-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, O/d0matJ8GK9kr8nF/e6i9CB7A9gomt2KboYf6u9KkAXcFtSeKUXUixrZtXPcFXN Hul4peVqt1up6OcQV7oz6w== 0000012707-94-000015.txt : 19940715 0000012707-94-000015.hdr.sgml : 19940715 ACCESSION NUMBER: 0000012707-94-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940531 FILED AS OF DATE: 19940713 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLOUNT INC CENTRAL INDEX KEY: 0000012707 STANDARD INDUSTRIAL CLASSIFICATION: 1540 IRS NUMBER: 630593908 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07002 FILM NUMBER: 94538648 BUSINESS ADDRESS: STREET 1: 4520 EXECUTIVE PK DR CITY: MONTGOMERY STATE: AL ZIP: 36116 BUSINESS PHONE: 2052444000 10-Q 1 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, 1994 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) (205) 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, 1994 --------------------- ---------------- Class A Common Stock $1.00 Par Value 8,319,226 shares Class B Common Stock $1.00 Par Value 4,177,175 shares Page 1 BLOUNT, INC. AND SUBSIDIARIES INDEX Page No. ------------ Part I. Financial Information Consolidated Balance Sheets - May 31, 1994 and February 28, 1994 3 Consolidated Statements of Income - three months ended May 31, 1994 and 1993 4 Consolidated Statements of Cash Flows - three months ended May 31, 1994 and 1993 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis 10 Exhibit 11 - Computation of Net Income Per Common Share 13 Page 2 BLOUNT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) May 31, February 28, 1994 1994 -------- -------- (Unaudited) ASSETS ------ Current assets: Cash and cash equivalents, including short-term investments of $38,841 and $48,810 $ 43,481 $ 52,213 Accounts receivable, net of allowances for doubtful accounts of $2,438 and $2,238 127,266 134,458 Inventories 61,879 60,180 Deferred income taxes 17,237 17,742 Other current assets 19,522 12,812 -------- -------- Total current assets 269,385 277,405 Property, plant and equipment, net of accumulated depreciation of $134,027 and $135,694 138,908 140,422 Cost in excess of net assets of acquired businesses, net 67,581 60,171 Other assets 14,260 14,903 -------- -------- Total Assets $490,134 $492,901 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Notes payable and current maturities of long-term debt $ 6,633 $ 2,082 Accounts payable 63,851 74,267 Accrued expenses 85,106 83,757 Billings in excess of costs and recognized profits on uncompleted contracts 7,098 12,953 -------- -------- Total current liabilities 162,688 173,059 Long-term debt, exclusive of current maturities 101,762 107,651 Deferred income taxes, exclusive of current portion 14,939 13,499 Other liabilities 35,785 31,839 -------- -------- Total liabilities 315,174 326,048 -------- -------- Commitments and Contingent Liabilities Shareholders' equity: Common Stock: par value $1.00 per share Class A: 8,319,226 and 8,273,035 shares issued 8,319 8,273 Class B: 4,177,175 and 4,178,197 shares issued 4,178 4,178 Capital in excess of par value of stock 9,935 9,515 Retained earnings 144,943 137,440 Accumulated translation adjustment 7,585 7,447 -------- -------- Total shareholders' equity 174,960 166,853 -------- -------- Total Liabilities and Shareholders' Equity $490,134 $492,901 ======== ======== The accompanying notes are an integral part of these statements. Page 3 BLOUNT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data) Three months ended May 31, -------------------------- 1994 1993 * ----------- ----------- (Unaudited) Sales $ 145,684 $ 117,386 Cost of sales 97,165 81,954 ----------- ----------- Gross profit 48,519 35,432 Selling, general and administrative expenses 30,266 24,582 ----------- ----------- Income from operations 18,253 10,850 Interest expense, net (2,386) (2,269) Other expense, net (853) (944) ----------- ----------- Income before income taxes 15,014 7,637 Provision for income taxes 6,006 2,773 ----------- ----------- Income from continuing operations 9,008 4,864 Discontinued operations: Loss from operations, net (3,657) ----------- ----------- Net income $ 9,008 $ 1,207 =========== =========== Income (loss) per share of common stock: Continuing operations $ .70 $ .39 Discontinued operations (.29) ----------- ----------- Net income $ .70 $ .10 =========== =========== Weighted average number of common shares outstanding 12,853,894 12,578,387 =========== =========== Cash dividends declared per share: Class A Common Stock $ .1250 $ .1125 =========== =========== Class B Common Stock $ .1125 $ .1000 =========== =========== * Certain items have been reclassified for comparative purposes. The accompanying notes are an integral part of these statements. Page 4 BLOUNT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three months ended May 31, -------------------------- 1994 1993 -------- -------- (Unaudited) Cash Flows From Operating Activities: Net Income $ 9,008 $ 1,207 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other noncash charges 5,811 5,909 Deferred income taxes 2,112 (625) Loss on disposals of property, plant and equipment 27 591 Changes in assets and liabilities, net of effect of business acquisition: Increase in aggregate balance of accounts receivable sold 685 Decrease in accounts receivable 8,690 3,189 Decrease in inventories 1,030 2,811 Increase in other assets (6,214) (9,278) Increase (decrease) in accounts payable (10,571) 6,599 Decrease in accrued expenses (2,821) (3,932) Decrease in other liabilities (1,786) (1,016) -------- -------- Net cash provided by operating activities 5,286 6,140 -------- -------- Cash Flows From Investing Activities: Proceeds from sales of property, plant and equipment 347 180 Purchases of property, plant and equipment (1,405) (1,563) Acquisition of business (5,053) -------- -------- Net cash used in investing activities (6,111) (1,383) -------- -------- Cash Flows From Financing Activities: Net increase (reduction) in short-term borrowings 26 (1,313) Reduction of long-term debt (6,789) (1,896) Dividends paid (1,505) (1,322) Issuance of stock under stock option and dividend reinvestment plans 361 188 -------- -------- Net cash used in financing activities (7,907) (4,343) -------- -------- Net increase (decrease) in cash and cash equivalents (8,732) 414 Cash and cash equivalents at beginning of period 52,213 17,723 -------- -------- Cash and cash equivalents at end of period $ 43,481 $ 18,137 ======== ======== The accompanying notes are an integral part of these statements. Page 5 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, 1994 and the results of operations and cash flows for the periods ended May 31, 1994 and 1993. 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, 1994. The results of operations for the periods ended May 31, 1994 and 1993 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, 1994 1994 ------------ ------------ Finished goods $ 26,049 $ 27,169 Work in process 12,973 13,329 Raw materials and supplies 22,857 19,682 -------- -------- $ 61,879 $ 60,180 ======== ======== 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, Financial Position 1994 1994 ------------ ------------ Accounts receivable $ 48,230 $ 59,265 Other current assets 16,222 7,922 Other assets 5,618 6,013 Accounts payable (35,297) (38,503) Accrued expenses (10,818) (11,106) Other current liabilities (7,110) (13,015) Other liabilities (6,659) (7,312) NOTE 4 On April 28, 1994, the Company acquired all the outstanding capital stock of CTR Manufacturing, Inc. ("CTR") for cash and notes of approximately $11.5 million. CTR manufactures automated forestry harvesting equipment. The transaction has been accounted for as a purchase and, accordingly, the net assets and results of operations of CTR have been included in the Company's consolidated financial statements since the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired is being amortized on a straight-line basis over 40 years. The company's consolidated results of operations for the three months ended May 31, 1994 and 1993 would not have been materially different from reported amounts if the purchase had occurred at the beginning of either period. CTR's sales and net income for its most recent fiscal year were approximately $11.8 million and $.8 million, respectively. Page 6 NOTE 5 During the first quarter of fiscal 1995, the Company repurchased $6.7 million of its 9% subordinated notes with no significant gain or loss. NOTE 6 The Company announced in January 1989, that a pocket of a cleaning solvent, trichloroethylene ("TCE"), had been detected under the concrete floor of the Company's cutting systems division plant in Milwaukie, Oregon. TCE was detected in the City of Milwaukie drinking water wells. The Company's deep wells, which are surrounded by the City of Milwaukie wells, draw from the same aquifer and show TCE amounts less than those of the City's wells. On December 6, 1989, the Company entered into a Stipulation and Consent Agreement for facility investigation with the Department of Environmental Quality ("DEQ") of the State of Oregon and agreed to investigate the TCE contamination beneath the plant and take appropriate measures to remediate potential adverse effects from such contamination. In November 1992, the Company submitted a Facility Investigation Final Report ("Report") to the DEQ for the Milwaukie, Oregon plant. The Report states that the contamination has affected a limited portion of the saturated engineered fill under the building. Since monitoring began in 1988, the contaminant plume in the engineered fill has not migrated. The concentration of the contaminants in the plume has been reduced by greater than 50% since 1989. The TCE plume has not migrated off Company property. The Company believes the contaminants pose no risk to Company employees or the community because the groundwater within the shallow alluvium is not used and the contaminants are not migrating towards the drinking water supply aquifer. There is no evidence that the Company's operations have affected the drinking water supply aquifer. The Company does not expect the situation to have a material adverse effect. 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 waste complained of was placed in the landfill prior to 1981 by a corporation, some of whose assets were purchased in 1981 by the 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 clean-up costs are approximately $5 million to $10 million with maintenance costs of approximately $150 thousand per year for 30 years. The Company does not expect the situation to have a material adverse effect. On December 20, 1989, the Company sold to Asea Brown Boveri Ltd. ("ABB") all the stock of W+E Umwelttechnik AG, then an engineering subsidiary of the Company in the waste-to-energy business located in Zurich, Switzerland. On July 26, 1993, ABB filed a Request for Arbitration with the Zurich Chamber of Commerce. The request contains statements that ABB has or anticipates having losses on two projects which were underway at the time of sale. While it is not clear, ABB appears to be claiming approximately 100 million Swiss francs and rescission of the purchase agreement based on the Company's alleged wilful failure to disclose material facts and that ABB made a fundamental mistake in entering into the purchase agreement. The Company believes it has valid defenses based on the terms of the purchase agreement, the facts and the law. In March 1994, the Company filed a lawsuit against ABB and two of its subsidiaries in the Circuit Court of Jefferson County, Alabama seeking declaratory judgment and injunctive relief as well as money damages for (i) intentional interference with the Company's business relationships and (ii) abuse of process. ABB has filed a separate lawsuit against Blount in the U.S. Page 7 District Court in Birmingham to compel arbitration and has removed the lawsuit filed by Blount to the Federal Court. These two lawsuits have been consolidated. The Company does not expect the situation to have a material adverse effect on its financial condition. The Company is a defendant in a number of product liability lawsuits involving serious injuries for which it is self-insured, some of which seek significant or unspecified damages. 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. The Company's contingencies include normal liabilities for performance and completion of construction contracts. At May 31, 1994, the Company had outstanding bank letters of credit in the approximate amount of $18.5 million issued principally in connection with various construction contracts for which the Company is contingently liable to the issuing banks in the event payment is demanded by the holder. The Company is contingently liable for the remaining rental payments, net of the value of the leased equipment, under certain leases transferred to the buyer of a former subsidiary. The leases have rental payments remaining of approximately $10 million which expire in 1999. The Company has received indemnification against liabilities arising from the leases from the purchaser of the former subsidiary. 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, 1994 for other commitments and contingencies of the Company which have not changed significantly since year-end. NOTE 7 Segment information is as follows (in thousands): Three Months Ended May 31, ------------------- 1994 1993 -------- -------- Sales: Outdoor products $ 68,520 $ 59,732 Industrial and power equipment 52,297 37,967 Sporting equipment 24,867 19,687 -------- -------- $145,684 $117,386 ======== ======== Operating income: Outdoor products $ 10,052 $ 6,734 Industrial and power equipment 7,827 4,654 Sporting equipment 4,671 3,145 -------- -------- Operating income from segments 22,550 14,533 Corporate office expenses (4,297) (3,683) -------- -------- Income from operations 18,253 10,850 Interest expense, net (2,386) (2,269) Other expense, net (853) (944) -------- -------- Income before income taxes $ 15,014 $ 7,637 ======== ======== Page 8 NOTE 8 Income taxes paid during the three months ended May 31, 1994 and 1993 were $5.2 million and $3.2 million. Interest paid during the three months ended May 31, 1994 and 1993 was $494 thousand and $367 thousand. NOTE 9 Net income per common share is based on the weighted average number of common and common equivalent shares (stock options) outstanding in each period. Page 9 MANAGEMENT'S DISCUSSION AND ANALYSIS Operating Results Sales for the first quarter of fiscal 1995 were $145.7 million compared to $117.4 million for the first quarter of fiscal 1994. Net income for the first three months of fiscal 1995 was $9.0 million ($.70 per share) compared to net income of $1.2 million ($.10 per share) for the comparable period of fiscal 1994. Last year's first quarter included a loss from discontinued operations of $3.7 million ($.29 per share). The improved 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 1994 Form 10-K and 1994 Annual Report to Shareholders. Sales for the Outdoor Products segment in the first quarter of fiscal 1995 were $68.5 million compared to $59.7 million during the first quarter of fiscal 1994. Operating income increased to $10.1 million during the first quarter of fiscal 1995 from $6.7 million in the comparable period of the prior fiscal year. The sales and operating income increase were principally attributable to a higher volume of saw chain, saw bars and power pruners sold by the Company's Oregon Cutting Systems Division, and improved margins and demand for the Company's riding lawn mowers. Sales for the Industrial and Power Equipment segment were $52.3 million during the first three months of fiscal 1995 compared to $38.0 million during the same period of fiscal 1994. Operating income increased to $7.8 million from $4.7 million during the comparable period of fiscal 1994. Demand for this segment's products remained high as the aggregate volume of timber harvesting and industrial tractor and loader units sold during the first quarter of fiscal 1995 increased over the comparable period of the prior year. The improvement in operating income was principally due to this increase in volume. Sales for the Sporting Equipment segment increased to $24.9 million in the first quarter of fiscal 1995 from $19.7 million in the comparable period of fiscal 1994. Operating income during the first three months of fiscal 1995 increased to $4.7 million from $3.1 million during the first three months of fiscal 1994. The increase in operating income was principally due to increased sales volume. Selling, general and administrative expenses, reflecting the increased sales level, were 20.8 percent of sales in the first quarter of fiscal 1995 compared to 20.9 percent of sales in the comparable period of the prior year. The Company's total backlog at May 31, 1994 was $134.0 million compared to $147.1 million at February 28, 1994 and $71.8 million at May 31, 1993. Financial Condition, Liquidity and Capital Resources At May 31, 1994, the Company had no amounts outstanding under its uncommitted short-term lines of credit, its $25 million receivable sale agreement or its $60 million revolving credit agreement. The Company's total capitalization at May 31, 1994 consists of $101.8 million long-term debt and equity of $175.0 million for a long-term debt to equity ratio of .6 to 1 as compared to a ratio of .6 to 1 at February 28, 1994. At May 31, 1994, the Company had 9% subordinated notes outstanding in the principal amount of $93.3 million maturing in 2003. See Note 3 of Notes to the Consolidated Financial Statements included in Blount, Inc.'s 1994 Annual Report to Shareholders for the terms and conditions of the revolving credit agreement, the receivable sale agreement and the 9% subordinated notes. Page 10 Working capital was $106.7 million at May 31, 1994 compared to $104.3 million at February 28, 1994. The Company's operating cash flows for the first three months of fiscal 1995 were $5.3 million compared to $6.1 million in the first three months of the prior fiscal year. Cash and cash equivalent balances decreased to $43.5 million from $52.2 million at February 28, 1994 as the Company's operating cash flows were offset by cash expenditures to acquire CTR Manufacturing, Inc. and repurchase $6.7 million of the Company's 9% subordinated notes (see Notes 4 and 5 to the attached consolidated financial statements). 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 $16.8 million were available for the payment of dividends at May 31, 1994. Page 11 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 13, 1994 /s/ Harold E. Layman --------------------------------- Harold E. Layman Senior Vice President & Chief Financial Officer Page 12 EX-11 2 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, -------------------------- 1994 1993 ----------- ----------- Primary: Income from continuing operations $ 9,008 $ 4,864 Discontinued operations - loss from operations, net (3,657) ----------- ----------- Net Income $ 9,008 $ 1,207 =========== =========== Shares: Weighted average common shares outstanding 12,494,242 12,264,545 Dilutive effect of stock options 359,652 313,842 ----------- ----------- Average common shares outstanding as adjusted 12,853,894 12,578,387 =========== =========== Per Common Share: Continuing operations $ .70 $ .39 Discontinued operations (.29) ----------- ----------- Net Income $ .70 $ .10 =========== =========== Assuming Full Dilution: Income from continuing operations $ 9,008 $ 4,864 Discontinued operations - loss from (3,657) operations, net ----------- ----------- Net Income $ 9,008 $ 1,207 =========== =========== Shares: Average common shares as adjusted for primary computation 12,853,894 12,578,387 Additional dilutive effect of stock options 38,965 55,506 ----------- ----------- Average common shares outstanding as adjusted 12,892,859 12,633,893 =========== =========== Per Common Share: Continuing operations $ .70 $ .39 Discontinued operations (.29) ----------- ----------- Net Income $ .70 .10 =========== =========== Page 13 -----END PRIVACY-ENHANCED MESSAGE-----