
in 1998. Sales in 1998 were $831.9 million compared to $716.9 million in 1997.
Income before extraordinary loss was $63.3 million ($1.65 per share) in 1998
compared to $59.1 million ($1.53 per share) in 1997. Net income of $61.3
million ($1.60 per share) for 1998 reflects a net extraordinary loss of $2.0
million ($.05 per share) on the redemption of long-term debt. The higher sales
and improved operating results in 1998 are primarily due to the full year
contribution to the Sporting Equipment segment by Federal Cartridge Company
("Federal") which was acquired during the fourth quarter of 1997.
Selling, general and administrative expenses were 17% of sales in 1998 compared
to 19% in 1997. Total selling, general and administrative expenses increased by
$10.0 million in 1998 primarily due to Federal being included in operating
results for the entire year. Higher interest expense in 1998 reflects higher
debt levels during the current year, principally due to the Federal acquisition.
Total backlog was $61.3 million at December 31, 1998, compared to $117.9 million
at December 31, 1997. The current year backlog is lower at each of the
Company's operating segments with the largest decrease at the Industrial and
Power Equipment segment, principally reflecting reduced demand for timber
harvesting and industrial equipment. The Company expects that 1999 will be a
challenging year as, for the near term, poor economic conditions in Southeast
Asia and the Far East will likely continue to affect the Outdoor Products
segment and low pulp prices and high mill inventories will impact the demand for
the Industrial and Power Equipment segment's timber harvesting equipment. The
Industrial and Power Equipment segment has implemented production and cost
control measures to help mitigate the effect of the reduction in demand. In
1999, the Sporting Equipment segment should continue to benefit from the
acquisition of Federal and related consolidation and cost reduction activities.
Sales and operating income for the Outdoor Products segment for 1998 were $315.4
million and $68.4 million, respectively, compared to $319.3 million and $67.1
million during 1997. The operating results for this segment reflect a decrease
in sales and operating income of $10.0 million and $1.3 million, respectively,
at the Company's Oregon Cutting Systems Division ("Oregon") and higher sales and
operating income at Dixon Industries, Inc. ("Dixon"). Oregon's 1998 results
reflect an approximate $11.5 million sales decrease in Southeast Asia and the
Far East, primarily due to the economic problems in those areas, which has
contributed to an approximate 4% reduction in the sales volume of cutting chain
and chain saw guide bars, Oregon's principal products. Oregon has foreign
manufacturing or distribution operations in Canada, Europe, Brazil, Japan and
Russia. The Company estimates that foreign currency exchange rates in 1998, as
compared to 1997, provided a favorable impact on operating income of
approximately $1.5 million. During 1998, operating income from Brazil was $3.1
million compared to $2.6 million during 1997. Dixon's sales and operating
income improved in 1998 compared to the prior year due to higher volume and more
favorable weather conditions.
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Sales and operating income for the Sporting Equipment segment were $286.7
million and $36.1 million, respectively, in 1998 compared to $158.5 million and
$18.1 million in 1997. The significant improvement in sales and operating
income reflect the sales and income added by Federal which was acquired during
the fourth quarter of 1997. Total sales and operating income at other Sporting
Equipment operations were flat in 1998 as compared to the prior year.
Sales and operating income for the Industrial and Power Equipment segment were
down to $229.8 million and $27.9 million, respectively, in 1998 from $239.1
million and $32.7 million in 1997. The results for 1998 reflect reduced demand
for timber harvesting equipment resulting principally from sharply lower pulp
prices since mid-year and higher mill inventories, higher competitive discounts
and higher warranty costs. The operating results for this segment's Gear
Products, Inc. subsidiary ("Gear") improved slightly in 1998 compared to 1997.
TWELVE MONTHS ENDED DECEMBER 31, 1997 (AUDITED) COMPARED TO TWELVE MONTHS ENDED
DECEMBER 31, 1996 (UNAUDITED)
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. This discussion and analysis includes a
discussion of 1997 compared to the twelve-month period ended December 31, 1996
("1996").
Sales in 1997 were $716.9 million compared to $649.3 million in 1996. Income
from continuing operations improved to $59.1 million ($1.53 per share) in 1997
from $53.8 million ($1.38 per share) during the prior year. Net income for 1996
included income of $1.4 million ($.03 per share) from discontinued operations.
The sales increase reflected higher sales in 1997 by each operating segment,
while the income increase resulted primarily from improved performance by the
Outdoor Products segment.
Selling, general and administrative expenses were 19% of sales in 1997 compared
to 20% in 1996. Total selling, general and administrative expenses increased by
$4.6 million in 1997 principally due to the acquisitions of Federal and
Frederick Manufacturing Company and Orbex, Inc. ("Frederick-Orbex"). See Note 4
of Notes to Consolidated Financial Statements. Other income was higher in 1997
as a result of gains on sales of securities.
Sales and operating income for the Outdoor Products segment for 1997 were $319.3
million and $67.1 million, respectively, compared to $292.7 million and $61.4
million during 1996. The operating results for this segment reflect an increase
in sales and operating income of $25.7 million and $7.2 million, respectively,
at Oregon and flat sales and lower operating income at Dixon. Oregon's results
reflect a 7% increase in the sales volume of cutting chain and a 15% increase in
the sales volume of chain saw guide bars, Oregon's two principal products,
partially offset by lower average selling prices, due to a higher percentage of
lower priced sales to original equipment manufacturers and unfavorable exchange
rates. Additionally, the acquisition of Frederick-Orbex increased sales by 7.5%
in 1997. Approximately 24% and 36% of Oregon's sales and operating costs and
expenses, respectively, were transacted in foreign currencies in 1997. The
Company estimates that unfavorable exchange rates in 1997, as compared to 1996,
reduced operating income by approximately $2.0 million. During 1997, operating
income from Brazil was $2.6 million compared to $0.3 million during 1996,
principally as a result of improved economic conditions. Dixon's operating
results in 1997 compared to the prior year reflect the effects of reduced volume
and higher costs, partially offset by higher average selling prices.
Page 12
<PAGE>
Sales for the Sporting Equipment segment were $158.5 million in 1997 compared to
$147.1 million in 1996. Operating income was $18.1 million during 1997,
compared to $19.8 million during 1996. Sales reflected a higher volume of
ammunition products sales and the contribution by Federal since acquisition in
November 1997, partially offset by a lower volume of sales of sports optics.
Operating income was lower in 1997 as lower sports optics sales offset the
effect of higher ammunition products sales. Additionally, operating income for
the prior year included the positive effect of reduced environmental cost
estimates of $1.9 million resulting from the resolution of an environmental
matter.
Sales and operating income for the Industrial and Power Equipment segment were
$239.1 million and $32.7 million, respectively, in 1997 compared to $209.5
million and $31.9 million in 1996. The higher sales during 1997 are principally
due to a higher volume of forestry equipment sold as a result of improved market
conditions and higher average selling prices. Operating income increased by
$0.8 million during 1997 as higher forestry equipment product and warranty costs
offset much of the effect of the sales increase. The operating results for Gear
continued to improve in 1997 as its sales and operating income increased by 8%
and 15%, respectively, primarily due to higher volume.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company had senior notes ("the senior notes")
outstanding in the principal amount of $150.0 million which are due in 2005 and
no amounts outstanding under its $150 million revolving credit agreement. At
December 31, 1998, the Company's long-term debt to equity ratio was 0.5 to 1
compared to a ratio of 0.4 to 1 at December 31, 1997. See Note 3 of Notes to
Consolidated Financial Statements for a description of the terms and conditions
of the senior notes and the $150 million revolving credit agreement.
Working capital increased to $232.2 million at December 31, 1998, from $171.1
million at December 31, 1997, principally due to working capital provided by
operations. Inventories decreased by $11.9 million, primarily due to production
and inventory control efforts. Accounts payable decreased by $26.2 million
since the prior year end, reflecting reduced purchasing associated with the
production and inventory control efforts and the payment of an approximate $13.6
million post-closing adjustment for the purchase of Federal. The Company's
operating cash flows for the year ended December 31, 1998 were $88.9 million
compared to $80.3 million in 1997. Cash and cash equivalent balances were $45.1
million at December 31, 1998, compared to $4.8 million at December 31, 1997, as
the Company's cash flows from operations exceeded cash expenditures for
investing and financing activities. Acquisition expenditures and the purchase
of treasury stock were lower in 1998.
Management believes that the Company will generate sufficient future taxable
income to realize all deferred income tax assets.
The Company believes that its operating cash flows and $150 million revolving
credit facility will provide both short-term and long-term liquidity.
The Company and its operations are subject to various environmental laws and
regulations. See Note 7 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 13
<PAGE>
MARKET RISK
The Company is exposed to market risk from changes in interest rates, foreign
currency exchange rates and commodity prices. The Company manages its exposure
to these market risks through its regular operating and financing activities,
and, when deemed appropriate, through the use of derivatives. When utilized,
derivatives are used as risk management tools and not for trading purposes.
Interest Rate Risk:
The Company manages its ratio of fixed to variable rate debt with the objective
of achieving a mix that management believes is appropriate. Historically, the
Company has, on occasion, entered into interest rate swap agreements to exchange
fixed and variable interest rates based on agreed upon notional amounts and has
entered into interest rate lock contracts to hedge the interest rate of an
anticipated debt issue. At December 31, 1998, no derivative financial
instruments were outstanding to hedge interest rate risk. A hypothetical
immediate 10% increase in interest rates would decrease the fair value of the
Company's fixed rate long-term debt outstanding at December 31, 1998, by $5.3
million. A hypothetical 10% increase in the interest rates on the Company's
variable rate long-term debt for a duration of one year would increase interest
expense by less than $0.1 million in 1999.
Foreign Currency Exchange Risk:
Approximately 36% of Oregon's sales and 42% of its operating costs and expenses
were transacted in foreign currencies in 1998. As a result, fluctuations in
exchange rates impact the amount of Oregon's reported sales and operating
income. Historically, the Company's principal exposures have been related to
local currency operating costs and expenses in Canada and local currency sales
in Europe (principally France and Germany). During the past three years, the
Company has not used derivatives to manage any significant foreign currency
exchange risk and, at December 31, 1998, no foreign currency exchange
derivatives were outstanding.
Commodity Price Risk:
During 1998, the Company purchased approximately 10.9 million pounds of brass
for use in its Sporting Equipment operations. The price risk of approximately
40% of these purchases was hedged through the use of copper and zinc futures
contracts. In the near future, the Company expects to decrease its use of
futures contracts to manage this price risk. An immediate hypothetical 10%
decrease in the futures prices of copper and zinc contracts outstanding at
December 31, 1998, would decrease their fair value by $0.3 million. In
addition, a large quantity of other metals (principally lead) were purchased by
Sporting Equipment operations in 1998. Derivatives were not used to manage this
price risk.
IMPACT OF YEAR 2000 ISSUE
The Company has been evaluating its internal date-sensitive systems and
equipment for Year 2000 compliance. The assessment phase of the Year 2000
project is substantially complete and included both information technology
equipment and non-information technology equipment. Based on its assessment,
the Company determined that it was necessary to modify or replace a portion of
its information systems and other equipment. As of December 31, 1998, the
Company is approximately 76% complete in the modification or replacement and
testing of the critical software, hardware and equipment requiring remediation.
The Company expects to be completed by June 1999.
The Company believes that the above modifications and replacements should
mitigate the effect of the Year 2000 issue. However, if such modifications and
replacements are not made, or fail to correct date-sensitive problems, the Year
Page 14
<PAGE>
2000 issue could have a material impact on the Company's operations by
disrupting its ability to manufacture and ship products, process financial
transactions or engage in similar normal business activities. The Company does
not believe that the effect of the Year 2000 issue on non-information technology
systems is likely to have a material adverse impact. Finally, the Company has
reviewed its own products and believes that it has no significant Year 2000
issues for those products.
The total estimated cost of the Year 2000 project, including system upgrades, is
approximately $5.5 million and is being funded by operating cash flows. As of
December 31, 1998, costs of $3.7 million had been incurred. Of the total cost
of the project, approximately $2.9 million is attributable to new software and
equipment, which will be capitalized. The remaining costs will be expensed as
incurred.
The Company has also communicated with key suppliers and customers to determine
their Year 2000 compliance and the extent to which the Company is vulnerable to
any third-party Year 2000 issues. This program will be ongoing and the
Company's efforts with respect to specific problems identified will depend on
its assessment of the risk. Most key suppliers and customers who have replied
to our inquiries indicated that they expect to be Year 2000 compliant on a
timely basis. There can be no assurance that there will not be an adverse
effect on the Company if third parties do not make the necessary modifications
to their systems in a timely manner. However, management believes that ongoing
communication with and assessment of these third parties will minimize these
risks.
Where needed, the Company will establish contingency plans based on actual
testing results and assessment of outside risks.
The costs of the Year 2000 issue and completion dates are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events including the continued availability of certain resources, third-party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those plans.
The above statement in its entirety is designated a Year 2000 readiness
disclosure under the Year 2000 Information and Readiness Disclosure Act.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivatives and hedging. It requires that all
derivatives be recognized as either assets or liabilities at fair value and
establishes specific criteria for the use of hedge accounting. The Company's
required adoption date is January 1, 2000. SFAS No. 133 is not to be applied
retroactively to financial statements of prior periods. The Company expects no
material adverse effect on consolidated results of operations, financial
position or cash flows upon adoption of SFAS No. 133, but does expect a small
reduction in stockholders' equity.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition - Market Risk" on page 14.
Page 15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders, Blount International, Inc.:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) present fairly, in all material respects, the
financial position of Blount International, Inc. and its subsidiaries at
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the two years in the period ended December 31, 1998 and the
ten-month period ended December 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedules listed in the index appearing under Item 14(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. 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 of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
January 28, 1999
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 fiscal year 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.
Six 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, PricewaterhouseCoopers LLP, audited the
financial statements prepared by the Company. Their opinion on these statements
appears herein.
JOHN M. PANETTIERE HAROLD E. LAYMAN
President and Executive Vice President
Chief Executive Officer Finance Operations and
Chief Financial Officer
Page 17
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Blount International, Inc. and Subsidiaries
Twelve Months Ended Ten Months
December 31, Ended
(Dollar amounts in millions, -------------------------- December 31,
except per share data) 1998 1997 1996 1996
- ----------------------------------- ------ ------ ------ ------------
(Unaudited)
Sales $831.9 $716.9 $649.3 $526.7
Cost of sales 573.6 482.9 426.9 346.5
- ----------------------------------- ------ ------ ------ ------
Gross profit 258.3 234.0 222.4 180.2
Selling, general and administrative
expenses 144.6 134.6 130.0 105.2
- ----------------------------------- ------ ------ ------ ------
Income from operations 113.7 99.4 92.4 75.0
Interest expense (14.3) (9.5) (9.9) (7.9)
Interest income 2.5 2.5 2.4 2.3
Other income, net 0.3 1.3 0.5 0.2
- ----------------------------------- ------ ------ ------ ------
Income before income taxes 102.2 93.7 85.4 69.6
Provision for income taxes 38.9 34.6 31.6 25.6
- ----------------------------------- ------ ------ ------ ------
Income from continuing operations
before extraordinary loss 63.3 59.1 53.8 44.0
Discontinued operations -
Income on disposal, net 1.4 1.4
Extraordinary loss on repurchase
of debt, net (2.0)
- ----------------------------------- ------ ------ ------ ------
Net income $ 61.3 $ 59.1 $ 55.2 $ 45.4
- ----------------------------------- ------ ------ ------ ------
Basic earnings per share:
Continuing operations before
extraordinary loss $ 1.69 $ 1.57 $ 1.40 $ 1.14
Discontinued operations .04 .04
Extraordinary loss (.05)
- ----------------------------------- ------ ------ ------ ------
Net income $ 1.64 $ 1.57 $ 1.44 $ 1.18
- ----------------------------------- ------ ------ ------ ------
Diluted earnings per share:
Continuing operations before
extraordinary loss $ 1.65 $ 1.53 $ 1.38 $ 1.13
Discontinued operations .03 .03
Extraordinary loss (.05)
- ----------------------------------- ------ ------ ------ ------
Net income $ 1.60 $ 1.53 $ 1.41 $ 1.16
- ----------------------------------- ------ ------ ------ ------
Cash dividends per share:
Class A $ .285 $ .261 $ .228 $ .228
Class B .268 .244 .212 .212
- ----------------------------------- ------ ------ ------ ------
The accompanying notes are an integral part of the audited financial statements.
Page 18
<PAGE>
CONSOLIDATED BALANCE SHEETS
Blount International, Inc. and Subsidiaries
December 31,
(Dollar amounts in millions, except per share data) 1998 1997
- -------------------------------------------------------- ------ ------
Assets
- -------------------------------------------------------- ------ ------
Current assets:
Cash and cash equivalents $ 45.1 $ 4.8
Accounts receivable, net of allowance for
doubtful accounts of $3.9 and $3.7 132.3 135.7
Inventories 121.0 132.9
Deferred income taxes 22.0 22.0
Other current assets 6.7 5.8
- -------------------------------------------------------- ------ ------
Total current assets 327.1 301.2
Property, plant and equipment, net of accumulated
depreciation of $209.9 and $188.3 182.9 188.5
Cost in excess of net assets of acquired businesses, net 114.7 116.4
Other assets 44.1 31.7
- -------------------------------------------------------- ------ ------
Total Assets $668.8 $637.8
- -------------------------------------------------------- ------ ------
Liabilities and Stockholders' Equity
- -------------------------------------------------------- ------ ------
Current liabilities:
Notes payable and current maturities of long-term debt $ 0.7 $ 1.5
Accounts payable 30.4 56.6
Accrued expenses 63.8 72.0
- -------------------------------------------------------- ------ ------
Total current liabilities 94.9 130.1
Long-term debt, exclusive of current maturities 161.6 138.8
Deferred income taxes, exclusive of current portion 13.0 15.2
Other liabilities 44.7 37.6
- -------------------------------------------------------- ------ ------
Total liabilities 314.2 321.7
- -------------------------------------------------------- ------ ------
Commitments and Contingent Liabilities
- -------------------------------------------------------- ------ ------
Stockholders' equity:
Common stock: par value $.01 per share (see
Note 5 for voting rights by class);
Class A: 27,428,105 and 27,277,969 shares issued 0.3 0.3
Class B, convertible: 11,479,471 and
11,620,552 shares issued 0.1 0.1
Capital in excess of par value of stock 38.7 37.7
Retained earnings 348.9 300.3
Accumulated other comprehensive income 7.6 7.0
Less Class A treasury stock at cost, 1,852,302 and
1,453,180 shares (41.0) (29.3)
- -------------------------------------------------------- ------ ------
Total stockholders' equity 354.6 316.1
- -------------------------------------------------------- ------ ------
Total Liabilities and Stockholders' Equity $668.8 $637.8
- -------------------------------------------------------- ------ ------
The accompanying notes are an integral part of the audited financial statements.
Page 19
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Blount International, Inc. and Subsidiaries
<CAPTION>
Twelve Months Ended Ten Months
December 31, Ended
------------------------ December 31,
(Dollar amounts in millions) 1998 1997 1996 1996
- -------------------------------------------- ------ ------ ------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 61.3 $ 59.1 $ 55.2 $ 45.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary loss 2.0
Depreciation, amortization and other
noncash charges 30.9 25.0 23.6 19.6
Deferred income taxes (2.3) (1.7) 2.1 (2.1)
Gain on disposals of property, plant
and equipment (0.6) (0.2) (0.9)
Changes in assets and liabilities, net
of effects of businesses acquired and sold:
(Increase) decrease in accounts receivable 3.4 20.4 (0.6) 34.0
(Increase) decrease in inventories 13.3 (10.4) 13.2 11.4
(Increase) decrease in other assets 0.8 1.9 (1.8)
Increase (decrease) in accounts payable (12.8) 0.8 (6.7) (15.5)
Decrease in accrued expenses (7.3) (15.5) (4.3) (6.8)
Increase (decrease) in other liabilities 0.4 2.4 3.3 (0.1)
- -------------------------------------------- ------ ------ ------ ------
Net cash provided by operating activities 88.9 80.3 87.5 83.2
- -------------------------------------------- ------ ------ ------ ------
Cash flows from investing activities:
Proceeds from sales of property, plant
and equipment 1.3 0.9 1.9 1.8
Purchases of property, plant and equipment (21.1) (17.8) (21.2) (18.7)
Acquisitions of businesses (17.4) (132.5)
- -------------------------------------------- ------ ------ ------ ------
Net cash used in investing activities (37.2) (149.4) (19.3) (16.9)
- -------------------------------------------- ------ ------ ------ ------
Cash flows from financing activities:
Net reduction in short-term borrowings (0.4) (2.7) (1.6)
Issuance of long-term debt 149.4 62.0
Reduction of long-term debt (137.5) (14.9) (13.9) (13.9)
Decrease in restricted funds 0.5 1.0 3.7 2.7
Dividends paid (10.5) (9.4) (8.5) (8.5)
Purchase of treasury stock (18.1) (27.5) (4.3) (4.3)
Other 5.2 4.0 3.7 3.4
- -------------------------------------------- ------ ------ ------ ------
Net cash provided by (used in) financing
activities (11.4) 15.2 (22.0) (22.2)
- -------------------------------------------- ------ ------ ------ ------
Net increase (decrease) in cash and cash
equivalents 40.3 (53.9) 46.2 44.1
- -------------------------------------------- ------ ------ ------ ------
Cash and cash equivalents at beginning of period 4.8 58.7 12.5 14.6
- -------------------------------------------- ------ ------ ------ ------
Cash and cash equivalents at end of period $ 45.1 $ 4.8 $ 58.7 $ 58.7
- -------------------------------------------- ------ ------ ------ ------
</TABLE>
The accompanying notes are an integral part of the audited financial statements.
Page 20
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Blount International, Inc. and Subsidiaries
<CAPTION>
Accumulated
Common Stock Capital Other
(Dollar amounts in millions, ---------------- In Excess Retained Comprehensive Treasury
shares in thousands) Class A Class B of Par Earnings Income Stock Total
- ---------------------------------------- ------- ------- --------- -------- ------------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 29, 1996 $ 0.1 $ 0.1 $31.3 $215.3 $ 8.2 $255.0
Net income 45.4 45.4
Other comprehensive income, net:
Foreign currency translation adjustment (0.3) (0.3)
-------
Comprehensive income 45.1
Dividends (8.5) (8.5)
Conversion of Class B to Class A
Common stock (35 shares)
Purchase of treasury stock
(118 Class A shares) $ (4.3) (4.3)
Other (187 Class A shares) -
principally stock options exercised 3.5 3.5
- ---------------------------------------- ------- ------- --------- -------- ------------- -------- -------
Balance, December 31, 1996 0.1 0.1 34.8 252.2 7.9 (4.3) 290.8
Stock split (13,638 Class A
shares, 728 shares to treasury,
and 5,811 Class B shares) 0.2 (0.2)
Net income 59.1 59.1
Other comprehensive income, net:
Foreign currency translation adjustment (0.9) (0.9)
-------
Comprehensive income 58.2
Dividends (9.6) (9.6)
Conversion of Class B to Class A
Common stock (79 shares)
Purchase of treasury stock
(673 Class A shares) (27.5) (27.5)
Other (229 Class A shares, 66 from
treasury) - principally stock options
exercised 3.1 (1.4) 2.5 4.2
- ---------------------------------------- ------- ------- --------- -------- ------------- -------- -------
Balance, December 31, 1997 0.3 0.1 37.7 300.3 7.0 (29.3) 316.1
Net income 61.3 61.3
Other comprehensive income, net:
Foreign currency translation adjustment 0.5 0.5
Unrealized gains on securities, net of
gains of $0.2 reclassified to net income 0.6 0.6
Minimum pension liability adjustment (0.5) (0.5)
-------
Comprehensive income 61.9
Dividends (10.5) (10.5)
Conversion of Class B to Class A
Common stock (141 shares)
Purchase of treasury stock
(705 Class A shares) (18.0) (18.0)
Other (315 Class A shares, 306 from
treasury) - principally stock options
exercised 1.0 (2.2) 6.3 5.1
- ---------------------------------------- ------- ------- --------- -------- ------------- -------- -------
Balance, December 31, 1998 $ 0.3 $ 0.1 $38.7 $348.9 $ 7.6 $ (41.0) $354.6
- ---------------------------------------- ------- ------- --------- -------- ------------- -------- -------
</TABLE>
The accompanying notes are an integral part of the audited 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 twelve-month periods ended
December 31, 1998 ("1998") and 1997 ("1997"), and the ten-month period ended
December 31, 1996 ("transition period"). In addition to the basic audited
financial statements and related notes, unaudited financial information for the
twelve-month period ended December 31, 1996 has been presented to enhance
comparability.
Reclassifications:
Certain amounts in 1997 and the transition period and notes to consolidated
financial statements have been reclassified to conform with the 1998
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.
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. The
principal ranges of estimated useful lives for depreciation purposes are as
follows: buildings and improvements - 5 years to 45 years; machinery and
equipment - 3 years to 15 years; furniture, fixtures and office equipment - 2
years to 10 years; and transportation equipment - 1 year to 15 years. Gains or
losses on disposal are reflected in income. Property, plant and equipment held
under leases which are essentially installment purchases are capitalized with
the related obligations stated at the principal portion of future lease
payments. Depreciation charged to costs and expenses was $25.9 million, $21.1
million and $16.4 million in 1998, 1997 and the transition period.
Page 22
<PAGE>
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, 1998.
Cost in excess of net assets of acquired businesses:
The excess cost is being amortized by the straight-line method over periods
ranging from 10 to 40 years. Accumulated amortization was $28.9 million and
$25.0 million as of December 31, 1998 and 1997. 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
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 whose operations are principally conducted in U.S.
dollars, 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 reflected as "other comprehensive
income" in stockholders' equity. The amount of income taxes allocated to this
translation adjustment is not significant. Foreign exchange adjustments to
pretax income were not material in 1998, 1997 and the transition period.
Derivative financial instruments:
The Company accounts for copper and zinc futures contracts in accordance with
SFAS No. 80, "Accounting for Futures Contracts." These contracts (approximately
4.0 million pounds and 8.4 million pounds at December 31, 1998 and 1997,
respectively) hedge a portion of the anticipated brass purchases the Company
expects to carry out in the normal course of business. Any gain or loss on
futures contracts accounted for as a hedge which are closed before the date of
the anticipated transaction is deferred until completion of the transaction.
Deferred gains or losses are amortized over the transaction period.
An interest rate contract accounted for as an interest rate hedge of an expected
debt issue was extinguished upon the issuance of 7% senior notes in the
principal amount of $150 million (see Note 3) in June 1998. The cost to
extinguish the interest rate contract is being amortized as an adjustment to
interest expense over the life of the senior notes.
Deferred gains and losses on derivative financial instruments are generally
classified as other assets or other liabilities in the consolidated balance
sheets.
Revenue recognition:
The Company's policy is to record sales as orders are shipped.
Page 23
<PAGE>
Advertising:
Advertising costs are generally expensed as incurred. Advertising costs were
$13.5 million, $14.6 million and $10.1 million for 1998, 1997 and the transition
period.
Research and development:
Expenditures for research and development are expensed as incurred. These costs
were $7.4 million, $8.0 million and $6.0 million for 1998, 1997 and the
transition period.
Accounting standards:
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in the financial statements.
Prior periods have been reclassified to reflect the adoption of this standard.
The adoption of SFAS No. 130 has no material impact on the Company's results of
operations, financial position or cash flows. Comprehensive income equals net
income plus other comprehensive income. Other comprehensive income refers to
revenue, expenses, gains and losses which are reflected in stockholders' equity
but excluded from net income. For the Company, the components of other
comprehensive income are principally foreign currency translation adjustments,
unrealized gains or losses on investments and minimum pension liability
adjustments.
As of December 31, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" and SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." These standards
have no material effect on the Company's results of operations, financial
position or cash flows.
SFAS No. 131 establishes new standards for reporting operating segments and
disclosing information about products and services and geographic areas. The
Company's reportable segments are unchanged from the prior year. See Note 9.
SFAS No. 132 revises disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans. See
Note 6.
Page 24
<PAGE>
NOTE 2:
INCOME TAXES
The provision for income taxes attributable to continuing operations before
extraordinary loss is as follows:
Twelve Months Ended Ten Months
December 31, Ended
------------------- December 31,
(Dollar amounts in millions) 1998 1997 1996
- ------------------------------------------ ------ ------ ------------
Current provision:
Federal $ 33.3 $ 28.6 $ 24.5
State 4.3 3.8 0.8
Foreign 4.2 3.9 2.4
Deferred provision (benefit):
Federal (2.4) (1.5) (3.6)
State (0.1) 0.1 0.4
Foreign (0.4) (0.3) 1.1
- ------------------------------------------ ------ ------ ------
$ 38.9 $ 34.6 $ 25.6
- ------------------------------------------ ------ ------ ------
A reconciliation of the provision for income taxes to the amount computed by
applying the statutory federal income tax rate to income from continuing
operations before extraordinary loss and income taxes is as follows:
Twelve Months Ended Ten Months
December 31, Ended
------------------- December 31,
(Dollar amounts in millions) 1998 1997 1996
- ------------------------------------------ ------ ------ ------------
Income before income taxes:
Domestic $ 91.5 $ 83.8 $ 61.1
Foreign 10.7 9.9 8.5
- ------------------------------------------ ------ ------ ------
$102.2 $ 93.7 $ 69.6
- ------------------------------------------ ------ ------ ------
% % %
Statutory tax rate 35.0 35.0 35.0
Impact of earnings of foreign operations (0.7) 0.7
State income taxes, net of federal tax benefit 2.6 2.2 1.5
Permanent differences between book
bases and tax bases 1.2 1.6 1.5
Other items, net (0.7) (1.2) (1.9)
- ------------------------------------------ ------ ------ ------
Effective income tax rate 38.1 36.9 36.8
- ------------------------------------------ ------ ------ ------
All years reflect the allocation of substantially all corporate office expenses
and interest expense to domestic operations.
Page 25
<PAGE>
As of December 31, 1998 and 1997, deferred income tax assets were $35.7 million
and $35.6 million and deferred income tax liabilities were $26.7 million and
$28.8 million. Deferred income tax assets (liabilities) applicable to temporary
differences at December 31, 1998 and 1997 are as follows:
(Dollar amounts in millions) 1998 1997
- -------------------------------------------------- ------ ------
Property, plant and equipment basis differences $(17.8) $(18.3)
Employee benefits 19.1 16.8
Other accrued expenses 15.0 16.1
Other - net (7.3) (7.8)
- -------------------------------------------------- ------ ------
$ 9.0 $ 6.8
- -------------------------------------------------- ------ ------
Deferred income taxes of approximately $3.9 million have not been provided on
undistributed earnings of foreign subsidiaries in the amount of $45.9 million as
the earnings are considered to be permanently reinvested.
The Company has settled its issues with the Internal Revenue Service through the
1993 fiscal year with no material adverse effect. The periods from fiscal 1994
through 1998 are still open for review.
NOTE 3:
DEBT AND FINANCING AGREEMENTS
Long-term debt at December 31, 1998 and 1997 consists of the following:
(Dollar amounts in millions) 1998 1997
- -------------------------------------------------- ------ ------
Senior notes (net of discount) $148.6
9% subordinated notes $ 68.8
Revolving credit agreement 54.0
Industrial development revenue bonds payable,
maturing between 1999 and 2013, interest at varying
rates (principally 4.2% at December 31, 1998) 13.1 15.7
Other long-term debt, interest at 8.8% 0.4 0.5
Lease purchase obligations, interest at varying
rates, payable in installments to 2000 0.2 0.9
- -------------------------------------------------- ------ ------
162.3 139.9
Less current maturities (0.7) (1.1)
- -------------------------------------------------- ------ ------
$161.6 $138.8
- -------------------------------------------------- ------ ------
Page 26
<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
- ------------------------------- ------ --------- -------- --------
1999 $ 0.5 $ 0.2 $ 0.0 $ 0.7
2000 0.4 0.4
2001 0.4 0.4
2002 0.5 0.5
2003 0.0 0.0
2004 and beyond 160.3 160.3
- ------------------------------- ------ ----- ----- ------
$162.1 $ 0.2 $ 0.0 $162.3
- ------------------------------- ------ ----- ----- ------
In June 1998, Blount, Inc., a wholly-owned subsidiary of Blount International,
Inc., issued senior notes ("the senior notes") with a stated interest rate of 7%
in the principal amount of $150 million maturing on June 15, 2005. The senior
notes are fully and unconditionally guaranteed by Blount International, Inc.
Approximately $8.3 million, reflecting the price discount and the cost to
extinguish an interest rate contract accounted for as a hedge of future interest
on the debt, is being amortized to expense over the life of the senior notes.
The senior notes are redeemable at a premium, in whole or in part, at the option
of the Company at any time. The debt indenture contains restrictions on secured
debt, sale and lease-back transactions, and the consolidation, merger and sale
of assets.
In July 1998, the Company redeemed all its 9% subordinated notes in the amount
of $68.8 million. The extraordinary loss on redemption was $2.0 million, net of
income taxes of $1.2 million.
At December 31, 1998, no amount was outstanding under the Company's $150 million
revolving credit agreement with a group of five banks. The $150 million
agreement expires April 2002 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 and commitment fees may vary based on the ratio
of cash flow to debt as defined in the agreement. The agreement contains
covenants relating to liens, subsidiary debt, transactions with affiliates,
consolidations, mergers and sales of assets, and requires the Company to
maintain certain leverage and fixed charge coverage ratios.
Proceeds from industrial development revenue bonds issued in fiscal 1995 are
held in trust and released as qualified capital expenditures are made. As of
December 31, 1998 and 1997, $3.5 million and $3.9 million were held in trust and
are included in "Other assets" in the Company's consolidated balance sheets.
As of December 31, 1997, the weighted average interest rate on outstanding
short-term borrowings (principally foreign) was 9.7%. No short-term borrowings
were outstanding at December 31, 1998.
Page 27
<PAGE>
NOTE 4:
ACQUISITIONS AND DISPOSALS
The following acquisitions have been accounted for by the purchase method, and
the net assets and results of operations of the acquired companies have been
included in the Company's consolidated financial statements since the dates 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.
In September 1998, the Company purchased certain operating assets of the
Redfield line for approximately $3 million. The fair value of the assets
acquired approximated the purchase price.
On November 4, 1997, the Company acquired Federal Cartridge Company ("Federal"),
formerly Federal-Hoffman, Inc. The purchase price was approximately $129
million including a post-closing adjustment and acquisition expenses. Federal
manufactures shotshell, centerfire and rimfire cartridges, ammunition components
and clay targets. The following summarized unaudited pro forma financial
information for the twelve months ended December 31, 1997 and 1996 assumes the
acquisition had occurred on January 1 of each year:
Pro forma information
(Dollar amounts in millions, except per share data) 1997 1996
- --------------------------------------------------- ------ ------
Sales $842.2 $779.2
Income from continuing operations 65.1 50.7
Earnings per share from continuing operations:
Basic 1.73 1.32
Diluted 1.69 1.30
- --------------------------------------------------- ------ ------
The pro forma results do not necessarily represent the results which would have
occurred if the acquisition had taken place on the basis assumed nor are they
indicative of the results of future operations.
In January 1997, the Company acquired the outstanding capital stock of the
Frederick Manufacturing Corporation ("Frederick") and Orbex, Inc. ("Orbex") for
approximately $19 million and paid existing debt of the acquired companies in
the amount of $5.8 million. Orbex was subsequently merged into Frederick. 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 prior to the acquisition 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.
NOTE 5:
CAPITAL STOCK, STOCK OPTIONS AND EARNINGS PER SHARE DATA
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, 1998, 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 $.00415 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%
Page 28
<PAGE>
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 stockholder into one share of Class A Common Stock.
The number of shares used in the denominators of the basic and diluted earnings
per share computations were as follows (in thousands):
Twelve Months Ended Ten Months
December 31, Ended
------------------- December 31,
1998 1997 1996
- --------------------------------------- ------ ------ ------------
Shares for basic earnings per share
computation - weighted average
common shares outstanding 37,372 37,632 38,418
Dilutive effect of stock options 1,022 916 737
- --------------------------------------- ------ ------ ------
Shares for diluted earnings per
share computation 38,394 38,548 39,155
- --------------------------------------- ------ ------ ------
No adjustment was required to reported income amounts for inclusion in the
numerators of the earnings per share computations.
The Company has granted options to purchase its Class A Common Stock to certain
officers and key employees under four fixed stock option plans. Under these
plans, options may be granted up to 6,750,000 shares. Each plan provides for
the granting of options with an option price per 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,
1998 and 1997, there were options for 815,020 shares and 99,422 shares available
for grant under the plans.
A summary of the status of the Company's fixed stock option plans as of December
31, 1998, 1997 and 1996, and changes during the periods ending on those dates is
presented below:
<TABLE>
<CAPTION>
Twelve Months
Ended December 31, Ten Months
------------------------------------------------ Ended December 31,
1998 1997 1996
---------------------- ---------------------- ----------------------
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 3,466 $14.79 2,918 $11.88 2,162 $ 9.05
Granted 598 25.15 1,035 19.98 1,171 15.48
Exercised (306) 13.69 (444) 7.87 (365) 6.78
Forfeited (114) 21.45 (43) 13.75 (50) 10.78
- -------------------- ---------- --------- ---------- --------- ---------- ---------
Outstanding at
end of period 3,644 $16.38 3,466 $14.79 2,918 $11.88
- -------------------- ---------- --------- ---------- --------- ---------- ---------
Options exercisable
at end of period 1,948 1,385 849
- -------------------- ---------- ---------- ----------
</TABLE>
Page 29
<PAGE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1998:
<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
- ------------------------ ---------- ---------------- --------- ---------- ---------
<S> <C> <C> <S> <C> <C> <C>
$2.54 to $4.56 175 4.0 years $ 3.43 95 $ 4.02
$9.35 to $12.78 633 5.1 years 9.50 585 9.51
$14.33 to $20.72 2,249 7.4 years 17.02 1,257 16.31
$23.64 to $31.28 587 9.1 years 25.19 11 25.44
- ------------------------ ---------- ---------------- --------- ---------- ---------
Total 3,644 7.1 years $16.38 1,948 $13.72
- ------------------------ ---------- ---------------- --------- ---------- ---------
</TABLE>
The Company applies APB Opinion 25 and related interpretations in accounting for
fixed stock option plans. Accordingly, no compensation cost has been
recognized. Had compensation cost been determined based on the estimated fair
value at the grant dates for awards under the Company's plans, consistent with
the method of SFAS No. 123, the Company's net income and earnings per share
would have been the pro forma amounts indicated below:
Twelve Months Ended Ten Months
December 31, Ended
(Dollar amounts in millions, ------------------- December 31,
except per share data) 1998 1997 1996
- ------------------------------------ ------ ------ ------------
Net income:
As reported $ 61.3 $ 59.1 $ 45.4
Pro forma 58.1 56.7 44.5
Earnings per share:
As reported:
Basic 1.64 1.57 1.18
Diluted 1.60 1.53 1.16
Pro forma:
Basic 1.55 1.51 1.16
Diluted 1.51 1.48 1.14
- ------------------------------------ ------ ------ ------
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 Ended Ten Months
December 31, Ended
------------------- December 31,
1998 1997 1996
- ------------------------------------ ------ ------ ------------
Estimated lives of plan options 6 years 6 years 6 years
Risk-free interest rates 5.5% 6.2% 6.2%
Expected volatility 23.0% 23.0% 24.0%
Dividend yield 1.5% 1.5% 1.5%
- ------------------------------------ ------- ------- -------
The weighted average estimated fair value of options granted during 1998, 1997
and the transition period was $7.34, $6.15 and $4.87, respectively.
Page 30
<PAGE>
NOTE 6:
PENSION AND POSTRETIREMENT BENEFIT PLANS
The changes in the benefit obligations, changes in plan assets, and funded
status of the Company's defined benefit pension plans and other postretirement
medical and life benefit plans for the periods ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
Other
Pension Postretirement
Benefits Benefits
FUNDED PLANS ---------------- ----------------
(Dollar amounts in millions) 1998 1997 1998 1997
- ---------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of period $(107.9) $ (76.4) $ (2.1) $ (2.2)
Service cost (6.2) (4.6)
Interest cost (8.4) (6.2) (0.2) (0.2)
Plan participants' contributions (0.2) (0.2)
Actuarial losses (6.8) (2.7) (0.4) (0.1)
Benefits and plan expenses paid 2.9 2.6 0.5 0.6
Acquisition (20.6)
- ---------------------------------------- ------- ------- ------ ------
Benefit obligation at end of period (126.4) (107.9) (2.4) (2.1)
- ---------------------------------------- ------- ------- ------ ------
Change in Plan Assets:
Fair value of plan assets at beginning of period 114.1 82.0 2.1 2.1
Actual return on plan assets 10.5 14.1 0.1 0.4
Company contributions
Plan participants' contributions 0.2 0.2
Benefits and plan expenses paid (2.9) (2.6) (0.5) (0.6)
Acquisition 20.6
- ---------------------------------------- ------- ------- ------ ------
Fair value of plan assets at end of period 121.7 114.1 1.9 2.1
- ---------------------------------------- ------- ------- ------ ------
Funded status (4.7) 6.2 (0.5) 0.0
Unrecognized actuarial losses 7.3 1.4 0.5
Unrecognized transition asset (0.6) (0.8)
Unrecognized prior service cost (0.2) (0.2)
- ---------------------------------------- ------- ------- ------ ------
Net amount recognized $ 1.8 $ 6.6 $ 0.0 $ 0.0
- ---------------------------------------- ------- ------- ------ ------
Net amount recognized:
Prepaid benefits $ 3.3 $ 6.8
Accrued benefits (1.5) (0.2)
- ---------------------------------------- ------- ------- ------ ------
$ 1.8 $ 6.6 $ 0.0 $ 0.0
- ---------------------------------------- ------- ------- ------ ------
</TABLE>
Page 31
<PAGE>
<TABLE>
<CAPTION>
Other
Pension Postretirement
Benefits Benefits
OTHER PLANS ---------------- ----------------
(Dollar amounts in millions) 1998 1997 1998 1997
- ---------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of period $ (6.3) $ (5.4) $(16.8) $(13.5)
Service cost (0.5) (0.3) (0.4) (0.3)
Interest cost (0.6) (0.5) (1.2) (1.0)
Plan participants' contributions (0.4) (0.2)
Actuarial gains (losses) (0.4) (0.4) 0.3 0.6
Benefits and plan expenses paid 0.3 0.3 1.1 0.7
Acquisition (3.1)
Plan amendments (6.3)
- ---------------------------------------- ------ ------ ------ ------
Benefit obligation at end of period (13.8) (6.3) (17.4) (16.8)
Unrecognized actuarial (gains) losses 1.2 1.0 (0.9) (0.5)
Unrecognized transition obligation 0.1 0.2
Unrecognized prior service cost 6.2 0.3 0.1
- ---------------------------------------- ------ ------ ------ ------
Net amount recognized $ (6.3) $ (4.8) $(18.2) $(17.3)
- ---------------------------------------- ------ ------ ------ ------
Net amount recognized:
Accrued benefits $(13.4) $ (4.8) $(18.2) $(17.3)
Intangible asset 6.3
Accumulated other comprehensive income 0.8
- ---------------------------------------- ------ ------ ------ ------
$ (6.3) $ (4.8) $(18.2) $(17.3)
- ---------------------------------------- ------ ------ ------ ------
</TABLE>
The Company acquired Federal in November 1997, including the pension and
postretirement benefit plans for its active employees.
The accumulated pension benefit obligation of supplemental non-qualified defined
benefit pension plans was $13.4 million and $4.9 million at December 31, 1998
and 1997, respectively. A Rabbi Trust, whose assets are not included in the
table above has been established to fund part of these non-qualified benefits.
Page 32
<PAGE>
The components of net periodic benefit cost and the weighted average assumptions
used in accounting for pension and other postretirement benefits follow:
<TABLE>
<CAPTION>
Pension Benefits Other Postretirement Benefits
--------------------------------- ---------------------------------
Twelve Months Ended Ten Months Twelve Months Ended Ten Months
December 31, Ended December 31, Ended
------------------- December 31, ------------------- December 31,
(Dollar amounts in millions) 1998 1997 1996 1998 1997 1996
- ---------------------------------- -------- -------- ------------ -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic benefit cost:
Service cost $ 6.7 $ 4.9 $ 3.7 $ 0.4 $ 0.3 $ 0.3
Interest cost 9.0 6.7 5.5 1.4 1.2 0.9
Expected return on plan assets (9.7) (7.3) (6.0) (0.2) (0.2) (0.1)
Amortization of actuarial (gains) losses 0.1 0.1 0.1 (0.1) 0.1
Amortization of transition asset (0.1) (0.1) (0.1)
Amortization of prior service cost 0.4 0.8 1.1
------ ------ ------ ------ ------ ------
$ 6.4 $ 5.1 $ 4.3 $ 1.5 $ 1.4 $ 1.1
------ ------ ------ ------ ------ ------
Weighted average assumptions:
Discount rate 7.0% 7.4% 7.6% 7.0% 7.5% 7.5%
Expected return on plan assets 8.9% 8.7% 8.7% 9.0% 8.8% 8.8%
Rate of compensation increase 3.8% 4.0% 4.2%
- ---------------------------------- ------ ------ ------ ------ ------ ------
</TABLE>
A 7% annual rate of increase in the cost of health care benefits was assumed for
1998; 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%.
A 1% change in assumed health care cost trend rates would have the following
effects:
(Dollar amounts in millions) 1% Increase 1% Decrease
- ------------------------------------------------ ----------- -----------
Effect on service and interest cost components $ 0.1 $ 0.1
Effect on other postretirement benefit obligations 0.9 0.8
- ------------------------------------------------ ----------- -----------
The Company sponsors a defined contribution 401(k) plan and matches a portion of
employee contributions. The expense was $4.9 million, $3.6 million and $2.4
million in 1998, 1997 and the transition period.
NOTE 7:
COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office space and equipment under operating leases expiring in
1 to 7 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, 1998, are as follows (in millions): 1999--
$3.4; 2000--$2.1; 2001--$1.6; 2002--$0.9; 2003--$0.7; and 2004 and beyond--$0.6.
Rentals charged to costs and expenses under cancelable and noncancelable lease
arrangements were $4.6 million, $4.9 million and $5.0 million for 1998, 1997 and
the transition period, respectively.
Page 33
<PAGE>
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
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 expected in the
near future. 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 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.
Page 34
<PAGE>
NOTE 8:
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
The Company has manufacturing or distribution operations in Brazil, Canada,
Europe, Japan, Russia 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 9). At December 31, 1998, approximately 78% of trade
accounts receivable were from customers within the United States. Trade
accounts receivable are principally from service and dealer groups,
distributors, mass merchants, and chain saw and other original equipment
manufacturers, and are normally not collateralized.
The estimated fair values of certain financial instruments at December 31, 1998
and 1997 are as follows:
1998 1997
-------------------- --------------------
Carrying Fair Carrying Fair
(Dollar amounts in millions) Amount Value Amount Value
- ---------------------------------- --------- --------- --------- ---------
Cash and short-term investments $ 45.1 $ 45.1 $ 4.8 $ 4.8
Futures contracts (see Note 1) 0.0 (0.1) 0.0 (0.9)
Other assets (restricted trust
funds and notes receivable) 17.3 17.1 14.7 16.1
Notes payable and long-term debt
(see Note 3) (162.3) (163.7) (140.3) (143.2)
Interest rate lock contract
(see Note 1) 0.0 (1.4)
- ---------------------------------- ------- ------- ------- -------
The carrying amount of cash and short-term investments approximates fair value
because of the short maturity of those instruments. The fair value of
derivative financial instruments (futures contracts and interest rate lock
contract) is estimated by obtaining market quotes. 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 the carrying amount
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 9:
SEGMENT INFORMATION
The Company identifies operating segments based on management responsibility.
The Company has three reportable segments: Outdoor Products, Sporting
Equipment, and Industrial and Power Equipment. Outdoor Products produces or
markets chain saw components (chain, bars and sprockets), lawn mowers and
related products, and other outdoor care products. Sporting Equipment produces
or markets small arms ammunition, sports optical products, reloading equipment
and other shooting sports accessories. Industrial and Power Equipment produces
timber harvesting and industrial loading equipment and power transmission and
gear components.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Intersegment sales are not
significant.
Page 35
<PAGE>
Information on Segments:
Twelve Months Ended Ten Months
December 31, Ended
-------------------------- December 31,
(Dollar amounts in millions) 1998 1997 1996 1996
- --------------------------------- ------ ------ ------ ------------
(Unaudited)
Sales:
Outdoor products $315.4 $319.3 $292.7 $239.3
Sporting equipment 286.7 158.5 147.1 121.7
Industrial and power equipment 229.8 239.1 209.5 165.7
- --------------------------------- ------ ------ ------ ------
$831.9 $716.9 $649.3 $526.7
- --------------------------------- ------ ------ ------ ------
Operating income:
Outdoor products $ 68.4 $ 67.1 $ 61.4 $ 50.7
Sporting equipment 36.1 18.1 19.8 16.5
Industrial and power equipment 27.9 32.7 31.9 24.0
- --------------------------------- ------ ------ ------ ------
Operating income from segments 132.4 117.9 113.1 91.2
Corporate office expenses (18.7) (18.5) (20.7) (16.2)
- --------------------------------- ------ ------ ------ ------
Income from operations 113.7 99.4 92.4 75.0
Interest expense (14.3) (9.5) (9.9) (7.9)
Interest income 2.5 2.5 2.4 2.3
Other income, net 0.3 1.3 0.5 0.2
- --------------------------------- ------ ------ ------ ------
Income before income taxes $102.2 $ 93.7 $ 85.4 $ 69.6
- --------------------------------- ------ ------ ------ ------
Identifiable assets:
Outdoor products $209.1 $221.9 $196.2 $196.2
Sporting equipment 226.8 236.6 107.7 107.7
Industrial and power equipment 107.1 102.7 102.6 102.6
Corporate office 125.8 76.6 127.3 127.3
- --------------------------------- ------ ------ ------ ------
$668.8 $637.8 $533.8 $533.8
- --------------------------------- ------ ------ ------ ------
Depreciation and amortization:
Outdoor products $ 13.6 $ 13.4 $ 12.8 $ 10.6
Sporting equipment 10.7 5.7 4.8 4.0
Industrial and power equipment 4.2 4.1 3.9 3.2
Corporate office 2.4 1.8 1.8 1.4
- --------------------------------- ------ ------ ------ ------
$ 30.9 $ 25.0 $ 23.3 $ 19.2
- --------------------------------- ------ ------ ------ ------
Capital expenditures:
Outdoor products $ 7.9 $ 13.5 $ 11.4 $ 10.2
Sporting equipment 6.9 60.5 3.3 2.5
Industrial and power equipment 6.7 4.2 6.0 5.6
Corporate office 0.2 0.3 0.6 0.4
- --------------------------------- ------ ------ ------ ------
$ 21.7 $ 78.5 $ 21.3 $ 18.7
- --------------------------------- ------ ------ ------ ------
Page 36
<PAGE>
Information on Sales By Significant Product Groups:
Twelve Months Ended Ten Months
December 31, Ended
-------------------------- December 31,
(Dollar amounts in millions) 1998 1997 1996 1996
- --------------------------------- ------ ------ ------ ------------
(Unaudited)
Chain saw components $199.7 $211.1 $201.1 $167.0
Ammunition and related products 212.0 87.9 64.9 52.9
Timber harvesting and loading equipment 199.8 210.5 183.3 143.5
Lawn mowers and related products 75.7 66.2 45.6 34.9
Sports optical products 41.3 36.6 43.2 34.2
All others, less than 5% each 103.4 104.6 111.2 94.2
- --------------------------------- ------ ------ ------ ------
$831.9 $716.9 $649.3 $526.7
- --------------------------------- ====== ====== ====== ======
Information on Geographic Areas:
Twelve Months Ended Ten Months
December 31, Ended
-------------------------- December 31,
(Dollar amounts in millions) 1998 1997 1996 1996
- --------------------------------- ------ ------ ------ ------------
(Unaudited)
Sales:
United States $623.4 $495.1 $446.6 $360.0
Canada 32.4 36.5 30.8 25.0
Germany 24.0 24.5 25.0 19.9
All others, less than 3% each 152.1 160.8 146.9 121.8
- --------------------------------- ------ ------ ------ ------
$831.9 $716.9 $649.3 $526.7
- --------------------------------- ------ ------ ------ ------
Long-Lived Assets:
United States $156.1 $159.6 $103.3 $103.3
Canada 20.1 22.3 21.4 21.4
Brazil 3.7 3.6 3.8 3.8
All others, less than 3% each 3.0 3.0 3.2 3.2
- --------------------------------- ------ ------ ------ ------
$182.9 $188.5 $131.7 $131.7
- --------------------------------- ------ ------ ------ ------
The geographic sales information is by country of destination. Long-lived
assets exclude the cost in excess of net assets of acquired businesses. No
customer accounted for more than 10% of consolidated sales in 1998, 1997 or the
transition period. In 1998, approximately 16% of sales by Outdoor Products were
to one customer, 20% of Sporting Equipment sales were to one customer, and 27%
of Industrial and Power Equipment sales were to two customers. While the
Company expects these business relationships to continue, the loss of any of
these customers could affect the operations of the segments. Each of the
Company's segments purchases 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.
Page 37
<PAGE>
NOTE 10:
SUMMARIZED FINANCIAL INFORMATION
Blount, Inc. is a wholly-owned subsidiary of Blount International, Inc. and is
the issuer of the 7% senior notes described in Note 3. Summarized financial
information for Blount, Inc. is as follows:
December 31,
(Dollar amounts in millions) 1998 1997
- ------------------------------------------------ ---------- ----------
Current assets $ 351.3 $ 301.2
Noncurrent assets 341.8 336.6
- ------------------------------------------------ ------- -------
Total assets $ 693.1 $ 637.8
- ------------------------------------------------ ======= =======
Current liabilities $ 92.4 $ 128.3
Noncurrent liabilities 219.2 191.6
Stockholder's equity 381.5 317.9
- ------------------------------------------------ ------- -------
Total liabilities and stockholder's equity $ 693.1 $ 637.8
- ------------------------------------------------ ======= =======
Twelve Months Ended Ten Months
December 31, Ended
------------------- December 31,
1998 1997 1996
- ------------------------------------ ------ ------ ------------
Sales $831.9 $716.9 $526.7
Gross profit 258.3 234.0 180.2
Income from continuing operations
before extraordinary loss 64.3 60.0 44.8
Net income 62.3 60.0 46.2
- ------------------------------------ ------ ------ ------
Page 38
<PAGE>
NOTE 11:
OTHER INFORMATION
At December 31, 1998 and 1997, the following balance sheet captions are
comprised of the items specified below:
(Dollar amounts in millions) 1998 1997
- ----------------------------------------------- --------- ---------
Accounts receivable:
Trade accounts $ 132.9 $ 131.5
Other 3.3 7.9
Allowance for doubtful accounts (3.9) (3.7)
- ----------------------------------------------- ------- -------
$ 132.3 $ 135.7
- ----------------------------------------------- ------- -------
Inventories:
Finished goods $ 73.6 $ 79.0
Work in process 19.3 20.9
Raw materials and supplies 28.1 33.0
- ----------------------------------------------- ------- -------
$ 121.0 $ 132.9
- ----------------------------------------------- ------- -------
Property, plant and equipment:
Land $ 12.6 $ 13.1
Buildings and improvements 107.1 106.1
Machinery and equipment 219.8 204.8
Furniture, fixtures and office equipment 26.0 25.6
Transportation equipment 16.7 16.6
Construction in progress 10.6 10.6
Accumulated depreciation (209.9) (188.3)
- ----------------------------------------------- -------- -------
$ 182.9 $ 188.5
- ----------------------------------------------- -------- -------
Accrued expenses:
Salaries, wages and related withholdings $ 23.6 $ 25.8
Employee benefits 8.6 7.5
Casualty insurance costs 9.5 9.5
Income taxes payable 0.5 1.3
Other 21.6 27.9
- ----------------------------------------------- -------- -------
$ 63.8 $ 72.0
- ----------------------------------------------- -------- -------
Other liabilities:
Employee benefits $ 41.3 $ 31.9
Casualty insurance costs 1.5 1.7
Other 1.9 4.0
- ----------------------------------------------- -------- -------
$ 44.7 $ 37.6
- ----------------------------------------------- -------- -------
At December 31, 1998, the Company's manufacturing operation in Canada had net
assets of $19.6 million which were subject to withdrawal restrictions resulting
from a financing agreement expiring in 1999. The majority of this amount was
invested in property, plant and equipment.
Page 39
<PAGE>
Supplemental cash flow information is as follows:
Twelve Months Ended Ten Months
December 31, Ended
------------------- December 31,
(Dollar amounts in millions) 1998 1997 1996
- ------------------------------------ ------ ------ ------------
Interest paid $ 20.9 $ 10.4 $ 9.1
Income taxes paid 39.3 38.4 16.9
Noncash investing and financing activities:
Capital lease obligations
incurred (terminated) 0.8 (6.4)
Fair value of assets acquired 175.3
Cash paid (132.5)
Liabilities assumed and incurred 42.8
- ------------------------------------ ------ ------ ------
Page 40
<PAGE>
SUPPLEMENTARY DATA
QUARTERLY RESULTS OF OPERATIONS
(unaudited)
The following tables set forth a summary of the unaudited quarterly results of
operations for the twelve-month periods ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
(Dollar amounts 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
in millions, except Ended Ended Ended Ended
per share data) March 31, 1998 June 30, 1998 September 30, 1998 December 31, 1998 Total
- ----------------- -------------- ------------- ------------------ ----------------- -------
<S> <C> <C> <C> <C> <C>
1998
Sales $199.7 $205.1 $226.6 $200.5 $831.9
Gross profit 60.5 63.1 70.7 64.0 258.3
Income before
extraordinary loss 13.7 13.8 19.2 16.6 63.3
Net income 13.7 13.8 17.2 16.6 61.3
Earnings per share:
Basic:
Income before
extraordinary loss .37 .36 .51 .45 1.69
Net income .37 .36 .46 .45 1.64
Diluted:
Income before
extraordinary loss .36 .35 .50 .44 1.65
Net income .36 .35 .45 .44 1.60
</TABLE>
The third quarter includes a net extraordinary loss of $2.0 million ($.05 per
share) on the redemption of long-term debt.
<TABLE>
<CAPTION>
(Dollar amounts 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
in millions, except Ended Ended Ended Ended
per share data) March 31, 1997 June 30, 1997 September 30, 1997 December 31, 1997 Total
- ----------------- -------------- ------------- ------------------ ----------------- -------
<S> <C> <C> <C> <C> <C>
1997
Sales $170.1 $160.5 $182.1 $204.2 $716.9
Gross profit 56.3 51.8 58.9 67.0 234.0
Net income 13.6 11.4 15.8 18.3 59.1
Earnings per share:
Basic .36 .30 .42 .49 1.57
Diluted .35 .30 .41 .47 1.53
</TABLE>
The fourth quarter includes the results of Federal, acquired on November 4, 1997
(see Note 4 of Notes to Consolidated Financial Statements). Federal's sales
were $14.5 million in the fourth quarter since acquisition.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 41
<PAGE>
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
See the "Election of Directors," "Executive Officers," and "Filing Disclosure"
sections of the proxy statement for the April 19, 1999, Annual Meeting of
Stockholders of Blount International, Inc., which sections are incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
See the "Executive Compensation," "Compensation of Directors," "Compensation
Committee Interlocks and Insider Participation," and "Employment Contracts,
Termination of Employment and Change in Control Arrangements" sections of the
proxy statement for the April 19, 1999, Annual Meeting of Stockholders of Blount
International, Inc., which sections are 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
19, 1999, Annual Meeting of Stockholders of Blount International, Inc., which
section is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the "Indebtedness of Management" and "Certain Transactions and Other
Matters" sections of the proxy statement for the April 19, 1999, Annual Meeting
of Stockholders of Blount International, Inc., which sections are incorporated
herein by reference.
Page 42
<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 years
ended December 31, 1998 and 1997 and the ten-month
period ended December 31, 1996 18
Consolidated Balance Sheets as of
December 31, 1998 and 1997 19
Consolidated Statements of Cash Flows for the years
ended December 31, 1998 and 1997 and the ten-month
period ended December 31, 1996 20
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1998 and 1997 and the
ten-month period ended December 31, 1996 21
Notes to Consolidated Financial Statements 22 - 40
Supplementary Data 41
(2) Financial Statement Schedules
Schedule II - Valuation and qualifying accounts
for the years ended December 31, 1998 and 1997
and the ten-month period ended December 31, 1996 48
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
None.
(c) Exhibits required by Item 601 of Regulation S-K:
* 2(a) 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).
* 2(b) Stock Purchase Agreement, dated November 4, 1997, by and among
Blount, Inc., Hoffman Enclosures, Inc., Pentair, Inc. and Federal-Hoffman, Inc.
which was filed as Exhibit No. 2 to the Form 8-K filed by Blount International,
Inc. on November 19, 1997 (Commission File No. 001-11549).
Page 43
<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-3 (Reg. Nos. 333-42481 and
333-42481-01), with respect to the 7% $150 million Senior Notes due 2005 of
Blount, Inc. which are guaranteed by Blount International, Inc., including
amendments and exhibits, which became effective on June 17, 1998.
* 4(c) $150,000,000 Credit Agreement dated as of April 1, 1997 among
Blount, Inc., Blount International, Inc. and certain banks filed as Exhibit 4(d)
to the Annual Report of Blount International, Inc. on Form 10-K for the fiscal
year ended December 31, 1997 (Commission File No. 001-11549).
*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).
Page 44
<PAGE>
*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).
*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) Employment Agreement between Blount, Inc. and Richard H.
Irving III which was filed as Exhibit 10(t) to the Transition Report of Blount
International, Inc. on Form 10-K for the transition period from March 1, 1996 to
December 31, 1996 (Commission File No. 001-11549).
Page 45
<PAGE>
*10(t) 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(u) 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(v) 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(w) 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(x) 1998 Blount Long-Term Executive Stock Option Plan of Blount
International, Inc. filed as part of Registration Statement on Form S-8 (Reg.
No. 333-56701), including exhibits, which became effective on June 12, 1998.
**10(y) Employment Agreement between Blount, Inc. and Gerald W.
Bersett.
**10(z) Supplemental Executive Retirement Plan between Blount, Inc.
and Gerald W. Bersett.
**10(aa) Amendment to the Employment Agreement between Blount
International, Inc. and Richard H. Irving.
**10(bb) Amendment to the Employment Agreement between Blount
International, Inc. and Harold E. Layman.
**10(cc) The Blount Deferred Compensation Plan.
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 included herein on page 51.
* Incorporated by reference.
** Filed electronically herewith. Copies of such exhibits may be obtained
upon written request from:
Blount International, Inc.
P.O. Box 949
Montgomery, AL 36101-0949
Page 46
<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
Executive Vice President Finance Operations
and Chief Financial Officer
Dated: February 22, 1999
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: February 22, 1999
/s/ Winton M. Blount /s/ C. Todd Conover
Winton M. Blount C. Todd Conover
Chairman of the Board Director
and Director
/s/ John M. Panettiere /s/ H. Corbin Day
John M. Panettiere H. Corbin Day
President and Chief Executive Director
Officer and Director
/s/ Haley Barbour /s/ Mary D. Nelson
Haley Barbour Mary D. Nelson
Director Director
/s/ Samuel R. Blount /s/ Arthur P. Ronan
Samuel R. Blount Arthur P. Ronan
Director Director
/s/ W. Houston Blount /s/ Andrew A. Sorensen
W. Houston Blount Andrew A. Sorensen
Director Director
/s/ R. Eugene Cartledge /s/ Rodney W. Blankenship
R. Eugene Cartledge Rodney W. Blankenship
Director Vice President and Controller
(Chief Accounting Officer)
Page 47
<PAGE>
<TABLE>
BLOUNT INTERNATIONAL, INC. AND 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>
Ten months ended
December 31, 1996
- -----------------
Allowance for doubtful
accounts receivable $ 3.9 $ 0.6 $ 1.5 (1) $ 3.0
======= ======= ======= =======
Year ended
December 31, 1997
- -------------------
Allowance for doubtful
accounts receivable $ 3.0 $ 1.0 $ 0.9 (2) $ 1.2 (1) $ 3.7
======= ======= ======= ======= =======
Year ended
December 31, 1998
- -------------------
Allowance for doubtful
accounts receivable $ 3.7 $ 0.9 $ 0.7 (1) $ 3.9
======= ======= ======= =======
</TABLE>
(1) Principally amounts written-off less recoveries of amounts previously
written-off.
(2) Principally allowances established for companies acquired by purchase.
Page 48
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
At December 31, 1998, consolidated, directly or indirectly, 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
Federal Cartridge Company Minnesota
Dixon Industries, Inc. Kansas
Gear Products, Inc. Oklahoma
Simmons Outdoor Corporation Delaware
CTR Manufacturing, Inc. North Carolina
Frederick Manufacturing Corporation Delaware
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, 1998.
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), Form S-8 (File No. 333-14261) and Form
S-8 (File No. 333-56701) of our report dated January 28, 1999, on our audits of
the consolidated financial statements and financial statement schedules of
Blount International, Inc. and subsidiaries as of December 31, 1998 and 1997,
and for the ten months ended December 31, 1996, which report is included in this
Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Atlanta, Georgia
January 28, 1999
Page 50
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BLOUNT INTERNATIONAL, INC. FOR THE PERIOD ENDED
DECEMBER 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 12-MOS
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EXHIBIT 10(y)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 28th day
of April, 1998, by and between BLOUNT, INC., a Delaware corporation
(the "Company"), and Gerald W. Bersett ("Executive").
W I T N E S S E T H:
WHEREAS, the Company and Executive desire to enter
into an agreement providing for Executive's employment by
Company and specifying the terms and conditions of such
employment; and
WHEREAS, Executive desires to continue his
employment with the Company on the terms and conditions
provided herein; and
WHEREAS, Executive's services for the Company will
benefit Blount International, Inc. ("BII"), which is the
parent corporation of the Company;
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
create an understanding 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 Group
President Outdoor Sports of the Company or other positions
to which 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, Inc.
(b) Unless earlier terminated as provided herein,
Executive's employment under this Agreement shall be for a
rolling, eighteen month term (the "Term") commencing on May
18, 1998, 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 eighteen months;
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 eighteen months 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 eighteen months
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 (d) below:
(a) An annual base salary ("Base Salary") of
Three Hundred Twenty-Five Thousand Dollars ($325,000.00),
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, to the extent designated by
the President and Chief Executive Officer of the Company,
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 50% of
Base Salary; as provided in the Target Incentive Plan,
bonuses may be adjusted up or down based on attainment of
individual and corporate performance objectives. Maximum
bonus attainable is 200% of target (100% of base salary).
The annual incentive bonus payable under this subsection (b)
shall generally 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 generally by the Company to its
executive officers (whether such plan or arrangement is
established by the Company or BII), including plans
providing retirement, 401(k) benefits, deferred
compensation, health care, life insurance, disability and
similar benefits. Blount's ExecUcare program will also be
provided to Executive and his dependents.
(d) The Company will provide membership
initiation fees and dues at a Country Club to be determined
by mutual agreement between the Executive and the President
and Chief Executive Officer. Executive is eligible for
three weeks vacation his first year of employment and four
weeks each year thereafter. Executive will be provided an
annual physical examination and Executive will be provided
an automobile per company policy. Financial and estate
planning and income tax preparation will be provided through
Blount's outside consultant, Coopers & Lybrand.
Exhibit A, attached and made part of this
agreement, lists additional considerations for Executive,
guaranteed by the Company.
4. Confidentiality and Noncompetition.
(a) Executive acknowledges that, prior to and
during the Term of this Agreement, the Company (and BII) has
furnished and will furnish to Executive Confidential
Information which could be used by Executive on behalf of a
competitor of the Company (or BII) to the Company's (or
BII'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 (and BII). 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 (and BII's) legitimate business
interests and good will.
(b) Executive agrees that he shall protect the
Company's (and BII'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 President and Chief Executive Officer
of the Company.
(c) Upon the termination or expiration of his
employment hereunder, Executive agrees to deliver promptly
to the Company all Company (and BII) 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 (and BII'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 for whatever reason,
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 eighteen months
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 (and BII) which
could not be compensated in damages. Accordingly, if
Executive breaches or threatens to breach this Section 4,
the Company (and BII) shall be entitled to seek injunctive
relief, in addition to any other rights or remedies of the
Company (or BII).The existence of any claim or cause of
action by Executive against the Company (or BII), whether
predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company (and
BII) of Executive's agreement under this Section 4 (e).
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 (g) below. The time periods in
(a) through (e) below shall be the lesser of the eighteen
(18) month period stated therein or the time period
remaining from the date of Executive's termination to the
end of the Term of this Agreement. 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 , 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 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
eighteen (18) months following the month in which
his employment under this Employment Agreement is
terminated in an amount for each such month equal
to one-twelfth of the average of the bonuses
earned by him for the two fiscal years in which
bonuses were paid immediately preceding the fiscal
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 will be achieved for such
year), based upon the number of days that he was
employed during such fiscal year divided by 365
days. 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, with respect to the 12
months payments, the lump sum amount shall be
determined by taking the twelve monthly bonus
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.
(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 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 to the extent such plans
are still maintained by the Company (whether such
plans are established by the Company or BII).
Executive's participation in such retirement plans
shall continue for a period of 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 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
payments 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 eighteen (18) months.
(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) Stock Options. For purposes of the 1992 Plan
and other stock option programs of the Company in
which the Executive may participate, Executive
shall be deemed to have completed one eighteen
months (18) of service with the Company.
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 (g) 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 or incapacity (as defined in the next
two sentences) of Winton M. Blount, 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. For purposes of this Agreement, Mr. Blount
shall be considered incapacitated if he is determined to be
permanently unable to perform his duties as Chairman of the
Board of Blount International, Inc. The Board of Blount
International, Inc. shall have the authority to make the
determination whether Mr. Blount is incapacitated under this
Agreement and shall also have the authority to determine
whether Mr. Blount has ceased to be incapacitated hereunder.
(a) Stock Options. As of his date of
termination, all outstanding stock options granted to
Executive 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 (to the extent such period does not
extend beyond the original term of the option).
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" - For the purposes of this Agreement,
"cause" shall be defined as any of the following acts by
Executive: (a) any act that constitutes a fraud, felony or
gross malfeasance of duty on the part of the Executive and
that results in material injury to the Company (or BII) ;
(b) Executive's willful and continued failure to devote his
full business time and efforts to the performance of duties
for the Company; (c) any action or failure to act that is in
knowing insubordination to the directives of Executive's
superiors, if lawful, ethical, and germane to Executive's
responsibilities; (d) any continuing failure on the part of
Executive to perform the major responsibilities of his
position in a professional and competent manner; (e) any
willful disclosure of trade secrets; (f) any breach or
threatened breach of this Agreement; or (g) any willful
refusal to carry out the policies and directives of the
Chief Executive Officer of the Company or his designee;
provided, however, that in the case of (b), (d) or (f)
above, such conduct shall not constitute cause unless a
notice is delivered to Executive by the Chairman of the
Board of the Company or his designee pursuant to Section 7
setting forth with specificity (i) the conduct deemed to
qualify as cause, (ii) reasonable action that would remedy
such objection, and (iii) 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. Upon
termination for cause, the Company shall pay to Executive
only that portion of Executive's Base Salary which has
accrued to Executive to the date of termination but which
has not been paid.
6.3 "Change in Control" - Either
(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) within any
twelve (12) month period of securities of BII
representing an aggregate of fifty percent (50%)
or more of the combined voting power of BII'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);
(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 BII, 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 BII's voting securities owned by the Blount
Partnership;
(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 BII's then
outstanding securities; or
(d) During any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board or BII, 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 BII 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 BIII 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 BII (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 BII or an agreement for the sale or
disposition by BII of all or substantially all of
BII'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 BII determines affects control of BII 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) consecutive 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 or
incapacity (as defined in Section 5.3) of Winton M. Blount,
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 paragraphs (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 Group President Outdoor Sports 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 or
incapacity 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 or incapacity of Mr. Blount, or the Company's
requiring Executive without his consent to be based anywhere
other than the Executive's principal office, 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 or
incapacity of Mr. Blount, which is material to Executive's
total compensation or any substitute plans adopted prior to
the Change in Control or death or incapacity 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 or incapacity 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, medical, health and accident or
disability plans in which Executive was participating at the
time of the Change in Control or death or incapacity 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 or incapacity 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 one or more of the clauses 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 or transferor to the Company, the Company
will require any successor or transferor to all or
substantially all of the business and/or assets of the
Company (whether direct or indirect, by purchase, merger,
reoganization, liquidation, consolidation or otherwise) 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: Gerald W. Bersett
114 Imperial Point Drive
Lake Ozark, Missouri 65049
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:
______________________________
GERALD W. BERSETT
Group President Outdoor Sports
COMPANY:
BLOUNT, INC.
By:___________________________
JOHN M. PANETTIERE
President
& Chief Executive Officer
Witness:_____________________
Exhibit A
Additional considerations guaranteed to Mr. Gerald W. Bersett
for his joining the Company as Group President Outdoor Sports
by April 28, 1998 are:
1. Design and provision of a Supplemental Executive Retirement
Plan providing, at age 65, nine years which combined with
nine years earned via the Blount Pension Plan will provide a
total of 18 years retirement benefit at age 65. Attached is
a chart indicating service credit under this arrangement.
2. A separate commitment (letter) to provide options on 30,000
shares of Blount A to vest over a three year period from
date of hire will be sent shortly after commencement of
employment. Strike price to be average of high and low on
date of employment.
3. Paid vacation of three weeks first year, four weeks each
year thereafter.
4. Waiver of one year waiting period for disability benefit
coverage. Coverage begins on employment date.
5. Guaranteed CY `98 bonus of not less than $100,000. Bonus
could be greater than $100,000 if bonus plan calculation
generates an amount greater than $100,000 guarantee.
6. Initial office location of Executive will be in the St.
Louis, Missouri area.
<PAGE>
EXHIBIT 10(z)
BLOUNT, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
GERALD W. BERSETT
1. Purpose - The purpose of this Supplemental Executive
Retirement Plan (SERP) is to provide Gerald W. Bersett with a
retirement benefit payable as a supplement to his vested
benefit under The Blount Retirement Plan.
2. Definitions
a. Blount Plan is The Blount Retirement Plan, as amended and
restated effective January 1, 1995, including any future
amendments or restatements adopted and effective while
Gerald W. Bersett is an employee of Blount, Inc.
b. Disability shall mean periods of time during which
(i) Gerald W. Bersett is totally and permanent disabled, and
(ii) Gerald W. Bersett is receiving Social Security
disability benefits.
c. Effective Date of this SERP is May 11, 1998.
d. Excess Benefit Plan is the Blount, Inc. and Subsidiaries
Supplemental Retirement Benefit Plan, as in effect on
November 3, 1995, including any future amendments or
restatements adopted and effective while Gerald W.
Bersett is an employee of Blount, Inc.
e. Normal Retirement Date is October 16, 2005.
f. SERP is this Supplemental Executive Retirement Plan
sponsored by Blount, Inc. for Gerald W. Bersett.
g. Termination Date is the date on which the employment
relationship between Gerald W. Bersett and Blount, Inc.
(including any "affiliated company" as that term is
defined in the Blount Plan) ceases.
3. Years of Benefit Service shall mean the years of benefit
service granted to Gerald W. Bersett under this SERP and the
years of "Benefit Service" (as that term is defined in the
Blount Plan) granted to Gerald W. Bersett under the Blount
Plan. Years of Benefit Service shall be determined in
accordance with the following schedule:
Age Years of Benefit Years of Benefit Total Years of Vested
Service under the Service under Benefit Service
Blount Plan the SERP
58 1 + 0 = 0
59 2 + 0 = 0
60 3 + 0 = 0
61 4 + 0 = 0
62 5 + 7 = 12
63 6 + 8 = 14
64 7 + 9 = 16
65 8 + 10 = 18
Years of Benefit Service under the SERP shall continue to accrue
during any period of Disability provided that Years of Benefit
Service continue to accrue under the Blount Plan.
4. Vested Retirement Benefits payable under this SERP shall equal
(a) less (b) where:
(a) is the monthly retirement income that would be payable to
Gerald W. Bersett under the provisions of the Blount
Plan, assuming
(i) that in determining the fraction for purposes of
Section 6.1(a)(i) of the Blount Plan, the numerator
shall be his total Years of Benefit Service
determined in accordance with paragraph 3 at his
age when his employment terminates and the
denominator of which is 18; and
(ii) that the Blount Plan does not contain the
limitation on compensation imposed by Section
401(a)(17) of the Internal Revenue Code or the
limitation on benefits imposed by Section 415 of
the Internal Revenue Code;
and
(b) is the sum of (i) and (ii) where
(i) is the monthly retirement income actually payable
to Gerald W. Bersett under the Blount Plan; and
(ii) is the monthly retirement income actually payable
to Gerald W. Bersett under the Excess Benefit Plan.
Vested retirement benefits are payable on or after Gerald W.
Bersett's Termination Date provided he has obtained a fully
vested interest under the Blount Plan. No benefits shall be
payable under this SERP until Gerald W. Bersett has obtained
a fully vested interest under the Blount Plan. No benefits
are payable during continued employment. The above benefit is
on a life annuity basis. If an optional form of benefit is
desired, the benefit above will be adjusted by the actuarial
factors used by the Blount Plan. In determining benefits
under this paragraph, amounts described in paragraphs (b)(i),
(b)(ii) and (b)(iii) above that are paid in a form other than
a straight life annuity shall be valued as a straight life
annuity using the actuarial factors used by the Blount Plan.
5. Gerald W. Bersett shall receive the following benefits as
described in the Blount Plan, which benefits shall be
calculated on the basis of the benefit formula set forth in
paragraph 4 above:
a. Benefits due to the pre-retirement death of Gerald W.
Bersett;
b. Normal and optional forms of payment under the Blount
Plan provided that the form of payment under this SERP
shall be the same as the form of payment elected by
Gerald W. Bersett under the Blount Plan;
c. If Gerald W. Bersett elects for payment of his vested
retirement benefits to commence prior to his Normal
Retirement Date but after 10 Years of Benefit Service as
determined under paragraph 3, his vested retirement
benefits will be reduced by .3% for each full month by
which the date his benefits begin precedes his Normal
Retirement Date. If Gerald W. Bersett has less than 10
Years of Benefit Service, his vested retirement benefits
shall be reduced on an actuarially equivalent basis using
the actuarial factors used by the Blount Plan.
6. Non-Alienation of Benefits - To the maximum extent permitted
by law, no benefit under this SERP shall be assignable or
subject in any manner to alienation, sale, transfer, claims of
creditors, pledge, attachment or encumbrances of any kind.
7. Administration - The Board of Directors of Blount, Inc. or at
its discretion, the Compensation Committee of the Board of
Directors, shall administer, construe, and interpret this
SERP. No member of the Board of Directors or the Committee,
as the case may be, shall be liable for any act done or
determination made in good faith. The construction and
interpretation by the Board of Directors or the Committee of
any provisions of this SERP shall be final and conclusive.
The Board of Directors or the Committee may, in its
discretion, delegate its duties to an officer or employee or
committee composed of officers or employees of Blount, Inc.
8. Amendment or Termination - The Board of Directors and Gerald
W. Bersett may amend this SERP from time to time in any
respect with the consent of the other party. This SERP may
not be terminated without the consent of Blount, Inc. through
its Board of Directors or its designated Committee or officer
and Gerald W. Bersett.
9. Construction of the SERP - This SERP is unfunded. This SERP
shall be so construed that it will be maintained primarily for
the purpose of providing certain retirement, death and
disability benefits for Gerald W. Bersett.
This SERP and the rights and obligations of the parties
thereunder, shall be construed in accordance with the laws of
the State of Alabama.
10. Forfeiture of Benefits - At the discretion of the Board of
Directors and after a timely written notice to Gerald W.
Bersett (or his spouse or other beneficiary if Gerald W.
Bersett has no right or power to change such beneficiary,
whether by reason of his death or otherwise), rights to
receive any benefits under this SERP may be forfeited,
suspended, reduced or terminated by the Board of Directors if
it determines in good faith that good cause for the
forfeiture, suspension, reduction or termination has been
shown. For purposes of this Section 10, good cause shall mean
(1) Gerald W. Bersett's engaging in competition with Blount,
Inc. without appropriate prior authorization from the Board of
Directors, (2) any material breach or violation of Gerald W.
Bersett's duties as an employee including but not limited to
violation of any ethics or business conduct policies adopted
by the Board of Directors, or (3) any material misconduct,
including misconduct in the performance of duties which is
manifestly injurious to Blount, Inc. Written notice under
this Section 10 shall be timely if sent to Gerald W. Bersett's
last known address within 12 months after the Board of
Directors discovers the existence of facts which could give
rise to a loss of benefits; provided, however, that said
notice, to be effective, must be sent to Gerald W. Bersett
within 18 months following his termination of employment with
Blount, Inc.
11. Denied Claims
a. If any application for payment of a benefit under the
SERP shall be denied, Blount, Inc. shall;
(i) Notify Gerald W. Bersett within a reasonable time
of such denial setting forth the specific reasons
therefor; and
(ii) Afford Gerald W. Bersett a reasonable opportunity for a
full and fair review of the decision denying the claim.
b. Notice of such denial shall set forth, in addition to the
specific reasons for the denial, the following:
(i) Reference to pertinent provisions of the SERP;
(ii) Such additional information as may be relevant to
denial of claim;
(iii)An explanation of the claims review procedure;
(iv) Advice that Gerald W. Bersett may request the
opportunity to review pertinent plan documents and
submit a statement of issues and comments.
c. Within 60 days following advice of denial of his claim,
upon request made by Gerald W. Bersett for a review of
such denial, Blount, Inc. shall take appropriate steps to
review its decision in light of any further information
or comments submitted by Gerald W. Bersett. Blount, Inc.
shall be empowered to hold a hearing at which Gerald W.
Bersett shall be entitled to present the basis of his
claim for review and at which he may be represented by
counsel.
d. Blount, Inc. shall render a decision within 60 days after
Gerald W. Bersett's request for review (which may be
extended to 120 days if circumstances so require) and
shall advise Gerald W. Bersett in writing of its decision
on such review, specifying its reasons and identifying
appropriate provisions of the Plan.
Signed and agreed to this ___ day ______________________, 1998.
BLOUNT, INC.
By:_____________________________
Its:____________________________
________________________________
Gerald W. Bersett
<PAGE>
EXHIBIT 10(aa)
AMENDMENT NO. 1
Pursuant to Section 14 of that certain Employment
Agreement by and between Blount International, Inc. ("Company")
and Richard H. Irving III ("Executive") dated as of the 15th day
of May, 1995 ("Agreement"), the parties hereby amend and modify
such Agreement ("Amendment No. 1") and agree that effective from
and after this 1st day of November, 1998:
In order better to reflect the terms and conditions of
comparable agreements, and in recognition of Executive's
contribution to the Company, the "eighteen (18) month" references
at Sections 5.1, 5.1(a), 5.1(b), 5.1(c), 5.1(d)(both references),
5.1(e), 5.1(g), 5.1(h), 5.1(i) and 5.4(a) shall be amended and
modified to read, "twenty-four (24) months."
IN WITNESS WHEREOF, the parties have executed this
Amendment No. 1 as of the day and year first above written.
EXECUTIVE:
_____________________________
RICHARD H. IRVING III
Senior Vice President and
General Counsel
COMPANY:
BLOUNT INTERNATIONAL, INC.
By: ___________________________
JOHN M. PANETTIERE
President
& Chief Executive Officer
Witness:_____________________
_____________________________
Notary Public
<PAGE>
EXHIBIT 10(bb)
AMENDMENT NO. 1
Pursuant to Section 14 of that certain Employment
Agreement by and between Blount International, Inc. ("Company")
and Harold E. Layman ("Executive") dated as of the 22nd day of
August, 1994 ("Agreement"), the parties hereby amend and modify
such Agreement ("Amendment No. 1") and agree that effective from
and after the 11th day of October, 1998, the following be added
as a new Section 5.3 (c):
"(c) As of Executive's date of termination as described
in this Section 5.3, any offset that would otherwise be
applicable to the benefit payable to Executive under the Blount
Deferred Compensation Plan adopted October 9, 1998 (or any
successor or substitute plan "SERP") for benefits payable under a
prior employer's retirement plan (whether qualified or non-
qualified) shall not apply, and Executive's SERP shall be
calculated without regard to any such offset."
IN WITNESS WHEREOF, the parties have executed this
Amendment No. 1 effective October 11, 1998.
EXECUTIVE:
_____________________________
HAROLD E. LAYMAN
Executive Vice President &
Chief Financial Officer
COMPANY:
BLOUNT INTERNATIONAL, INC.
By: ___________________________
JOHN M. PANETTIERE
President
& Chief Executive Officer
Witness:_____________________
_____________________________
Notary Public
<PAGE>
EXHIBIT 10(cc)
THE BLOUNT
DEFERRED COMPENSATION PLAN
I.
Blount International, Inc. and its wholly owned
subsidiary Blount, Inc. hereby adopt The Blount Deferred
Compensation Plan for the purpose of providing supplemental
retirement benefits to a select group of highly compensated or
management employees of Blount International, Inc. and Blount, Inc.
It is intended that the Plan constitute an "employee pension
benefit plan," within the meaning of Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended.
II.
When used herein, terms which are defined in the Blount
Retirement Plan, as amended and in effect at the Effective Date,
shall have the meanings given to such terms therein unless a
different meaning is ascribed to such a term below. In addition,
the following terms shall, when used herein, have the meanings
indicated below:
(a)"Accrued Benefit" shall mean with respect to any
Participant at any time, an annuity providing for monthly payments
commencing on the first day of the calendar month next following
the Participant's attainment of age 65 or later actual retirement
and terminating on the first day of the calendar month in which the
Participant dies, in an amount equal to (i) less (ii) below and
monthly payments to the Participant's surviving Spouse, if any,
commencing on the first day of the calendar month next following
such Participant's death and terminating on the first day of the
calendar month in which Spouse dies, in an amount equal to 66 2/3%
of (i) less (ii) below, where:
(i) is the product of 0.2083% of the
Participant's Average Earnings multiplied by
his Years of Benefit Service up to, but not in
excess of, 20; and
(ii) is the amount of a Straight Life Annuity
commencing on the first day of the month
following the Participant's attainment of age
65 that is the Actuarial Equivalent of his
Social Security Amount plus the aggregate
benefit payable to the Participant under all
other defined benefit plans, whether qualified
under Section 401(a) of the Code or not,
maintained by the Employer or to which any
Employer contributes, plus any pension plan
maintained by any employer by whom the
Participant was employed prior to his
employment by an Employer.
For purposes of subparagraph (ii) above, any amounts payable to a
Participant solely pursuant to his employment agreement with his
Employer shall not be treated as paid pursuant to a defined benefit
plan and therefore shall not be used to reduce the benefit in
subparagraph (i) above.
(b)"Average Earnings" shall mean the average Earnings
of a Participant for the three fiscal years of the Employers out of
the last ten such fiscal years (or such lesser number as the
Participant may have been employed by an Employer) for which such
average is highest.
(c)"Blount Partnership" shall mean Blount Holding
Company, L.P., the limited partnership that owns and holds voting
securities of the Company.
(d)"Committee" shall mean the Compensation and
Management Development Committee of the Board.
(e)"Earnings" for a calendar year shall mean a
Participant's base salary and targeted bonus for such calendar year
under the Annual Target Incentive Plan (or a successor plan), but
shall exclude discretionary bonuses.
(f)"Excess Parachute Payment" shall have the meaning
provided in Section 280G(b)(1) of the Code.
(g)"Effective Date" shall mean October 8, 1998.
(h)"Employers" shall mean the Company and Blount, Inc.
(i)"Good Reason" shall have the same meaning given to
such term in the Participant's employment agreement and shall be
subject to the same conditions as provided in such agreement;
provided, however, if the Participant has no employment agreement,
"Good Reason" shall have a meaning similar to and using the same
criteria as those set forth in other Participant's employment
agreements.
(j)"Parachute Payment" shall have the meaning provided
in Section 280G(b)(2) of the Code.
(k)"Participant" shall mean Winton M. Blount, John M.
Panettiere, D. Joseph McInnes, James S. Osterman, Harold E. Layman,
Donald B. Zorn, and such other highly compensated, management
employees of the Employers as the Committee may from time to time
designate.
(l)"Plan" means this Plan, as it may be amended from
time to time.
(m)"Present Value" shall have the meaning provided in
Section 280G(d)(4) of the Code.
(n)"Reasonable Compensation" shall have the meaning
provided in Section 280G(b)(4) of the Code.
(o)"Retirement Plan" means The Blount Retirement Plan,
as the same may be from time to time amended.
(p)"Years of Benefit Service" shall mean with respect
to a Participant at any time
(i) the sum of
(A) the number of years of Benefit
Service credited to such Participant
under the Retirement Plan at such time,
(B) in the event that the employment of a
Participant is terminated under
circumstances entitling the Participant
to continue to receive payments of his
base salary for a period of time pursuant
to the terms of his employment agreement
with his Employer, the number of years
(rounded up for any fraction of a year)
included in such period,
except as otherwise provided in (ii), (iii) or (iv) below.
(ii) John M. Panettiere shall be credited
with one year of Benefit Service for
each of the first two years of
Benefit Service credited to him
under the Retirement Plan, two Years
of Benefit Service for each year of
Benefit Service in excess of two
credited to him under the Retirement
Plan, and two years for each year
described in Section II(p)(i)(B)
above.
(iii) Donald B. Zorn shall be
credited with two Years
of Benefit Service for
each year of Benefit
Service credited to him
under the Retirement
Plan, and two years for
each year described in
Section II(p)(i)(B)
above.
(iv) In the case of a Participant who is
admitted after the Effective Date,
Years of Benefit Service shall be
determined as provided in paragraph
(i) above except, and to the extent
that, the Committee, at the time it
admits such Participant to
participation in the Plan, shall
specify that such Participant's
Years of Benefit Service shall be
determined in accordance with
another method; provided, that such
other method of determining Years of
Benefit Service for such Participant
shall be set forth in a written
instrument which shall be attached
to the Plan.
III.
(a)A Participant who attains age 65 while in the employ
of an Employer may thereupon retire and commence receiving payment
of his Accrued Benefit on the first day of the month following such
retirement. A Participant whose employment with his Employer is
terminated prior to his attainment of age 65 because the
Participant has become Disabled shall be treated as if his
employment continued (and he will continue to receive credit for
years of benefit service) until the earlier of his 65th birthday or
the date he ceases to be Disabled.
(b)A Participant who continues in the employ of an
Employer after attaining age 65 and subsequently retires shall be
entitled to receive payment of his Accrued Benefit, actuarially
adjusted to reflect the deferral of commencement thereof beyond the
first day following his 65th birthday, commencing on the first of
the month following such retirement. The actuarial adjustment to
the Participant's Accrued Benefit shall be calculated using the
factors then utilized to determine Actuarial Equivalents under the
Retirement Plan.
(c)In the event a Participant is discharged by his
Employer or resigns at the request of his Employer, the Participant
shall be entitled to receive payment of his Accrued Benefit
commencing on the first day of the month following the earlier of
(i) or (ii) below:
(i) the date he attains age 65 or
(ii) the later of the expiration of the period for
which he receives salary payments (or would receive
such salary payments if the amount were not paid as
a lump sum) from his Employer pursuant to his
employment agreement or the date he attains age 55.
If the Participant elects to commence payment of such benefit prior
to the Participant's attaining age 65, the amount otherwise payable
shall be reduced by 0.3% for each full month between the date
payment commences and the date the Participant will attain age 65.
(d)In the event a Participant terminates employment
with his Employer for Good Reason, he shall be entitled to receive
payment of his Accrued Benefit, commencing on the first day of the
month following the earlier of (i) or (ii) below:
(i) the date he attains age 65 or
(ii) the later of the expiration of the period for
which he receives salary payments (or would receive
such salary payments if the amount were not paid as
a lump sum) from his Employer pursuant to his
employment agreement or the date he attains age 55.
If the Participant elects to commence payment of such benefit prior
to the Participant's attaining age 65, the amount otherwise payable
shall be reduced by 0.3% for each full month between the date
payment commences and the date the Participant will attain age 65.
(e)In the event a Participant dies while in the employ
of an Employer, the Participant's Spouse shall be entitled to
receive a benefit commencing at the same time and in the same
amount as the benefit to which such Spouse would have been entitled
if the Participant had terminated employment pursuant to Section
III(d) above on his date of death and commenced receiving payment
of his Accrued Benefit (ignoring any election by Participant to
receive such Accrued Benefit in a lump sum) on the first day of
the month following the later of his date of death or the date he
would have attained age 55 (taking into account any reduction in
the Participant's Accrued Benefit attributable to commencement
prior to the Participant's attainment of age 65).
(f)If a Participant terminates employment with his
Employer under circumstances entitling the Participant to payment
of his Accrued Benefit and dies before payment of such Accrued
Benefit commences, the Participant's Spouse shall be entitled to
receive a benefit commencing at the same time and in the same
amount as the benefit to which such Spouse would have been entitled
if the Participant had terminated employment pursuant to Section
III(d) above and commenced receiving payment of his Accrued Benefit
(ignoring any election by Participant to receive such Accrued
Benefit in a lump sum) on the first day of the month following the
later of his date of death or the date he would have attained age
55 (taking into account any reduction in the Participant's Accrued
Benefit attributable to commencement prior to the Participant's
attainment of age 65).
(g)If Participant's employment is terminated pursuant
to Paragraph III(c) or (d) above within 24 months following a
change in control (as such term is defined in the Participant's
employment agreement) under circumstances that would entitle
Participant to benefits under his employment agreement upon such
termination, the Participant may elect on such form and in such
manner as determined by the Committee to receive his Accrued
Benefit in the form of a single lump sum payment. The lump sum
payment shall be actuarially equivalent to the present value of the
Participant's Accrued Benefit (not including the value of any
spousal annuity), calculated using the same factors then utilized
to determine Actuarial Equivalence under the Retirement Plan. The
lump sum payment shall be made to the Participant within 30 days of
the date he would otherwise have commenced receiving payments under
Paragraph III(c) or (d) above.
IV.
(a)If all or any portion of the payments to be made to,
or with respect to, a Participant hereunder are treated as Excess
Parachute Payments (whether by action of the Internal Revenue
Service or otherwise), the Participant shall be protected from
depletion of the amount of his benefits by payment of a tax
equalization payment in accordance with this paragraph (a). In
connection with any Internal Revenue Service examination, audit or
other inquiry, the Participant and his Employer shall take actions
to provide and to cooperate in providing evidence to the Internal
Revenue Service (and, if applicable, the State of Alabama) that the
benefits under this Agreement do not result from the payment of
Excess Parachute Payments. The tax equalization payments shall be
an amount which, when added to the other amounts payable, or to be
provided, to the Participant hereunder will place the Participant
in the same position as if the excise tax penalty of Section 4999
of the Code (and any state tax statute) or any successor statute of
similar import, do not apply to any of the payments provided under
this Plan. The amount of the tax equalization payments shall be
determined by the Company's independent accountants and shall be
paid to the Participant not later than ten (10) days prior to the
date any excise tax under Section 4999 of the Code is due to be
paid by the Participant.
For purposes of this Paragraph IV(a):
(i) Except as provided in (b) below, the benefits payable to
a Participant under this Plan or any employment agreement or other
plan or program of the Employer, shall not be reduced to prevent
the imposition of an excise tax under Section 4999 resulting from
the payments received under this Plan;
(ii) If the payment of benefits under this Plan to a
Participant causes the payments or benefits received under an
employment agreement or other plan or program of the Employer to be
treated as Excess Parachute Payments (that would not otherwise be
so treated) subject to the excise tax under Section 4999 of the
Code, the tax equalization payment hereunder shall include an
additional amount that will place the Participant in the same
position as if the excise tax did not apply to such other payments.
For purposes of this subparagraph (ii), the payments under the
employment agreement or other plan or program shall be treated as
being made first and then the payments under the Plan shall be
added to such amounts;
(iii) For Participants who are entitled to a tax equalization
payment under this Plan and under an employment agreement or other
plan or program of the Employer, the operation of the tax
equalization provisions shall be coordinated so that the
Participants shall be in the same position as if the excise taxes
of Section 4999 of the Code did not apply to the payments or
benefits the Participant receives under any arrangements with the
Employer.
(b)In addition to the limits otherwise provided in this
Section IV, the extent permitted by law, the Participant may in his
sole discretion elect to reduce any payment he may be eligible to
receive through this Plan to prevent the imposition of excise taxes
on the Participant under Section 4999 of the Code.
V.
The Committee shall have full power and authority to
construe, interpret and administer the Plan, and all decisions,
actions, or interpretations of the Committee shall be final,
conclusive and binding upon all parties. Any action of the
Committee may be taken by instrument in writing. No member of the
Committee shall be personally liable by reason of any contract or
other instrument executed by him or on his behalf in his capacity
as a member of the Committee nor for any mistake of judgment made
in good faith, and the Company shall indemnify and hold harmless
each member of the Committee and each other officer, employee,
director of the Company to whom any duty or power related to the
administration or interpretation of the Plan may be allocated or
delegated against any other cost or expenses (including counsel
fees) or liability (including any sum paid in settlement of a claim
with the approval of the Board) arising out of any act or omission
to act in connection with the Plan, unless arising out of such a
person's own fraud or bad faith.
VI.
The procedure for review and appeal of claims for
benefits hereunder shall be the same as the procedure prescribed by
the Retirement Plan except that the Committee shall have the
responsibilities and rights delegated to the Administrative Officer
by the procedure prescribed in the Retirement Plan.
VII.
The Plan may be amended or terminated only with the
consent of all Employers and Participants; provided, that the
Company, without the Participants' consent, may make amendments to
increase benefits (for a Participant or group of Participants), to
increase Participants' rights or to change insignificant
administrative matters, provided further that no such amendment
shall adversely affect the rights of any Participant.
VIII.
Except to the extent otherwise required by law, no amount
payable at any time under the Plan shall be subject in any manner
to alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, attachment, charge, or encumbrance of any kind,
nor in any manner be subject to the debts or liabilities of any
person, and any attempt to so alienate or subject any such amount,
whether presently or thereafter payable, shall be void. In the
event any person shall attempt to, or shall, alienate, sell,
transfer, assign, pledge, attach, charge, or otherwise encumber any
amount payable under the Plan or any part thereof, or if by reason
of his bankruptcy or other event happening at such time such amount
would be made subject to his debts or liabilities or would
otherwise not be enjoyed by him, then the Committee, if it so
elects, may direct that such amount be withheld and that the same
or any part thereof be paid or applied to or for the benefit of
such person, his spouse, children or other dependents, or any of
them, in such manner and proportion as the Committee may deem
appropriate.
IX.
No Participant shall have any right, title, or interest
whatsoever in and to any assets of an Employer or any investments
which an Employer may make to aid in meeting its obligations under
the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between an
Employer and any Participant. To the extent any person acquires
the right to receive payments from an Employer under the Plan, such
right shall be no greater than the right of any unsecured general
creditor of an Employer. All payments to be made hereunder shall
be paid from the general funds of the Employers or from the trust
created pursuant to that certain declaration of trust captioned
"Blount, Inc. Executive Benefit Plan Trust," between the Company
and SunTrust Bank dated April 17, 1995.
X.
Notwithstanding anything herein to the contrary, nothing
contained in the Plan shall give any employee the right to be
retained in the employment of an Employer or effect the right of an
Employer to dismiss any employee. The adoption of the Plan shall
not constitute a contract between an Employer and any employee.
XI.
The Plan is intended to constitute an unfunded pension
benefit plan for a select group of management or highly compensated
personnel, and all rights hereunder shall to the extent not
governed by federal law be governed by and construed in accordance
with the laws of the State of Alabama.
IN WITNESS WHEREOF, the Employers have caused this instrument
to be executed on this _____ day of _________________________, 1998.
BLOUNT INTERNATIONAL, INC.
By __________________________________
Its __________________________________
BLOUNT, INC.
By __________________________________
Its __________________________________
THE BLOUNT
DEFERRED COMPENSATION PLAN
ELECTION FORM
Name:_______________________________________________________________
Social Security Name:_______________________________________________
I understand that unless I elect otherwise, payments under the
Blount Deferred Compensation Plan will be made in equal monthly
payments over my lifetime with additional monthly payments made to
my surviving spouse, if any, upon my death in an amount equal to 66
2/3% of the payments made to me. Under the Plan, if certain events
occur, I have the right to elect to receive a single lump sum
payment which is actuarially equivalent to the payments that would
be made to me over my lifetime (not including the payments that
could be paid to my surviving spouse upon my death). I understand
that if I elect a lump sum payment, no additional amount will be
payable to my spouse upon my death.
I further understand that this election as to the method of
payment can be revoked but that no such revocation or subsequent
election to receive a lump sum payment will be valid unless it is
made at least twenty-four (24) months prior to the date payment is
otherwise scheduled to commence.
By signing below, I hereby elect to receive payment of any
Accrued Benefit under the Blount Deferred Compensation Plan in a
single lump sum payment upon the occurrence of certain events.
_____________________________________________ ________________
Participant's Signature Date
Received by Company:__________________________ ________________
Signature Date
<PAGE>
