UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  -------------

                                    FORM 10-K


                   FOR ANNUAL AND TRANSITION REPORTS PURSUANT
             TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

(Mark One)

[X]       ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF
          THE  SECURITIES EXCHANGE ACT OF 1934.

          For the year ended       December 31, 1999
                               ---------------------------
                                          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:   333-17305
                                                --------------

                         International Knife & Saw, Inc.
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             (Exact name of registrant as specified in its charter)

                 Delaware                               57-0697252
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       (State or other jurisdiction of               (I.R.S. Employer
        incorporation or organization)                Identification No.)

     1299 Cox Avenue, Erlanger, Kentucky                               41018
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     (Address of registrant's principal executive offices)           (Zip Code)

Registrant's telephone number, including area code:    (606) 371-0333
                                                     -------------------
Securities registered pursuant to Section 12(b) of the Act:   None
Securities registered pursuant to Section 12(g) of the Act:   None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [ x ] No [ ]

Indicate 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 definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ x ].

         As of January 1, 2000,  there were 481,971  shares of the  registrant's
common  stock  outstanding,  all of  which  were  owned by an  affiliate  of the
registrant.

         Documents incorporated by reference:    None


<PAGE>


         Unless  otherwise  indicated,  industry and market data used throughout
this report are based on Company estimates which,  while believed by the Company
to be reliable,  have not been verified by independent sources. Unless otherwise
indicated  or  the  context  otherwise  requires,  references  to  "IKS"  or the
"Company"  are  to  International   Knife  &  Saw,  Inc.  and  its  consolidated
subsidiaries.

         The Private  Securities  Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward  looking  statements.  Certain matters  discussed in
this  filing  could be  characterized  as forward  looking  statements,  such as
statements  relating  to plans for future  expansion,  other  capital  spending,
financing  sources and  effects of  regulation  and  competition.  Such  forward
looking  statements  involve important risks and uncertainties  that could cause
actual results to differ materially from those expressed in such forward looking
statements.

                                     PART I

ITEM 1.  BUSINESS

General

         International  Knife  &  Saw,  Inc.  ("IKS"  or  the  "Company")  is  a
wholly-owned subsidiary of IKS Corporation, a Delaware corporation.  The Company
is a global leader in the  manufacturing,  servicing and marketing of industrial
and  commercial  machine  knives and saws,  operating in an estimated  worldwide
market of at least $1.0 billion.  The Company's products,  which are consumed in
the normal course of machine operation and need resharpening or replacement many
times a year, are mounted in industrial machines and are used in virtually every
facet of  cutting,  slitting,  chipping  and forming of  materials.  The Company
serves the  following  major market  sectors:  (i) Wood (44% of 1999 net sales);
(ii) Paper & Packaging  (41%);  (iii) Metal (11%);  and (iv) Plastic & Recycling
(4%). The Company believes that it has a leading  worldwide market share in each
of these market  sectors and that there is no other company that serves all four
such sectors.

         IKS traces its origins to 1814, when Klingelnberg Soehne was founded in
Germany as a textile and  hardware  trading  house.  Klingelnberg  Soehne  began
manufacturing  industrial  knives  and saws in the  early  1900s and by 1940 was
serving a variety of product  segments.  Klingelnberg  Soehne expanded its sales
into the North  American  market during the 1960s and  subsequently  established
manufacturing  and resharpening  operations  which were  complemented by several
strategic acquisitions. The Company was incorporated in 1973, and by 1991 it had
acquired the European and North  American  operations  of  Klingelnberg  Soehne.
Since 1991,  the Company has expanded its  resharpening  operations by adding an
additional 21 service centers, commenced operations in Asia, Australia and Latin
America  and  expanded  its   manufacturing   operations   by  acquiring   three
manufacturing operations.

The Recapitalization

         The Company issued $90 million in aggregate principal amount of 11 3/8%
Senior  Subordinated  Notes due 2006 (the  "Notes") on November 6, 1996 under an
Indenture,  dated as of November 6, 1996 (the  "Indenture"),  by and between the
Company and United States Trust Company of New York, as trustee.  The Notes were
issued   concurrently   with  the  consummation  of  a   recapitalization   (the
"Recapitalization")  of IKS Corporation.  Prior to the Recapitalization,  all of
the issued and outstanding  capital stock of IKS Corporation was held by members
of the  Klingelnberg  family and the Company's  issued and  outstanding  capital
stock was held  approximately  97% by IKS  Corporation and  approximately  3% by
certain executive officers of the Company (the "Existing Management Investors").

         The  Recapitalization  involved  the  following  transactions:  (i) the
Existing  Management  Investors exchanged their holdings of capital stock issued
by the Company for capital stock of IKS  Corporation,  and the Company  became a
wholly owned  subsidiary of IKS  Corporation;  (ii) IKS Corporation  amended its
charter to change its corporate name from "The Klingelnberg Corporation" to "IKS
Corporation"  and to authorize  three  classes of capital  stock,  consisting of
preferred stock (the "Corp.  Preferred Stock"),  voting common stock (the "Corp.
Class A Stock") and  non-voting  common  stock (the  "Corp.  Class B Stock" and,
together with the Corp. Class A Stock, the "Corp.


                                      I-1


<PAGE>


Common  Stock");   (iii)  the  issued  and  outstanding  capital  stock  of  IKS
Corporation   was   exchanged   for   a   recapitalization   distribution   (the
"Recapitalization  Distribution")  which  consisted of (a)  approximately  $86.6
million in cash and (b) Junior  Subordinated  Debentures of IKS Corporation (the
"Corp.  Debentures"),  Corp.  Preferred  Stock and Corp.  Class A Stock  with an
aggregate  value of  approximately  $9.4 million  issued to Arndt  Klingelnberg,
Diether  Klingelnberg and certain Existing  Management  Investors;  (iv) certain
Existing Management Investors,  together with certain other key employees of the
Company  who  were  not  Existing  Management  Investors  (the  "New  Management
Investors" and, together with the Existing Management Investors, the "Management
Investors"), purchased Corp. Debentures, Corp. Preferred Stock and Corp. Class A
Stock from IKS  Corporation  for  approximately  $1.3  million in cash;  and (v)
Citicorp  Venture  Capital  Ltd.  ("CVC")  purchased  Corp.  Debentures,   Corp.
Preferred Stock and Corp. Common Stock from IKS Corporation for $14.3 million in
cash.

         The gross proceeds to the Company from the sale of the Notes,  together
with the aggregate  investment of $15.6 million made in IKS  Corporation  by the
Management Investors and CVC in connection with the Recapitalization,  were used
to  (i)  finance  the  cash   portion  of  the   Recapitalization   Distribution
(approximately  $86.6  million),  (ii)  repay  approximately  $11.4  million  of
outstanding  indebtedness  referred  to below and (iii) pay  approximately  $4.5
million of fees and expenses related to the transactions.

         In accordance with certain  provisions  contained in the  documentation
governing the Recapitalization,  the amount of the Recapitalization Distribution
was adjusted  upwards by  approximately  $2.8 million in March,  1997,  and such
amount was paid in cash by the Company to the recipients of the Recapitalization
Distribution.

Business Strategy

         The Company  believes that it can enhance its leading  market  position
through the continued  implementation of its business strategy.  Key elements of
this strategy include (i) maximizing  stable,  high margin end-user sales;  (ii)
increasing its global manufacturing, sourcing and marketing capabilities through
strategic  alliances;  (iii) expanding its own or independently owned network of
resharpening  service  center  operations,  which  increases  direct  access  to
end-users and enables the Company to capture both  resharpening  and  additional
replacement  business;  (iv) expanding and improving its product  offering;  (v)
maintaining its focus on cost improvement opportunities;  and (vi) continuing to
evaluate  acquisitions  in the highly  fragmented  knife and saw  industry.  The
Company is presently evaluating potential acquisition  opportunities and as part
of its strategy will continue to do so in the future.  There can be no assurance
that the Company will consummate any such  acquisitions or, if consummated,  the
timing thereof.

Products and Markets

         The Company  manufactures  and sells its  products in four major market
sectors  including  (i) Wood (44% of 1999 net  sales);  (ii)  Paper &  Packaging
(41%);  (iii) Metal  (11%);  and (iv)  Plastic & Recycling  (4%).  IKS offers an
extensive  variety of knives and saws which are mounted in  industrial  machines
and are sold across a wide customer base and over numerous industries throughout
the world.  The  Company's  knives and saws are consumed in the normal course of
machine operation and need resharpening or replacement many times per year.

Wood

         IKS believes it is the largest  manufacturer  of industrial wood knives
and saws with 1999 net  sales of  approximately  $67  million.  Industrial  wood
knives and saws are utilized in  applications  by companies  such as Weyerhauser
Co. and Louisiana Pacific Corp. for sawing logs into specific  dimensional sized
lumber for use in the housing  industry;  by companies  such as Georgia  Pacific
Corp.,  Willamette Industries and Boise Cascade Corp. for peeling large diameter
logs into veneer for use in the  production of plywood,  paneling and furniture;
and by companies such as Fletcher  Challenge and  International  Paper Co., Inc.
for the production of wood chips used in their pulp mills to produce fine paper,
newsprint and craft paper.  In addition,  the  Company's  knives are used to cut
wood into chips,  used for fuel by wood and coal burning power plants as well as
generating power and steam for large paper and pulp mills worldwide.


                                      I-2

<PAGE>


         Industrial  wood  cutting  knives and saws are  consumed  in the normal
course of operation and, due to their rough service applications, generally need
resharpening  as often as every six to eight hours and up to 40 to 50 times over
the life of the product.  Wood circular and band saws are generally  resharpened
and retensioned daily and replaced often.

         As wood becomes more expensive,  the industry is increasingly cognizant
of the need for more effective tree  utilization  and reducing  material lost to
inefficient  sawing. As a result, the industry is trending toward engineered and
composite  materials made from  specially  sized wood chips leading to increased
sales of waferizer and flaker knives,  and wear parts. In the past,  plywood was
typically used in favor of engineered and composite materials.  However, plywood
requires the use of large  diameter logs as raw material,  leaving  considerable
waste on the forest  floor,  whereas  wafer board and oriented  strand board use
tighter tolerance waferizer and flaker knives to reduce smaller,  less expensive
raw material logs into  specifically  sized and shaped wood chips. The chips are
then  assembled  with  synthetic  binders  into  boards,  sheets  and  specialty
profiles, having properties superior to plywood or solid wood predecessors.  The
Company  believes that it is the leading North  American  manufacturer  of these
specialty  knives  and has the  ability  to grow  with this  rapidly  increasing
market.

         The Company is a leader in the  manufacture  of carbide  edger saws and
also one of the largest  providers of stock saws for the  secondary  industry in
North  America  as a result of its  purchase  of the  assets of the  Systi-Matic
Company  ("Systi-Matic") in April,  1997. Located near Seattle,  WA, Systi-Matic
represents one of the most modern precision wood saw manufacturing facilities in
the U.S.  Using  automated  equipment in  combination  with  skilled  craftsmen,
Systi-Matic produces extremely accurate saws used for primary wood, to mitre cut
wood  moldings for cabinet  making and  furniture  production.  State-of-the-art
laser cutting equipment provides  Systi-Matic with both extreme precision in the
manufacturing process and reduced costs due to automated production.

         The Company is also a leader in the  manufacture  of long  wood-peeling
and slicing veneer knives. Veneer knives are among the more difficult industrial
knives  to  manufacture  due to their  length  (up to six  meters)  and  quality
requirements.  IKS is one of only a  limited  number of  manufacturers  that can
produce such a knife.  As the market demands  higher quality veneer knives,  the
Company believes that its expertise in the design and manufacture of such knives
gives it a competitive advantage.

         The Company  increased  its presence in the wood saw  machinery  market
with its acquisition of the assets of Cascade/Southern Saw Corp.  ("Cascade") in
June, 1997. Located near Portland,  OR and in Hot Springs,  AR, Cascade provides
technical  assistance to the primary wood industry  particularly  in the area of
thin kerf sawing for yield and  productivity  improvements.  The highly trained,
experienced,  technical  sales  staff  provides  primary  wood end users  with a
valuable resource to improve their mills' performance, thereby creating mutually
beneficial long-term exclusive supplier  relationships for saws, saw maintenance
equipment, and supplies.

          The  market  for wood  cutting  knives  and saws is  growing  in Latin
America and other  developing  regions as many of the  nations in these  regions
begin to export  products  further along the  production  cycle.  As the Company
expands in these  regions,  it believes  that it will benefit from the increased
exportation of finished  products.  The Company is also using its service center
operations  to  increase  its  sales,  as  more  wood  cutting   operations  are
outsourcing their knife and saw servicing needs.

Paper & Packaging

         The Company  believes it is the largest  manufacturer  and  supplier of
industrial  paper & packaging  knives with 1999 net sales of  approximately  $62
million.  Among the Company's  four major markets,  the paper & packaging  knife
market is the  largest  and most  diverse,  with the  widest  variety of cutting
methods.   These  knives  are  used  in   applications   by  companies  such  as
Kimberly-Clark  Corp.,  Fort  James and  Proctor & Gamble Co.  for  cutting  and
perforating  tissue  paper and paper  towels and the  production  of  disposable
diapers;  by companies such as Frito-Lay,  Inc. and M&M Mars, Inc. which utilize
Zig Zag  knives to cut the top and  bottom of snack  food,  salt and  pepper and
candy packages sold by convenience stores and fast food chains; and by companies
such as Quebecor World, Champion International Corp. and RR Donnelly & Sons Co.,
Inc. for cutting and trimming paper in the  production of copy paper,  books and
business  forms.  As a result  of their  many  uses,  paper &  packaging  knives
represent the largest


                                      I-3

<PAGE>


category of the  Company's  approximately  10,000  products with more than 2,500
paper & packaging  knife products  relating to every aspect of paper & packaging
manufacturing and converting.

         Paper  converting  knives are made from a wide  range of steel  grades,
from inlaid  carbon  steels to  carbide.  Recent  trends in the paper  industry,
including  an  increase  in the use of  recycled  fiber  and a  change  in paper
chemistry to more abrasive alkaline  additives,  have required upgrades by paper
producers to higher  quality,  more expensive  knife materials and designs which
are better suited for more sophisticated and diverse cutting applications.  As a
result,  the market for industrial paper converting knives is experiencing price
and margin expansion as higher-end knives are increasing in demand.  The Company
has  developed  an  expertise  in the  manufacture  of these more  sophisticated
cutting tools which allow the paper  converter to run longer and produce  better
quality  cuts.  The  Company  believes  that  few of its  competitors  have  the
expertise to manufacture  machine  knives out of the more  expensive  materials,
which gives IKS a  competitive  edge and positions it to offer the most complete
package of new knife products and services in the world paper market.

         The  Company  expanded  its  presence in the  printing  market with its
acquisition  of the assets of the Rolf Meyer  Company  ("Rolf  Meyer") in April,
1997.  Located in  northern  Germany,  Rolf Meyer,  over the past 30 years,  has
developed a reputation of being a leading  producer of high  precision  printing
press knives and spare parts. By acquiring Rolf Meyer's technical  expertise and
proprietary  machining  methods,  IKS has also been able to expand its precision
toothed knife  manufacturing  capabilities into the packaging and food industry,
growing markets for the IKS group.

         Industrial  paper knives are generally  consumed  rapidly in the normal
course of operation and can need  resharpening  as often as once per week and 50
times over the life of the  product.  The Company  has a strong  presence in the
knife servicing market in North America, capitalizing on the preference of users
of paper knives to outsource  their knife  servicing needs rather than resharpen
their knives  themselves.  Customers  often find that the  performance  of these
tools can be better  maintained if the sharpening is outsourced to  professional
service  shops  having  more  specialized   equipment  and  technically  trained
personnel.   The  Company   believes   that  it  has  the  largest   network  of
Company-owned,  strategically  located  service  shops  equipped  with  the  IKS
Hyperhone(TM)  system,  which system maintains new knife performance  throughout
the life of a tool and is not  available at most other  independent  or in-house
grinding shops. Through Company owned service facilities in strategic locations,
IKS can offer  customers a local supply of  consumable  cutting tools as well as
factory  trained  service  facilities to sharpen and maintain  cutting tools for
peak performance and productivity. In addition to Company owned service centers,
the Company  works very closely  with  independently  owned  dealers and regrind
shops. The Company is continuously  expanding its paper knife servicing business
by educating paper mills on the benefits of outsourcing their knife resharpening
needs to the Company's service centers.

         The Company  believes  that the market for paper & packaging  knives is
strong  worldwide and is growing in Europe,  Latin America and Asia. The Company
should  benefit in Asia and Latin  America as consumer  markets in those regions
emerge and the use of packaged consumer products rapidly increases.  The Company
has expanded its  penetration  of the European  market to include  packaging and
food knives  previously  not  marketed in Europe  through the IKS  organization,
primarily  due to the  increased  capacities  in  precision  serrated  edge tool
products the Company  obtained when it acquired Rolf Meyer. The Company believes
that,  through  its  continued  emphasis  on  providing   specialized  technical
assistance, it will continue to grow in these markets.

Metal

         The Company  believes it is the second  largest  manufacturer  of metal
knives with 1999 net sales of  approximately  $16 million.  The Company's  metal
knives are used by steel  processing  facilities  such as Heyco Corp.,  Edgecomb
Metals Co. and Allegheny Ludlum Corp. and metal products  manufacturers  such as
Deere & Co.  Inc.,  Caterpillar,  Inc.  and  Steelcase  Corp.;  in the  cutting,
shearing and  chopping of steel being  produced in steel mills used by companies
such as  Bethlehem  Steel Corp.,  Rouge Steel Co. and USX Corp.;  and in cutting
metal  sheets  and  slitting  strips  from  rolls of sheet  steel  processed  by
companies such as California Steel Corp. and Joseph T. Ryerson & Son, Inc.


                                      I-4


<PAGE>


         Steel circular slitter knives are highly accurate,  requiring thickness
tolerances  of up to 40 millionths of an inch for a high degree of precision and
customization. There is a trend toward increased tensile strengths of metals and
maximizing the efficiency of metal slitting  machines.  This trend requires tool
technology that extends the normal  resharpening  cycle. The Company is a leader
in this field, utilizing fine-grained raw materials, triple-tempered vacuum heat
treatment  procedures,  and finely lapped  surfaces  which enable this degree of
precision.
         In setting up their steel slitting lines, the Company's customers order
knives  specifically  designed for the particular demands and characteristics of
each  production  line.  IKS  offers  expert  technical  and  computer  software
assistance  to  companies  setting up such a line.  The Company has  developed a
proprietary  software  package,  Slitting  Assembly  Very Easy  ("SAVE"),  which
assists  customers in choosing  and setting up metal  slitting  knives.  The IKS
(SAVE)  technology makes use of custom computer  software to guide the personnel
setting up the arbor in the selection of the individual slitter knife and spacer
combination to an exact  thickness,  assuring that, as the arbor is loaded,  the
accumulated  error is maintained near zero. The accuracy of this knife clearance
directly  affects the cut edge  quality of the steel  strip.  By  offering  this
technology, as well as personal technical assistance, the Company is an integral
part of the steel slitting knife purchasing process,  which the Company believes
increases the likelihood that a customer will choose an IKS product.

         Another  method the Company  utilizes to maintain its position with its
customers  of steel  slitting  knives is its focus on metal  knife  resharpening
centers. Metal knives are consumable and generally need resharpening as often as
once per week and as often as 100  times  over the life of a  product.  Although
most users of metal knives have expertise in metalworking processes,  there is a
trend in the United States to outsource their  resharpening  requirements due to
the increasing  sophistication  and tolerance  required of metal knives.  IKS is
capitalizing  on this  opportunity.  The market for  industrial  metal knives is
dependent upon the steel usage by numerous  industries  including the automotive
industry and metal and consumer product manufacturers,  such as aluminum can and
appliance manufacturers.

Plastic & Recycling

         The  Company  believes  it  is  one  of  the  largest  manufacturer  of
industrial  plastic & recycling  knives with 1999 net sales of  approximately $6
million.  Industrial  plastic  granulator knives are used for the manufacture of
plastic,  typically  by  companies  such as  Mobil  Chemical  Corp.  and  I.C.I.
Americas,  Inc.  where  pelletizing  knives are used to cut plastic  into small,
precise pieces for processing; by companies such as E.I. DuPont de Nemours & Co.
for cutting  artificial  fibers; by companies such as Wellman Inc. for recycling
plastic  containers;  and by  companies  such as Waste  Recovery  Corp.  for the
environmental recycling of styrofoam, rubber and glass. The Company manufactures
knives for all of these uses,  as well as related  knives  used to cut  computer
tape, foil and film by companies such as Alcoa Aluminum Co. of America, Inc. and
Eastman Kodak Co. and household products produced by Hasbro Corp. and Rubbermaid
Inc.

         IKS  is  one  of  North  America's  largest   manufacturer  of  plastic
granulator knives and is also one of the largest manufacturers of such knives in
Europe.  The market for industrial plastic granulator knives is currently strong
in Europe as a result of  government  mandated  recycling  programs  and is also
growing in North  America  due to the  increased  focus on the  environment  and
recycling.  There is a growing  emphasis on recycling with respect to reclaiming
the reusable value of material in plastic,  rubber, glass and metal products, as
well as with  respect to easing the  disposal  of urban  waste,  medical  waste,
aluminum cans and soda bottles in accordance with environmental regulations.

         The  Company  is also a leader in the  development  and  production  of
knives used in the size  reduction and recycling of automobile  tires and glass.
The  Company  believes  the use of tire  granulating  knives  will  continue  to
increase as new uses are developed  for the  reprocessed  material.  The Company
believes  that the  recycling of copper and  aluminum  cable and wires will also
increase as fiber optic and  satellite  communication  technologies  become more
widespread. The Company manufactures the knives which are used in the granulator
systems used in recycling these materials and is thus well positioned to benefit
as demand for these products increases.


                                      I-5


<PAGE>


         Industrial  plastic granulator knives are consumed in the normal course
of machine  operation  and need  resharpening  as often as once per month and as
many a 15 times over the life of a product.  Most  users of  industrial  plastic
granulator  knives do not  service  their own knives and the  servicing  of such
knives is also an important  area for the  potential  expansion of the Company's
customer base.

Marketing and Distribution

         The  Company is the only  industrial  knife and saw  manufacturer  with
operations  in North  America,  Europe,  Asia,  Australia  and Latin America and
products sold in more than 75 countries.  Historically, the Company's sales have
been  principally in North America and Europe.  However the Company has recently
expanded  operations  into the emerging  markets of Asia and Latin America,  and
plans to continue its  international  growth,  entering new  geographic  markets
while broadening existing ones.

         The  Company  has one of the  largest  direct  salesforces  focused  on
industrial knives and saws.  Complementing the Company's knowledgeable worldwide
salesforce,  the Company has a  significant  staff of product  managers  who are
experts in their respective fields and are responsible for product  coordination
among the Company's  salespeople,  customers and manufacturing  operations.  The
Company concentrates its sales efforts on end-users, which represent 92% of 1999
net  sales,   through  its  direct   sales  force,   distributors,   agents  and
Company-owned and independent  resharpening service centers. The remaining 8% of
the  Company's  net sales are to original  equipment  manufacturers  ("OEMs") of
cutting machines through its direct sales force.

         In order to  better  serve its  customers,  the  Company  strategically
places its  inventory  around the world to best suit  geographical  and customer
needs.  This  results in the  Company  being able to ship most  products  to the
end-users more rapidly than many of its competitors.

         End-users  -- Direct  Salesforce  and  Company-Owned  Service  Centers.
Approximately  65% of the  Company's  1999 net sales  were  direct to  end-users
through the Company's salesforce and Company-owned service centers, representing
approximately  7,500 customer  accounts.  The Company  believes that it has been
successful  in  selling  to  end-users  because  of its large and  knowledgeable
salesforce, broad product offering, customer service, the strategic placement of
its inventory and its relationships with OEMs. The Company's salesforce develops
close working relationships with end-users, continually providing customers with
direct technical support,  offering advice about the types of knives,  materials
and specifications which would be appropriate for their specific machines.

         The  Company is  afforded  additional  direct  access to  end-users  by
providing   resharpening   services  to  end-users  of  both  its  own  and  its
competitors'  products  through its 21 service  centers,  fourteen in the United
States,  three in Canada, one in the Netherlands,  one in France, one in Mexico,
and one in Chile.  In addition to  company-owned  service  centers,  the Company
works very closely in conjunction with a network of independently  owned dealers
and regrind  shops.  This  enables  the  Company to create even closer  customer
relationships  which  better  position it to be the first choice of the end-user
when a replacement is needed.  Since industrial  knives and saws are consumable,
and generally need  resharpening at least once per week and as often as 50 times
over the life of a product, resharpening revenues can be significantly in excess
of the cost of the product.

         The resharpening  service centers also act as distributors as they sell
replacement knives and saws. By owning and operating these service centers,  the
Company can replace  competitors'  products  with IKS  products,  including  IKS
products  that the  service  center may not have  previously  sold.  The Company
believes that the number of service  center users will continue to increase as a
result of a slow but emerging trend toward outsourcing  resharpening operations.
This outsourcing trend results from end-users  implementing  overhead reductions
and  requiring  expertise  in  resharpening  blades that are  increasingly  more
sophisticated in materials and design.

         End-users -- Distributors and Independent Service Centers.  The Company
sells  approximately 27% of its net sales to end-users through  distributors and
independent  resharpening service centers. The Company's long term relationships
with these  distributors,  agents and independent  resharpening  service centers
complements  its salesforce by providing the  opportunity  to access  additional
niche markets.  The Company will continue to utilize its distribution network to
expand its sales reach and carry the IKS products in their  inventory,  ready to
be sold to end-users.


                                      I-6


<PAGE>


         OEMs.  Approximately  8% of IKS'  1999 net  sales  were  directly  to a
variety of OEM manufacturers. The Company believes it is the leading supplier to
the OEM market,  placing the original knife or saw in the OEM machine, and has a
close  relationship  with  many  of  the  major  cutting  machine  manufacturers
worldwide.  The Company has developed and maintains these close relationships by
providing advice to OEM manufacturers  about the types of knives,  materials and
specifications  which would be appropriate  for their  particular  machines.  In
supplying over 350 OEMs, the Company's  market managers have an enhanced ability
to identify the needs of its customers and to coordinate the Company's technical
capabilities  with those needs.  As a result,  the Company  believes that it has
greater  opportunities  to place its products  into OEM machines and by doing so
provides itself with a competitive advantage in capturing the resultant end-user
replacement sales.

Strategic Alliances

         The   Company's   strategic   alliances   include   over  50   business
relationships  with suppliers of finished  industrial knives and saws throughout
the  world,  five  joint  ventures  and  several  strategic  relationships  with
independent  resharpening centers.  These alliances enable the Company to expand
its international presence, increase its product offerings and align itself with
local  entrepreneurs  in  international  markets where local market expertise is
needed while broadening its customer base with limited additional investment.

         Finished Goods Suppliers. The Company's relationships with suppliers of
finished goods are typically with small manufacturers  throughout the world. The
Company's  relationships  with finished goods suppliers allow it the flexibility
to  manufacture  or source a product  based  upon cost and  delivery  time,  the
quality of product  needed,  the region to be  supplied  and the  material to be
used. The more significant of these  relationships  provide the Company with the
exclusive or semi-exclusive  rights to market certain of its partners'  products
within the Company's  markets and allow the Company to purchase  finished  goods
for a relatively low cost and then resell these  products at attractive  margins
often using the Company's  trademarks and tradenames.  The Company generally has
at least two  suppliers  for most of the products it sources.  In addition,  the
loss of any  particular  supplier  would  not have a  material  effect  upon the
Company,  since the  Company  is able to  manufacture  substantially  all of the
products it sources.

         Joint Ventures.  The Company also maintains its international  presence
through joint ventures in Asia, Australia,  and Latin America. These include two
joint  ventures  in China which  commenced  operations  in January.  The Company
increased  its  interest  from 51% to 80% in 1999 in both China joint  ventures.
These joint ventures sell products domestically within China and IKS exclusively
exports  these  products to the rest of the world,  providing the Company with a
relatively  low cost source of supply for resale to its  customers.  These joint
ventures  provide a distribution  network for the Company to import its products
from North America and Europe into the rapidly developing market in China as the
economy  expands and demands a greater  variety of cutting  tool  products.  The
Company's  other joint venture  interests are a 42.5%  interest in a distributor
and service center in Chile which had net sales of approximately $1.0 million in
1999, a 30% interest in a distributor in the Philippines  which had net sales of
approximately  $.9  million in 1999,  and a 45%  interest  in a  distributor  in
Australia which had net sales of approximately $.8 million in 1999.

Raw Materials

         The Company has numerous suppliers of raw materials,  including over 20
raw material  suppliers of steel. IKS's steel purchase volume is typically large
enough to allow the Company to purchase steel  directly from steel mills,  which
results  in  reduced  raw  material  costs.   The  Company   believes  that  its
relationships  with all of its  steel  vendors  are  good.  The  Company  is not
dependent on any one of its suppliers for all of its raw materials.

         In 1995, the Company experienced an unexpected increase in the price of
tool steel because of an unusual  general  market price  increase which affected
the knife industry worldwide.  This price escalation was attributable to a major
reduction in specialty  tool steel  production  resulting  from the closing of a
major  German  steel  mill and the  consolidation  of steel  producers  in Latin
America  and Europe  coupled  with a strong  demand for raw  materials  in North
America and Europe.  Due to the  unexpected  nature of the price  increase,  the
Company was not able to pass along this  increase to its  customers  on a timely
basis.  The  Company  has taken  measures  to  prevent  such a


                                      I-7


<PAGE>


reoccurrence  by  negotiating  a 90-day  fixed price term into most of its sales
contracts as opposed to the previous one year term,  increasing prices on a more
regular basis and expanding the number of its steel suppliers.

Backlog Orders

         As of February 29, 2000,  the dollar  amount of backlog  orders,  which
includes  BMMS (see Note 13 on page  II-29),  believed by the Company to be firm
totaled  approximately $35 million. It is expected that a significant portion of
all such orders will be filled  during 2000.  As of February 28, 1999 the dollar
amount of backlog orders totaled approximately $37 million.

Competition

         The industrial knife and saw market is highly  fragmented with numerous
participants.  The Company competes principally on the basis of price,  service,
delivery,  quality and technical  expertise.  The Company's  competitors vary in
each of the market  sectors that the Company  serves.  No single  company  which
competes  with the  Company in all four of the market  sectors  that the Company
serves and no single  company is  dominant in any of such  market  sectors.  The
Company  believes that the reputation it has  established  over its long history
for  quality  products,  sales and  service  network  and its  in-depth  product
knowledge  provide it with a competitive  advantage in all the market sectors it
serves.

Trademarks and Tradenames

         The Company  markets its products under certain  trademarks,  including
"IKS(TM)," "IKS  Klingelnberg,"  "Cascade Southern",  "Chromavan,"  "Chromalit,"
"Compaflex,"  "Compalloy,"  "Durakut,"  "Durapid,"  "Duritan,"   "Dynabloc(TM),"
"Dynapren," "Dynatherm," "KeyMatic,"  "Hyperhone(TM)," "Klirit," "KSFmicroplan,"
"Novacrom(TM),"  "Novador,"  "QCP," "Quality Cut Knife  Maintenance  Program and
Design,"  "Rolf  Meyer",   "SAVE,"  "Sawyer's  Choice,"  "Stop,"  "Surekut(TM),"
"Systi-Matic",  "Tecalloy(TM),"  "Tecnolite(TM),"  "Tungsten  Carbide  Quattro,"
"Diamond Cut," "New Wave," "Dialux," "Ultrid," and "Workalit." In addition,  the
Company uses the following tradenames: American Custom Metals; Ban-Carb; Buland;
Canadian Knife & Saw; Diacarb; AK Vander Wijngaart Beheer;  Diacarb Stansvormen;
Mayemyton Trading;  Durakut;  Econokut;  Hannaco;  Hyperhone; IKS de Mexico; IKS
Shanghai; Kodiak; SPS; Tuff-Tip; and Ultrakut.

Employees

         At December 31, 1999,  the Company had 1,453  full-time  employees.  Of
such  employees,  780 were located in North America,  341 were located in Europe
and 332 were  located in Asia.  The Company  considers  its  relations  with its
employees to be good.

         The Company's employees are primarily non-union. The Company's Bergisch
Born,  Germany facility,  its China facilities  (operated in connection with its
joint venture arrangements) and its Systi-Matic facility in Kirkland, Washington
are the only facilities which employ union workers.  The Company  estimates that
45 of its German  employees and 72 of its U.S employees are union  members.  The
majority of the 315 employees at the  facilities of the two China joint ventures
are part of a governmental  bargaining unit. The Company considers its relations
with the unions to be good.

Environmental and Regulatory Matters

         As  with  most  industrial  companies,  the  Company's  facilities  and
operations  are  required to comply  with and are  subject to a wide  variety of
federal,  state,  local and foreign  environmental  and worker health and safety
laws,  regulations  and  ordinances,  including  those related to air emissions,
wastewater  discharges and chemical and hazardous waste  management and disposal
("Environmental  Laws").  Certain  of these  Environmental  Laws hold  owners or
operators of land or businesses liable for their own and for previous owners' or
operators'  releases of  hazardous  or toxic  substances,  materials  or wastes,
pollutants  or  contaminants,   including   petroleum  and  petroleum  products.
Compliance with  Environmental  Laws also may require the acquisition of permits
or other  authorizations


                                      I-8


<PAGE>


for certain  activities  and  compliance  with various  standards or  procedural
requirements.  The  nature of the  Company's  operations,  the long  history  of
industrial uses at some of its current or former facilities,  and the operations
of  predecessor  owners or  operators  of certain of the  businesses  expose the
Company to risk of  liabilities  or claims  with  respect to  environmental  and
worker health and safety matters.  There can be no assurance that material costs
or  liabilities  will not be incurred in  connection  with such  liabilities  or
claims.

         In  connection  with the  Recapitalization,  the  Company  obtained  an
indemnity for fines and penalties for violations of  Environmental  Laws and for
losses suffered by the Company with respect to certain environmental  conditions
occurring  prior to the  Recapitalization.  The  environmental  indemnities  are
subject to certain time limitations depending on the nature of the environmental
claim, a $15.0 million cap and, except for fines and penalties for violations of
Environmental Laws, a $2.5 million deductible. Based on the Company's experience
to date and the indemnities  obtained in connection  with the  Recapitalization,
the  Company   believes  that  the  future  cost  of  compliance  with  existing
Environmental Laws (or liability for known environmental  liabilities or claims)
should not have a material adverse effect on the Company's  business,  financial
condition or results of operations.  However,  future events, such as changes in
existing  laws  and  regulations  or  their  interpretation,  may  give  rise to
additional  compliance  costs or liabilities  that could have a material adverse
effect on the Company's business,  financial condition or results of operations.
Compliance  with more  stringent laws or  regulations,  as well as more vigorous
enforcement   policies  of   regulatory   agencies  or  stricter  or   different
interpretations  of existing laws, may require  additional  expenditures  by the
Company that may be material.

ITEM 2.  PROPERTIES

         The Company is headquartered in Erlanger, Kentucky, located a few miles
south of Cincinnati, Ohio. The Company currently owns or leases 30 facilities in
North America,  Europe,  Asia,  and Australia  that are used for  manufacturing,
distribution, sales, warehousing and service center activity.


                                      I-9


<PAGE>


         The  following  table  sets  forth the  location,  square  footage  and
principal functions of each of the Company's facilities.

<TABLE>
<CAPTION>

                        Location                    Approx. Sq. Ft.             Use
              --------------------------------      ---------------  ---------------------------------
                        <S>                         <C>                         <C>

              North American Facilities
                Florence, SC...................          106,600     Manufacturing/Service
                                                                     Center/Distribution/Sales
                Erlanger, KY (corporate                              Manufacturing/Service
                   Headquarters)...............           99,700     Center/Distribution/Sales
                Camden, AL.....................           44,700     Manufacturing/Service
                                                                     Center/Distribution/Sales
                McMinnville, OR................           55,000     Manufacturing/Service
                                                                     Center/Distribution/Sales
                Granby, Quebec*................           20,000     Manufacturing/Service
                                                                     Center/Distribution/Sales
                Langley, British Columbia........         19,200     Manufacturing/Service
                                                                     Center/Distribution/Sales
                Elmhurst, IL*..................           18,500     Service Center/Distribution/Sales
                Kirkland,WA *..................           30,000     Manufacturing/Service
                                                                     Center/Distribution/Sales
                Milwaukie, OR *................            8,600     Manufacturing/Service Center
                Hot Springs, AR................            6,700     Distribution/Sales
                Atlanta, GA *..................            3,900     Service Center/Distribution/Sales
                Appleton, WI *.................            5,000     Service Center/Distribution/Sales
                Nashville, TN *................            2,400     Service Center/Distribution/Sales
                Bangor, ME.....................           12,400     Service Center/Distribution/Sales
                Mississauga, Ontario*..........           11,800     Service Center/Distribution/Sales
                West Monroe, LA................            7,500     Service Center/Distribution/Sales
                Richmond, VA *.................            7,400     Service Center/Distribution/Sales
                Mexico City, Mexico*...........            3,500     Service Center/Distribution/Sales
                Statesboro, GA*................            2,700     Service Center/Distribution/Sales
              European Facilities
                Bargteheide, Germany...........           64,500     Manufacturing/Distribution/Sales
                Bergisch Born, Germany.............       56,000     Manufacturing/Distribution/Sales
                Geringswalde, Germany..........           30,700     Manufacturing
                Rotterdam,  the Netherlands....           23,700     Service Center/Distribution/Sales
                Palaiseau, France..............           17,200     Service Center/Distribution/Sales
              Asian Facilities
                Jakarta, Indonesia*............            2,700     Distribution/Sales
                Kuala Lumpur, Malaysia*........            1,000     Distribution/Sales
              Joint Venture Facilities
                Shanghai, China** (80%)........           32,000     Manufacturing/Distribution/Sales
               Coffs Harbour, Australia*(45%)              2,000     Distribution/Sales
               Concepcion, Chile (42.5%).......            3,700     Service Center/Distribution/Sales
               Manila, Philippines (30%).......            2,500     Distribution/Sales

----------

*    Leased.

**   Facility owned, land leased.

</TABLE>

         The  Company   believes  that  its  facilities  are  suitable  for  its
operations and provide  sufficient  capacity to meet the Company's  requirements
for the foreseeable future.


                                      I-10


<PAGE>


         The  Company  places  a  strong  emphasis  on  producing  high  quality
products.  The Company's European facility located in Bergisch Born, Germany has
been awarded ISO 9001 certification,  while its Erlanger,  Kentucky facility has
been  awarded  ISO 9002  certification  indicating  that these  facilities  have
achieved and sustained a high degree of quality and consistency  with respect to
their  production  systems.  The Company  believes that ISO  certification is an
increasingly important selling feature both domestically and internationally, as
it provides  evidence to  purchasers  that the  Company's  systems have achieved
specified standards and are being sustained.

ITEM 3. LEGAL PROCEEDINGS

         The Company is from time to time involved in legal proceedings  arising
in the ordinary course of business. The Company believes there is no outstanding
litigation  which  could have a material  impact on its  financial  position  or
results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

         This item is not  applicable to the  registrant for this filing on Form
10-K.


                                      I-11


<PAGE>


                                     PART II


ITEM 5.  MARKET  FOR  THE  REGISTRANT  COMMON  EQUITY AND  RELATED  STOCKHOLDERS
         MATTERS

         The  Company  is a wholly  owned  subsidiary  of IKS  Corporation.  The
Company's common equity is not publicly traded and, accordingly,  an established
market does not exist for such common equity.

         IKS Corporation has two classes of common equity outstanding as well as
two classes of preferred  stock.  As of March 1, 2000,  there were 36 holders of
IKS Corporation'  outstanding  common equity.  In August and September 1997, IKS
Corporation  issued  11,319  shares of Class A Stock,  96 shares of Series A 12%
Cumulative  Compounding Preferred Stock and 96 shares of Series B 12% Cumulative
Compounding Preferred Stock to Participants for total consideration of $305,190.
During 1998, IKS  Corporation  issued 200 shares of Class A Stock,  24 shares of
Series A 12% Cumulative  Compounding  Preferred  Stock and 24 shares of Series B
12%  Cumulative   Compounding   Preferred  Stock  to   Participants   for  total
consideration  of $50,000.  During 1999,  IKS  Corporation  issued 312 shares of
Class A stock, 2.4 shares of Series A 12% Cumulative Compounding Preferred Stock
and 2.4  shares  of  Series  B 12%  Cumulative  Compounding  Preferred  Stock to
Participants  for total  consideration  of  $7,920.  The above  securities  were
purchased  under  certain  employee  stock  purchase  plans in reliance upon the
exemptions  available  under  Section 4 (2) of the  Securities  Act of 1993,  as
amended,  and  Regulation  D  thereunder.  See "Item 12.  Security  Ownership of
Certain Beneficial Owners and Management."

         On November 6, 1996, IKS  Corporation  completed the  Recapitalization.
See "Item 1. Business - The  Recapitalization." As part of the Recapitalization,
the Company paid a special cash dividend of  approximately  $63.5 million to IKS
Corporation  to  finance,  in part,  the cash  portion  of the  Recapitalization
Distribution. See "Item 1. Business - The Recapitalization."

         The Company did not pay any  dividends  in 1999  because the  Indenture
prohibits  the  Company  from  declaring  or paying any  dividend  or making any
distribution  on  account  of the  Company's  equity  interests  unless  certain
conditions, as outlined in the Indenture, exist at the time of such payment. The
Company is not  prohibited  from  declaring  or paying  dividends in the form of
capital stock of the Company.

ITEM 6.  SELECTED FINANCIAL DATA

         The following table contains selected historical  financial data of the
Company as of and for each of the five years in the period  ended  December  31,
1999. The information contained in this table should be read in conjunction with
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations",  and the Company's historical consolidated financial statements,
including the notes thereto, included elsewhere herein.


                                      II-1


<PAGE>


<TABLE>
<CAPTION>

                                                        Year Ended December 31
                                                        (dollars in thousands)
                                         1999         1998         1997         1996        1995
                                     -----------  -----------  -----------  ----------- --------
<S>                                  <C>          <C>          <C>          <C>         <C>

Operating Data:
Net sales                            $ 151,087    $ 150,132    $ 142,265    $ 118,996   $ 107,030
Cost of sales                          106,431      105,020       99,176       83,122      77,026
                                     ---------    ---------    ---------    ---------   ---------
  Gross profit                          44,656       45,112       43,089       35,874      30,004
Selling, general and administrative
  expenses                              34,517       30,299       27,681       23,952      19,734
                                     ---------    ---------    ---------    ---------   ---------
  Operating income                      10,139       14,813       15,408       11,922      10,270
Interest expense, net                   12,354       12,006       11,687        3,245       1,416
Minority interest                          295           71          174         (271)          -
                                     -----------  ---------    ---------    ----------  ---------
Income (loss) before income taxes       (2,510)       2,736        3,547        8,948       8,854
Provision for income taxes                 880        1,146        1,499        2,924       3,606
                                     ---------    ---------    ----------   ---------   ---------
Net income (loss)                    $  (3,390)   $   1,590    $   2,048    $   6,024   $   5,248
                                     ==========   ==========   ==========   =========   =========
Net income (loss) per common share   $   (7.03)   $    3.30    $    4.25    $   12.50   $   10.89

Other Data:
EBITDA (1)                           $  16,893    $  20,803    $  20,027    $  17,055   $  14,687
Net cash provided by operating
  activities                             6,889       10,694        7,282        9,999       2,963
Net cash used in investing
  activities                            (5,497)     (17,687)     (25,183)      (8,998)     (3,783)
Net cash (used) provided by
  financing activities                  (1,332)       6,690        8,676          965       4,494
Depreciation and amortization (2)        6,360        5,620        5,145        4,596       3,786
Capital expenditures (3)                 6,019        9,320        7,734        8,157       4,663
Gross margin                              29.6%        30.0%        30.3%        30.1%       28.0%
EBITDA margin                             11.2%        13.9%        14.1%        14.3%       13.7%
EBITDA including LIFO charges and
  credits                            $  16,499    $  20,434    $  20,553    $  16,518    $ 14,056

Balance Sheet Data:
Working capital                      $  28,869    $  26,095    $  32,910    $  40,753    $ 32,564
Total assets                           127,618      134,975      115,274      101,275      85,697
Debt (4)                               114,957      122,455      109,265      100,075      23,716
Shareholder's equity (deficit)         (22,846)     (18,093)     (19,607)    (19,644)      38,029


   (1)   EBITDA  is  defined  as   operating   income  plus   depreciation   and
         amortization  adjusted to exclude LIFO charges (credits) of $394, $370,
         ($526),  $537,  and $631 for the years ended  December 31, 1999,  1998,
         1997, 1996 and 1995, respectively. EBITDA should not be construed as an
         alternative  to  operating  income,  net  income  or  cash  flows  from
         operating  activities  (as  determined  in  accordance  with  generally
         accepted  accounting  principles)  and  should not be  construed  as an
         indication of the Company's  operating  performance  or as a measure of
         liquidity.  See  "Item  7.  Management's  Discussion  and  Analysis  of
         Financial  Condition  and Results of  Operations."  The EBITDA  measure
         presented  by the Company may not be  comparable  to  similarly  titled
         measures reported by other companies.

   (2)   Depreciation  and amortization as presented will not agree with amounts
         in the consolidated statement of cash flows because of the amortization
         of debt issuance costs reported below the operating income line.

   (3)   1998   includes   $2,172  of  capital   expenditures   related  to  the
         implementation  of a new  computer  system  (SAP)  and  related  system
         software.  1996 includes $1,524 of capital  expenditures related to the
         consolidation  of the Company's west coast operations and the expansion
         of the Cincinnati facility,  and $1,105 of capital expenditures related
         to the expansion of the China joint venture operations.

   (4)   Debt includes  notes payable and current  portion of long-term debt and
         excludes capital lease obligations.

</TABLE>

                                      II-2


<PAGE>






ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

         The  following  discussion  should  be read  in  conjunction  with  the
Consolidated Financial Statements and related notes.

General

         The  Company is a global  leader in the  manufacturing,  servicing  and
marketing of industrial  and commercial  machine knives and saws.  Together with
its predecessor,  the Company has been manufacturing  knives and saws for nearly
100 years,  beginning in Europe and  expanding its presence to the United States
in the 1960s. The Company operates on an international  basis with facilities in
North  America,  Europe,  Asia and Latin  America and  products  sold in over 75
countries.  The  Company  offers a broad  range of  products,  used for  various
applications in numerous markets.

Presence outside the U.S.

         The Company's North American  operations  accounted for 66% of its 1999
net  sales.  The  Company's  other  international  operations  account  for  the
remainder  and are located  primarily  in Europe,  30% of 1999  sales,  and to a
lesser extent in Asia.

         Historically,  the  Company  had  focused  its sales  efforts  in North
America  and Europe,  only  recently  establishing  itself in other areas of the
world and has  increased  sales in these other  markets from 1% in 1995 to 4% of
1999 net sales. During 1994, 1995, 1996 and 1997, the Company entered into joint
ventures to establish itself in these emerging markets.

         The Company's  operating results are subject to fluctuations in foreign
currency  exchange  rates as well as the  currency  translation  of its  foreign
operations into U.S.  dollars.  The Company  manufactures  products in the U.S.,
Germany,  Canada and China and exports  products to more than 75 countries.  The
Company's  foreign  sales,  the  majority of which occur in Canada and  European
countries,  are subject to exchange rate  volatility.  In addition,  the Company
consolidates German, Dutch, French,  Canadian,  Mexican, Chinese and other Asian
operations  and  changes in  exchange  rates  relative  to the U.S.  dollar have
impacted  financial  results.  As a result, a decline in the value of the dollar
relative  to  these  other  currencies  can  have  a  favorable  effect  on  the
profitability of the Company and an increase in the value of the dollar relative
to these other currencies can have a negative effect on the profitability of the
Company.  Comparing  exchange  rates for 1999 to 1998,  the weaker  German Mark,
Dutch Guilder,  and French Franc had the  translation  effect of decreasing 1999
sales by $1.6, $.5 and $.5 million,  respectively with immaterial impact on 1999
operating  income.  To  mitigate  the  short-term  effect of changes in currency
exchange  rates  on the  Company's  foreign  currency  based  purchases  and its
functional  currency based sales, the Company  occasionally  enters into foreign
exchange and U.S.  dollar  forward  contracts to hedge a portion of its budgeted
(future) net foreign exchange and U.S. dollar  transactions over periods ranging
from one to twelve months.

         At December 31, 1999 the result of a hypothetical 10% adverse change in
foreign  currency  rates would not  significantly  impact the  Company's  future
results  of  operations,  cash flows or  financial  position.  This  calculation
assumes that each exchange rate would change in the same  direction  relative to
the U.S.  dollar.  In addition to the direct  effects of the changes in exchange
rates, changes in exchange rates also affect the volume of sales and the foreign
currency sales price as competitors'  products  become more or less  attractive.
The Company's sensitivity analysis of the effects of changes in foreign currency
exchange rates does not factor in the potential  change in sales levels or local
currency prices.


                                      II-3


<PAGE>


Results of Operations

         The following table sets forth the items in the Company's  consolidated
statements of income as percentages of its net sales for the periods indicated:



                                                 Year Ended December 31,
                                               1999         1998         1997
                                            ----------   ---------    ----------

Net sales..............................        100.0%       100.0%       100.0%
Cost of sales..........................        (70.4)%      (70.0)%      (69.7)%
                                            ----------   ----------   ----------
Gross margin...........................         29.6%        30.0%        30.3%
Selling, general and administrative
     expenses..........................        (22.8)%      (20.2)%      (19.5)%
                                            ----------   ----------   ----------
Operating income.......................          6.8%         9.8%        10.8%
Interest expense, net..................          8.2%         8.0%         8.2%
Minority interest......................          0.2%         0.0%         0.1%
                                            ---------    ---------    ---------
Income (loss) before income
taxes..................................         (1.6)%        1.8%         2.5%
Provision for income taxes.............         (0.6)%       (0.8)%       (1.1)%
                                            ----------   ----------   ----------
          Net (loss) income............         (2.2)%        1.0%         1.4%
                                            ==========   =========    =========


         As  used  in the  following  discussion  of the  Company's  results  of
operations,  (i) the term "gross profit" means the dollar difference between the
Company's net sales and cost of sales and (ii) the term "gross margin" means the
Company's gross profit divided by its net sales.

Year Ended December 31, 1999 Compared To Year Ended December 31, 1998

         Net  Sales:  Net sales  increased  .6% to $151.1  million  in 1999 from
$150.1  million in 1998.  The Company  experienced  sales  declines in its North
American  operations (6.5% to $99.2 million) compared to $106.1 million in 1998,
primarily  attributable to  organizational  issues and to a lesser extent due to
pricing pressures from Asian,  South American and domestic  competitors that led
to a loss of  business in the major  market  sectors  the  Company  serves.  The
Company  has  addressed  these  organizational  issues  through  several  senior
management  changes,  including the hiring of a new CEO in May 1999. The Company
experienced sales improvements  (18.0% to $51.9 million) in its other operations
compared  to $44.0  million in 1998,  primarily  attributable  to the Buland and
Diacarb acquisitions in the fourth quarter of 1998.

         Gross Profit:  Gross profit decreased slightly to $44.7 million in 1999
from $45.1 million in 1998.  Gross margin also  decreased  slightly to 29.6% for
1999 compared to 30.0% for 1998. The Company experienced a significant  decrease
in gross profit in its North  American  operations  (16.7% to $27.0 million) for
1999 compared to $32.4 million for 1998,  while gross margin also  significantly
declined to 27.2% from 30.5%.  The  decrease in gross profit and gross margin is
attributable  to the factors noted above.  The Company  experienced  significant
gross profit  improvements  (39.4% to $17.7 million) in its other operations for
1999 compared to $12.7 million for 1998,  while gross margin also  significantly
increased to 34.1% from 28.9%. The gross profit and gross margin improvement was
primarily due to the fourth quarter 1998 acquisitions of Buland and Diacarb.

         Selling,  General and  Administrative  Expenses:  Selling,  general and
administrative  expenses  ("SG&A") were $34.5 million for 1999 compared to $30.3
million  for 1998 and  increased  to 22.8% of sales  from 20.2% of


                                      II-4


<PAGE>


sales for the respective periods.  The increase in SG&A was primarily due to the
Diacarb and Buland  acquisitions  and to a lesser  extent due to  reorganization
costs in North America.

         Interest Expense,  net: Net interest expense increased to $12.4 million
in 1999 from $12.0 in 1998 due to an increase in borrowings primarily related to
the Diacarb and Buland  acquisitions in the fourth quarter of 1998 and increased
working capital needs due to the drop in sales in North America.

         Income  Taxes:  Due to pre-tax  losses in the United States in 1999 for
which the Company did not fully  realize  the  related  current tax  benefits in
accordance with income tax accounting  rules,  and as a result of pre-tax income
in the Company's  other  operations for which the Company  recorded  related tax
provisions,  the Company has recorded a consolidated provision for income tax on
a  consolidated  pre-tax loss of $2,510.  The  Company's  effective tax rate was
41.9% in 1998.  The  significant  change in income taxes from 1998 is due to the
above factors and significant changes in income  contributions for the Company's
operations in certain tax jurisdictions.

Year Ended December 31, 1998 Compared To Year Ended December 31, 1997

         Net  Sales:  Net sales  increased  5.5% to $150.1  million in 1998 from
$142.2 million in 1997,  primarily  attributable to 1998 and 1997  acquisitions,
significantly offset by softness in the wood, paper, and metal industries caused
by  pricing  pressures  from  Asian,   South  American,   Russian  and  domestic
competitors.  The Company  experienced sales  improvements in its North American
operations  (2.6%  to  $106.1  million)  compared  to  $103.4  million  in 1997,
primarily  attributable the above mentioned factors and the negative translation
effects of a weaker Canadian  dollar that had the effect of decreasing  sales by
$.7 million. The Company experienced sales improvements (13.1% to $44.0 million)
in its other  operations  compared  to $38.9  million in 1997,  attributable  to
increased  sales from the Buland and Diacarb  acquisitions in the fourth quarter
of 1998  which  accounted  for about  half of the  increase,  and the Rolf Meyer
acquisition in the second quarter of 1997, partially offset by the factors noted
above.

         Gross Profit:  Gross profit  increased to $45.1 million in 1998 up from
$43.1 million in 1997, primarily attributable to the 1998 and 1997 acquisitions,
significantly  offset by the  softness  in the wood  paper and metal  industries
caused by pricing  pressures from Asian,  South  American,  Russian and domestic
competitors. Gross margin decreased slightly to 30.0% for 1998 compared to 30.3%
for  1997.  The  Company  experienced  gross  profit  improvements  in its North
American  operations  (.6% to $32.4  million) for 1998 compared to $32.2 million
for 1997,  although gross margin  declined to 30.5% from 31.2%.  The increase in
gross profit and slight decline in gross margin is  attributable  to the factors
noted above. The Company also experienced  gross profit  improvements  (16.5% to
$12.7  million) in its other  operations  for 1998 compared to $10.9 million for
1997,  and  gross  margin  increased  to 28.9%  from  28.0%.  The  gross  profit
improvement was primarily due to the fourth quarter 1998  acquisitions of Buland
and Diacarb and the second quarter 1997 Rolf Meyer acquisition, partially offset
by the factors noted above.

         Selling,  General and  Administrative  Expenses:  Selling,  general and
administrative  expenses  were $30.3  million for 1998 compared to $27.7 million
for 1997 and increased to 20.2% of sales from 19.5% of sales for the  respective
periods. The increase in SG&A was primarily due to acquisitions.

         Interest Expense,  net: Net interest expense increased to $12.0 million
in 1998 from $11.7 in 1997 due to an increase in borrowings primarily related to
the Diacarb and Buland  acquisitions in the fourth quarter of 1998, and the Rolf
Meyer acquisition in the second quarter of 1997.

         Income  Taxes:  The Company's  effective  tax rate remained  relatively
constant at 41.9% compared to 42.3% in 1997.


                                      II-5


<PAGE>


Liquidity and Capital Resources

         The  Company's  principal  capital  requirements  are to  fund  working
capital  needs,  to meet  required  debt and  interest  payments and to complete
planned maintenance and expansion expenditures. The Company anticipates that its
operating cash flow,  together with available  borrowings of $16.8 million under
existing credit facilities, will be sufficient to meet its capital requirements.
The 11-3/8% Notes impose,  and other debt instruments of the Company may impose,
various  restrictions and covenants on the Company which could potentially limit
the  Company's  ability  to  respond  to  market  conditions,   to  provide  for
unanticipated   capital   investments   or  to  take   advantage   of   business
opportunities.  As of December 31, 1999, the Company's  total long term debt and
shareholder's deficit was $114.9 million and $22.9 million, respectively.

         Net cash flow  from  operations  aggregated  $6.9  million  for 1999 as
compared to $10.7 million for 1998. The decrease was primarily attributable to a
$5.0 million  decrease in net income offset by a $.9 million decrease in working
capital and additional  depreciation  and  amortization of $.7 compared to 1998.
Net cash flow from operations  aggregated  $10.7 million for 1998 as compared to
$7.3 in 1997. The increase was primarily attributable to a $2.7 million decrease
in working capital compared to 1997.

         Cash used in investing activities for 1999 was $5.5 million as compared
to $17.7 million for 1998 and $25.2 million of 1997. The decrease in use of cash
compared  to 1998 was  primarily  attributable  to a $8.9  million  decrease  in
purchases  of  operations  net of cash  acquired  and $3.3  million less capital
expenditures. The decrease in 1998 from 1997 was primarily due to a $7.8 million
decrease in purchases of operations net of cash acquired.

         Cash used in financing activities for 1999 was $1.3 million as compared
to cash provided of $6.7 million for 1998 and $8.7 million in 1997. The 1999 use
of cash is  primarily  due to  repayments  of $.9  million due to parent and $.5
million net payments of notes payable and long-term  debt.  The cash provided by
financing activities in 1998 primarily represents a net increase of $7.5 million
in notes payable and long term debt due primarily to the  acquisitions of Buland
and Diacarb in the fourth quarter of 1998,  offset by a $.8 million  decrease in
amounts due to parent.

         The  Company  is  currently  involved  in  discussions  with  potential
acquisition candidates. If consummated,  the consideration for such acquisitions
would likely be funded from a  combination  of the  Company's  existing cash and
cash equivalent balances as well as its borrowing  availability under its senior
credit facilities.  However, any material acquisitions could require the Company
to obtain  additional  sources of financing.  There can be no assurance that the
Company will consummate any such  acquisitions  or, if  consummated,  the timing
thereof.

Impact of Recently Issued Accounting Standards

         In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities,  which is
required  to be adopted in fiscal  years  beginning  after  June 15,  2000.  The
Statement  will require the Company to recognize any  derivatives on the balance
sheet at fair value.  The Company does not  anticipate  that the adoption of the
new  Statement  will have a  significant  effect on its  earnings  or  financial
position.


Impact of Year 2000

         The Company has  addressed  the Year 2000 issue by both  replacing  and
modifying  its  existing  mission  critical   information  and   non-information
technology  systems. In 1996, the Company began to develop a plan to upgrade its
information systems to enable it to realize cost savings through  centralization
of functions  that would result in reductions  in working  capital items such as
inventory  and accounts  receivable.  This plan also was developed to assess and
resolve Year 2000 compliance issues potentially affecting the Company, both with
respect to internal  systems and systems on which the Company's  major  vendors,
suppliers,  and  distributors  are reliant.  In the


                                      II-6


<PAGE>


first  quarter of 1999,  the Company  completed its  remediation  and testing of
systems,  and was fully Y2K  compliant as of June 1, 1999.  As a result of those
planning and  implementation  efforts,  as of the filing date of this Form 10-K,
the Company has  experienced  no  significant  disruptions  in mission  critical
information  technology  and  non-information  technology  systems and concludes
those systems  successfully  responded to the Year 2000 date change. The Company
is not aware of any material  problems  resulting from Year 2000 issues,  either
with its products,  its internal systems,  or the products and services of third
parties.  The Company spent  approximately $4.5 million primarily to upgrade its
systems and to a lesser extent to address Year 2000 issues.  No further expenses
of a material nature are  anticipated.  The Company will continue to monitor its
mission  critical  computer  applications and those of its suppliers and vendors
throughout  the year 2000 to ensure that any latent Year 2000  matters  that may
arise are addressed promptly.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Information  required  by Item 7a is included in Item 7 on page II-3 of
this form 10-K.





ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                INTERNATIONAL KNIFE & SAW, INC. AND SUBSIDIARIES

                   Index to Consolidated Financial Statements

                                                                            Page
                                                                            ----

   Report of Independent Auditors......................................    II-8
   Consolidated Balance Sheets as of December 31, 1999 and 1998........    II-9
   Consolidated Statements of Income for the years ended
     December 31, 1999, 1998 and 1997..................................    II-11
   Consolidated Statements of Changes in Shareholder's Deficit
     for the years ended December 31, 1999, 1998 and 1997..............    II-12
   Consolidated Statements of Cash Flows for the years ended
     December 31, 1999, 1998 and 1997..................................    II-13
   Notes to Consolidated Financial Statements..........................    II-14


                                      II-7


<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
International Knife & Saw, Inc.

         We  have  audited  the  accompanying  consolidated  balance  sheets  of
International  Knife & Saw,  Inc. and  Subsidiaries  as of December 31, 1999 and
1998,   and  the  related   consolidated   statements  of  income,   changes  in
shareholder's  deficit, and cash flows for each of the three years in the period
ended  December  31, 1999.  Our audits also  included  the  financial  statement
schedule listed in the index at Item 14(a)(2).  These  financial  statements and
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
International  Knife & Saw, Inc. and Subsidiaries at December 31, 1999 and 1998,
and the  consolidated  results of their operations and their cash flows for each
of the three years in the period ended  December 31, 1999,  in  conformity  with
accounting  principles  generally  accepted in the United  States.  Also, in our
opinion,  the related financial statement schedule,  when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.


                                   ERNST & YOUNG LLP

Cincinnati, Ohio
March 3, 2000


                                      II-8


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

                           Consolidated Balance Sheets




                                                               December 31,
                                                          1999           1998
                                                       -------------------------
                                                             (in thousands)
Assets
Current assets:
  Cash and cash equivalents                           $    1,862      $    2,032
  Accounts receivable, trade, less allowances for
    doubtful accounts of $1,856 and $1,780                 25,620         25,595
  Inventories                                              27,922         30,981
  Due from parent                                           1,159            249
  Other current assets                                      2,759          2,964
                                                      --------------------------
Total current assets                                       59,322         61,821

Other assets:
  Goodwill                                                 17,015         18,284
  Debt issuance costs                                       2,736          3,203
  Other noncurrent assets                                   2,163          2,307
                                                       -------------------------
                                                           21,914         23,794

Property, plant and equipment-net                          46,382         49,360

                                                       =========================
        Total assets                                   $  127,618     $  134,975
                                                       =========================


See accompanying notes.


                                      II-9


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

                           Consolidated Balance Sheets



                                                              December 31,
                                                          1999           1998
                                                      --------------------------
                                                             (in thousands)
Liabilities and shareholder's deficit

Current liabilities:
  Notes payable                                         $    4,362    $  12,667
  Current portion of long-term debt                          2,465        2,555
  Accounts payable                                          13,007        9,546
  Accrued liabilities                                       10,619       10,958
                                                        ------------------------
Total current liabilities                                   30,453       35,726

Long-term debt, less current portion                       112,391      107,954
Other liabilities                                            6,557        7,004
                                                        ------------------------
Total liabilities                                          149,401      150,684

Minority interest                                            1,063        2,384

Shareholder's deficit:
  Common stock,  no par value - authorized - 580,000
    shares;  issued - 526,904 shares; outstanding -
    481,971 shares                                              5             5
  Additional paid-in capital                               10,153        10,153
  Accumulated deficit                                     (25,898)      (22,508)
  Accumulated other comprehensive loss                     (3,674)       (2,311)
  Treasury stock, at cost                                  (3,432)       (3,432)
                                                     ---------------------------
Total shareholder's deficit                               (22,846)      (18,093)

                                                      ==========================
      Total liabilities and shareholder's deficit         127,618     $  134,975
                                                      ==========================


See accompanying notes.


                                      II-10

<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

                        Consolidated Statements of Income


<TABLE>
<CAPTION>


                                                      Year Ended December 31,
                                                 1999         1998           1997
                                             --------------------------------------------
                                               (in thousands, except per share amounts)
<S>                                            <C>            <C>           <C>

Net sales                                      $ 151,087      $ 150,132     $ 142,265

Cost of sales                                    106,431        105,020        99,176
                                             --------------------------------------------
Gross profit                                      44,656         45,112        43,089

Selling, general and administrative
  expenses                                        34,517         30,299        27,681
                                             --------------------------------------------
Operating income                                  10,139         14,813        15,408

Other expenses (income):
    Interest income                                 (141)          (175)         (261)
    Interest expense                              12,495         12,181        11,948
    Minority interest                                295             71           174
                                             --------------------------------------------
                                                  12,649         12,077        11,861
                                             --------------------------------------------
Income (loss) before income taxes                 (2,510)         2,736         3,547

Provision for income taxes                           880          1,146         1,499
                                             ============================================
Net income (loss)                            $    (3,390)   $     1,590   $     2,048
                                             ============================================

Net income (loss) per common share           $     (7.03)   $      3.30   $      4.25

See accompanying notes.

</TABLE>

                                      II-11


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

           Consolidated Statements of Changes in Shareholder's Deficit

<TABLE>
<CAPTION>

                                                                                      Accumulated
                                                        Additional                       Other                         Total
                                             Common       Paid-in     Accumulated    Comprehensive     Treasury    Shareholder's
                                             Stock        Capital       Deficit      Income (Loss)      Stock         Deficit
                                           ----------- -------------- ------------- ---------------- ------------- ---------------
                                                                               (in thousands)
<S>                                        <C>         <C>             <C>             <C>             <C>           <C>

Balance at December 31, 1996               $       5   $   10,153      $ (26,146)      $       (224)   $ (3,432)     $  (19,644)

  Net income for the year                                                  2,048                                          2,048
  Foreign currency translation
    adjustments, net of tax of $537                                                          (2,011)                     (2,011)
                                                                                                                   ---------------
  Total comprehensive income                                                                                                 37
                                           ----------- -------------- ------------- ---------------- ------------- ---------------

Balance at December 31, 1997                       5        10,153       (24,098)         (2,235)        (3,432)        (19,607)
  Net income for the year                                                  1,590                                          1,590
  Minimum pension liability adjustment                                                      (297)                          (297)
  Foreign currency translation
  adjustments, net of tax of $50                                                             221                            221
                                                                                                                   ---------------
  Total comprehensive income                                                                                              1,514
                                           ----------- -------------- ------------- ---------------- ------------- ---------------

Balance at December 31, 1998                       5        10,153       (22,508)         (2,311)        (3,432)        (18,093)
  Net loss for the year                                                   (3,390)                                        (3,390)
  Minimum pension liability adjustment                                                       222                            222
  Foreign currency translation
    adjustments, net of tax of $17                                                        (1,585)                        (1,585)
                                                                                                                   ---------------
  Total comprehensive loss                                                                                               (4,753)
                                           ----------- -------------- ------------- ---------------- ------------- ---------------

Balance at December 31, 1999               $       5   $    10,153     $ (25,898)    $    (3,674)(A)  $  (3,432)    $   (22,846)

                                           =========== ============== ============= ================ ============= ===============


(A)  At December 31, 1999,  accumulated other comprehensive income was a loss of
     $3,674 comprised of net foreign currency translation  adjustments of $3,599
     and a minimum pension liability of $75.

See accompanying notes.

</TABLE>


                                     II-12


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>

                                                                 Year ended December 31,
                                                             1999          1998           1997
                                                        -------------------------------------------
                                                                      (in thousands)
<S>                                                        <C>           <C>            <C>

Operating activities
Net (loss) income                                          $  (3,390)    $    1,590      $  2,048
Adjustments to reconcile net (loss) income to net cash
  provided by operating activities:
     Depreciation and amortization                             6,827          6,087         5,606
     Deferred income taxes                                       432          1,032           699
     Loss (gain) on sale of property, plant and                   51             89          (342)
       equipment
     Minority interest in income of subsidiary                   295             71           174
     Changes in operating assets and liabilities net
       of effects from purchases of operations:
         Accounts receivable                                  (1,164)         1,832        (1,526)
         Inventories                                           1,936           (336)          811
         Accounts payable                                      1,078           (502)        1,357
         Accrued liabilities                                   1,393             31        (2,478)
         Other                                                  (569)           800           933
                                                        -------------------------------------------
Net cash provided by operating activities                      6,889         10,694         7,282

Investing activities
Purchases of operations, net of cash acquired                   (650)        (9,418)      (17,198)
Purchases of property, plant and equipment                    (6,019)        (9,320)       (7,734)
Proceeds from sale of property, plant and equipment              578            349           411
Decrease (increase) in notes receivable and other                594            702          (662)
assets
                                                        -------------------------------------------
Net cash used in investing activities                         (5,497)       (17,687)      (25,183)

Financing activities
Decrease in amounts due to parent                               (910)          (810)         (559)
Increase in notes payable and long-term debt                  20,175         20,538        15,457
Repayment of notes payable and long-term debt                (20,631)       (13,042)       (6,257)
Cash received from investees                                      34              4            35
                                                        -------------------------------------------
Net cash (used) provided by financing activities              (1,332)         6,690         8,676

Effect of exchange rate on cash and cash equivalents            (230)           (14)         (127)
                                                        -------------------------------------------

Decrease in cash and cash equivalents                           (170)          (317)       (9,352)
Cash and cash equivalents at beginning of year                 2,032          2,349        11,701
                                                        ===========================================
Cash and cash equivalents at end of year                $      1,862   $      2,032  $      2,349
                                                        ===========================================

See accompanying notes.


</TABLE>


                                     II-13


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements
                                 (in thousands)


1. Significant Accounting Policies

Principles of Consolidation

The  consolidated  financial  statements  include the accounts of  International
Knife  &  Saw,  Inc.  and  its  majority-owned   subsidiaries  (the  "Company").
Investments in business entities in which the Company does not have control, but
has the ability to exercise  significant  influence over operating and financial
policies,  are accounted for by the equity method. All significant  intercompany
balances and transactions have been eliminated in consolidation.

Inventories

Inventories are stated at the lower of cost or market. Cost in the United States
is determined principally by use of the last-in, first-out method.  Subsidiaries
use the first-in, first-out method.

Property, Plant, and Equipment

Property, plant and equipment are stated at cost or, for assets acquired through
business   combinations,   at  fair  value  at  the  dates  of  the   respective
acquisitions.  Depreciation is computed by the straight-line method based on the
estimated useful lives of the assets.
Depreciation expense includes  amortization of assets recorded under capitalized
leases.

Amortization of Intangibles

Goodwill is being amortized over 10-40 years by the  straight-line  method.  The
carrying value of goodwill is periodically reviewed using estimated undiscounted
cash flows for the businesses acquired over the remaining  amortization periods.
Amortization  charged to earnings amounted to $731, $633 and $489 for 1999, 1998
and  1997,   respectively.   As  of  December  31,  1999,  accumulated  goodwill
amortization was $2,658.

Debt issuance  costs,  which  originated in 1996,  are being  amortized over the
ten-year life of the related debt.  Amortization  of debt issuance costs charged
to  earnings  amounted  to  $467,  $467  and  $461  for  1999,  1998  and  1997,
respectively. As of December 31, 1999, accumulated amortization was $1,479.

Income Taxes

Deferred taxes are provided for accumulated  temporary  differences due to basis
differences for assets and  liabilities  for financial  reporting and income tax
purposes.   The  Company's   temporary   differences   are  due  to  accelerated
depreciation and amortization,  allowances for doubtful  accounts,  expenses not
currently deductible, and income not currently taxable.


                                     II-14


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)


1. Significant Accounting Policies (continued)

Cash Equivalents

The Company  considers  all highly liquid  investments  with a maturity of three
months or less when purchased to be cash equivalents.

Revenue Recognition

Revenue from product sales is recognized when the product is shipped and revenue
from services is recognized  as the services are  performed.  Revenue is reduced
for estimated customer returns and allowances.

Dividend Payments

Dividend payments are restricted under the covenants of an indenture dated as of
November 6, 1996 between the Company and United States Trust Company of New York
in connection with the issuance of the $90,000 Senior Subordinated Notes.

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 amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates.

Reclassification

Certain 1998 and 1997 amounts have been  reclassified  to conform to the current
year presentation.

Net (Loss) Income Per Common Share

Net (loss)  income per common share is based on the weighted  average  number of
common shares outstanding, which amount has remained unchanged at 481,971 shares
for 1999,  1998 and 1997,  respectively.  The  Company  does not have any common
stock equivalents.


                                     II-15


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

1.  Significant Accounting Policies (continued)

Foreign Currency Translation

The  Company  maintains  the  accounting  records  and  prepares  the  financial
statements  of  its  foreign   subsidiaries  in  their   respective   functional
currencies. The accompanying financial statements,  which include the effects of
the consolidated results of operations of these companies, are expressed in U.S.
dollar  equivalents  in  accordance  with  Statement  of  Financial   Accounting
Standards  (SFAS)  No.  52,  Foreign  Currency  Translation.  It  should  not be
construed that the assets and liabilities  included at U.S.  dollar  equivalents
can  actually be realized in or  extinguished  by U.S.  dollars at the  exchange
rates used in  translation.  The gains and losses  resulting from the changes in
exchange  rates  from  year to year have been  reported  in other  comprehensive
income.  The effects on the statements of income of transaction gains and losses
is insignificant for all years presented.

Foreign Currency Forwards

To mitigate the short-term  effect of changes in currency  exchange rates on the
Company's  foreign  currency based  purchases and its functional  currency based
sales,  the Company  occasionally  hedges by entering into foreign  exchange and
U.S.  dollar  forward  contracts.  A forward  contract  obligates the Company to
exchange  predetermined  amounts of specified foreign currencies or U.S. dollars
at specified  exchange rates on specified dates or to make an equivalent foreign
currency or U.S.  dollar payment equal to the value of such exchange.  Discounts
or  premiums  (the  difference  between the spot  exchange  rate and the forward
exchange  rate at inception of the  contract) are accreted or amortized to other
operating expenses over the contract lives using the straight-line  method while
realized  and  unrealized  gains and losses  resulting  from changes in the spot
exchange rate (included those from open, matured, and terminated contracts), net
of related taxes, are included in the accumulated  other  comprehensive  loss in
shareholders'  deficit (the deferral accounting method). The related amounts due
to or from counterparties are included in other assets or other liabilities. The
unrecognized gains or losses were immaterial at year end.

Accounting Changes

In June,  1998, the Financial  Accounting  Standards  Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities,  which is required
to be adopted in fiscal years  beginning after June 15, 2000. The Statement will
require the Company to recognize  any  derivatives  on the balance sheet at fair
value.  The Company does not  anticipate  that the adoption of the new Statement
will have a significant effect on its earnings or financial position.


                                     II-16


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

2.  Acquisitions

In November,  1999,  the Company  acquired an additional 29% interest in its two
Chinese joint venture  companies,  Shanghai IKS Lida Mechanical  Blade Co., Ltd.
and Shanghai IKS Mechanical Blade Co., Ltd. for approximately  $1,100. There was
no goodwill recorded on this acquisition.

In  November,  1998,  the  Company  acquired  all of the shares of A.K.  van der
Wijngaart Beheer B.V. and subsidiaries ("Diacarb").  Diacarb's business includes
the regrinding and distribution of industrial knives in the Netherlands, Belgian
and  Luxembourg  markets.  Diacarb  is  also  involved  in  the  manufacture  of
stansformen  (molds to punch holes) for the carton industry.  Diacarb is located
in Rotterdam,  the  Netherlands.  The purchase  price  consisted of 12,000 Dutch
guilders in cash (approximately $6,250), financed from existing lines of credit,
1,088 Dutch guilders (approximately $567) in assumed debt, and a 5.0% promissory
note to the Seller for 5,000 Dutch guilders (approximately  $2,605),  subject to
post closing  adjustments.  The promissory  note is payable in  installments  of
1,000 Dutch guilders  (approximately  $521) on January 15, 2000, and 2,000 Dutch
guilders  (approximately  $1,042) on January 15, 2001 and 2002. The  acquisition
was accounted for under the purchase  method.  Goodwill  totaled  $4,683 on this
acquisition.

In October,  1998,  the Company  executed an agreement to purchase the shares of
Buland S.A.  ("Buland") for 8,700 French Francs  (approximately  $1,560) in cash
and 2,175  French  Francs  (approximately  $395) in  assumed  debt,  subject  to
post-closing  adjustments.  Headquartered  in France,  Buland is a reseller  and
regrinder of industrial  knives for the printing industry and reseller of rotary
and flexible  dies,  with annual sales of 36,000  French  Francs  (approximately
$6,545).  The  acquisition  was accounted for under the purchase  method and was
financed  from  borrowings  under  the  Company's   existing   revolving  credit
facilities. Additional consideration is contingent upon Buland achieving certain
annual  earnings  and  is  payable  in  2002.  Goodwill  totaled  $558  on  this
acquisition.

In June and February, 1998, the Company completed the acquisitions of the assets
of  Valiquet,  Inc.,  Des  Plaines,  IL,  the  Atlanta,  GA  division  of K.S.W.
Corporation,  and Sheridan Saw Works,  Sheridan,  OR for approximately $1,200 in
cash, $29 in assumed debt, post closing contingent payments of $55 for achieving
certain annualized  earnings levels and promissory notes totaling $140 to two of
the  sellers,  subject  to  post-closing   adjustments.   These  service  center
acquisitions  were financed from available cash balances.  These operations have
historically  generated combined annual sales of approximately  $1,700, and were
accounted for under the purchase method.  Goodwill totaled approximately $835 on
these acquisitions.

In October and November,  1997, the Company completed acquisitions of the assets
of four strategically  located service centers for approximately  $1,300 in cash
and a $75  promissory  note  to one  of the  sellers,  subject  to  post-closing
adjustments.  The  acquisitions  were financed from available cash balances.  In
October,  1997, the Company acquired Parker Industrial Tool Company,  Nashville,
TN; Stafford Grinding


                                     II-17


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)



2. Acquisitions (continued)

Services,  Chattanooga,  TN; and B&W Industrial Grinding, Inc., Appleton, WI. In
November,  the  Company  acquired  North  Quabbin  Saw Shop,  Athol,  MA.  These
operations have  historically  generated  combined annual sales of approximately
$1,400  and  were  accounted  for  by  the  purchase  method.  Goodwill  totaled
approximately $700 on these acquisitions.

In June, 1997, the Company  purchased the assets of  Cascade/Southern  Saw Corp.
("Cascade") for $2,300 in cash, subject to post-closing adjustments.  Located in
Milwaukie,  OR,  Cascade is a wood saw and wood saw machinery  distributor  with
annual sales of  approximately  $7,900.  The acquisition was accounted for under
the purchase method. Goodwill totaled $1,242 on this acquisition.

In April,  1997,  the Company  purchased the assets of Rolf Meyer Company ("Rolf
Meyer") for DM 8,200  (approximately  $4,700) in cash,  post-closing  contingent
payments of DM 658 (approximately  $400) for achieving certain earning levels of
which DM 405 (approximately $200) is included in accrued liabilities at December
31,  1998,  a  promissory  note  to  the  seller  in  the  amount  of  DM  4,300
(approximately  $2,500) and DM 400 (approximately $200) in assumed debt, subject
to post-closing adjustments.  Headquartered in Germany, Rolf Meyer is a producer
and specialist in knives and spare parts for the printing industry,  with annual
sales of approximately  DM 15,000  (approximately  $8,700).  The acquisition was
accounted for under the purchase method and was financed from  borrowings  under
the Company's existing  revolving credit facilities.  Goodwill totaled $2,500 on
this  acquisition.  Additional  consideration  of approximately DM 400 ($200) is
contingent  upon Rolf Meyer  achieving  certain  annual  earnings  levels and is
payable December 31, 2000.

In April,  1997,  the Company  purchased the assets of  Systi-Matic  Company and
affiliated entities ("Systi- Matic") for $6,400 in cash, post-closing contingent
payments of $1,200 for achieving certain  annualized  earnings levels and $1,100
in assumed debt, subject to post-closing adjustments.  Headquartered in Seattle,
WA,  Systi-Matic  is the largest  U.S.  producer  of carbide  edger saws and the
largest  independent  provider of stock saws for the secondary industry in North
America  with  annual  sales  of  approximately  $18,000.  The  acquisition  was
accounted  for under the purchase  method and was financed from  available  cash
balances. Goodwill totaled approximately $4,280 on this acquisition.

The  consolidated   financial  statements  include  the  results  of  operations
generated by and financial  position of the above acquisitions from the dates of
acquisition.


                                     II-18


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

3. Inventories

                                                       December 31,
                                                   1999            1998
                                            -------------------------------
     Finished goods                              $   17,120     $   20,373
     Work in process                                  5,088          4,101
     Raw materials and supplies                       5,714          6,507
                                            ===============================
                                                   $ 27,922       $ 30,981
                                            ===============================

Inventories include approximately $14,285 in 1999 and $16,220 in 1998 determined
by the LIFO method.  If the cost of LIFO  inventories had been determined by the
FIFO method for financial  reporting,  they would have been approximately $3,806
and $3,412  higher  than the amounts  reported  at  December  31, 1999 and 1998,
respectively.

4. Property, Plant and Equipment-Net

                                                            December 31,
                                                        1999            1998
                                              ---------------------------------

     Land and land improvements                        $ 5,784         $ 6,274
     Buildings and leasehold improvements               16,875          16,826
     Machinery and equipment                            50,119          45,015
     Furniture and fixtures                              4,020           4,485
     Construction in progress                              740           3,729
     Motor vehicles                                      2,432           2,498
                                              ---------------------------------
                                                        79,970          78,827
      Less accumulated depreciation                     33,588          29,467
                                              =================================
                                                       $46,382         $49,360
                                              =================================


Depreciation expense, including depreciation for assets under capital lease, was
$5,629, $4,987 and $4,656, for 1999, 1998 and 1997,  respectively.  Depreciation
is provided for on the straight-line  method over the following estimated useful
lives:

         Land improvements: 15 years
         Buildings and leasehold improvements:  15 to 40 years
         Machinery and equipment:  5 to 12 years
         Furniture and fixtures:  10 years
         Motor vehicles:  3 to 5 years


                                     II-19


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

5. Notes Payable and Long-Term Debt

<TABLE>
<CAPTION>


                                                                                    December 31,
                                                                               1999                1998
                                                                            ------------------------------
<S>                                                                             <C>                <C>

     Notes payable:
       Notes payable on demand in German  Marks to a
         German  bank,  issued under revolving credit
         agreements, interest payable quarterly                                 $   1,347          $   7,922
       Notes payable on demand in Chinese Yuan Renminbi
         to Chinese banks, issued under revolving credit
         agreements, interest payable monthly                                       1,765               1,259
       Notes payable on demand in U.S. Dollars to a German
         bank, issued under revolving credit agreements,
         interest payable quarterly                                                 1,250               3,280
       Other                                                                            -                 206
                                                                            ==================================
                                                                                $   4,362          $   12,667
                                                                            ==================================
     Long-term debt:
       11-3/8% Senior Subordinated Notes due 2006                               $  90,000          $   90,000
       Notes payable in German Marks to a German bank                              16,399              12,830
       Notes payable in Chinese Yuan Renminbi to Chinese
          banks                                                                     1,680               2,989
       Capitalized lease obligations in U.S. dollars to U.S.
          lenders                                                                   4,261                 721
        Promissory note payable in German Marks to a
           former shareholder of the Rolf Meyer Company                                 -                 787
        Promissory note payable in Dutch Guilders to a
           former shareholder of the Diacarb Company                                2,414               2,682
       Other                                                                          102                 500
                                                                            ---------------------------------
                                                                                  114,856             110,509
     Less current portion                                                           2,465               2,555
                                                                            ==================================
                                                                                $ 112,391          $  107,954
                                                                            ==================================


</TABLE>

                                     II-20


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

5. Notes Payable and Long-Term Debt (continued)

Except for the 11-3/8%  notes,  the carrying  amount of the Company's  long-term
debt  approximates  fair value,  which is determined  using discounted cash flow
analysis based on the Company's  incremental borrowing rate for similar types of
financing  arrangements.  At year-end  1999, the fair value of the 11-3/8% notes
was $68,400.  Such amounts are based on recent trade prices  through  registered
securities brokers.

The 11-3/8% Notes are senior  subordinated  indebtedness  of the Company ranking
pari passu with all other existing and future senior  subordinated  indebtedness
of the Company.

The notes  payable of $16,399  have  maturities  that extend to 2011 at rates of
2.5%  to  6.05%.  Outstanding  borrowings  under  the  Company's  senior  credit
facilities  are included in long-term debt based on the  expectation  that these
borrowings will remain outstanding for more than one year. Land and buildings in
Germany with a net book value of $8,281 are pledged as collateral for the German
revolving credit agreements and the German bank notes payable.

The  notes  payable  of  $1,680  mature in 2003 at rates of 7.2% to 7.7% and are
non-recourse to the Company.  Plant and equipment in China with a net book value
of  approximately  $2,084 are pledged as  collateral  for the Chinese  revolving
credit agreements and the Chinese bank note payable.

The capitalized  lease obligations of $4,261 are for capital leases on equipment
that have maturities that extend to 2004 at rates of 6.99% to 8.7%.  Included in
property, plant and equipment-net is equipment under capital lease of $4,600.

The  promissory  note  payable  to a former  shareholder  of  Diacarb  is due in
installments  of 1,000 Dutch  guilders in 2000 and 2,000 Dutch  guilders in 2001
and 2002 at a rate of 5.0% in connection with the Diacarb acquisition.

At December 31, 1999, the Company had a DM 62,796 (US$ 32,312) committed global,
multi-currency  credit  facility.  Unused  committed  lines of credit  from this
global  facility  were US$ 16,801,  compared to US$ 15,188 at December 31, 1998.
Fees for these revolving  credit  arrangements  were $22 in 1999 and were $24 in
1998.

The short-term note payable of $1,347  represents  short-term bank borrowings at
rates from 6.0% to 6.5%.

The short-term notes payable of $1,765 represent short-term bank borrowings at a
rate of 5.4% to 7.4%.

The short-term note payable of $1,250 represents short-term bank borrowings at a
rate of 7.3%.


                                     II-21


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

5. Notes Payable and Long-Term Debt (continued)

At December 31, 1999, amounts due as minimum payments under long-term debt were
as follows:

        2000                                               $          2,465
        2001                                                          4,731
        2002                                                          3,800
        2003                                                          4,920
        2004                                                          2,113
        Thereafter                                                   96,827
                                                           ----------------
                                                           $        114,856
                                                           ================

Cash paid for  interest  amounted to  $12,097,  $11,670 and $11,713 in the years
ended December 31, 1999, 1998 and 1997, respectively.

6. Accrued Liabilities

                                                      December 31,
                                                 1999             1998
                                           -----------------------------------

Salaries, wages and bonuses                   $      2,157     $      2,097
Profit sharing and 401(k) plans                        809            1,078
Interest                                             1,322            1,419
Other employee related accruals                      1,397              930
Other                                                4,934            5,434
                                           ===================================
                                              $     10,619     $     10,958
                                           ===================================


7. Income Taxes

IKS Corporation files a consolidated Federal income tax return that includes the
Company.  The current and  deferred  tax expense and benefit for the Company are
recorded  as if it  filed  on a  stand-alone  basis.  All  participants  in  the
consolidated  income tax return are separately liable for the full amount of the
taxes,  including penalties and interest,  if any, which may be assessed against
the consolidated group. The current provision (benefit) for United States income
taxes is recorded to the intercompany account with IKS Corporation.


                                     II-22


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

7.  Income Taxes (continued)

Summarized in the following tables are the Company's income (loss) before income
taxes, its provision  (benefit) for income taxes, the components of the deferred
income  taxes  and a  reconciliation  of the  U.S.  statutory  rate  to the  tax
provision rate.

Income (Loss) Before Income Taxes


                                     Year ended December 31,
                            1999               1998             1997
                     ------------------- ----------------- ----------------
United States        $    (7,287)        $    (705)        $   1,199
Non-U.S.                   3,441             2,348             4,777
                     =================== ================= ================
                     $    (2,510)        $   2,736         $   3,547
                     =================== ================= ================


<TABLE>
<CAPTION>


Components of Deferred Tax Assets and Liabilities

                                                                                    December 31,
                                                                               1999              1998
                                                                         ----------------- -----------------
<S>                                                                        <C>               <C>

Current deferred tax assets (liabilities):
    Inventories, primarily obsolescence and additional costs
      inventoried for tax purposes                                         $      559        $      253
    Reserve for bad debts                                                        (366)             (432)
    Accrued employee benefits                                                     292               168
    Other                                                                         166                64
                                                                           ----------        -----------
    Total current deferred tax assets                                             651                53

Noncurrent deferred tax assets (liabilities):
    Net operating loss carryforwards                                            2,545                 -
    Property, plant and equipment, primarily differences in
      depreciation methods                                                     (4,028)           (3,754)
    Deferred compensation                                                         143               157
    Goodwill, difference in amortization methods                                 (523)             (327)
    Other                                                                         (21)              (18)
                                                                           ----------        -----------
    Total noncurrent deferred tax liabilities                                  (1,884)           (3,942)
    Less valuation allowance                                                   (1,490)                -
                                                                           ----------        -----------
    Total net noncurrent deferred tax liabilities                              (3,374)           (3,942)
                                                                           -----------       -----------
Net deferred tax liabilities                                               $   (2,723)       $   (3,889)
                                                                           ===========       ===========

</TABLE>


                                     II-23


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

7. Income Taxes (continued)

<TABLE>
<CAPTION>

Provision (benefit) for Income Taxes                                       Year Ended December 31,
                                                                 --------------- -------------- --------------
                                                                      1999           1998           1997
                                                                 --------------- -------------- --------------
<S>                                                                <C>             <C>            <C>

Current (benefit) provision
  Federal                                                          $        -      $     (562)    $      436
  State and local                                                        (219)              -             36
  Foreign                                                               1,504             676            328
                                                                 ---------------
                                                                                 -------------- --------------
                                                                        1,285             114            800

Deferred provision (benefit)
  Federal                                                                (909)            321           (115)
  State and local                                                          (6)             28            (10)
  Foreign                                                                 510             683            824
                                                                 --------------- -------------- --------------
                                                                         (405)          1,032            699
                                                                 =============== ============== ==============
                                                                   $      880      $    1,146     $    1,499
                                                                 =============== ============== ==============


The  differences  between the provision and the amount  computed by applying the
statutory Federal income tax rate are as follows:


                                                                           Year Ended December 31,
                                                                     1999           1998            1997
                                                                ----------------------------------------------

Income (loss) before income taxes                                  $   (2,510)    $    2,736      $    3,547
                                                                ==============================================

Tax (benefit) provision on above amount at 34%                     $     (853)    $      930      $    1,206
Change in valuation allowance                                           1,490              -               -
State income tax (benefit) provision, net of federal tax impact
                                                                         (225)            28              36
Foreign tax rates different than U.S. statutory rate                      387            134             254
Foreign losses without tax benefit                                         69             56              90
Other, net                                                                 12             (2)            (87)
                                                                ==============================================
Provision for income taxes                                         $      880     $    1,146      $    1,499
                                                                ==============================================


</TABLE>


At year-end  1999,  the Company's  U.S.  operations  had net loss carry forwards
aggregating $6,900 which expire in 2019. The Company has recorded a deferred tax
asset of $2,545 and a  corresponding  valuation  allowance of $1,490  related to
these net operating loss carry forwards.


                                     II-24


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

7. Income Taxes (continued)

Undistributed  earnings  of  foreign  subsidiaries  which  are  intended  to  be
indefinitely  reinvested aggregated  approximately $9,492 at the end of 1999. In
the event these earnings were to be repatriated,  foreign income tax credits and
deductions under existing U.S. federal income tax laws would offset a portion of
any additional U.S. tax liability.

8. Employee Benefit Plans

The Company has profit sharing plans for its U.S. and Canadian employees. Profit
sharing  contributions  are  determined  annually  by the  respective  Boards of
Directors.  Contributions  to the 401 (k) plan are equal to one-half of employee
contributions,  up to a  maximum  of 2% of an  employee's  annual  compensation,
subject to certain statutory limitations.

The expense for profit sharing contributions was $560 in 1999, $953 in 1998, and
$1,095 in 1997. The Company's matching contributions to the 401(k) plan amounted
to $285 in 1999, $368 in 1998 and $249 in 1997.

Included in other  liabilities are amounts for deferred  compensation  plans for
former  officers of $387 and $424 at December  31, 1999 and 1998,  respectively.
The plans  provide  for a maximum  payment of $25  annually  to each  officer or
beneficiary for a period of ten years commencing at retirement or death.

The Company's  German  subsidiaries  have pension  plans  covering a majority of
their  employees who qualify as to age and length of service.  Entrance into the
plan is at age 30 with defined benefits payable at age 65. Vesting  requirements
vary  depending  on  employment   category,   contracts  and  years  of  service
requirements  which range from five to fifteen years.  The following  table sets
forth the status of the Company's  defined pension plan for certain employees in
Germany.  Consistent with customary practice in Germany,  this plan has not been
funded. Benefit payments are funded from current operations.

Change in benefit obligation

                                                           December 31,
                                                      1999             1998
                                                ----------------- --------------

Benefit obligation at beginning of year            $    1,736        $    1,413
Service cost                                               23                14
Interest cost                                             100                92
Actuarial (gains) losses                                  (60)              144
Loss (gain) currency exchange rate                       (248)              117
Benefits paid                                             (48)              (44)
                                                   ===========       ===========
Benefit obligation at end of year                  $    1,503        $    1,736
                                                   ===========       ===========


                                     II-25


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

8. Employee Benefit Plans (continued)

Funded status at year-end
<TABLE>
<CAPTION>

                                                                                     December 31,
                                                                                 1999             1998
                                                                           ----------------- ----------------
<S>                                                                          <C>               <C>

Projected benefit obligation                                                 $    1,503        $    1,736
Unrecognized net loss                                                              (108)             (195)
Unrecognized net obligation                                                        (177)             (224)
Additional minimum liability                                                          252             382
                                                                           ================= ================
Accrued pension cost - included in other liabilities                         $    1,470        $    1,699
                                                                           ================= ================

</TABLE>


<TABLE>
<CAPTION>

Components of net periodic benefit costs                                      Year Ended December 31,
                                                                     1999           1998            1997
                                                                ----------------------------------------------
<S>                                                                <C>            <C>             <C>

Service cost (benefits earned during the period)                   $       24     $       14      $       14
Interest cost on projected benefit obligation                             100             92              93
Net amortization and deferral                                              19             12              13
                                                                ==============================================
Net periodic benefit cost                                          $      143     $      118      $      120
                                                                ==============================================

</TABLE>


<TABLE>
<CAPTION>

Weighted-average actuarial assumptions                                     Year Ended December 31,
                                                                     1999           1998            1997
                                                                ----------------------------------------------
<S>                                                                <C>            <C>             <C>
Discount rate                                                      6.5%            6.5%           6.5%
Rate of increase in future compensation levels                     2.5%            2.5%           2.0%

</TABLE>


9. Related Parties

The consolidated  financial  statements  include the following  transactions and
balances with companies which had been under common  controlling  ownership with
the Company prior to the  Recapitalization.  Such  companies  are, and have been
since the  Recapitalization,  controlled  by a  minority  shareholder  and board
member of IKS Corporation.

<TABLE>
<CAPTION>


                                                                                 December 31,
                                                                        1999          1998         1997
                                                                    ----------------------------------------
<S>                                                                <C>            <C>             <C>

Other payables to affiliated companies                             $    (35)     $    (62)     $ (174)
Purchased administrative and manufacturing services                     670           712        1,015

</TABLE>


                                     II-26


<PAGE>



                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)

10. Operating Leases

Future minimum rentals required under operating leases are as follows:

Year ending December 31      Buildings          Other             Total
------------------------------------------------------------------------------


2000                          $     534         $      57        $     591
2001                                525                55              580
2002                                331                32              363
2003                                 84                 9               93
2004                                 30                 4               34

Rent expense was $553 for 1999, $566 for 1998 and $545 for 1997.



11. Organization

The Company operates in one business  segment - industrial  knives and saws. The
Company manufactures,  markets and services primarily industrial knives and saws
internationally,  and its customers  include  distributors,  original  equipment
manufacturers  and customers  purchasing  replacement  parts and  services.  The
Company has a leading market share in each of the major sectors it serves: Paper
& Packaging;  Wood; Metal; and  Plastic/Recycling.  The Company's operations are
principally in the United States, Germany and Canada,  representing 57%, 23% and
8%  of  1999  net  sales,  respectively.  The  Company  plans  to  continue  its
international  growth.  As a result of the  Company's  broad  product  range and
numerous  applications,  no customer accounts for more than 3% of net sales. The
Company performs periodic credit evaluations of its customers and generally does
not require collateral.

Sales attributable to German and Canadian operations are based on external sales
generated by subsidiaries located in those countries


                                     II-27


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                                 (in thousands)


11. Organization (continued)

The following table summarizes the Company's United States, German, Canadian and
other operations.


                                            Year Ended December 31,
                                   1999               1998               1997
                             -------------- ------------------ -----------------
United States Operations:
  Net sales - Customers      $    86,450    $        92,875    $        88,175
  Long Lived Assets               22,111             22,479             19,395

German Operations:
  Net sales - Customers           35,183    $        34,762    $        30,675
  Long Lived Assets               13,428             14,457             11,974

Canadian Operations:
  Net sales - Customers           11,932    $        12,644    $        14,639
  Long Lived Assets                1,081              1,078              1,288

Other Operations:
  Net sales - Customers           17,522    $         9,851    $         8,776
  Long Lived Assets               10,371             11,898              5,344


Consolidated:
  Net sales                      151,087    $       150,132    $       142,265
  Long Lived Assets               46,991             49,912             38,001


                                     II-28


<PAGE>


                International Knife & Saw, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)
                      (in thousands, except per share data)

12. Operating Results by Quarter (Unaudited)

<TABLE>
<CAPTION>

                                                ------------------------------------------------------------
                                                                           1999
                                                ------------------------------------------------------------
                                                    Qtr 1          Qtr 2           Qtr 3          Qtr 4
                                                -------------- --------------- -------------- --------------
<S>                                             <C>            <C>             <C>            <C>

Sales                                           $    39,236    $    37,280     $    37,473    $    37,098

Gross profit                                         11,660         10,346          11,174         11,476

Net income (loss)                                       116           (804)           (289)        (2,413)

Net income (loss) per common share                      .24          (1.67)           (.60)         (5.01)
                                                ------------------------------------------------------------
                                                                           1998
                                                ------------------------------------------------------------
                                                    Qtr 1          Qtr 2           Qtr 3          Qtr 4
                                                -------------- --------------- -------------- --------------

Sales                                           $    38,703    $    37,334     $    35,844    $    38,251

Gross profit                                         11,598         11,658          10,602         11,254

Net income                                              654            661             270              5

Net income per common share                            1.36           1.37             .56            .01

</TABLE>


13. Subsequent Event

In  January 2000 the Company's German  subsidiary  acquired all of the shares of
Boehler  Miller  Messer und  Saegen  GmbH  ("BMMS").  BMMS is  headquartered  in
Waidhofen,  Austria.  The purchase price consisted of 24,700 Austrian  Schilling
(approximately  $1,776) in cash and  63,000  Austrian  Schilling  (approximately
$4,530) in assumed debt.  The Company's  lines of credit were increased in order
to finance the cash payment.  Additional  consideration  is contingent upon BMMS
achieving  certain annual  earnings and would be payable in 2002.  BMMS produces
knives,  saws and ground flats for the wood,  paper,  and metal  industries with
annual sales of approximately 30,000 Austrian Shillings (approximately $21,600).
The  acquisition  was  accounted  for under the  purchase  method.  There was no
goodwill on this acquisition.


                                     II-29


<PAGE>


                                      III-9
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.

None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table sets forth certain  information with respect to the
persons who are members of the Board of directors  or executive  officers of the
Company.  Directors  serve for a term of one year or until their  successors are
elected  and  qualified;  officers  serve  at the  discretion  of the  Board  of
Directors.

           Name                 Age                  Position
    ---------------------     ------    ----------------------------------------

    P. Daniel Miller             51     President, Chief Executive Officer and
                                        Director
    Thomas W. G. Meyer           43     Executive Vice President -- Europe and
                                        Asia
    William M. Schult            38     Executive Vice President -- Chief
                                        Financial Officer, Treasurer and
                                        Secretary
    Bradley H. Widmann           53     Vice President -- Operations/Americas
    W. Randolph Underhill        50     Vice President -- Operations
    Paul A. Severt               37     Vice President -- Financial
                                        Reporting/Controller
    David M. Hofmeister          40     Chief Information Officer
    W. Rayburn Connell           59     Vice President -- Service and Sales
                                        Director, North America
    Diether Klingelnberg         55     Director
    James A. Urry                45     Director
    Michael A. Delaney           45     Director
    Richard J. Puricelli         53     Director

----------

         P. Daniel Miller, President,  Chief Executive Officer and Director. Mr.
Miller has been  President  and Chief  Executive  Officer since May 1999 when he
joined the Company. Prior to joining the Company, Mr. Miller served as President
and Chief  Operating  Officer of Overhead Door  Corporation.  Prior to that, Mr.
Miller spent  eleven  years with  Whirlpool  Corporation  in various  management
positions, the last of which was Executive Vice President-Latin America.

         Thomas W. G. Meyer,  Executive  Vice  President -- Europe and Asia. Mr.
Meyer has served as  Executive  Vice  President  since he joined the  Company in
1993.  Prior  thereto,  Mr. Meyer worked in the textile  industry for ten years,
including  service as the head of  marketing  for Barmag AG from 1988 until 1991
and as a director of A. Monforts GmbH & Co., from 1991 until 1992.

         William M. Schult,  Executive Vice President --Chief Financial Officer,
Treasurer and  Secretary.  Mr.  Schult  joined the Company as Vice  President --
Finance in July 1996.  Prior to joining the Company,  he served as Controller of
IKS Corporation since 1995 and in several capacities at Siemens Corporation from
1987 until 1995. Prior to that, Mr. Schult held various  accounting and auditing
positions with the Allen Group, Salomon Brothers and Coopers & Lybrand.

         Bradley H. Widmann, Vice President -  Operations/Americas.  Mr. Widmann
joined the Company in  November  1999 as Vice  President -  Operations/Americas.
From 1996 - 1999,  he headed the global  supply chain


                                     III-1


<PAGE>


management for Magnetek, Inc. Prior to working with Magnetek,  Inc., Mr. Widmann
held senior  operations  positions with Textron,  Inc.,  Gould, Inc. and General
Electric Co. in both aerospace and commercial products industries.

         W. Randolph  Underhill,  Vice  President -- Operations.  Mr.  Underhill
joined the Company in 1977 as Product  Manager.  Mr. Underhill served in various
capacities, including purchasing agent and sales manager, from 1977 to 1990, and
became Vice President -- Operations in 1996.

         Paul A. Severt, Vice President -- Financial  Reporting/Controller.  Mr.
Severt joined the Company as Vice President - Financial  Reporting/Controller in
April 1997. Prior to joining the Company, Mr. Severt held various accounting and
auditing positions with Ernst & Young with which he was employed for 12 years.

         David M. Hofmeister - Chief Information  Officer. Mr. Hofmeister joined
the company as Chief  Information  officer in June 1997.  From 1984 to 1997, Mr.
Hofmeister  worked  for  E.I.Du  Pont de  Nemours,  holding  various  management
positions in Du Pont's Consolidation Coal and Remington Arms subsidiaries. Prior
to working with Du Pont, Mr. Hofmeister  worked as a Management  Science Analyst
for the Gulf Oil Corporation.

         W. Rayburn Connell, Vice President,  Service and Sales Director,  North
America. Mr. Connell joined the Company in 1991 as Vice President -- Service and
Sales  Director.  From  1990 to 1991,  Mr.  Connell  was the  owner  of  Connell
Distribution and prior to that was the part owner of Austin Saw and Knife, which
the  Company  acquired  in 1991.  Between  1974 and 1990,  Mr.  Connell  was the
Company's sales manager.

         Diether  Klingelnberg,  Director.  Mr.  Klingelnberg  served  as  Chief
Executive  Officer of the Company  until March 1996.  In addition,  he served as
Chairman of the Board and Chief Executive  Officer of IKS  Corporation  from its
formation  until  consummation  of the  Recapitalization.  Mr.  Klingelnberg  is
currently  Managing  Director  of  Klingelnberg  Beteiligungs-GmbH,  Chairman of
Oerlikon  Geartec AG and Eickhoff  GmbH. He is also a Director of Clark Material
Handling Company.

         James A. Urry,  Director.  Mr. Urry has been with Citibank,  N.A. since
1981,  serving as a Vice  President  since 1986. He has been a Vice President of
CVC since  1989.  He is a  Director  of  Intersil  Corporation,  Hancor  Holding
Corporation,   Airxcel,   Inc.,  Palomar   Technologies   Corporation  and  York
International Corporation.

         Michael A. Delaney,  Director. Mr. Delaney has been a Vice President of
CVC since 1989.  Mr. Delaney is a Director of  AmeriSource  Health  Corporation,
Clark Material Handling Company, Chip PAC Inc., Delco Remy International,  Inc.,
Great Lakes Dock and Dredge  Corporation,  GVC Holdings,  JAC Holdings,  Palomar
Technologies  Corporation,  Paper Pak Products,  Inc., SC Processing,  Inc., MSX
International and Triumph Holdings, Inc.

         Richard J.Puricelli,  Director.  Mr. Puricelli has been associated with
JAC Products  since 1995.  He became a Director in 1995 and Chairman in 1997. As
Chairman,   he  is  responsible  for  the  company's   operations  that  produce
approximately $300 million in annual sales and employ approximately 1,500 people
in Europe and North America.  JAC Products is the leading supplier of roof racks
and related accessories to automobile OEMs. Mr. Puricelli is also Chairman and a
Director of FabriSteel Products, Inc.


                                     III-2


<PAGE>


         Director Compensation and Arrangements

         With the exception of Mr.  Puricelli,  who receives $4,000 per quarter,
other directors of the Company do not currently  receive  compensation for their
services as directors. Members of the Board of Directors are elected pursuant to
a Securities  Purchase and Holders  Agreement  (the  "Stockholders'  Agreement")
entered into in connection with the Recapitalization  among IKS, IKS Corporation
and its  stockholders.  Pursuant to the  Stockholders'  Agreement,  the Board of
Directors of the Company is composed at all times of five  directors as follows:
P. Daniel Miller (as long as he continues to serve as President of the Company);
one individual designated by Diether Klingelnberg, two individuals designated by
CVC; and one independent  director who shall be designated by CVC subject to the
right of holders of the majority of the  outstanding  shares of Holdings Class A
Stock to veto the election of any such independent director.

ITEM 11.  EXECUTIVE COMPENSATION.

         The  following  table sets forth  certain  information  concerning  the
compensation  received  for  services  rendered  in 1999 by (i) each  person who
served as the Company's Chief  Executive  Officer during 1999 and, (ii) the four
most  highly  compensated  executive  officers  of the  Company  (other than the
individuals who served as the Company`s  Chief  Executive  Officer) in office on
December 31, 1999.

<TABLE>
<CAPTION>

                                                           Summary Compensation Table

                                                        Annual Compensation
                                   -------------------------------------------------------------------------------
                                                                                                        All Other
                                                       Salary           Bonus            Other        Compensation
    Name and Principal Position        Year              ($)             ($)              ($)              ($)
----------------------------------   ----------     ------------    ------------     ------------    -------------
<S>                                  <C>            <C>             <C>              <C>             <C>

John E. Halloran (1)..............      1999             190,192              --       24,853 (2)       3,486 (3)
President and Chief Executive           1998             220,000          70,000       26,268          11,661 (4)
Officer                                 1997             200,000          85,000       29,728          11,661 (4)

P. Daniel Miller (1)..............      1999             216,705         302,400           --          12,646 (5)
President and Chief Executive           1998                 --               --           --             --
Officer                                 1997                 --               --           --             --

Thomas W.G. Meyer.................      1999             201,251         159,006           --             --
Executive Vice President --             1998             184,600         165,430           --             --
Europe and Asia                         1997             173,100         103,860           --             --

William M. Schult.................      1999             155,954          97,336           --           7,899 (6)
Executive Vice President --             1998             135,000           38,750           --          11,036 (7)
Finance, Chief Financial Officer,       1997             127,000           45,000           --          11,302 (8)
Treasurer and Secretary

W. Randolph Underhill.............      1999            125,000           49,365           --           7,059 (9)
Vice President -- Operations            1998            120,000           31,150           --          10,972 (10)
                                        1997            111,000           36,200           --          10,567 (11)

W. Rayburn Connell ..............       1999            120,000           47,390           --          13,366 (12)
Vice President -- Sales and             1998            117,500           41,125           --          12,720 (13)
Service Director, North America         1997            113,000           41,500           --          11,352 (14)


</TABLE>


                                     III-3


<PAGE>


(1)  In May 1999, John E. Halloran was replaced as President and Chief Executive
     Officer by P. Daniel Miller.  Mr.  Halloran's  employment  with the company
     terminated effective October 22, 1999.

(2)  Paid by IKS Corporation.  Represents additional  compensation sufficient to
     permit Mr.  Halloran to pay interest  payments to IKS Corporation on a loan
     made in the amount of income taxes  incurred by Mr.  Halloran in connection
     with  the  securities  received  by him as a part  of the  Recapitalization
     Distribution.

(3)  Includes $3,200 in Company 401(k) contributions and $286 in group term life
     insurance premiums.

(4)  Includes $3,200 in Company 401(k)  contributions,  $8,000 in Company Profit
     Sharing Plan  contributions and $461 in group term life insurance premiums.

(5)  Includes $5,418 in Company Profit Sharing Plan contributions, $7,154 in car
     allowance, and $74 in group term life insurance premiums.

(6)  Includes  $4,818 in Company  Profit Sharing Plan  contributions,  $2,911 in
     Company  401(k) plan  contributions,  and $170 in group term life insurance
     premiums.

(7)  Includes $2,930 in Company 401(k)  contributions,  $8,000 in Company Profit
     Sharing Plan contributions and $106 in group term life insurance premiums.

(8)  Includes $3,200 in Company 401(k)  contributions,  $8,000 in Company Profit
     Sharing Plan  contributions and $102 in group term life insurance premiums.

(9)  Includes  $3,744 in Company  Profit Sharing Plan  contributions,  $2,995 in
     Company  401(k) plan  contributions,  and $320 in group term life insurance
     premiums.

(10) Includes $2,728 in Company 401(k)  contributions,  $8,000 in Company Profit
     Sharing Plan  contributions and $244 in group term life insurance premiums.

(11) Includes $2,995 in Company 401(k)  contributions,  $7,360 in Company Profit
     Sharing Plan contributions and $212 in group term life insurance premiums.

(12) Includes  $2,920 in Company 401(k)  contributions, $3,650 in Company Profit
     Sharing Plan  contributions $6,300 in car  allowance and $496 in group term
     life insurance premiums.

(13) Includes $2,600 in Company 401(k)  contributions,  $6,058 in Company Profit
     Sharing Plan  contributions, $3,450 in car allowance and $612 in group term
     life insurance premiums.

(14) Includes  $3,060 in Company 401(k)  contributions, $7,725 in Company Profit
     Sharing Plan contributions and $567 in group term life  insurance premiums.



Employment Arrangements and Deferred Compensation Agreements

         P.  Daniel  Miller  was hired by the  Company  as  President  and Chief
Executive  Officer  pursuant to an Employment  Agreement  effective May 24, 1999
which  expires  on  May  31,  2001.  As  compensation,  Mr.  Miller  receives  a
predetermined  annual  salary  ($350,000  in 1999) and receives  certain  fringe
benefits including a bonus, a car allowance, reimbursement of club expenses, and
insurance coverage.  Following any termination of Mr. Miller's  employment,  Mr.
Miller will be subject to a  non-competition  covenant for up to two years.  The
Company also granted Mr. Miller a non-qualified  stock option to purchase shares
of common  stock of its  parent  with a term of eight  years from the grant date
(May 24, 1999). Upon full exercise of the option, Mr. Miller would own 5% of the
issued and  outstanding  shares of the parent's  common stock on a fully diluted
basis, assuming full conversion of all convertible  securities and full exercise
of all options, warrants and other rights to acquire common stock.


                                     III-4


<PAGE>


          Thomas Meyer was hired by IKS Klingelnberg GmbH as its Chief Executive
Officer  pursuant to an Employment  Agreement  effective  January 1, 1993 which,
following an extension  on December 17, 1998,  expires on December 31, 2003.  As
compensation,  Mr. Meyer receives a  predetermined  annual salary (DM 370,000 in
1999) and receives certain fringe benefits including a bonus, an automobile, and
insurance  coverage.  Following any termination of Mr. Meyer's  employment,  Mr.
Meyer will be  subject to a  non-competition  covenant  for up to two years,  in
exchange for payment in each year of an amount equal to one-half of Mr.  Meyer's
most recently agreed upon annual compensation.

         William M. Schult was hired by the Company as Vice  President - Finance
pursuant to an Employment  Agreement  effective  August 16, 1995. Mr. Schult was
promoted to Chief  Financial  Officer on November 6, 1996 and to Executive  Vice
President  on  October  15,  1999.  As  compensation,   Mr.  Schult  receives  a
predetermined annual salary ($191,700 as of September 1999) and receives certain
fringe  benefits  including  a bonus,  a  company  car and  insurance  coverage.
Following any termination of Mr. Schult's employment, Mr. Schult will be subject
to a  non-competition  covenant  for one year.  The  Company  or Mr.  Schult may
terminate this employment agreement upon six months written notice.

401(k) and Profit Sharing Plan

         In 1997,  the Company's tax  qualified  profit  sharing plan was merged
into the IKS Corporation  401(k)  retirement plan. The combined plan was renamed
the  International  Knife & Saw, Inc. 401(k) and Profit Sharing Plan. All of the
Company's  domestic  non-unionized  employees are eligible to participate  after
completing  one year of service  and  attaining  age 20 1/2.  Subject to certain
statutory  limitations,  employees  may  contribute  up to 15  percent  of their
compensation to the plan on a pre-tax basis. The Company may make  discretionary
matching   contributions  equal  to  a  percentage  of  the  employees'  pre-tax
contributions.  However,  in determining  the amount of matching  contributions,
only employee pre-tax contributions up to four percent of compensation are taken
into account.  Employees are fully vested in their benefits under the plan after
two years of service.

         In addition  to  discretionary  matching  contributions  on  employees'
pre-tax  contributions,  the Company may also make profit sharing contributions.
These  contributions are allocated to the accounts of the eligible  employees in
the same ratio that each eligible employee's  compensation for the year bears to
the total  compensation  of all eligible  employees for the year. For allocation
purposes, the compensation of any employee in excess of $170,000 is disregarded.
Employees are fully vested in their  benefits under the plan after five years of
service.  An employee may not receive a  distribution  of his benefits under the
plan until following his termination of employment.

Compensation Committee Interlocks and Insider Participation

         Each of the five current  members of the  Company's  Board of Directors
also serve on the compensation  committee.  See "Item 13. Certain  Relationships
and Related  Transactions" for disclosure with respect to certain  relationships
of the some of the members of the compensation committee and the Company.

         In the event that Messrs.  Urry and Delaney are  unwilling or unable to
serve,  or  otherwise  cease to serve,  CVC shall be  entitled  to select  their
replacement on the Board of Directors.  In addition, the Stockholders' Agreement
provides that Diether Klingelnberg or his designated  representative shall serve
as a director.


                                     III-5


<PAGE>


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND  MANAGEMENT.

         All of the outstanding  capital stock of the Company is currently owned
by IKS  Corporation.  The following  table sets forth certain  information  with
respect  to the  beneficial  ownership  of the Corp.  Preferred  Stock and Corp.
Common Stock by (i) each person or entity who owns five percent or more thereof,
(ii)  each  director  of the  Company  who is a  stockholder,  (iii)  the  Chief
Executive  Officer of the Company and the other executive  officers named in the
"Summary Compensation Table" above who are stockholders,  and (iv) the directors
and executive  officers of the Company as a group.  Unless otherwise  specified,
all shares are directly held.

<TABLE>
<CAPTION>

                                                                  Number and Percent of Shares
                                 --------------------------------------------------------------------------------------------
                                        Holdings              Holdings              Holdings Class A         Holdings Class B
                                 Series A Preferred Stock Series B Preferred Stock       Stock(2)                 Stock(3)
                                 ------------------------ ------------------------  ------------------      ------------------
Name of Beneficial Owner (1)       Number      Percent      Number     Percent      Percent    Percent       Number    Percent
----------------------------       ------      -------      ------     -------      -------    -------       ------    -------
<S>                                <C>         <C>          <C>        <C>         <C>        <C>           <C>       <C>

Citicorp Venture Capital Ltd         8,241       68.7%         --          --       31,453     35.1%      11,234        76.5%
  399 Park Avenue
  New York, New York 10043

Haulux, AG                             --         --          --          --        17,000     19.0%          --         --

Dualux, AG                             --         --          --          --        17,000     19.0%          --         --

John E. Halloran...........            600                    600       67.2%        5,000      5.6%          --         --
P.O. Box 80307
Simpsonville, SC 29680-0307

Thomas W.G. Meyer..........            242      2.0%            2       0.3%         4,534      5.1%          --         --

William M. Schult..........             48      0.4%           48       5.4%           956      1.1%          --         --

W. Rayburn Connell.........             48      0.4%           48       5.4%           800      0.9%          --         --

W. Randolph Underhill.....              12      0.1%           12       1.3%           500      0.6%          --         --

James A. Urry (4)..........             58      0.5%           --       --             221      0.2%          79         0.5%

Michael Delaney (4)........             58      0.5%           --       --             221      0.2%          79         0.5%

Richard  J. Puricelli......             41      0.3%           --       --             200      0.2%          --          --

All directors and executive officers

as a group (10 persons)(4)             556      4.6%          158      17.7%        24,958     27.9%         157        1.1%

----------

(1)  Unless otherwise indicated, the address of each shareholder listed above is
     1299 Cox Avenue, Erlanger, KY 41018.

(2)  Does not include shares of Corp.  Class A Stock issuable upon conversion of
     Corp. Class B Stock. See "--- Corp. Common Stock".

(3)  Does  not include shares of Corp. Class B Stock issuable upon conversion of
     Corp. Class A Stock.  See "---Corp. Common Stock".

(4)  Does not  include  shares  beneficially  held  by CVC, which  may be deemed
     beneficially owned by Messrs.  Delaney and Urry.  Messrs.  Delaney and Urry
     disclaim beneficial ownership of shares held by CVC.

</TABLE>


                                     III-6


<PAGE>


Corp. Common Stock

         The Certificate of Incorporation  of IKS Corporation  provides that IKS
Corporation  may issue 400,000  shares of Corp.  Common Stock,  divided into two
classes  consisting of 200,000 shares of Corp.  Class A Stock and 200,000 shares
of Corp.  Class B Stock.  The holders of Corp. Class A Stock are entitled to one
vote for each share  held of record on all  matters  submitted  to a vote of the
stockholders. Except as required by law, the holders of Corp. Class B Stock have
no voting rights.  Under the Certificate of Incorporation of IKS Corporation,  a
holder of either  class of Corp.  Common  Stock  may  convert  any or all of his
shares into an equal number of shares of the other class of Corp.  Common Stock;
provided  that in the case of a conversion  from Corp.  Class B Stock,  which is
nonvoting, into Corp. Class A Stock, which is voting, the holder of shares to be
converted  would be permitted  under  applicable law to hold the total number of
shares of Corp.  Class A Stock  which would be held after  giving  effect to the
conversion.

Stockholders' Agreement

         In  connection  with  the  Recapitalization,  the  stockholders  of IKS
Corporation  entered  into  the  Stockholders'   Agreement   containing  certain
agreements  among  such  stockholders  with  respect  to the  capital  stock and
corporate governance of IKS Corporation and the Company.

         The  Stockholders'  Agreement  contains certain  provisions which, with
certain  exceptions  restrict the ability of the stockholders  from transferring
any  Corp.  Common  Stock,  Corp.  Preferred  Stock or Corp.  Debentures  except
pursuant to the terms of the  Stockholders'  Agreement.  If holders of more than
50% of the Corp. Common Stock approve the sale of the Company,  each stockholder
has agreed to consent to such sale and, if such sale includes the sale of stock,
each stockholder has agreed to sell all of such stockholder's Corp. Common Stock
on the terms and  conditions  approved  by holders  of a  majority  of the Corp.
Common Stock then  outstanding.  In the event IKS Corporation  proposes to issue
and sell (other than in a public offering pursuant to a registration  statement)
any shares of Corp. Common Stock or any securities  containing options or rights
to acquire any shares of Corp.  Common Stock or any securities  convertible into
Corp. Common Stock to CVC or its affiliates, IKS Corporation must first offer to
each  of the  other  shareholders  a pro  rata  portion  of  such  shares.  Such
preemptive  rights are not applicable to the issuance of shares of Corp.  Common
Stock  upon the  conversion  of shares of one class of Corp.  Common  Stock into
shares of the other class.

         Pursuant to the Stockholders'  Agreement, the Board of Directors of the
Company is composed at all times of five directors as follows:  P. Daniel Miller
(as long as he continues to serve as President of the Company);  one  individual
designated by Diether Klingelnberg,  two individuals  designated by CVC; and one
independent  director  who shall be  designated  by CVC  subject to the right of
holders of the majority of the outstanding shares of Corp. Class A Stock to veto
the election of any such independent director.

         The  Stockholders'  Agreement  also  provides  for  certain  additional
restrictions on transfer of shares acquired by members of management pursuant to
certain  employee  stock  purchase  plans  adopted  by IKS  Corporation  in 1997
("Incentive  Shares"),  including  the right of IKS  Corporation  to  repurchase
Incentive  Shares  held  by  a  member  of  management  (a  "Participant")  upon
termination of such Participant's  employment prior to 2001, at a formula price,
and the grant of a right of first  refusal  in favor of IKS  Corporation  in the
event a Participant  elects to transfer such  Incentive  Shares of Corp.  Common
Stock.

Registration Rights Agreement

         In connection with their entry into the  Stockholders'  Agreement,  IKS
Corporation,  CVC and certain other stockholders of IKS Corporation entered into
a Registration  Rights Agreement (the "Corp.  Registration  Rights  Agreement").
Pursuant to the Corp. Registration Rights Agreement, upon the written request of
CVC, IKS  Corporation  has agreed to prepare and file a  registration  statement
with the  Commission  concerning the  distribution  of all or part of the shares
held by CVC and use its best  efforts to cause such  registration  statement  to
become effective.  If at any time IKS Corporation files a registration statement
for the Corp. Common Stock pursuant to a request by CVC or otherwise (other than
a  registration  statement  on  Form  S-8,  Form  S-4 or  any  similar  form,  a


                                     III-7


<PAGE>


registration  statement filed in connection with a share exchange or an offering
solely to IKS Corporation' employees or existing stockholders, or a registration
statement  registering  a unit  offering),  IKS  Corporation  will  use its best
efforts to allow the other parties to the Corp. Registration Rights Agreement to
have their  shares of Corp.  Common  Stock (or a portion of their  shares  under
certain  circumstances)  included in such offering of Corp.  Common Stock if the
registration  form  proposed  to be used may be used to  register  such  shares.
Registration expenses of the selling stockholders (other than underwriting fees,
brokerage  fees  and  transfer  taxes  applicable  to the  shares  sold  by such
stockholders   or  the  fees  and   expenses   of  any   accountants   or  other
representatives  retained  by a  selling  stockholder)  are  to be  paid  by IKS
Corporation.

Employee Stock Purchase Plans

          In 1997, IKS Corporation  adopted a Restricted Stock Plan, pursuant to
which Participants were offered the opportunity to purchase Corp. Class A Stock.
The Participants were given the opportunity to acquire an aggregate of up to 10%
of the Corp. Class A Stock outstanding on a fully-diluted basis.

         Also in 1997,  IKS  Corporation  adopted  an  Equity  Investment  Plan,
pursuant to which  Participants  were offered the  opportunity to purchase Corp.
Class A Stock,  Series A 12% Cumulative  Compounding  Preferred Stock, par value
$.01 per share,  and Series B 12% Cumulative  Compounding  Preferred  Stock, par
value $.01 per share. The Participants  were given the opportunity to acquire an
aggregate of up to 1,020 shares of Corp. Class A Stock, 122.4 shares of Series A
Preferred Stock and 122.4 shares of Series B Preferred Stock.

         Upon the  Participants'  purchase of  securities  under the  Restricted
Stock Plan or the Equity Investment Plan (the "Plans"), such Participants became
subject  to the  terms  and  conditions  of  the  Stockholders'  Agreement.  See
"--Stockholders'  Agreement." In addition to the restrictions set forth above in
the discussion of the Stockholders  Agreement,  the Stockholders' Agreement also
provides the following  restrictions with respect to the  Participants:  (i) the
Incentive  Shares acquired by a Participant will be subject to repurchase by IKS
Corporation or its designee if such Participant's employment with the Company is
terminated  within five years after  acquiring such securities at formula prices
which vary based upon the time and  circumstance of such  termination,  (ii) IKS
Corporation  has a right of first  refusal  through such date on all  securities
acquired by a Participant pursuant to a Plan, and (iii) if holders of a majority
of Corp.  Class A Stock  approve a sale of IKS  Corporation,  Participants  will
consent to such sale.

Other

         In connection with the  Recapitalization,  Arndt Klingelnberg,  Diether
Klingelnberg and CVC entered into an agreement pursuant to which their ownership
percentages  of the  Corp.  Preferred  Stock  and the  Corp.  Debentures  may be
adjusted.  Upon the occurrence of certain  events,  their  respective  ownership
percentages of Corp.  Preferred  Stock and Corp.  Debentures will be adjusted so
that they will be pro rata with their respective ownership  percentages of Corp.
Common Stock.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In connection with the Recapitalization, IKS Corporation entered into a
letter  agreement with Mr.  Halloran,  the former  President and Chief Executive
Officer of the Company, pursuant to which IKS Corporation loaned to Mr. Halloran
an amount equal to the income taxes which were incurred by him in respect of the
securities received by him as a part of the Recapitalization  Distribution.  The
loan is secured by a pledge of the  securities  and the  recourse to the Company
for repayment of the loan is limited to the securities.  The loan bears interest
at the  "applicable  federal  rate" under the Internal  Revenue Code of 1986, as
amended, and the Company makes payments to Mr. Halloran in amounts sufficient to
permit him to pay such interest payments.


                                     III-8


<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1)   List of Financial Statements.

         -      Financial Data Schedule

         The following  Consolidated Financial Statements of the Company and the
         Report of  Independent  Auditors set forth on pages II-9 through  II-29
         and II-8, respectively, are incorporated by reference into this item 14
         of Form 10-K by item 8 hereof:

         -      Report of Independent Auditors
         -      Consolidated Balance Sheets as of December 31, 1999 and 1998.
         -      Consolidated   Statements   of   Income  for  the  years   ended
                December 31, 1999, 1998 and 1997.
         -      Consolidated Statements of Changes in  Shareholder's Deficit for
                the years ended December 31, 1999, 1998 and 1997.
         -      Consolidated  Statements   of  Cash  Flows  for the  years ended
                December 31, 1999, 1998 and 1997.
         -      Notes to Consolidated Financial Statements.

(a)(2)   Financial Statement Schedule.

         Schedule  II -  Valuation  and  Qualifying  Accounts  and  Reserves  is
         attached hereto at page IV-5 and is incorporated by reference into this
         Item 14 of Form 10-K. No other financial  statement schedules have been
         filed herewith since they are either not required,  are not applicable,
         or the  required  information  is shown in the  consolidated  financial
         statements or related notes.


                                      IV-1


<PAGE>

(a)(3)   Exhibits.

                  Exhibit
                    No.                                          Description
                  -------     --------------------------------------------------

                    3.1         Restated   Certificate  of   Incorporation,   as
                                amended,   of  the  Company   (incorporated   by
                                reference  to  Exhibit  3.1  to  the   Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                    3.2         By-laws   of  the   Company   (incorporated   by
                                reference  to  Exhibit  3.2  to  the   Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                    4.1         Indenture  dated as of November 6, 1996  between
                                the Company and United  States Trust  Company of
                                New York, as Trustee  (incorporated by reference
                                to  Exhibit  4.1 to the  Company's  Registration
                                Statement   on  Form   S-4,   Registration   No.
                                333-17305)
                    4.2         Registration   Rights   Agreement  dated  as  of
                                November  6, 1996  among the  Company,  Schroder
                                Wertheim  & Co.  Incorporated  and Smith  Barney
                                Inc.  (incorporated  by reference to Exhibit 4.2
                                to the Company's  Registration Statement on Form
                                S-4, Registration No. 333-17305)
                    4.3         Form of  113/8%  Senior  Subordinated  Notes due
                                2006  (included  in Exhibit  4.1) 10.1  Purchase
                                Agreement  dated  October  31,  1996  among  the
                                Company,  Schroder  Wertheim & Co.  Incorporated
                                and Smith Barney Inc. (incorporated by reference
                                to Exhibit  10.1 to the  Company's  Registration
                                Statement   on  Form   S-4,   Registration   No.
                                333-17305)
                   10.2         Letter  Agreement  dated October 8, 1996 between
                                Deutsche Bank and the Company  (incorporated  by
                                reference  to  Exhibit  10.2  to  the  Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                   10.3         Letter  Agreement  dated October 8, 1996 between
                                Deutsche   Bank   and  IKS   Klingelnberg   GmbH
                                (incorporated  by  reference  to Exhibit 10.3 to
                                the  Company's  Registration  Statement  on Form
                                S-4, Registration No. 333-17305)
                   10.4         Agreement  and  Plan of  Recapitalization  dated
                                September  17,  1996  among   Citicorp   Venture
                                Capital    Ltd.,    IKS    Corporation"),    the
                                stockholders  of  IKS  Corporation  and  certain
                                stockholders  of the  Company  (incorporated  by
                                reference  to  Exhibit  10.4  to  the  Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                   10.5         Commercial  Lease  Contract  dated March 1, 1992
                                between Howard & Howard Real Estate  Partnership
                                and IKS Service,  Inc., as amended (incorporated
                                by reference  to Exhibit  10.5 to the  Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                   10.6         Lease  dated  June  5,  1996   between   Century
                                Development Co. and the Company (incorporated by
                                reference  to  Exhibit  10.6  to  the  Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                   10.7         Lease dated July 21, 1995  between 1st  American
                                Management    Co.,    Inc.   and   the   Company
                                (incorporated  by  reference  to Exhibit 10.7 to
                                the  Company's  Registration  Statement  on Form
                                S-4, Registration No. 333-17305)
                   10.8         Lease  Agreement  dated April 17,  1991  between
                                Tate Engineering, Inc. and IKS Eastern Services,
                                Inc., as amended  (incorporated  by reference to
                                Exhibit  10.8  to  the  Company's   Registration
                                Statement   on  Form   S-4,   Registration   No.
                                333-17305)


                                      IV-2


<PAGE>


                   10.9         Offer to Lease dated  October  25, 1995  between
                                Sigma  Enterprises Ltd. and IKS Canadian Knife &
                                Saw Ltd.  (incorporated  by reference to Exhibit
                                10.9 to the Company's  Registration Statement on
                                Form S-4, Registration No. 333-17305)
                  10.10         Industrial Multiple Tenancy Lease dated June 14,
                                1995  between  Geary  Investments   Limited  "in
                                Trust"  and  IKS  Canadian   Knife  &  Saw  Ltd.
                                (incorporated  by reference to Exhibit  10.10 to
                                the  Company's  Registration  Statement  on Form
                                S-4, Registration No. 333-17305)
                  10.11         Lease dated March 12, 1992 between  Gestion W. &
                                L.  Choiniere  Inc. and IKS Canadian Knife & Saw
                                Ltd., as amended  (incorporated  by reference to
                                Exhibit  10.11  to  the  Company's  Registration
                                Statement   on  Form   S-4,   Registration   No.
                                333-17305)
                  10.12         Joint Venture  Company  Contract dated September
                                24, 1995 between IKS  Klingelnberg Far East GmbH
                                and  Shanghai  Printing  &  Packaging  Machinery
                                General  Corporation  (incorporated by reference
                                to Exhibit 10.12 to the  Company's  Registration
                                Statement  on   Form   S-4,   Registration   No.
                                333-17305)
                  10.13         Joint Venture  Company  Contract dated September
                                24, 1995 between IKS  Klingelnberg Far East GmbH
                                and  Shanghai  Printing  &  Packaging  Machinery
                                General  Corporation  (incorporated by reference
                                to Exhibit 10.13 to the  Company's  Registration
                                Statement   on  Form   S-4,   Registration   No.
                                333-17305)
                   10.14        Letter   Agreement   dated  September  23,  1997
                                between Deutsche Bank and IKS Klingelnberg  GmbH
                                (incorporated  by  reference  to Exhibit 10.1 to
                                the Company's Quarterly Report on Form 10-Q, for
                                the quarterly  period ended  September 30, 1997,
                                Registration No. 333-17305)
                   21.1         Subsidiaries of the Company
                     27         Financial Data Schedule

         (b)    Reports on Form 8-K

                None.


                                      IV-3


<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.

                                  INTERNATIONAL KNIFE & SAW, INC.


                                  By:   /s/ P. Daniel Miller
                                     --------------------------------------
                                      P. Daniel Miller
                                      President and Chief Executive Officer


                                 March 17, 2000


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities indicated on March 17, 2000.

     Signature                              Title
--------------------              -------------------------------------------

/s/ P. Daniel Miller              President, Chief Executive
------------------------          Officer and Director (Principal Executive
P. Daniel Miller                  Officer)


/s/ William M. Schult             Executive Vice President- Chief Financial
------------------------          Officer, Treasurer and Secretary (Principal
William M. Schult                 Financial and Accounting Officer)


/s/ Diether Klingelnberg          Director
------------------------
Diether Klingelnberg


/s/ James A. Urry                 Director
------------------------
James A. Urry


                                      IV-4


<PAGE>


         SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
         SECTION  15(d) OF THE ACT BY  REGISTRANTS  WHICH  HAVE  NOT  REGISTERED
         SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

         The registrant has not sent the following to security holders:  (i) any
annual report to security holders covering the registrant's last fiscal year; or
(ii) any proxy  statements,  forms of proxy or other proxy  soliciting  material
wither respect to any annual or other meeting of security holders.


                                      IV-5


<PAGE>


<TABLE>
<CAPTION>

                                                                                                                     SCHEDULE II
                                                INTERNATIONAL KNIFE & SAW, INC.

                                  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                         YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
                                                     (DOLLARS IN THOUSANDS)

                                                                           COL. C
                                           COL. B                        ADDITIONS                               COL. E
                                           BALANCE AT         CHARGED TO                        COL. D           BALANCE
COL. A                                     BEGINNING          COSTS AND         OTHER           DEDUCTIONS        AT END
DESCRIPTION                                OF PERIOD          EXPENSES          DESCRIBE        DESCRIBE         OF PERIOD
-----------                                ----------         ----------        --------        ----------       ---------
<S>                                        <C>                <C>               <C>             <C>              <C>

YEAR ENDED 1999
Allowance for doubtful accounts            $    1,780         $    1,005        $      -        $    575(a)      $   1,856
                                                                                                     354(c)

Allowance for inventory obsolescence            2,788              1,001               -            1,438(a)         2,118
                                                                                                      233(c)

YEAR ENDED 1998
Allowance for doubtful accounts                 1,480                231             261(b)           164(a)         1,780
                                                                                                       28(c)

Allowance for inventory obsolescence            2,381                768             170(b)           481(a)         2,788
                                                                                                       50(c)

YEAR ENDED 1997
Allowance for doubtful accounts                 1,500                297             116(b)           189(a)          1,480
                                                                                                      244(c)

Allowance for inventory obsolescence            2,327                539              40(b)           340(a)          2,381
                                                                                                      185(c)

(a)     Represents amounts charged against the reserves during the year.
(b)     Consists of reserves of subsidiaries purchased during the year.
(c)     Represents foreign currency translation adjustments during the year.

</TABLE>


                                      IV-6


<PAGE>


                                  EXHIBIT INDEX



                     Exhibit
                       No.                       Description
                     -------    ------------------------------------------------

                       3.1      Restated   Certificate  of   Incorporation,   as
                                amended,   of  the  Company   (incorporated   by
                                reference  to  Exhibit  3.1  to  the   Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                       3.2      By-laws   of  the   Company   (incorporated   by
                                reference  to  Exhibit  3.2  to  the   Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                       4.1      Indenture  dated as of November 6, 1996  between
                                the Company and United  States Trust  Company of
                                New York, as Trustee  (incorporated by reference
                                to  Exhibit  4.1 to the  Company's  Registration
                                Statement   on  Form   S-4,   Registration   No.
                                333-17305)
                       4.2      Registration   Rights   Agreement  dated  as  of
                                November  6, 1996  among the  Company,  Schroder
                                Wertheim  & Co.  Incorporated  and Smith  Barney
                                Inc.  (incorporated  by reference to Exhibit 4.2
                                to the Company's  Registration Statement on Form
                                S-4, Registration No. 333-17305)
                       4.3      Form of  113/8%  Senior  Subordinated  Notes due
                                2006  (included  in Exhibit  4.1) 10.1  Purchase
                                Agreement  dated  October  31,  1996  among  the
                                Company,  Schroder  Wertheim & Co.  Incorporated
                                and Smith Barney Inc. (incorporated by reference
                                to Exhibit  10.1 to the  Company's  Registration
                                Statement   on  Form   S-4,   Registration   No.
                                333-17305)
                      10.2      Letter  Agreement  dated October 8, 1996 between
                                Deutsche Bank and the Company  (incorporated  by
                                reference  to  Exhibit  10.2  to  the  Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                      10.3      Letter  Agreement  dated October 8, 1996 between
                                Deutsche   Bank   and  IKS   Klingelnberg   GmbH
                                (incorporated  by  reference  to Exhibit 10.3 to
                                the  Company's  Registration  Statement  on Form
                                S-4, Registration No. 333-17305)
                      10.4      Agreement  and  Plan of  Recapitalization  dated
                                September  17,  1996  among   Citicorp   Venture
                                Capital    Ltd.,    IKS    Corporation"),    the
                                stockholders  of  IKS  Corporation  and  certain
                                stockholders  of the  Company  (incorporated  by
                                reference  to  Exhibit  10.4  to  the  Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                      10.5      Commercial  Lease  Contract  dated March 1, 1992
                                between Howard & Howard Real Estate  Partnership
                                and IKS Service,  Inc., as amended (incorporated
                                by reference  to Exhibit  10.5 to the  Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                      10.6      Lease  dated  June  5,  1996   between   Century
                                Development Co. and the Company (incorporated by
                                reference  to  Exhibit  10.6  to  the  Company's
                                Registration Statement on Form S-4, Registration
                                No. 333-17305)
                      10.7      Lease dated July 21, 1995  between 1st  American
                                Management    Co.,    Inc.   and   the   Company
                                (incorporated  by  reference  to Exhibit 10.7 to
                                the  Company's  Registration  Statement  on Form
                                S-4, Registration No. 333-17305)
                      10.8      Lease  Agreement  dated April 17,  1991  between
                                Tate Engineering, Inc. and IKS Eastern Services,
                                Inc., as amended  (incorporated  by reference to
                                Exhibit  10.8  to  the  Company's   Registration
                                Statement on Form S-4, Registration No.
                                333-17305)


                                      IV-7


<PAGE>


                      10.9      Offer to Lease dated  October  25, 1995  between
                                Sigma  Enterprises Ltd. and IKS Canadian Knife &
                                Saw Ltd.  (incorporated  by reference to Exhibit
                                10.9 to the Company's  Registration Statement on
                                Form S-4, Registration No. 333-17305)
                     10.10      Industrial Multiple Tenancy Lease dated June 14,
                                1995  between  Geary  Investments   Limited  "in
                                Trust"  and  IKS  Canadian   Knife  &  Saw  Ltd.
                                (incorporated  by reference to Exhibit  10.10 to
                                the  Company's  Registration  Statement  on Form
                                S-4, Registration No. 333-17305)
                     10.11      Lease dated March 12, 1992 between  Gestion W. &
                                L.  Choiniere  Inc. and IKS Canadian Knife & Saw
                                Ltd., as amended  (incorporated  by reference to
                                Exhibit  10.11  to  the  Company's  Registration
                                Statement on Form S-4, Registration No.
                                333-17305)
                     10.12      Joint Venture  Company  Contract dated September
                                24, 1995 between IKS  Klingelnberg Far East GmbH
                                and  Shanghai  Printing  &  Packaging  Machinery
                                General  Corporation  (incorporated by reference
                                to Exhibit 10.12 to the  Company's  Registration
                                Statement   on  Form   S-4,   Registration   No.
                                333-17305)
                     10.13      Joint Venture  Company  Contract dated September
                                24, 1995 between IKS  Klingelnberg Far East GmbH
                                and  Shanghai  Printing  &  Packaging  Machinery
                                General  Corporation  (incorporated by reference
                                to Exhibit 10.13 to the  Company's  Registration
                                Statement   on  Form   S-4,   Registration   No.
                                333-17305)
                      10.14     Letter   Agreement   dated  September  23,  1997
                                between Deutsche Bank and IKS Klingelnberg  GmbH
                                (incorporated  by  reference  to Exhibit 10.1 to
                                the Company's Quarterly Report on Form 10-Q, for
                                the quarterly  period ended  September 30, 1997,
                                Registration No. 333-17305)
                      21.1      Subsidiaries of the Company
                        27      Financial Data Schedule


                                      IV-8


<PAGE>


                                                             EXHIBIT 21.1


                                  Subsidiaries


                Name                                         Jurisdiction
                ----                                         ------------

Hannaco Knives & Saws, Inc.                                  Delaware
IKS Canadian Knife & Saw Ltd.                                Canada
IKS Klingelnberg GmbH                                        Germany
  IKS Klingelnberg Asia Pte. Ltd.                            Singapore
  IKS Knives & Saws (M) Sdn. Bhd.                            Malaysia
  IKS Klingelnberg Far East GmbH                             Germany
    Shanghai IKS Lida Mechanical Blade Co. Ltd.              China
    Shanghai IKS Mechanical Blade Co. Ltd.                   China
  IKS Messerfabrik Geringswalde GmbH                         Germany
  Rolf Meyer GmbH                                            Germany
  A.K. van der Wijngaart Beheer B.V. and subsidiaries        the Netherlands
  Buland S.A.                                                France
IKS Mexican Holdings S.A. de C.V.                            Mexico
  International Knife and Saw de Mexico S.A. de C.V.         Mexico
International Knife and Saw Trading Corporation              U.S. Virgin Islands
P.T. Bevenmas Jaya                                           Indonesia


                                      IV-9