FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1995
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-7002
BLOUNT, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0593908
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4520 Executive Park Drive 36116-1602
Montgomery, Alabama (Zip Code)
(Address of principal executive offices)
(334) 244-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock May 31, 1995
--------------------- -----------------
Class A Common Stock $1.00 Par Value 8,646,149 shares
Class B Common Stock $1.00 Par Value 3,978,492 shares
Page 1
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BLOUNT, INC. AND SUBSIDIARIES
INDEX
Page No.
------------
Part I. Financial Information
Consolidated Balance Sheets -
May 31, 1995 and February 28, 1995 3
Consolidated Statements of Income -
three months ended May 31, 1995 4
Consolidated Statements of Cash Flows -
three months ended May 31, 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis 9
Exhibit 11 - Computation of Net Income
Per Common Share 12
Page 2
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BLOUNT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
May 31, February 28,
1995 1995
---------- ----------
(Unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents, including short-term
investments of $38,731 and $39,458 $ 42,945 $ 42,576
Accounts receivable, net of allowances for
doubtful accounts of $2,672 and $2,611 129,371 130,665
Inventories 75,212 77,075
Deferred income taxes 25,030 25,068
Other current assets 6,357 16,153
-------- --------
Total current assets 278,915 291,537
Property, plant and equipment, net of accumulated
depreciation of $147,024 and $145,519 126,306 134,289
Cost in excess of net assets of acquired
businesses, net 67,770 68,762
Other assets 26,777 23,200
-------- --------
Total Assets $499,768 $517,788
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable and current maturities of
long-term debt $ 5,611 $ 7,791
Accounts payable 39,695 64,793
Accrued expenses 93,117 92,190
Other current liabilities 2,687 4,658
-------- --------
Total current liabilities 141,110 169,432
Long-term debt, exclusive of current maturities 97,170 99,754
Deferred income taxes, exclusive of current portion 19,075 19,214
Other liabilities 26,144 26,321
-------- --------
Total liabilities 283,499 314,721
-------- --------
Commitments and Contingent Liabilities
Shareholders' equity:
Common Stock: par value $1.00 per share
Class A: 8,646,149 and 8,562,786 shares issued 8,646 8,563
Class B, convertible: 3,978,492 and 4,030,424
shares issued 3,979 4,030
Capital in excess of par value of stock 11,209 10,964
Retained earnings 183,794 171,260
Accumulated translation adjustment 8,641 8,250
-------- --------
Total shareholders' equity 216,269 203,067
-------- --------
Total Liabilities and Shareholders' Equity $499,768 $517,788
======== ========
The accompanying notes are an integral part of these statements.
Page 3
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BLOUNT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
Three months ended May 31,
--------------------------
1995 1994
----------- -----------
(Unaudited)
Sales $ 164,189 $ 145,684
Cost of sales 109,137 97,165
----------- -----------
Gross profit 55,052 48,519
Selling, general and
administrative expenses 28,751 30,266
----------- -----------
Income from operations 26,301 18,253
Interest expense (2,653) (2,838)
Interest income 610 452
Other expense, net (459) (853)
----------- -----------
Income before income taxes 23,799 15,014
Provision for income taxes 9,520 6,006
----------- -----------
Net income $ 14,279 $ 9,008
=========== ===========
Net income per common share $ 1.10 $ .70
=========== ===========
Weighted average number of
common shares outstanding 12,954,389 12,853,894
=========== ===========
Cash dividends declared
per share:
Class A Common Stock $ .1425 $ .1250
=========== ===========
Class B Common Stock $ .1300 $ .1125
=========== ===========
The accompanying notes are an integral part of these statements.
Page 4
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BLOUNT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three months ended May 31,
--------------------------
1995 1994
-------- --------
(Unaudited)
Cash Flows From Operating Activities:
Net Income $ 14,279 $ 9,008
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and other
noncash charges 5,603 5,811
Deferred income taxes (101) 2,112
Loss on disposals of property, plant and equipment (14) 27
Changes in assets and liabilities, net of effects
of acquisitions of business:
(Increase) decrease in accounts receivable (7,340) 8,690
Decrease in inventories 1,683 1,030
(Increase) decrease in other assets 5,148 (6,214)
Decrease in accounts payable (17,292) (10,571)
Increase (decrease) in accrued expenses 1,427 (2,821)
Decrease in other liabilities (547) (1,786)
-------- --------
Net cash provided by operating activities 2,846 5,286
-------- --------
Cash Flows From Investing Activities:
Proceeds from sales of businesses and property,
plant and equipment 4,987 347
Purchases of property, plant and equipment (1,816) (1,405)
Acquisitions of businesses (5,053)
-------- --------
Net cash provided by (used in)
investing activities 3,171 (6,111)
-------- --------
Cash Flows From Financing Activities:
Net increase in short-term borrowings 60 26
Reduction of long-term debt (4,824) (6,789)
Decrease in restricted funds 584
Dividends paid (1,745) (1,505)
Issuance of stock under stock option and
dividend reinvestment plans 277 361
-------- --------
Net cash used in financing activities (5,648) (7,907)
-------- --------
Net increase (decrease) in cash and cash equivalents 369 (8,732)
Cash and cash equivalents at beginning of period 42,576 52,213
-------- --------
Cash and cash equivalents at end of period $ 42,945 $ 43,481
======== ========
The accompanying notes are an integral part of these statements.
Page 5
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BLOUNT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position at May
31, 1995 and the results of operations and cash flows for the period ended May
31, 1995. These financial statements should be read in conjunction with the
notes to the financial statements included in Blount, Inc.'s Annual Report to
Shareholders for the year ended February 28, 1995. The results of operations
for the period ended May 31, 1995 are not necessarily indicative of the results
to be expected for the full fiscal year, due to the seasonal nature of certain
of the Company's operations.
NOTE 2 Inventories consist of the following (in thousands):
May 31, February 28,
1995 1995
------------ ------------
Finished goods $ 33,573 $ 35,769
Work in process 14,266 14,075
Raw materials and supplies 27,373 27,231
-------- --------
$ 75,212 $ 77,075
======== ========
NOTE 3 The principal assets and liabilities of the discontinued construction
operations included in the Company's consolidated balance sheets are as follows
(in thousands):
May 31, February 28,
1995 1995
------------ ------------
Accounts receivable $ 28,138 $ 45,706
Other current assets 4,416 11,911
Other assets 3,847 5,203
Accounts payable (12,170) (24,588)
Accrued expenses (11,731) (12,578)
Other current liabilities (2,687) (4,659)
Other liabilities (2,560) (2,849)
During the first quarter of fiscal 1996, the Company sold Pozzo Construction
Company, part of its remaining discontinued construction operations, and its
Injection Molding Metal Products operations, headquartered in Oregon. The
transactions were not material to the Company's financial condition or operating
results.
NOTE 4 The Company's $25 million receivable sale agreement (see Note 3 to the
Consolidated Financial Statements included in Blount, Inc.'s Annual Report to
Shareholders for the year ended February 28, 1995) expired in December 1994 and
has been extended until June 30, 1995. The Company plans to negotiate a
replacement agreement.
Page 6
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At May 31, 1995 and February 28, 1995, $9.5 million and $10.1 million,
representing the unexpended proceeds from issues of industrial development
revenue bonds in fiscal 1995, was held in trust and is included in "Other
assets" in the Company's consolidated balance sheets.
NOTE 5 The United States Environmental Protection Agency ("EPA") has designated
a predecessor of the Company as a potentially responsible party ("PRP") with
respect to the Onalaska Municipal Landfill in Onalaska, Wisconsin (the "Site").
The waste complained of was placed in the landfill prior to 1981 by a
corporation, some of whose assets were purchased in 1981 by a predecessor of the
Company. It is the view of the Company that because its predecessor corporation
purchased assets rather than stock, the Company does not have successor
liability and is not properly a PRP. However, the EPA has indicated it does not
accept this position. The Company believes the EPA is wrong on the successor
liability issue. However, with other PRP's, the Company made a good faith offer
to the EPA to pay a portion of the clean-up costs. The offer was rejected and
the EPA is proceeding with the clean-up. The estimated past and future clean-up
costs are approximately $12 million. In 1989 the EPA named four PRP's. One of
the PRP's, the Town of Onalaska (the "Town") and the EPA and State of Wisconsin
negotiated a consent decree under which the Town would have been released from
future liability in return for paying $110 thousand, granting access to the Site
and adjacent properties and performing some future maintenance work. The United
States District Court for the District of Wisconsin found, on December 21, 1994,
that the settlement was not fair, reasonable or in the public interest, and
refused to approve and confirm it as the order of the Court. The Company denies
that it is a PRP and is unable to determine any other party's share of total
remediation costs. The Company does not know the financial status of the other
PRP's and other parties that, while not named by the EPA as PRP's, may have
liability with respect to the Site. The Company does not expect the situation
to have a material adverse effect on the Company's financial condition or
operating results.
The Company is closing a Resource Conservation and Recovery Act ("RCRA") Part B
Storage Permit at its Sporting Equipment Division's CCI operations facility in
Lewiston, Idaho. As part of the process, the Company is required by the State
of Idaho to undertake RCRA corrective action at the facility. This will require
the Company to investigate all areas at the facility where solid waste and
hazardous waste have historically been managed. The facility has been operating
since the 1950s. There are several areas where investigation and sampling are
required. In order to effect the investigation, the Company and the State of
Idaho entered into an Administrative Consent Order which governs the completion
of the corrective action activities. As a result of initial testing, some
contamination of the uppermost groundwater beneath the facility has been
encountered. This uppermost groundwater is not the drinking water supply source
and does not appear to be connected to the drinking water aquifer. Further
investigation is ongoing. It is expected that the range of remediation costs is
from $2.8 million to $6.2 million. The Company does not expect the situation to
have a material adverse effect on its financial condition or operating results
beyond amounts accrued.
The Company is a defendant in a number of product liability lawsuits, some of
which seek significant or unspecified damages, involving serious personal
injuries for which there are large deductible amounts under the Company's
insurance programs. 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, the Company does not believe these
lawsuits will have a material adverse effect on its financial condition or
operating results.
Page 7
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The Company's contingencies include normal liabilities for performance and
completion of its remaining construction contracts. At May 31, 1995, the
Company had outstanding bank letters of credit in the approximate amount of
$17.3 million issued principally in connection with various foreign construction
contracts for which the Company is contingently liable to the issuing banks in
the event payment is demanded by the holder.
See Notes 4 and 8 to the Consolidated Financial Statements included in Blount,
Inc.'s Annual Report to Shareholders for the year ended February 28, 1995 for
other commitments and contingencies of the Company which have not changed
significantly since year-end.
NOTE 6 Segment information is as follows (in thousands):
Three Months
Ended May 31,
-------------------
1995 1994
-------- --------
Sales:
Outdoor products $ 76,693 $ 68,520
Industrial and power equipment 57,849 52,297
Sporting equipment 29,647 24,867
-------- --------
$164,189 $145,684
======== ========
Operating income:
Outdoor products $ 15,856 $ 10,052
Industrial and power equipment 9,895 7,827
Sporting equipment 4,695 4,671
-------- --------
Operating income from segments 30,446 22,550
Corporate office expenses (4,145) (4,297)
-------- --------
Income from operations 26,301 18,253
Interest expense (2,653) (2,838)
Interest income 610 452
Other expense, net (459) (853)
-------- --------
Income before income taxes $ 23,799 $ 15,014
======== ========
NOTE 7 Income taxes paid during the three months ended May 31, 1995 and 1994
were $3.2 million and $5.2 million. Interest paid during the three months ended
May 31, 1995 and 1994 was $696 thousand and $494 thousand.
NOTE 8 Net income per common share is based on the weighted average number of
common and common equivalent shares (stock options) outstanding in each period.
Page 8
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating Results
The Company reported record first quarter sales and net income for the three
months ended May 31, 1995. Sales for the first quarter of fiscal 1996 were
$164.2 million compared to $145.7 million for the first quarter of fiscal 1995.
Net income for the first quarter of fiscal 1996 was $14.3 million ($1.10 per
share) compared to net income of $9.0 million ($.70 per share) for the
comparable period of fiscal 1995. These operating results reflect continued
strong performance by each of the Company's manufacturing segments. The
principal reasons for these results and the status of the Company's financial
condition are set forth below and should be read in conjunction with the
Company's 1995 Form 10-K and 1995 Annual Report to Shareholders.
Sales for the Outdoor Products segment for the first three months of fiscal 1996
were $76.7 million compared to $68.5 million during the first three months of
fiscal 1995. Operating income increased by 58% to $15.9 million during the
first quarter of fiscal 1996 from $10.1 million in the comparable period of the
prior fiscal year. The sales and operating income increases were principally
attributable to a higher volume of saw chain and saw bars sold in foreign
markets by the Company's Oregon Cutting Systems Division and a 16% increase in
the volume of riding lawn mowers shipped by Dixon Industries, Inc.
Sales for the Industrial and Power Equipment segment were $57.8 million during
the first quarter of fiscal 1996 compared to $52.3 million during the same
period of fiscal 1995. Operating income increased to $9.9 million during the
first three months of fiscal 1996 from $7.8 million during the comparable period
of fiscal 1995. The improved operating results were principally due to the
inclusion of CTR Manufacturing, Inc., acquired on April 28, 1994, for the full
quarter in the current year and improved sales and operating income by the
Company's Gear Products, Inc. subsidiary, primarily due to higher volume.
Sales for the Sporting Equipment segment increased to $29.6 million in the first
three months of fiscal 1996 from $24.9 million in the comparable period of
fiscal 1995, while operating income was flat at $4.7 million during the first
quarter of fiscal 1996. These results reflect lower margins due to reduced
average selling prices to maintain market share and some increase in product
costs, and a small loss from the Company's Ram-Line unit acquired late in fiscal
1996.
The Company's total backlog at May 31, 1995 was $125.0 million compared to
$134.4 million at February 28, 1995. Orders received increased during the first
quarter of this year over last year to $170 million versus $163 million and
production levels increased, as reflected in the higher shipping levels.
Financial Condition, Liquidity and Capital Resources
At May 31, 1995, the Company had no amounts outstanding under its $100 million
revolving credit agreement or its $25 million receivable sale agreement. The
Company's total capitalization at May 31, 1995 consists of $97.2 million
long-term debt and equity of $216.3 million for a long-term debt to equity ratio
of .4 to 1 as compared to a ratio of .5 to 1 at February 28, 1995. At May 31,
1995, the Company had 9% subordinated notes outstanding in the principal amount
of $80.1 million maturing in 2003. See Note 3 of Notes to the Consolidated
Financial Statements included in Blount, Inc.'s 1995 Annual Report to
Shareholders for the terms and conditions of the $100 million revolving credit
agreement, the receivable sale agreement and the 9% subordinated notes.
Page 9
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Working capital was $137.8 million at May 31, 1995 compared to $122.1 million at
February 28, 1995. The increase resulted principally from the Company's
improved earnings. The Company's operating cash flows for the first three
months of fiscal 1996 were $2.8 million compared to $5.3 million in the first
three months of fiscal 1995. This decrease reflects higher receivables at each
manufacturing segment principally due to higher sales and marketing programs.
Cash flows from discontinued construction operations were substantially offset
by higher corporate expenditures due to the timing of management incentive
payments, higher charitable contributions which were accrued in the prior year
and increased payments to employee benefit plans.
Restrictions on the Company's ability to pay cash dividends are contained in the
indenture related to the Company's 9% subordinated notes and in certain
financial covenants of the revolving credit agreement. Under the most
restrictive requirement, retained earnings of approximately $45.7 million were
available for the payment of dividends at May 31, 1995.
Page 10
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLOUNT, INC.
- ----------------------
Registrant
Date: July 12, 1995 /s/ Harold E. Layman
--------------------------------
Harold E. Layman
Senior Vice President &
Chief Financial Officer
Page 11
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PART I - EXHIBIT 11
BLOUNT, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(In thousands, except share data)
(Unaudited)
Three Months Ended May 31,
--------------------------
1995 1994
----------- -----------
Primary:
Net income $ 14,279 $ 9,008
=========== ===========
Shares:
Weighted average common shares outstanding 12,624,384 12,494,242
Dilutive effect of stock options 330,005 359,652
----------- -----------
Average common shares outstanding as adjusted 12,954,389 12,853,894
=========== ===========
Primary net income per common share $ 1.10 $ .70
=========== ===========
Assuming Full Dilution:
Net income $ 14,279 $ 9,008
=========== ===========
Shares:
Average common shares as adjusted
for primary computation 12,954,389 12,853,894
Additional dilutive effect of stock options 38,965
----------- -----------
Average common shares outstanding as adjusted 12,954,389 12,892,859
=========== ===========
Net income per common share assuming full dilution $ 1.10 $ .70
=========== ===========
Page 12
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> MAY-31-1995
<CASH> 42,945
<SECURITIES> 0
<RECEIVABLES> 132,043
<ALLOWANCES> 2,672
<INVENTORY> 75,212
<CURRENT-ASSETS> 278,915
<PP&E> 273,330
<DEPRECIATION> 147,024
<TOTAL-ASSETS> 499,768
<CURRENT-LIABILITIES> 141,110
<BONDS> 97,170
<COMMON> 12,625
0
0
<OTHER-SE> 203,644
<TOTAL-LIABILITY-AND-EQUITY> 499,768
<SALES> 164,189
<TOTAL-REVENUES> 164,189
<CGS> 109,137
<TOTAL-COSTS> 109,137
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,653
<INCOME-PRETAX> 23,799
<INCOME-TAX> 9,520
<INCOME-CONTINUING> 14,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,279
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
