SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                                    FORM 10-K
         (Mark one)

          {X}    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended December 31, 2002

                                       OR

           { }    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

                        Commission file number 001-11549
                                               ---------

                           BLOUNT INTERNATIONAL, INC.
    -------------------------------------------------------------------------

             (Exact name of registrant as specified in its charter)

                  Delaware                                 63-0780521
       ------------------------------                ----------------------
      (State or other jurisdiction of                  (I.R.S  employer
       incorporation or organization)                  Identification  No.)

          4909 SE International Way
             Portland, Oregon                               97222-4679
        ------------------------------               ----------------------
   (Address of principal executive offices)                 (Zip Code)

                                 (503) 653-8881
              (Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
                                                      Name of each exchange
       Title of each class                             on which registered
    Common Stock, $.01 par value                      New York Stock Exchange
-------------------------------------                -------------------------

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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).

                   Yes                                  No X
                  ------                               ------


                                     Page 1

<PAGE>


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

                           ------

At June 30, 2002, the aggregate market value of the voting and non-voting common
stock held by non-affiliates was $17,691,748.

Common stock $0.01 par value as of December 31, 2002:  30,795,862 shares
                                                       ----------

                      DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes.

Portions of the proxy statement for the annual meeting of stockholders to be
held April 10, 2003, are incorporated by reference in Part III.


                                     Page 2


<PAGE>


PART I

ITEM 1.  BUSINESS

Blount International, Inc. ("Blount" or the "Company") is an international
manufacturing and marketing company with sales in over 100 countries and
operations in two business segments: Outdoor Products and Industrial and Power
Equipment.

In 2002, the Company relocated the corporate headquarters from Montgomery,
Alabama, to Portland, Oregon.

The following text contains various trademarks of Blount, Inc., a wholly-owned
subsidiary of the Company, and its subsidiaries.

OUTDOOR PRODUCTS

The Company's Outdoor Products segment is comprised of Oregon Cutting Systems
("Oregon") and Dixon Industries, Inc. ("Dixon"). Oregon produces a wide variety
of cutting chain, chain saw guide bars, cutting chain drive sprockets and
maintenance tools for use primarily on portable gasoline and electric chain
saws, and mechanical timber harvesting equipment. Oregon also produces a line of
outdoor care products such as lawn mower blades and trimmer line used for lawn
and garden. Finally, the ICS product line provides specialized concrete cutting
equipment into global construction markets. The principle product of ICS is a
proprietary diamond-segmented chain, which is used on gas-powered and hydraulic
based saws and equipment. The Oregon trademark is well known to end-users and
the Company believes that it is the world leader in the production of cutting
chain. Oregon's cutting chain and related products are used primarily by
professional loggers, construction workers, farmers, arborists and homeowners.

Oregon sells to distributors, dealers and mass merchandisers serving the retail
replacement market. In addition, Oregon currently sells its products to more
than 30 original equipment manufacturers ("OEMS"). Approximately 51% of this
segment's sales were outside of the United States in 2002. Due to the high level
of technical expertise and capital investment required to manufacture cutting
chain and guide bars, the Company believes that it is able to produce durable,
high-quality cutting chain and guide bars more efficiently than most of its
competitors. The use of Oregon cutting chain as original equipment on chain saws
is also promoted through cooperation with OEMs in improving the design and
specifications of chain and saws.

Oregon's business is affected to some extent by severe weather. For example,
severe weather patterns and events such as hurricanes, tornadoes or ice storms
generally result in greater chain saw use, and therefore, stronger sales of saw
chain and guide bars.

Oregon's marketing personnel are located throughout the United States and in a
number of foreign countries. Oregon manufactures cutting chain and related
products in Milwaukie, Oregon; Milan and Dyer, Tennessee; Guelph, Ontario
Canada; Curitiba, Parana, Brazil, and in Kansas City, Missouri.

Oregon's products compete with other cutting chain manufacturers as well as a
small number of international chain saw manufacturers, some of whom are also
customers. This segment's principal raw material, strip steel, is generally
purchased from two vendors, and can be obtained from other sources.

Sales by Oregon products accounted for 88% of sales attributable to the Outdoor
Products segment in the year ended December 31, 2002.

Dixon Industries ("Dixon"), located in Coffeyville, Kansas, was acquired in 1990
and has manufactured ZTR (zero turning radius) lawn mowers and related
attachments since 1974. Dixon pioneered the development of ZTR and offers a full
line of ZTR lawn mowers for both homeowner and commercial applications. The
Company believes Dixon is the leading manufacturer of residential zero turning
radius lawn mowers.


                                     Page 3

<PAGE>


The key element that differentiates Dixon from its competitors is its unique
mechanical transaxle. The transaxle transmits power independently to the rear
drive wheels and enables the operator to move the back wheels at different
speeds and turn the mower in a circle no wider than the machine, a "zero radius
turn". This unique transmission enables the Dixon mower to out-maneuver
conventional "tractor style" ride-on products available in the market today and
provides a cost advantage over the more expensive hydrostatic drives ("hydro")
used by competitors in the zero turning radius market. The mechanical drive
works best on smaller and mid-size units. As the equipment line grows in size of
cutting area and horsepower, there is an increased need to offer hydrostatic
versions of zero turn. In late 1997, Dixon introduced the "Estate Line"
featuring mowers that are designed for large homeowner lawns and are lower
priced than commercial hydrostatic units. Models are available in 42-inch,
50-inch and 60-inch sizes. Expanding on the Estate Line, Dixon introduced a
low-cost hydro line, IZT (integrated zero turn), in 1998. The IZT is positioned
between Dixon's normal hydrostatic and transaxle models geared for the
residential user. It features models with cut widths of 42 inches, 50 inches and
60 inches.

In 2000, Dixon did a complete redesign of its residential and estate product
lines. In 2001, a new commercial model was added that allows for large cut
widths up to 72 inches. In 2002 Dixon introduced new products responding to the
market demand. These are the new "Zeeter" entry level machine with a projected
retail price under $2,000 and the new 3500 series featuring hydrostatic drive on
mowers as small as 30" and 36" cut widths. Dixon is the first in the industry to
offer a 30" hydro. Dixon also offers an array of options for its products,
including attachments for grass collection, mulching, and snow removal. Dixon
sells its products through distribution channels comprised of full-service
dealers, North American distributors and export distributors.

Dixon's competitors include general lawn mower manufacturers such as John Deere
and Snapper, as well as zero turning radius lawn mower manufacturers such as
Ariens, Simplicity, Toro, MTD, Cadet and Yardman.

Sales by Dixon in the year ended December 31, 2002, accounted for 12% of sales
of the Outdoor Products segment.

INDUSTRIAL AND POWER EQUIPMENT

The Company's Industrial and Power Equipment segment manufactures equipment for
the timber harvesting industry and for industrial use, industrial tractors for
land and utility right-of-way clearing, and power transmission components. Major
users of these products include logging contractors, harvesters, land
reclamation companies, utility contractors, building materials distributors,
scrap yard operators and original equipment manufacturers of hydraulic
equipment.

The Company believes that it is a world leader in the manufacture of hydraulic
timber harvesting equipment, which includes a line of truck-mounted,
trailer-mounted, stationary-mounted and self-propelled loaders and crawler
feller bunchers (tractors with hydraulic attachments for felling timber) under
the Prentice brand name; a line of rubber-tired feller bunchers and related
attachments under the Hydro-Ax brand name; and a line of delimbers, slashers and
firewood processors under the CTR brand name. The Company is also a leading
manufacturer of cut-to-length harvesting equipment including forwarders,
harvesters, and harvester heads under the Fabtek brand.

The Company is a competitive force in the gear industry, selling power
transmissions and gear components under the Gear Products brand name.

The Company sells its timber harvesting products through a network of
approximately 200 dealers in over 300 locations in the United States and
currently has an


                                     Page 4

<PAGE>



additional 18 offshore dealers, primarily in the timber harvesting regions of
South America and Southeast Asia. Gear Products, Inc. sells its products to over
270 original equipment manufacturers servicing the utility, construction,
forestry and marine industries. Over 95% of this segment's sales in 2002 were in
the United States, primarily in the southeastern and south central states.

The Company places a strong emphasis on the quality, safety, comfort, durability
and productivity of its products and on the after-market service provided by its
distribution and support network.

The timber harvesting equipment market faces cyclicality due to its reliance on
customers in the lumber, pulp and paper markets. In the past, as pulp prices
have dropped and inventory levels have increased, pulp manufacturers postponed
purchases of new timber harvesting equipment as their existing machinery
provided them sufficient capacity to meet near-term demand.

Competition in markets served by the Industrial and Power Equipment segment is
based largely on quality, price, brand recognition and product support. The
segment's primary competition in timber harvesting equipment includes John
Deere, which also markets the Timberjack brand, Caterpillar, which participates
in certain market niches, and numerous smaller manufacturers including Barko,
Tigercat, Hood, Franklin, Bell, and Morbark. Gear Products' competitors in the
fragmented industry include SKF, Avon, Kaydon, Rotec, Fairfield, Auburn, Tulsa
Winch, Funk and Braden.

The Company attempts to capitalize on its technological and manufacturing
expertise to increase its participation in the market for replacement parts for
products which it manufactures and to develop new product applications both
within and beyond the timber, material handling, scrap, land clearing and gear
industries. The Company is committed to continuing research and development in
this segment to respond quickly to increasing mechanization and environmental
awareness in the timber harvesting industry.

Gear Products, acquired in 1991, is a leading manufacturer of rotational system
components for mobile heavy equipment. Its primary products are bearings, winch
drives and swing drives used to provide hydraulic power transmission in heavy
equipment used in the forestry, construction and utilities industries. Due to
extreme wear-and-tear on its products, Gear Products sells its products in the
replacement parts market in addition to its sales to OEMs. Gear Products
accounted for approximately 12% of the Industrial and Power Equipment segment's
sales in 2002.

The Company's Industrial and Power Equipment segment has manufacturing
facilities in Menominee, Michigan; Owatonna, Minnesota; Prentice, Wisconsin;
Tulsa, Oklahoma; and a parts warehouse in Zebulon, North Carolina. A majority of
the components used in the Company's products are obtained from a number of
domestic manufacturers.

CAPACITY UTILIZATION

Based on a five-day, three-shift work week, the Outdoor Products and Industrial
and Power Equipment segments utilized approximately 82% and 44% of their
respective production capacity in the year ended December 31, 2002.



                                     Page 5

<PAGE>


BACKLOG

The backlog for each of the Company's business segments as of the end of each of
its last four reporting periods was as follows (in millions):

                                                 December 31,
                                    -----------------------------------
                                      2002      2001      2000     1999
---------------------------------   ------    ------    ------   ------
Outdoor Products                     $46.0     $36.0     $49.0    $41.9
Industrial and Power Equipment        10.3      12.9      15.0     25.8
---------------------------------   ------    ------    ------   ------
         Total backlog               $56.3     $48.9     $64.0    $67.7
---------------------------------   ======    ======    ======   ======

The total backlog as of December 31, 2002 is expected to be completed and
shipped within twelve months.

ACQUISITIONS AND DISPOSITIONS

On December 7, 2001, the Company sold its Sporting Equipment Group ("SEG") to
Alliant Techsystems, Inc. ("ATK"). SEG was comprised of the then wholly-owned
subsidiaries of Federal Cartridge Company, Estate Cartridge, Inc., Simmons
Outdoor Corporation and Ammunition Accessories, Inc. The latter was formed on
December 4, 2001 to facilitate the sale of SEG. The Company contributed certain
assets and liabilities of its then Sporting Equipment Division to Ammunition
Accessories, Inc. in exchange for all the authorized stock of Ammunition
Accessories, Inc. In exchange for the shares of these four subsidiaries, the
Company received approximately 3 million shares of ATK stock and $10,000 in cash
for the sale of SEG. The Company subsequently sold the ATK stock and received
gross proceeds of $236.7 million.

Net proceeds of approximately $168.1 million were received after the payment of
$10.1 million in underwriting fees to Lehman Brothers, Inc. and CS First Boston,
of which ATK reimbursed $5.0 million, $38.5 million in other transaction related
costs and income taxes and the establishment of $25.0 million escrow amount,
which is included in Other Assets, as required by the Stock Purchase Agreement
between the Company and ATK.

As a result of the sale, the Company reduced its outstanding indebtedness by
$170.5 million with the repayment of a portion of its term loan, and results of
operations for SEG, prior to the sale on December 7, 2001, have now been
reclassified to discontinued operations as presented in the Consolidated
Statement of Income (Loss).

On September 22, 2000, the Company purchased the assets of Fabtek, Inc., a
manufacturer of timber harvesting equipment. On October 16, 2000, the Company
purchased the assets of Windsor Forestry Tools, Inc., a manufacturer of cutting
chain and guide bars for chain saws and timber harvesting equipment from Snap-on
Incorporated. On October 20, 2000, the Company purchased all the outstanding
stock of Estate Cartridge, Inc., a manufacturer of sporting shotshell
ammunition. Estate Cartridge, Inc. was sold on December 7, 2001 as part of the
SEG transaction. The aggregate purchased price of these acquisitions was $41.3
million and the combined sales and operating loss for the last twelve months
prior to acquisition were $47.1 million and $0.6 million, respectively. These
acquisitions have been accounted for by the purchase method of accounting. Up
until December 31, 2001, the excess of the purchase price over the fair value of
the net assets acquired had been amortized on a straight-line basis over a
period of 40 years. On January 1, 2002 the Company adopted SFAS 142, "Goodwill
and Other Intangible Assets," ("SFAS 142"), and accordingly, records an
adjustment only if periodic testing determines these assets to be impaired. See
Note 4 of Notes to Consolidated Financial Statements on page 39.



                                     Page 6

<PAGE>


EMPLOYEES

At December 31, 2002, the Company employed approximately 3,100 individuals. None
of the Company's domestic employees is unionized; the number of foreign
employees who belong to unions is not significant. The Company believes its
relations with its employees are satisfactory.

ENVIRONMENTAL MATTERS

For information regarding certain environmental matters, see Note 8 of Notes to
Consolidated Financial Statements on pages 44 through 46.

The Company's operations are subject to comprehensive U.S. and foreign laws and
regulations relating to the protection of the environment, including those
governing discharges of pollutants into the air and water, the management and
disposal of hazardous substances and the cleanup of contaminated sites. Permits
and environmental controls are required for certain of those operations to
prevent or reduce air and water pollution, and these permits are subject to
modification, renewal and revocation by issuing authorities.

On an ongoing basis, the Company incurs capital and operating costs to comply
with the environmental laws. We expect to spend approximately $0.2 million per
year in years 2003 through 2005 on environmental compliance. Environmental laws
and regulations generally have become stricter in recent years, and the cost to
comply with new laws and regulations may be greater than these estimated
amounts.

Some of the Company's manufacturing facilities are located on properties with a
long history of industrial use, including the use of hazardous substances. The
Company has identified soil and groundwater contamination from these historical
activities at several of its properties, which it is currently investigating,
monitoring or remediating. Management believes that costs incurred to
investigate, monitor and remediate known contamination at these sites will not
have a material adverse effect on the business, financial condition, results of
operations, or cash flow. The Company cannot be sure, however, that it has
identified all existing contamination on its properties or that its operations
will not cause contamination in the future. As a result, the Company could incur
material costs to cleanup contamination. Remediation liabilities are not
discounted.

From time to time the Company may be identified as a potentially responsible
party with respect to a Superfund site. The United States Environmental
Protection Agency (or a state) can either (a) allow such a party to conduct and
pay for a remedial investigation and feasibility study and remedial action or
(b) conduct the remedial investigation and action and then seek reimbursement
from the parties. Each party can be held jointly, severally and strictly liable
for all costs, but the parties can then bring contribution actions against each
other or third parties under certain circumstances. As a result of the Superfund
Act, the Company may be required to expend amounts on such remedial
investigations and actions, which amounts cannot be determined at the present
time but may ultimately prove to be significant.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS AND FOREIGN AND DOMESTIC
OPERATIONS

For information about industry segments and foreign and domestic operations, see
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 11 through 22 and Note 10 of Notes to Consolidated Financial
Statements on Pages 47 through 49.

SEASONALITY

The Company's two operating segments are somewhat seasonal in nature and quarter
to quarter operating results are impacted by economic and business trends within
the respective industries in which they compete.


                                     Page 7

<PAGE>


AVAILABLE INFORMATION:

Our website address is www.blount.com. You may obtain free electronic copies of
our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and all amendments to those reports by accessing the investor
relations section of the Company's website under the heading "E.D.G.A.R.
Financial Information About Blount". These reports are available on our investor
relations website as soon as reasonably practicable after we electronically file
them with the Securities and Exchange Commission ("SEC").

Once filed with the SEC, such documents may be read and/or copied at the SEC's
Public Reference Room at 450 Fifth Street, N.W. Washington, D.C. 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet
site that contains reports, proxy and information statements, and other
information regarding issuers, including Blount International, Inc., that
electronically file with the SEC at //www.sec.gov.

ITEM 2.  PROPERTIES

The corporate headquarters of the Company occupy executive offices at 4909 SE
International Way, Portland, Oregon.

The other principal properties of the Company and its subsidiaries are as
follows:

Cutting chain and accessories manufacturing plants are located in Portland,
Oregon; Milan and Dyer, Tennessee; Guelph, Ontario, Canada; and Curitiba,
Parana, Brazil, and sales and distribution offices located in Europe, Japan and
Russia. Lawn mower blades are manufactured in Kansas City, Missouri, and lawn
mowers are manufactured in Coffeyville, Kansas. Log loaders, feller bunchers,
harvesters, forwarders and accessories for automated forestry equipment are
manufactured at plants in Prentice, Wisconsin; Owatonna, Minnesota; and
Menominee, Michigan. Rotation bearings and mechanical power transmission
components are manufactured at a plant in Tulsa, Oklahoma. The Company also
maintains leased space for record retention in Montgomery, Alabama.

All of these facilities are in good condition, are currently in normal operation
and are generally suitable and adequate for the business activity conducted
therein. Approximate square footage of principal properties is as follows:

                                       Area in Square Feet
                                     ---------------------
                                         Owned      Leased
--------------------------------     ---------  ----------
Outdoor Products                     1,079,779     287,691
Industrial and Power Equipment         738,740           0
Corporate                                    0      12,400
--------------------------------     ---------  ----------
    Total                            1,818,519     300,091
--------------------------------     =========  ==========


                                     Page 8


<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

For information regarding legal proceedings see Note 8 of Notes to Consolidated
Financial Statements on pages 44 through 46.

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

Not applicable.

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock is traded on the New York Stock Exchange. The
following table presents the quarterly high and low prices for the Company's
last two years. Cash dividends have not been declared for the Company's common
stock in the last three years. The Company had approximately 6,000 shareholders
as of February 18, 2003.

                                                Common Stock
                                            ------------------
                                               High      Low
----------------------------------          --------  --------
Year Ended December 31, 2002

First quarter                                $ 3.25    $ 2.74
Second quarter                                 4.92      2.85
Third quarter                                  4.28      3.66
Fourth quarter                                 3.94      3.43

Year Ended December 31, 2001

First quarter                                $ 8.13    $ 4.40
Second quarter                                 4.46      2.45
Third quarter                                  2.54      2.01
Fourth quarter                                 3.62      2.32
-----------------------------------         --------  --------



                                     Page 9



<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                                   Twelve Months Ended
                                                                       December 31,
Dollar amounts in millions,                          ------------------------------------------------
Except per share data                                 2002(4)   2001      2000      1999      1998
-----------------------------------------------      --------  --------  --------  --------  --------
<S>                                                  <C>        <C>      <C>       <C>       <C>
Operating Results (1):
Sales                                                $ 479.5   $ 468.7   $ 513.9   $ 486.2   $ 545.2
Operating income from segments                          75.9      68.6      82.1      70.7      96.4
Income (loss) from continuing operations
  before extraordinary loss                             (4.5)    (32.1)    (11.7)    (46.8)     41.0
Net income (loss)                                       (5.7)    (43.6)     10.8     (21.8)     61.3
Earnings per share:
  Basic:
    Income (loss) from continuing
      operations before extraordinary loss             (0.15)    (1.04)    (0.38)    (0.80)     0.55
    Net income (loss)                                  (0.19)    (1.42)     0.35     (0.37)     0.82
  Diluted:
    Income (loss) from continuing
      operations before extraordinary loss             (0.15)    (1.04)    (0.38)    (0.80)     0.53
    Net income (loss)                                  (0.19)    (1.42)     0.35     (0.37)     0.80
-----------------------------------------------      --------  --------  --------  --------  --------
End of period Financial Position:
Total assets                                         $ 428.0   $ 444.8   $ 703.9   $ 688.7   $ 668.8
Working capital                                         91.0      82.7     191.8     187.5     232.2
Property, plant and equipment-gross                    271.2     281.4     428.1     402.7     392.8
Property, plant and equipment-net                       90.7      96.2     177.4     172.3     182.9
Long-term debt                                         624.1     632.5     824.5     809.7     161.6
Total debt                                             627.5     641.0     833.0     816.2     162.3
Stockholders' equity (deficit)                        (368.9)   (349.9)   (312.2)   (321.7)    354.6
Current ratio                                       1.9 to 1  1.7 to 1  2.3 to 1  2.3 to 1  3.4 to 1
-----------------------------------------------     --------  --------  --------  --------  --------
Other data:
Property, plant and equipment additions (2)          $  17.1   $  11.5   $  39.8   $  18.5   $  21.7
Depreciation and amortization                           18.9      23.6      32.7      34.0      30.9
Interest Expense, net of interest income                71.1      94.5      98.2      41.1      11.8
Stock price (3):             Common high                4.92      8.13     15.88      17.69
                             Common low                 2.74      2.01      7.44      10.50
Stock price (3):             Class A high                                             14.97     17.19
                             Class A low                                              11.94      9.47
Stock price (3):             Class B high                                             14.78     16.13
                             Class B low                                              11.91      9.75
Per common share dividends (3): Class A                                                 .072      .143
                                Class B                                                 .067      .134
Shares used in earnings per share
  computations (in millions) (3): Basic                 30.8      30.8      30.8      58.2      74.7
                                  Diluted               30.8      30.8      30.8      58.2      76.8
Employees (approximate continuing operations)(1)       3,134     3,209     3,455     3,461     3,454
-----------------------------------------------      --------  --------  --------  --------  --------

</TABLE>


(1)  Gives effect to the sale of the Company's Sporting Equipment Group on
     December 7, 2001.

(2)  Includes property, plant, and equipment of acquired companies at date of
     purchase of $11.3 million, and $0.7 million in the twelve months ended
     December 31, 2000, and 1999. Also includes property, plant, and equipment
     purchases of the Sporting Equipment Group which was sold on December 7,
     2001 for all years prior to 2001.

(3)  Gives effect to merger and recapitalization on August 19, 1999, described
     in Note 1 of Notes to Consolidated Financial Statements.

(4)  In 2002, the Company adopted the non-amortization provisions of Statement
     of Financial Accounting Standards ("SFAS") No. 142. As a result of the
     adoption of SFAS No. 142, results for the year 2002 do not include certain
     amounts of amortization of goodwill that are included in prior years'
     financial results, described in Note 4 of Notes to Consolidated Financial
     Statements.

                                   Page 10

<PAGE>


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

This discussion and analysis should be read in conjunction with the consolidated
financial statements and related notes. All references to earnings per share
included in this discussion are to diluted earnings per share.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's discussion and analysis of the Company's financial condition and
results of operations are based on the Company's consolidated financial
statements that have been prepared in accordance with generally accepted
accounting principles in the United States of America.

The preparation of these financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. The Company bases its estimates on historical experience
and various other assumptions that are believed to be reasonable and consistent
with industry practice. Actual results may differ from these estimates under
different assumptions or conditions. The Company believes the following critical
accounting policies affect its more significant judgments and estimates in the
preparation of its consolidated financial statements.

The Company records reductions to selling prices as products are shipped. These
reductions are based on competitive and market conditions, in addition to
specific customer contracts in some instances. These reductions are estimated
and recorded at the time of shipment either through a reduction to invoice or
the establishment of an accrual for payment at a later date. The amount accrued
may increase or decrease prior to payment due to customer performance and market
conditions.

The Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of its customers to make payments. Such allowance
is based on an ongoing review of customer payments against terms and a review of
customers' financial statements and conditions through monitoring services.
Based on these reviews, additional allowances may be required and are recorded
in the appropriate period.

Specific industry market conditions can significantly increase or decrease the
level of inventory on hand in any of the Company's business units. The Company
will adjust for changes in demand by reducing or increasing production levels.
The Company estimates the required inventory reserve by assessing inventory
turns and market selling prices on a product by product basis. The Company will
maintain such reserves until product is sold or market conditions require an
increase in the reserves.

The Company offers certain warranties with the sale of its products. The
warranty obligation is recorded as a liability on the balance sheet and is
estimated through historical customer claims, supplier performance, and new
product performance. Should a change in trend occur in customer claims, an
increase or decrease in the warranty liability may be necessary.

The Company incurs expenses in the form of product liability claims as a result
of alleged product malfunctions or misuse. The Company maintains insurance for a
portion of this exposure and records a liability for its non-insured
obligations. The Company estimates its product liability obligations on a case
by case basis in addition to a review of product performance trends. These
estimated obligations may be increased or decreased as more information on
specific cases becomes available.

The Company determines its post retirement obligations on an actuarial basis
that requires management to make certain assumptions. These assumptions include
the long-term rate of return on plan assets, the discount rate to be used in
calculating the


                                    Page 11

<PAGE>


applicable benefit obligation and the anticipated trend in health care costs.
These assumptions are reviewed on an annual basis and consideration is given to
market conditions as well as the requirements of Statement of Financial
Accounting Standards No. 87, Employers Accounting for Pensions and No. 106,
Employers Accounting for Post Retirement Costs other than Pensions. The assumed
rate of return on plan assets was 8.9% for 2002 and the Company anticipates the
same rate to be utilized in 2003. The Company believes this rate is reasonable
given the asset composition and historical trends. The Company lowered its
discount rate assumption to 6.5% to determine its plan liabilities at December
31, 2002 from 7.2% in the previous year due to the market declines in benchmark
interest rates. The Company assumed that health care costs in 2002 would
increase by 12% per year and future increases would decline by 1% per year until
5% is reached. The Company's annual post retirement expenses can be impacted by
changes in assumptions. A 1% change in the return on assets will change annual
pension expense by $0.6 million. A 1% change in the discount rate as of December
31, 2002 results in $0.6 million in increased pension expenses in 2003 and a 1%
change in health care costs will change annual post retirement medical costs by
$0.2 million a year.

OPERATING RESULTS

TWELVE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 2001

Sales for 2002 were $479.5 million compared to $468.7 million for 2001. Net loss
for 2002 was $5.7 million ($0.19 per share) compared to $43.6 million ($1.42 per
share) in 2001. Net loss from continuing operations before extraordinary loss
for 2002 was $4.5 million ($0.15 per share), compared to $32.1 million ($1.04
per share) for 2001.

These results reflect a 2% increase in sales, a 3% increase in gross profit to
$161.2 million in 2002 from $156.4 in 2001, and a 4% reduction in selling,
general and administrative expense to $91.5 million in 2002 from $95.5 million
in 2001. Income from continuing operations of $62.5 million in 2002 reflects an
increase of $17.8 million (40%) from $44.7 million in 2001. Included in this
increase are a $7.3 million (11%) increase in income from operations from
segments, a $1.5 million (19%) reduction in corporate expenses, and a $9.0
million (55%) reduction in restructuring expenses.

The principal reasons for these results and the status of the Company's
financial condition are set forth below.

Sales for the Outdoor Products segment for 2002 were $347.8 million compared to
$348.1 million in 2001. Income from operations in 2002 was $70.7 million
compared to $70.3 million in 2001. The slight drop in sales includes lower sales
of chain saw components, partially offset by increased sales of lawn mowers and
accessories and other products as reflected in the following table (in
millions):

                                                         % Increase
                                                          (Decrease)
                                       2002      2001      in 2002
------------------------------       --------  --------   ----------
Chain saw components                  $221.8    $230.3      (3.7)%
Lawn mowers and accessories             80.8      78.8       2.5 %
Other                                   45.2      39.0      15.9 %
------------------------------       --------  --------   ----------
     Total segment sales              $347.8    $348.1      (0.1)%
------------------------------       ========  ========   ==========

The decline in chain saw components in 2002 is in part due to weaker demand from
original equipment manufacturers (OEMs) resulting from a reduction in
inventories from year ago levels and selective competitive price discounting in
response to the strength of the United States dollar. Other sales have increased
primarily through



                                    Page 12
<PAGE>



the successful introduction of a new gas saw for our Industrial Cutting Systems
("ICS") product line.

Income from operations for the Outdoor Products segment increased by $0.4
million in 2002 which was due in part to the adoption of SFAS No. 142 which had
a favorable impact of $2.0 million compared to 2001 and favorable foreign
currency partially offset by higher post retirement costs and an unfavorable
product mix.

Sales for the Industrial and Power Equipment segment for 2002 were $131.7
million compared to $120.6 million in 2001. Income from operations in 2002 was
$5.2 million compared to a loss of $1.7 million in 2001. This segment is a
cyclical, capital goods business whose results are closely linked to the
performance of the forestry industry in general, particularly in the Company's
most important market (the Southeastern United States). Throughout 2002, the
forestry industry operated within a cyclical downturn environment. Sales of the
Company's timber harvesting and loading equipment increased by 13.9% with
increased unit demand and the introduction of new products. Sales of power
transmission components declined in 2002 from the prior year as demand declined
with a slowdown in the utility and construction markets that the segment serves.
Sales by the segment's principal product groups were as follows (in millions):

                                                                  % Increase
                                                                   (Decrease)
                                                2002      2001      in 2002
---------------------------------------       --------  --------   ----------
Timber harvesting and loading equipment        $115.9    $101.7      13.9 %
Power transmission components                    15.8      18.9     (16.4)%
--------------------------------------        --------  --------   ----------
     Total segment sales                       $131.7    $120.6       9.2 %
--------------------------------------        ========  ========   ==========

Income from operations for this segment in 2002 increased by $6.9 million as
compared to 2001. The increase in profitability is the result of higher sales
levels, improved gross margins and reduced SG&A expenses resulting from a plant
closure and significant headcount reduction actions taken in 2001.

Corporate office expenses for 2002 of $6.2 million compare to $7.7 million in
2001. The reduction in expense is due to lower costs associated with the
relocation of corporate operations from Montgomery, Alabama to Portland, Oregon
and the associated reduction of corporate staff. Restructuring expense in 2002
was $7.2 million, with $5.8 million related to the relocation of the corporate
office and $1.4 million associated with the relocation of equipment between
plants within the Oregon Cutting Systems Division. The restructuring expense for
2001 is related to a plant closure within the Industrial and Power Equipment
segment, the modifications of certain employee benefit plans, and a reduction in
headcount within the Company. (See Note 1 of the Notes to the Consolidated
Financial Statements.)

Interest expense in 2002 was $72.2 million in comparison to $95.9 million in
2001. The lower interest expense is primarily due to the $170.5 million
reduction of debt in conjunction with the sale of the Company's Sporting
Equipment Group ("SEG") in December of 2001.

Other expense for 2002 was $0.2 million and includes a $1.6 million loss on the
sale of the Company's former corporate headquarters in Montgomery, Alabama and a
fractional interest in an aircraft, and a $0.5 million loss on an executive
benefit trust, offset by $2.1 million in income from life insurance proceeds.
This compares to $0.7 million in other expense for 2001 which includes a $0.3
million loss on sale of a company aircraft, a $0.1 million loss on disposition
of production equipment for a discontinued product line, and a $0.1 million loss
on an executive benefit trust.


                                    Page 13


<PAGE>


The Company's effective income tax rate increased in 2002 to 49.9% from 36.4% in
2001. The favorable effect of foreign income tax rates as compared to the United
States statutory rate increased, as the Company's overall pre tax loss declined
substantially. Additionally an adjustment to the tax contingency increased the
overall rate.

After tax income from discontinued operations in 2002 of $0.5 million is
primarily due to proceeds on a settlement from the Company's former construction
business and compares to $2.5 million of after tax income for 2001 which
reflects the operations of the Company's former Sporting Equipment Group,
("SEG") through the date of disposal. Loss on the disposal of discontinued
operations for 2002 of $1.4 million includes the SEG recognition of the final
purchase price adjustment net or tax. This compares to a loss of $8.5 million in
2001, which was the estimated loss as of December 31, 2001.

The 2002 extraordinary loss of $0.3 million in 2002 compares to a $5.5 million
loss in 2001, both of which represent the write-off of unamortized deferred
financing costs together with prepayment penalties related to the early payment
of debt with the net proceeds generated from the sale of SEG and the sale of
corporate assets.

TWELVE MONTHS ENDED DECEMBER 31, 2001 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 2000

Sales for 2001 were $468.7 million compared to $513.9 million for 2000. Net loss
for 2001 was $43.6 ($1.42 per share) compared to net income of $10.8 million
($0.35 per share) in 2000. Net loss from continuing operations before
extraordinary loss for the year was $32.1 million ($1.04 per share), compared to
net loss of $11.7 million ($0.38 per share) for 2000.

These results reflect a 9% decrease in sales, a 10% decrease in gross profit to
$156.4 million in 2001 from $174.1 in 2000, and a 7% reduction in selling,
general and administrative expense to $95.5 million in 2001 from $102.3 million
in 2000. Income from continuing operations of $44.7 million in 2001, is a
decrease of $27.1 million (38%) from $71.8 million in 2000. Included in this
decrease are a $13.5 million (16%) decrease in income from operations from
segments, a $2.6 million (25%) reduction in corporate expenses, and $16.2
million increase in restructuring expenses.

The principal reasons for these results and the status of the Company's
financial condition are set forth below.

Sales for the Outdoor Products segment for 2001 were $348.1 million compared to
$360.7 million 2000. Income from operations in 2001 was $70.3 million compared
to $81.0 million in 2000. The decline in sales is primarily due to lower sales
of lawn mowers and accessories as reflected in the following table (in
millions):

                                                         % Increase
                                                          (Decrease)
                                       2002      2001      in 2002
------------------------------       --------  --------   ----------
Chain saw components                   $230.3    $230.8      (0.2)%
Lawn mowers and accessories              78.8      89.6     (12.1)%
Other                                    39.0      40.3      (3.2)%
------------------------------        --------  --------   ----------
     Total segment sales               $348.1    $360.7      (3.5)%
------------------------------        ========  ========   ==========

Income from operations decreased by $10.7 million due primarily to lower unit
sales of lawn mowers reflective of a weak industry demand and reduced sales and
profitability within the European market which was favorably impacted in 2000 by
the effects of a severe ice storm in late 1999.


                                    Page 14


<PAGE>


Sales for the Industrial and Power Equipment segment for 2001 were $120.6
million compared to $153.2 million in 2000. Loss from operations in 2001 was
$1.7 million compared to income from operations of $1.1 million in 2001. The
Company's Industrial and Power Equipment segment is a cyclical, capital goods
business whose results are closely linked to the performance of the forestry
industry in general, particularly in the Company's most important market (the
Southeastern United States). Throughout 2001, the forestry industry operated
within a cyclical downturn environment that resulted in weak demand for new
equipment sales. Sales of timber harvesting and loading equipment decreased by
20.4% with a decrease in unit sales. Sales of gear components and rotation
bearings declined in 2001 from the prior year as demand declined with a slowdown
in the utility and construction markets that the segment serves. Sales by the
segment's principal product groups were as follows (in millions):

                                                                   % Increase
                                                                    (Decrease)
                                                  2002      2001      in 2002
---------------------------------------         --------  --------   ----------
Timber harvesting and loading equipment          $101.7    $127.8      (20.4)%
Power transmission components                      18.9      25.4      (25.6)%
--------------------------------------         --------  --------   ----------
     Total segment sales                         $120.6    $153.2      (21.3)%
--------------------------------------         ========  ========   ==========

Income from operations for this segment decreased by $2.8 million. The decrease
in profitability is predominantly the result of the reduced sales level offset
by reduced SG&A expenses of $3.7 million resulting from a plant closure and
significant headcount reduction actions taken in 2001.

Corporate office expense for 2001 is $7.7 million compared to $10.3 million in
2000. The reduction in expense reflects a reduction of headcount for the
corporation's headquarters. Restructuring expense in 2001 was $16.2 million, of
which $15.6 million is for the modifications of certain employee benefit plans,
and a reduction in headcount at the corporate office, and $0.6 million is
related to a plant closure within the Industrial and Power Equipment segment.

Interest expense in 2001 was $95.9 million compared to $99.7 million in 2000.
The decrease was due to a decrease in interest rates, partially offset by higher
borrowing levels during the year.

In 2001, other expense of $0.7 million compared to other income of $6.6 million
in 2000 which was primarily due to $4.6 million realized from the sale of a
company aircraft and $1.8 million realized gain on assets held in an executive
trust.

Provision for income taxes for 2001 was a benefit of $18.4 million reflecting an
effective tax rate of 36% compared to a benefit of $8.1 million reflecting an
effective tax rate of 41% in 2000.

Income from discontinued operations in 2001 included the results of SEG which
was sold on December 7, 2001. Income from discontinued operations in 2001 was
$2.5 million compared to $22.5 million in 2000. The decline in profitability was
due to a decline in sales from $314.3 million in 2000 to $244.4 million in 2001.
This performance reflects lower sales of ammunition to the retail market sector
due to high distributor inventory levels, caused in part by the carryover
effects of Y2K buying, lower competitive selling prices on optics products, and
reduced shipments due to the December 7, 2001 sale of this segment to ATK (see
Note 1 of Notes to Consolidated Financial Statements).

Loss on the disposal of discontinued operations for 2001 of $8.5 million was the
estimated loss on the sale of SEG as of December 31, 2001.


                                    Page 15

<PAGE>


The extraordinary loss of $5.5 million in 2001 represents the write-off of
unamortized deferred financing costs, together with prepayment penalties related
to the early payment of debt with the net proceeds generated from the sale of
SEG.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2002, as a result of the merger and recapitalization
transactions (see Note 1 of Notes to Consolidated Financial Statements), the
Company has significant amounts of debt, with interest payments on the notes and
interest and principal payments under the credit facilities representing
significant obligations for the Company. Total debt at December 31, 2002 was
$627.5 million compared with total debt at December 31, 2001 of $641.0 million.

At December 31, 2002, the Company had an outstanding term loan of $134.4
million. This note requires semi-annual interest payments and the term loan
facilities under the credit facilities require payments of principal payments of
$3.4 million annually through 2004 and $127.6 million in 2005. In addition to
the required annual payment of $3.4 million, and in conjunction with the
transition of corporate operations from Montgomery, Alabama to Portland, Oregon,
the Company sold certain assets and used proceeds to reduce the term loan
facilities by an additional $8.4 million in 2002.

Interest on the term loan facilities and amounts outstanding under the revolving
credit facility are payable in arrears according to varying interest periods.
The Company's remaining liquidity needs relate to working capital needs and
capital expenditures.

The Company has senior notes outstanding in the principal amount of $150 million
that mature in 2005. The Company also has senior subordinated notes outstanding
in the principal amount of $325 million that mature in 2009. See Note 3 of Notes
to Consolidated Financial Statements for the terms and conditions of the senior
notes, the senior subordinated notes, and the senior term loans.

The Company maintains arrangements with third party finance companies by which
certain customers of FIED and Dixon may finance the purchase of equipment. As
part of these arrangements, the Company may be required to repurchase certain
equipment from the third party financing companies should the customer default
on payment. As of December 31, 2002, the maximum repurchase obligation was $4.0
million. Additionally, under its agreement, another third party financing
company may require the Company to reimburse the third party financing company
for its net loss. The maximum exposure with respect to this net loss position is
$750,000. These arrangements have not had a material effect on the Company's
operating results in the past since, with respect to the repurchase obligations,
any equipment repurchased has historically been resold with minimal, if any,
loss recognized. The Company does not expect to incur any material charges
related to these agreements in future periods.

The Company intends to fund working capital, capital expenditures and debt
service requirements through cash flows generated from operations and from the
revolving credit facility. The revolving credit facility has an availability of
up to $75.0 million. Letters of credit issued under the revolving credit
facility which reduce the amount available under the facility were $11.4 million
at December 31, 2002. The revolving credit facility will mature August 19, 2004.
Management believes that cash generated from operations, together with amounts
available under the revolving credit facility, will be sufficient to meet the
Company's working capital, capital expenditure and other cash needs in the
foreseeable future. There can be no assurance, however, that this will be the
case. The Company may also consider other options available to it in connection
with future liquidity needs.

The Company will be required to repay certain outstanding borrowings with the
maturity of the term loans and senior notes in 2005. The Company does not expect
to generate funds for these obligations through operating cash flow. Although
there can


                                    Page 16


<PAGE>


be no guarantee, the Company expects to fund these obligations through either
the refinancing of such debt, the sale of non-strategic assets or the issuance
of additional shares of Company stock, or any combination of these actions.

In conjunction with the sale of SEG, the Company and its lenders amended the
credit agreement relating to the outstanding term loans. Among other things,
this amendment adjusted the financial coverage ratios covenants to reflect the
sale of SEG and cured any event of default under the credit agreement that had
been communicated to the lenders on October 30, 2001. The Company does not have
any rating triggers that would accelerate repayment of outstanding debt.

Cash balances at December 31, 2002 were $26.4 million compared to $47.6 million
at December 31, 2001. The decrease is due to the payment of $23.8 million in
expenses during 2002 related to the sale of the Company's Sporting Equipment
Segment in December, 2001, capital expenditures of $17.1 million and the
repayment of debt of $17.1 million partially offset by $27.6 in cash generated
by continuing operations and proceeds from the sale of corporate assets of $8.0
million. Net cash generated from continuing operations increased from $18.0
million in 2001 to $27.6 million in 2002. The primary reason for the increase
was a decrease in net loss from continuing operations of $27.6 million partially
offset by a lower reduction in working capital of $6.1 million and a lower
deferred income tax benefit of $8.7 million.

Accounts receivable at December 31, 2002 and December 31, 2001, and sales by
segment for the fourth quarter of 2002 compared to the fourth quarter of 2001,
are as follows (in millions):

                                                                   Increase
                                     December 31,   December 31,  (Decrease)
                                         2002          2001        in 2002
------------------------------       -------------  -----------   ----------
Accounts Receivable
  Outdoor Products                      $ 41.3         $ 39.2       $  2.1
  Industrial & Power Equipment            16.1           16.6         (0.5)
------------------------------          ------         ------       ------
    Total segment receivables           $ 57.4         $ 55.8       $  1.6
------------------------------          ======         ======       ======

                                         Three Months Ended
                                     December 31,   December 31,   Increase
                                         2002           2001      (Decrease)
------------------------------       ------------   ------------  ----------
Sales
  Outdoor Products                      $ 92.3         $ 85.7       $  6.6
  Industrial & Power Equipment            35.8           33.3          2.5
-------------------------------         ------         ------       ------
    Total segment sales                 $128.1         $119.0       $  9.1
-------------------------------         ======         ======       ======

The increase from last year in Outdoor Product's accounts receivable is
proportionate to the increase in sales. Accounts receivable within the
Industrial and Power Equipment segment declined from last year due to improved
collection efforts partially offset by an increase in extended term receivables
offered in response to market and competitive factors. At December 31, 2002,
there were approximately $0.9 million in receivables with extended terms
compared to $0.1 million at December 31, 2001.

The Company expects the cash flow from operations and the amounts available
under its revolving credit agreements will be sufficient to cover any additional
increases in working capital. While there can be no assurance, management
believes the Company will comply with all debt covenants during 2003. Should the
Company not comply with the covenants during 2003, additional significant
actions will be required. These


                                    Page 17



<PAGE>


actions may include, among others, attempting to renegotiate its debt
facilities, sales of assets, additional restructuring and reductions in capital
expenditures. The covenant ratios in 2004 have not been adjusted to reflect the
2001 sale of the Sporting Equipment Group and therefore will need to be
renegotiated prior to March 31, 2004.

Immediately after the merger and recapitalization transaction described in Note
1 of Notes to Consolidated Financial Statements, the Company became
substantially leveraged which may adversely affect its operations.

This substantial leverage could have important consequences for the Company,
including the following:

1.   the ability to obtain additional financing for working capital, capital
     expenditures or other purposes may be impaired or may not be available on
     favorable terms;

2.   a substantial portion of cash flows available from operations will be
     dedicated to the payment of principal and interest expense, which will
     reduce the funds that would otherwise be available for operations and
     future business opportunities;

3.   a substantial decrease in net income and cash flows or an increase in
     expenses may make it difficult to meet debt service requirements or force
     the Company to modify operations; and

4.   substantial leverage may make the Company more vulnerable to economic
     downturns and competitive pressure.

MARKET RISK

The Company is exposed to market risk from changes in interest rates, foreign
currency exchange rates and commodity prices. The Company manages its exposure
to these market risks through its regular operating and financing activities,
and, when deemed appropriate, through the use of derivatives. When utilized,
derivatives are used as risk management tools and not for trading purposes. See
Interest Rate Risk and Commodity Price Risk below for discussion of expectations
as regards to future use of interest rate and commodity price derivatives.

Interest Rate Risk:
The Company manages its ratio of fixed to variable rate debt with the objective
of achieving a mix that management believes is appropriate. Historically, the
Company has, on occasion, entered into interest rate swap agreements to exchange
fixed and variable interest rates based on agreed upon notional amounts and has
entered into interest rate lock contracts to hedge the interest rate of an
anticipated debt issue. At December 31, 2002 and 2001, no significant derivative
financial instruments were outstanding to hedge interest rate risk. A
hypothetical immediate 10% increase in interest rates would decrease the fair
value of the Company's fixed rate long-term debt outstanding at December 31,
2002, by $20.7 million. A hypothetical 10% increase in the interest rates on the
Company's variable rate long-term debt for a duration of one year would increase
interest expense by approximately $0.8 million in 2003.

Foreign Currency Exchange Risk:
Approximately 34% of Oregon's sales and 55% of its operating costs and expenses
were transacted in foreign currencies in 2002. As a result, fluctuations in
exchange rates impact the amount of Oregon's reported sales and operating
income. Historically, the Company's principal exposures have been related to
local currency operating costs and expenses in Canada and Brazil, and local
currency sales and expenses in Europe (principally France and Germany). During
the past three years, the Company has not used derivatives to manage any foreign
currency exchange risk and, at December 31, 2002, no foreign currency exchange
derivatives were outstanding.

                                   Page 18

<PAGE>


The table below illustrates the estimated effect of a hypothetical immediate 10%
change in major currencies (defined for the Company as Euro, Canadian Dollar,
and Brazilian Real) would have (in millions):

                                            Effect of 10% Weaker US Dollar
                                            ------------------------------
                                            Sales     Cost of    Operating
                                                       Sales      Income
--------------------------                  -----     -------    ---------
Major Currencies
  Euro                                      $ 2.5     $ (0.2)      $ 1.3
  Canadian Dollar                             1.0       (3.8)       (3.0)
  Brazilian Real                              0.9       (0.6)        0.2
==================                          ======    =======    ========

Commodity Price Risk:
The Company purchases certain raw materials for the manufacture of products.
Some of these raw materials are subject to price volatility over periods of
time. The Company has not hedged against the price change within its continuing
operations segments with any derivative instruments. A hypothetical immediate
10% change in the price of steel would have the estimated effect of $5.7 million
on pre-tax income in 2003.

NEW ACCOUNTING PRONOUNCEMENTS

In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No.143 applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and/or normal use of the asset. The
Company will adopt the provisions of SFAS No. 143 on January 1, 2003. Upon
initial application of the provisions of SFAS No. 143, entities are required to
recognize a liability for any asset retirement obligations adjusted for the
cumulative accretion to the date of the adoption of this Statement, an asset
retirement cost capitalized as an increase to the carrying amount of the
associated long-lived asset, and accumulated depreciation on that capitalized
cost. The cumulative effect, if any, of initially applying this Statement will
be recognized as a change in accounting principle. The Company is evaluating the
effect this Statement will have on its future financial statements.

In October 2001, the FASB issued Statement of Financial Accounting Standards
No.144, "Accounting for the Impairment or Disposal of Long-lived assets." SFAS
No. 144 addresses financial accounting and reporting for the impairment of
long-lived assets and for assets to be disposed of and broadens the presentation
of discontinued operations to include more disposal transactions. The provisions
of this Statement, which were adopted by the Company January 1, 2002, have not
had a material impact on its financial condition or results of operations.

In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145, "Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections." This Statement, which updates, clarifies and
simplifies existing accounting pronouncements, addresses the reporting of debt
extinguishments and accounting for certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. The provisions
of this Statement are generally effective for the Company's 2003 fiscal year, or
in the case of specific provisions, for transactions occurring after May 15,
2002 or for financial statements issued on or after May 15, 2002. The Company
does not expect the provisions of SFAS

                                   Page 19

<PAGE>


145 to have a material impact on the Company's financial statements, however,
the Company will reclassify prior years debt extinguishment expense in future
reports.

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS
No. 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). This Statement requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is incurred,
and concludes that an entity's commitment to an exit plan does not by itself
create a present obligation that meets the definition of a liability. This
Statement also establishes that fair value is the objective of initial
measurement of the liability. The provisions of this Statement are effective for
exit or disposal activities that are initiated after December 31, 2002, with
early application encouraged. The Company believes that the adoption of SFAS No.
146 will impact the timing of the recognition of costs associated with an exit
or disposal activity but is not expected to have a material impact on the
financial statements. The Company adopted SFAS 146 on January 1, 2003.

In November 2002, the FASB issued Financial Accounting Standards Board
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others, an
interpretation of FASB Statements No. 5, 57 and 107 and Rescission of FASB
Interpretation No.34." FIN 45 clarifies the requirements of SFAS No. 5,
"Accounting for Contingencies," relating to the guarantor's accounting for, and
disclosure of, the issuance of certain types of guarantees. The disclosure
provisions of FIN 45 are effective for the current fiscal year and the Company
has included this information in Note 13 to the Company's consolidated financial
statements. However, the provisions for initial recognition and measurement are
effective on a prospective basis for guarantees that are issued or modified
after December 31, 2002, irrespective of a guarantor's year-end.

Information related to the Company's guarantees and other Commercial Commitments
are summarized in the following table (in millions):

                                                          Total at
                                                     December 31, 2002
-------------------------------                      -----------------

Product Warranty(1)                                     $     3.3
Letters of Credit Outstanding                                11.4
Third Party Financing Projections(2)                          4.0
Accounts Receivable Guarantees(3)                             0.4
--------------------------------------------         -----------------
         Total                                          $    19.1
============================================         =================


(1)  See Note 13 to the Consolidated Financial Statements
(2)  Applicable to the third party financing agreements for customer equipment
     purchases of Dixon lawnmowers and FIED equipment. See Note 8 to the
     Consolidated Financial Statements.
(3)  Included the guarantees of certain accounts receivable of Dixon's
     receivable to a third party financing company. See Note 8 to the
     Consolidated Financial Statements.

In addition to these amounts, Blount International, Inc. also guarantees certain
debt of its subsidiaries (see Note 11 to the Consolidated Financial Statements).

                                   Page 20

<PAGE>

Warranty Accruals:
The Company offers certain warranties with the sale of its products. The
warranty obligation is recorded as a liability on the balance sheet and is
estimated through historical customer claims, supplier performance, and new
product performance. Should a change in trend occur in customer claims, an
increase or decrease in the warranty liability may be necessary. Changes in the
Company's warranty reserve for the period ended December 31, 2002 are as follows
(in millions):


Balance as of December 31, 2001       $     3.3
Accrued                                     5.7
Payments made (in cash or in-kind)         (5.7)
-------------------------------       ----------
Balance as of December 31, 2002       $     3.3
===============================       ==========


In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure,
Amendment of SFAS No. 123. This Statement provides additional transition
guidance for those entities that elect to voluntarily adopt the provisions of
SFAS No. 123, "Accounting for Stock Based Compensation." Furthermore, SFAS No.
148 mandates new disclosures in both interim and year-end financial statements
within the Company's Significant Accounting Policies footnote. The Company has
elected not to adopt the recognition provisions of SFAS No. 123, as amended by
SFAS No. 148. However, the Company has adopted the disclosure provisions for the
current fiscal year and has included this information in Note 1 to the Company's
Consolidated Financial Statements.

In January 2003, the FASB issued Financial Accounting Standards Boards
Interpretation No. 46, "Consolidation of Variable Interest Entities." FIN 46
clarifies the application of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 applies
immediately to variable interest entities ("VIEs") created after January 31,
2003, and to variable interest entities in which an enterprise obtains an
interest after that date. It applies in the first fiscal year or interim period
beginning after June 15, 2003, to variable interest entities in which an
enterprise holds a variable interest that it acquired before February 1, 2003.
FIN 46 applies to public enterprises as of the beginning of the applicable
interim or annual periods. The Company has not identified any VIEs for which it
is the primary beneficiary or has significant involvement.

RELATED PARTY TRANSACTIONS

As a result of the Merger and Recapitalization, Lehman Brothers Holdings, Inc.,
through its affiliates, owns approximately 85% of the Company's stock. By virtue
of such ownership, Lehman Brothers Holdings, Inc., is able to significantly
influence the business and affairs of the Company with respect to matters
requiring stockholder approval. From time to time, Lehman Brothers Holdings,
Inc., or its affiliates also receive customary fees for services to the Company
in connection with other financings, divestitures, acquisitions, and certain
other transactions, including in 2001, $10.1 million in underwriting fees to
Lehman and CS First Boston of which ATK reimbursed $5.0 million in connection
with the sale of the Sporting Equipment segment on December 7, 2001.

                                   Page 21

<PAGE>


FORWARD LOOKING STATEMENTS

Forward looking statements in this report (including without limitation
management's "Assumptions", "beliefs", "Estimates", "Expectations" or
"Projections" and variants of each), as defined by the Private Securities
Litigation Reform Law of 1995, involve certain risks and uncertainties that may
cause actual results to differ materially from expectations as of the date of
this report.

ITEM 7A.  QUANTITIVE AND QUALATIVE DISCLOSURES ABOUT MARKET RISK

See "Management's Discussion and Analysis of Results of Operations and Financial
Condition - Market Risk" on pages 12 through 22.














                                   Page 22

<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                       REPORT OF INDEPENDENT ACCOUNTANTS
                       ---------------------------------

To the Board of Directors and Shareholders, Blount International, Inc.:

In our opinion, the consolidated financial statements listed in the index
appearing under item 15(a)(1) present fairly, in all material respects, the
financial position of Blount International, Inc. and its subsidiaries at
December 31, 2002 and 2001, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedules listed
in the index appearing under Item 15(a)(2) present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedules are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion.


PricewaterhouseCoopers LLP

Atlanta, Georgia
February 28, 2003

                                   Page 23

<PAGE>


                            MANAGEMENT RESPONSIBILITY


All information contained in the consolidated financial statements of Blount
International, Inc., has been prepared by management, which is responsible for
the accuracy and internal consistency of the information. Generally accepted
accounting principles in the United States of America have been followed.
Reasonable judgments and estimates have been made where necessary.

Management is responsible for establishing and maintaining a system of internal
accounting controls designed to provide reasonable assurance as to the integrity
and reliability of financial reporting. The system of internal accounting
controls is tested by the independent auditors to the extent deemed necessary in
accordance with generally accepted auditing standards. Management believes the
system of internal controls has been effective during the Company's most recent
fiscal year and that no matters have arisen which indicate a material weakness
in the system. Management follows the policy of responding to the
recommendations concerning the system of internal controls made by the
independent accountants. Management implements those recommendations that it
believes would improve the system of internal controls and be cost justified.

Three directors of the Company, not members of management, serve as the Audit
Committee of the Board and are the principal means through which the Board
discharges its financial reporting responsibility. The Audit Committee meets
with management personnel and the Company's independent accountants each year to
consider the results of external audits of the Company and to discuss internal
accounting control, auditing and financial reporting matters. At these meetings,
the Audit Committee also meets privately with the independent accountants of the
Company to ensure free access by the independent accountants to the committee.

The Company's independent accountants, PricewaterhouseCoopers LLP, audited the
financial statements prepared by the Company. Their opinion on these statements
appears herein.


JAMES S. OSTERMAN                                   CALVIN E. JENNESS
President and                                       Senior Vice President
Chief Executive Officer                             and Chief Financial Officer

                                   Page 24

<PAGE>


CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Blount International, Inc. and Subsidiaries

<TABLE>
<CAPTION>

                                                         Twelve Months Ended
                                                             December 31,
(Dollar amounts in millions,                          --------------------------
except per share data)                                 2002      2001     2000
---------------------------------------------------  -------   -------   -------
<S>                                                  <C>       <C>       <C>
Sales                                                $479.5    $468.7    $513.9
Cost of Sales                                         318.3     312.3     339.8
---------------------------------------------------  -------   -------   -------
Gross Profit                                          161.2     156.4     174.1
Selling, general and administrative expenses           91.5      95.5     102.3
Restructuring expenses                                  7.2      16.2
---------------------------------------------------  -------   -------   -------
Income from continuing operations                      62.5      44.7      71.8
Interest expense                                      (72.2)    (95.9)    (99.7)
Interest income                                         1.1       1.4       1.5
Other income (expense)                                 (0.2)     (0.7)      6.6
---------------------------------------------------  -------   -------   -------
Loss from continuing operations before income taxes   ( 8.8)    (50.5)    (19.8)
Benefit for income taxes                              ( 4.3)    (18.4)     (8.1)
---------------------------------------------------  -------   -------   -------
Loss from continuing operations before
  extraordinary loss                                  ( 4.5)    (32.1)    (11.7)
Discontinued operations:
  Net income from operations, net of taxes of
    $0.3, $2.3, and $14.5                               0.5       2.5      22.5
  Loss on disposal, net of taxes of $0.9 and $16.2     (1.4)     (8.5)
---------------------------------------------------  -------   -------   -------
Income (loss) before extraordinary items               (5.4)    (38.1)     10.8
Extraordinary loss, net of taxes of $0.2, and $2.9     (0.3)     (5.5)
---------------------------------------------------  -------   -------   -------
Net income (loss)                                    $ (5.7)   $(43.6)   $ 10.8
---------------------------------------------------  =======   =======   =======
Basic earnings (loss) per share:
  Continuing operations                              $(0.15)   $(1.04)   $(0.38)
  Discontinued operations                             (0.03)    (0.20)     0.73
  Extraordinary loss                                  (0.01)    (0.18)
---------------------------------------------------  -------   -------   -------
Net income (loss)                                    $(0.19)   $(1.42)   $ 0.35
---------------------------------------------------  =======   =======   =======
Diluted earnings (loss) per share:
  Continuing operations                              $(0.15)   $(1.04)   $(0.38)
  Discontinued operations                             (0.03)    (0.20)     0.73
  Extraordinary loss                                  (0.01)    (0.18)
---------------------------------------------------  -------   -------   -------
Net income (loss)                                    $(0.19)   $(1.42)   $ 0.35
---------------------------------------------------  =======   =======   =======
</TABLE>

The accompanying notes are an integral part of the audited financial statements.

                                   Page 25


<PAGE>


CONSOLIDATED BALANCE SHEETS
Blount International, Inc. and Subsidiaries

                                                                 December 31,
                                                              ------------------
(Dollar amounts in millions, except per share data)              2002     2001
------------------------------------------------------------  --------  --------
Assets
------------------------------------------------------------  --------  --------
Current assets:
  Cash and cash equivalents                                   $  26.4   $  47.6
  Accounts receivable, net of allowance for
    doubtful accounts of $4.3 and $3.5                           58.5      57.3
  Inventories                                                    64.8      68.1
  Deferred income taxes                                          30.5      22.9
  Other current assets                                           11.0       8.2
------------------------------------------------------------  --------  --------
    Total current assets                                        191.2     204.1
Property, plant and equipment, net of accumulated
  depreciation of $180.5 and $185.2                              90.7      96.2
Goodwill                                                         76.9      76.9
Other assets                                                     69.2      67.6
------------------------------------------------------------  --------  --------
Total Assets                                                  $ 428.0   $ 444.8
------------------------------------------------------------  ========  ========
Liabilities and Stockholders' Equity (Deficit)
------------------------------------------------------------  --------  --------
Current liabilities:
  Notes payable and current maturities of long-term debt      $   3.4   $   8.5
  Accounts payable                                               25.5      19.7
  Accrued expenses                                               71.3      93.2
------------------------------------------------------------  --------  --------
    Total current liabilities                                   100.2     121.4
Long-term debt, exclusive of current maturities                 624.1     632.5
Deferred income taxes, exclusive of current portion                         2.8
Other liabilities                                                72.6      38.0
------------------------------------------------------------  --------  --------
Total Liabilities                                               796.9     794.7
------------------------------------------------------------  --------  --------
Commitments and Contingent Liabilities
------------------------------------------------------------  --------  --------
Stockholders' equity (deficit):
Common stock: par value $0.01 per share, 100,000,000 shares
  authorized, 30,795,882 outstanding                              0.3       0.3
Capital in excess of par value of stock                         424.3     424.3
Accumulated deficit                                            (786.3)   (780.6)
Accumulated other comprehensive income                           (7.2)      6.1
------------------------------------------------------------  --------  --------
Total Stockholder's Deficit                                    (368.9)   (349.9)
------------------------------------------------------------  --------  --------
Total Liabilities and Stockholders' Equity (Deficit)          $ 428.0   $ 444.8
------------------------------------------------------------  ========  ========


The accompanying notes are an integral part of the audited financial statements.

                                   Page 26


<PAGE>


CONSOLIDATED STATEMENTS OF CASH FLOWS
Blount International, Inc. and Subsidiaries

<TABLE>
<CAPTION>

                                                                         Twelve Months Ended December 31,
                                                                         --------------------------------
(Dollar amounts in millions)                                                2002       2001        2000
------------------------------------------------------------------       ---------  ---------   ---------
<S>                                                                      <C>        <C>         <C>

Cash flows from operating activities:
         Net income (loss)                                               $  (5.7)   $ (43.6)    $   10.8
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
  (Income) loss from discontinued operations                                 0.9        6.0        (22.5)
  Extraordinary loss                                                         0.3        5.5
  Depreciation, amortization and other noncash charges                      22.2       25.6         21.2
  Deferred income taxes                                                    (10.8)     (19.5)        (6.8)
  Gain (loss) on disposals of property, plant & equipment                    1.6        0.5         (5.9)
  Changes in assets and liabilities, net of effects of businesses
   acquired and sold:
    (Increase) decrease in accounts receivable                              (1.6)      21.8         30.3
    (Increase) decrease in inventories                                       3.3       19.1        (16.0)
    Decrease in other assets                                                 3.2        9.7          8.2
    Increase (decrease) in accounts payable                                  5.8       (5.4)        (6.7)
    (Decrease) in accrued expenses                                          (1.3)      (2.7)        (3.6)
    Increase (decrease) in other liabilities                                 9.7        1.0         (2.0)
-------------------------------------------------------------------      ---------  ---------   ---------
  Net cash provided by continuing operations                                27.6       18.0          7.0
  Net cash provided by discontinued operations                               1.2       29.8         22.8
-------------------------------------------------------------------      ---------  ---------   ---------
  Net cash provided by operating activities                                 28.8       47.8         29.8
-------------------------------------------------------------------      ---------  ---------   ---------
Cash flows from investing activities:
Proceeds from sales of property, plant & equipment                           8.0        2.7         17.1
Purchases of property, plant & equipment                                   (17.1)     (11.5)       (20.6)
Acquisitions of businesses                                                   0.0       (1.3)       (32.6)
-------------------------------------------------------------------      ---------  ---------   ---------
  Net cash used in continuing operations                                    (9.1)     (10.1)       (36.1)
  Net cash provided by (used in) discontinued operations                   (23.8)     199.2        (15.6)
-------------------------------------------------------------------      ---------  ---------   ---------
  Net cash provided by (used in) investing activities                      (32.9)     189.1        (51.7)
-------------------------------------------------------------------      ---------  ---------   ---------
Cash flows from financing activities:
Net increase in short-term borrowings                                       (5.1)       0.0          2.0
Issuance of long-term debt                                                             13.0         18.1
Reduction of long-term debt                                                (11.8)    (211.2)        (3.5)
Capital contribution                                                         0.0        7.0
Other                                                                       (0.2)      (2.9)        (0.4)
------------------------------------------------------------------       ---------  ---------   ---------
  Net cash provided by (used in) financing activities                      (17.1)    (194.1)        16.2
------------------------------------------------------------------       ---------  ---------   ---------
Net increase (decrease) in cash and cash equivalents                       (21.2)      42.8         (5.7)
------------------------------------------------------------------       ---------  ---------   ---------
Cash and cash equivalents at beginning of period                            47.6        4.8         10.5
------------------------------------------------------------------       ---------  ---------   ---------
Cash and cash equivalents at end of period                               $  26.4    $   47.6    $    4.8
----------------------------------------------------------------         =========  =========   =========
</TABLE>

                                   Page 27

<PAGE>


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Blount International, Inc. and Subsidiaries

<TABLE>
<CAPTION>
                                                                                          Accumulated
                                                                  Capital     Retained       Other
(Dollar amounts in millions,                           Common     In Excess   Earnings   Comprehensive
shares in thousands)                                   Stock      of Par      (Deficit)      Income       Total
-----------------------------------------------        --------   ---------   ---------  -------------  ---------
<S>                                                    <C>        <C>         <C>         <C>           <C>

Balance December 31, 1999                              $  0.3     $  417.3    $ (747.9)   $   8.6       $ (321.7)
Net income                                                                        10.8                      10.8
Other comprehensive income, net:
  Foreign currency translation adjustment                                                    (0.8)          (0.8)
  Unrealized losses                                                                          (0.5)          (0.5)
                                                                                                        ---------
         Comprehensive income                                                                                9.5
-----------------------------------------------        --------   ---------   ---------  -------------   ---------
Balance December 31, 2000                                 0.3        417.3      (737.1)       7.3         (312.2)
Net loss                                                                         (43.6)                    (43.6)
Other comprehensive income, net:
  Foreign currency translation adjustment                                                    (0.7)          (0.7)
  Unrealized losses                                                                          (0.5)          (0.5)
                                                                                                        ---------
         Comprehensive income                                                                              (44.8)
Capital contribution                                                   7.0                                   7.0
-----------------------------------------------        --------   ---------   ---------   ------------   ---------
Balance December 31, 2001                                 0.3        424.3      (780.6)       6.1         (349.9)
Net loss                                                                          (5.7)                     (5.7)
Other comprehensive income, net:
  Foreign currency translation adjustment                                                     1.5            1.5
  Unrealized losses                                                                          (0.6)          (0.6)
  Minimum pension liability adjustment                                                      (14.2)         (14.2)
                                                                                                         --------
         Comprehensive income                                                                              (19.0)
-----------------------------------------------        --------   ---------   ---------   ------------   --------
Balance December 31, 2002                              $  0.3     $  424.3    $ (786.3)    $ (7.2)       $(368.9)
-----------------------------------------------        ========   =========   =========   ============   ========
</TABLE>

The accompanying notes are an integral part of the audited financial statements.

                                   Page 28

<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Blount International, Inc. and Subsidiaries

NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation:
The consolidated financial statements include the accounts of Blount
International, Inc. and its subsidiaries ("the Company")and are prepared in
conformity with accounting principles generally accepted in the United States of
America. All significant intercompany balances and transactions are eliminated
in consolidation.

Merger and Recapitalization:
On August 19, 1999, Blount International, Inc., a Delaware corporation, merged
with Red Dog Acquisition, Corp., a Delaware corporation and a wholly-owned
subsidiary of Lehman Brothers Merchant Banking Partners II, L.P. ("Lehman
Merchant Banking"). The merger was completed pursuant to an Agreement and Plan
of Merger and Recapitalization dated as of April 18, 1999. Lehman Merchant
Banking is a $2.0 billion institutional merchant banking fund focused on
investments in established operating companies. This transaction was accounted
for as a recapitalization under generally accepted accounting principles.
Accordingly, the historical basis of the Company's assets and liabilities was
not impacted by the transaction.

As a result of the proration and stock election procedures related to the
merger, approximately 1.5 million shares of Blount International's pre-merger
outstanding Class A and Class B common stock were retained by existing
shareholders and exchanged, on a two-for-one basis, for 3.0 million shares of
post-merger outstanding common stock. All share and per share information for
periods prior to the merger have been restated to reflect the split. Lehman and
certain members of Company management made a capital contribution of
approximately $417.5 million and received approximately 27.8 million shares of
post-merger outstanding common stock. Lehman controls approximately 85% of the
30.8 million shares outstanding following the merger.

The merger was financed by the equity contribution of $417.5 million, senior
term loans of $400 million and senior subordinated notes of $325 million issued
by Blount, Inc., a wholly-owned subsidiary of the Company. The new credit
facilities have an aggregate principal amount of $500.0 million, comprised of a
$60.0 million Tranche A Term Loan (none of which was outstanding at December 31,
2002) and a $340.0 million Tranche B Term Loan ($134.4 million of which was
outstanding at December 31, 2002), and a $100.0 million revolving credit
facility (none of which was outstanding at December 31, 2002). The amounts
available under the revolving credit facility were reduced to $75.0 million
after an amendment to the credit agreement on December 7, 2001.

Basis of Presentation:
On December 7, 2001, the Company sold its Sporting Equipment Group ("SEG") to
Alliant Techsystems, Inc. ("ATK"). SEG was comprised of the then wholly-owned
subsidiaries of Federal Cartridge Company, Estate Cartridge, Inc., Simmons
Outdoor Corporation, and Ammunition Accessories, Inc. As a result of the sale,
the results of operations for SEG, prior to the sale, were reclassified to
discontinued operations as presented in the Consolidated Statements of Income
(Loss).

Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Estimates are used when accounting for the allowance for doubtful accounts,
inventory obsolescence, long-lived assets, product warranty expenses, casualty
insurance costs, product liability expenses,

                                   Page 29

<PAGE>


other legal proceedings, employee benefit plans, income taxes, discontinued
operations and contingencies. It is reasonably possible that actual results
could differ significantly from those estimates and significant changes to
estimates could occur in the near term.

Cash and Cash Equivalents:
The Company considers all highly liquid temporary cash investments that are
readily convertible to known amounts of cash and present minimal risk of changes
in value because of changes in interest rates to be cash equivalents.

Inventories:
Inventories are valued at the lower of cost or market. The Company determines
the cost of most raw materials, work in process, and finished goods inventories
by the first-in, first-out ("FIFO") or average cost method. The Company writes
down its inventories for estimated obsolescence or unmarketable inventory equal
to the difference between the cost of inventory and the estimated market value
based upon assumptions about future demand and market conditions.

Property, Plant and Equipment:
These assets are stated at cost and are depreciated principally on the
straight-line method over the estimated useful lives of the individual assets.
The principal ranges of estimated useful lives for depreciation purposes are as
follows: buildings and improvements - 5 years to 45 years; machinery and
equipment - 3 years to 10 years; furniture, fixtures and office equipment - 3
years to 10 years; and transportation equipment - 3 years to 15 years. Gains or
losses on disposal are reflected in income. Property, plant and equipment held
under leases, which are essentially installment purchases, are capitalized with
the related obligations stated at the principal portion of future lease
payments. Depreciation charged to continuing operations costs and expenses was
$13.7 million, $14.4 million, and $13.5 million in 2002, 2001, and 2000
respectively.

Interest cost incurred during the period of construction of plant and equipment
is capitalized. No material amounts of interest were capitalized on plant and
equipment during the three years ended December 31, 2002.

Goodwill:
Prior to the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets,"
the Company amortized certain intangible assets on a straight-line basis over
the expected useful lives of the underlying assets, generally 40 years. The
Company adopted the provisions of SFAS No. 142, effective January 1, 2002, and
under this new standard the Company no longer amortizes goodwill. Accumulated
amortization was $34.7 million as of December 31, 2001 and the effect of
adopting SFAS No. 142 reduced amortization expense by $3.1 million annually.

Under the provisions of SFAS No. 142, the Company performs the annual review for
impairment at the reporting unit level. The tests are performed by determining
the fair values of the reporting units using a discounted cash flow model and
comparing those fair values to the carrying values of the reporting units,
including goodwill. If the fair value of a reporting unit is less than its
carrying value, the Company then allocates the fair value of the unit to all the
assets and liabilities of that unit, this includes any unrecognized intangible
assets, as if the reporting unit's fair value was the price to acquire the
reporting unit. The excess of the fair value of the reporting unit over the
amounts assigned to its assets and liabilities is the implied fair value of the
goodwill. If the carrying amount of the reporting unit's goodwill exceeds the
implied fair value of that goodwill, an impairment loss is recognized in an
amount equal to that excess. Events or changes in circumstances could occur that
may create underperformance relative to projected future cash flows which would
create further future impairments.

                                   Page 30

<PAGE>


Impaired Assets:
The Company evaluates the carrying value of long-lived assets to be held and
used, including definite lived intangible assets, when events or changes in
circumstances indicate that the carrying value may not be recoverable. The
carrying value of a long-lived asset is considered impaired when the total
projected undiscounted cash flows from such asset is separately identifiable and
is less than its carrying value. In that event, a loss is recognized based on
the amount by which the carrying value exceeds the fair value of the long-lived
asset. Fair value is determined primarily using the projected cash flows
discounted at a rate commensurate with the risk involved. Losses on long-lived
assets to be disposed of are determined in a similar manner, except that fair
values are reduced for disposal costs.

Insurance Accruals:
It is the Company's policy to retain a portion of expected losses related to
general and product liability through retentions or deductibles under its
insurance programs and for workers' compensation and vehicle liability losses.
Provisions for losses expected under these programs are recorded based on
estimates of the undiscounted aggregate liabilities for claims incurred.

Foreign Currency:
For foreign subsidiaries whose operations are principally conducted in U.S.
dollars, monetary assets and liabilities are translated into U.S. dollars at the
current exchange rate, while other assets (principally property, plant and
equipment and inventories) and related costs and expenses are generally
translated at historic exchange rates. Sales and other costs and expenses are
translated at the average exchange rate for the period and the resulting foreign
exchange adjustments are recognized in income. Assets and liabilities of the
remaining foreign operations are translated in U.S. dollars at the current
exchange rate and their statements of income are translated at the average
exchange rate for the period. Gains and losses resulting from translation of the
financial statements of these operations are reflected as "other comprehensive
income" in stockholders' equity (deficit). The amount of income taxes allocated
to this translation adjustment is not significant. Foreign exchange adjustments
to pretax income were not material in 2002, 2001 and 2000.

Derivative Financial Instruments:
The Company has adopted SFAS 133, as amended by SFAS 138, "Accounting for
Derivative Instruments and Hedging Activities". This adoption has not had a
material impact on the results of operations. As of December 31, 2002, the
Company did not have any material derivative contracts outstanding.

Deferred Financing Costs:
The Company capitalizes costs incurred in connection with borrowings or
establishment of credit facilities. These costs are amortized as an adjustment
to interest expense over the life of the borrowing or life of the credit
facility.

Revenue Recognition:
The Company's policy is to recognize revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the price to the customer is fixed or
determinable, and collectibility is reasonably assured, which has historically
been upon the date of shipment of product. There are an insignificant amount of
shipments with FOB destination terms. Given the short transit time and
insignificant number and amount of such FOB destination shipments, the impact of
these sales on the Company's results is immaterial.

Shipping and Handling costs:
The Company incurs expenses for the delivery of incoming goods and services and
the shipment of goods to customers. These expenses are recognized in the period
in which they occur and are classified as gross revenues if billed and cost of
goods sold if

                                   Page 31

<PAGE>


incurred by the Company in accordance with the Emerging Issues Task Force's
Issue (EITF) 00-10, "Accounting for Shipping and Handling Fees and Costs".

Sales Incentives:
The Company provides various sales incentives to customers in the form of
coupons, rebates, discounts, free product, and advertising allowances. The cost
of such expenses is recorded at the time of sale and revenue recognition and
recorded as a reduction to revenue, with the exception of free product recorded
as cost of sales, in accordance with EITF 00-14. "Accounting for Certain Sales
Incentives".

Advertising:
Advertising costs are expensed as incurred except for cooperative advertising
which is accrued over the period the revenues are recognized and sales
materials, such as brochures and catalogs, which are accounted for as prepaid
supplies and expensed over the period used. Advertising costs from continuing
operations were $6.7 million, $7.0 million, and $9.3 million for 2002, 2001, and
2000 respectively.

Research and Development:
Expenditures for research and development are expensed as incurred. These costs
from continuing operations were $3.0 million, $2.5 million, and $4.9 million for
2002, 2001,and 2000 respectively.

Warranty:
The Company offers certain warranties with the sale of its products. The
warranty obligation is recorded as a liability on the balance sheet and is
estimated through historical customer claims, supplier performance as well as
new product performance. Should a change in trend occur in customer claims or
supplier and new product performance, an increase or decrease in the warranty
liability may be necessary.

Product Liability:
The Company monitors claims that relate to the malfunction or misuse of its
products that may result in an injury to the equipment operator or others. The
Company records an accrual for its uninsured obligation based on estimates as
claims are incurred and evaluated. The accrual may increase or decrease as
additional information regarding claims is developed.

                                   Page 32

<PAGE>


Stock-Based Compensation:
As permitted by SFAS No. 123 "Accounting for Stock-Based Compensation," The
Company continues to apply intrinsic value accounting for its stock option
plans. Compensation cost for stock options, if any, is measured as the excess of
the quoted market price of the stock at the date of grant over the amount an
employee must pay to acquire the stock. The Company has adopted disclosure-only
provisions of SFAS No. 123 and SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure-an Amendment of FASB Statement No.
123". If the Company had elected to recognize compensation expense based upon
the fair value at the grant dates for awards under these plans, the Company's
net earnings (loss) and net earnings (loss) per share would have been as
follows:


                                                        Twelve months ended
                                                            December 31
                                                    ---------------------------
                                                      2002       2002      2000
                                                    -------   --------   -------
(Dollars in millions, except per share amounts)
-----------------------------------------------

Net income (loss), as reported                      $ (5.7)   $ (43.6)   $ 10.8

Deduct: total stock-based employee
compensation cost, net of tax,
that would have been included
in net income (loss) under
fair value method                                     (1.2)      (0.7)     (2.0)
                                                    -------   --------   -------
Proforma Net Income (Loss)                            (6.9)     (44.3)      8.8
=======================================             =======   ========   =======
Basic earnings (loss) per share
As reported                                         $(0.19)   $  (1.42)  $ 0.35

Pro forma                                            (0.22)      (1.44)    0.28

Diluted earnings (loss) per share
As reported                                          (0.19)      (1.42)    0.35

Pro forma                                            (0.22)      (1.44)    0.28

Stock-based employee
compensation cost,net of tax,
included in net earnings(loss)                      $ 0.0     $   0.0    $  0.0



Restructuring Expense:
During the first quarter of 2001, the Company incurred a restructuring charge of
$16.2 million related to the closure of a manufacturing facility in Zebulon,
North Carolina, the modification of certain employee benefit plans and a
reduction in headcount and expenses principally at the corporate headquarters.

In the first quarter of 2002, the Company incurred a restructuring charge
related to the closure and relocation of the Company's headquarters from
Montgomery, Alabama to Portland, Oregon. An initial charge of $5.6 million was
recorded and was subsequently adjusted to reflect transition expenses and a
revision of estimates. In the fourth quarter of 2002, the Company recorded a
$1.4 million charge related to the closure of a portion of a facility and
relocation of that equipment between its plants within its Oregon Cutting
Systems Division. The following table outlines the

                                   Page 33

<PAGE>

classification of the original expenses, the subsequent charge against the
restructuring liability and adjustment to the liability for each of these three
restructuring actions.

<TABLE>
<CAPTION>

                                                         Restructuring Action
                              --------------------------------------------------------------
                                 Plant Closure/
                              Headcount Reduction/      Corporate Office
                              Benefit Modification         Relocation       Asset Relocation
Recognition date                    Q1/2001                 Q1/2002             Q4/2002
                              --------------------      ----------------    ----------------
<S>                           <C>                       <C>                 <C>

Severance
  Corporate employees         $     8.0                 $   5.6
  Manufacturing facility            0.5
Benefits                            4.0
Facility closure                    0.2                                     $    1.4
Professional fees                   1.4
All other                           2.1
                              --------------------      ----------------    ----------------
Total original expense             16.2                     5.6                  1.4

Charges against liability
  2001                             13.1
  2002                              2.0                     5.7

Adjustments to liability
  2001
  2002                                                     (0.5)
                              --------------------      ----------------    ----------------
Balance at December 31, 2002   $     1.1                 $   0.4             $    1.4
                              ====================      ================    ================

</TABLE>

The number of corporate employees impacted by these restructuring actions was
five in 2001 and 18 in 2002. Related to the 2002 corporate office relocation,
the Company incurred an additional $0.7 million in transition expense. The
manufacturing facility closure in 2001 directly impacted 39 hourly employees and
3 salaried employees.

Income Taxes:
The provision for income taxes has been determined using the asset and liability
approach of accounting for income taxes. Under this approach, deferred taxes
represent the future tax consequences expected to occur when the reported
amounts of assets and liabilities are recovered or paid. The provision for
income taxes represents income taxes paid or payable for the current year plus
the change in deferred taxes during the year. Deferred taxes result from
differences between the financial and tax bases of the Company's assets and
liabilities and are adjusted for changes in tax rates and tax laws when changes
are enacted. Valuation allowances are recorded to reduce deferred tax assets
when it is more likely than not that a tax benefit will not be realized.
Provision has been made for income taxes on unremitted earnings of subsidiaries
and affiliates, except for subsidiaries in which earnings are deemed to be
permanently reinvested.

                                   Page 34

<PAGE>


NOTE 2:
INCOME TAXES

The provision (benefit) for income taxes attributable to income (loss) from
continuing operations is as follows:

                                                     Twelve Months Ended
                                                         December 31,
                                            ------------------------------------
(Dollar amounts in millions)                    2002         2001        2000
--------------------------------------      -----------  -----------  ----------

Current
   Federal                                  $  (13.1)    $  (24.7)    $  (8.8)
   State                                         1.0         (0.4)        1.0
   Foreign                                       6.5          6.4         6.0
Deferred
   Federal                                       1.3          1.3        (7.0)
   State                                         0.1         (0.3)       (0.4)
   Foreign                                      (0.1)        (0.7)        1.1
--------------------------------------      -----------  -----------  ----------
                                            $   (4.3)    $  (18.4)    $  (8.1)
======================================      ===========  ===========  ==========


In the year ended December 31, 2002, the Company also recorded an income tax
benefit of $8.7 million for the recognition of a minimum pension liability
adjustment that was recorded as other comprehensive income, a $0.6 million
benefit related to discontinued operations and a $0.2 million benefit for an
extraordinary loss. There was no minimum pension liability recorded in the years
ended December 31, 2001 and 2000.

A reconciliation of the benefit for income taxes to the amount computed by
applying the statutory federal income tax rate to loss before extraordinary loss
and income taxes is as follows:

                                                     Twelve Months Ended
                                                         December 31,
                                            ------------------------------------
(Dollar amounts in millions)                    2002         2001        2000
----------------------------------------    -----------  -----------  ----------

Loss before income taxes:
   Domestic                                 $  (28.7)    $  (68.8)    $ (35.4)
   Foreign                                      19.9         18.3        15.6
----------------------------------------    -----------  -----------  ----------
                                            $   (8.8)    $  (50.5)    $ (19.8)
----------------------------------------    -----------  -----------  ----------
                                                   %            %           %
Statutory tax rate                             (35.0)       (35.0)      (35.0)
Impact of earnings of foreign operations        (8.5)        (1.1)        2.1
State income taxes, net of federal
    tax benefit                                  9.5          0.1         1.0
Permanent differences                            1.3          1.4         7.0
Contingency                                    (17.2)        (1.8)      (16.0)
----------------------------------------
Effective income tax rate                      (49.9)       (36.4)      (40.9)
----------------------------------------    -----------  -----------  ----------

All years reflect the allocation of substantially all corporate office expenses
and interest expense to domestic operations.

The Company's effective income tax rate increased in 2002 to 49.9% from 36.4% in
2001. The favorable effect of foreign income tax rates as compared to the United
States statutory rate increased, as the Company's overall pre tax loss declined
substantially. Additionally an adjustment to the tax contingency increased the
overall rate.

                                   Page 35

<PAGE>


As of December 31, 2002 and 2001, deferred income tax assets were $73.9 million
and $50.1 million respectively. Deferred income tax liabilities were $33.6
million and $30.7 million. Deferred income tax assets (liabilities) applicable
to temporary differences at December 31, 2002 and 2001 are as follows:


(Dollar amounts in millions)                               2002          2001
---------------------------------------------------     ---------     ---------

Property, plant and equipment basis differences          $  (9.4)      $ (16.3)
Employee benefits                                           31.4          24.1
Other accrued expenses                                      32.4          20.4
Other - net                                                (14.1)         (8.8)
---------------------------------------------------     ---------     ---------
                                                         $  40.3      $   19.4
---------------------------------------------------     ---------     ---------

The net deferred income tax asset as of December 31, 2002 is recorded in the
Company's balance sheet as a current asset of $30.5 million with a remaining
$9.8 million included in other long term assets.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. The Company expects the deferred tax
assets at December 31, 2002 to be realized as a result of the reversal of
existing taxable temporary differences.

Deferred income taxes of approximately $4.0 million have not been provided on
undistributed earnings of foreign subsidiaries in the amount of $37.1 million as
the earnings are considered to be permanently reinvested.

The Company has settled its issues with the Internal Revenue Service through the
1998 fiscal year with no material adverse effect. The periods from fiscal 1999
through 2002 are still open for review and years through 1998 are still open
with Revenue Canada. The United States of America and Canadian Competent
Authority are in the process of resolving transfer pricing issues for years that
include 1994 through 1999.

NOTE 3:
DEBT AND FINANCING AGREEMENTS

Long-term debt at December 31, 2002 and 2001, consists of the following:

<TABLE>
<CAPTION>

(Dollar amounts in millions)                                           2002        2001
----------------------------------------------------------------    ---------   ---------
<S>                                                                 <C>         <C>

13% Senior subordinated notes, maturing on August 1, 2009           $  325.0    $  325.0
7% Senior notes (net of discount), maturing on June 15, 2005           149.4       149.2
Tranche B senior term loans, maturing at various dates through
  December 31, 2005, interest rate varies with LIBOR, prime or
  CD rate depending upon borrowing option selected                     134.4       146.2
$75 million revolving credit agreement maturing August 19,
  2004, interest rate varies with LIBOR, prime or CD rate
  depending upon borrowing option selected                               0.0         0.0
12% Lehman Brothers Inc. affiliate preferred equivalent security        18.7        15.5
Lease purchase obligations, interest at varying rates,
  payable in installments to 2003                                        0.0         0.1
----------------------------------------------------------------    ---------   ---------
                                                                       627.5       636.0
Less current maturities                                                 (3.4)       (3.5)
----------------------------------------------------------------    ---------   ---------
                                                                    $  624.1    $  632.5
----------------------------------------------------------------    =========   =========
</TABLE>

                                   Page 36

<PAGE>


Maturities of long-term debt:

(Dollar amounts in millions)            Payments
-----------------------------------     --------


2003                                    $   3.4
2004                                        3.4
2005                                      277.0
2006                                        0.0
2007 and beyond                           343.7
-----------------------------------     --------
         Total                          $ 627.5
===================================     ========


Included in the debt payable in 2007 and beyond is a balance of $18.7 million at
December 31, 2002 representing a 12% convertible preferred equivalent security
dated March 2, 2001 and due on March 2, 2013. The balance as of December 31,
2001 was $15.5 million. Interest in the first five years is payable in "PIKs",
or payments-in-kind. As of December 31, 2002 the Company did not have any
material Capital leases.

In June 1998, Blount, Inc., a wholly-owned subsidiary of Blount International,
Inc., issued senior notes ("the 7% senior notes") with a stated interest rate of
7% in the principal amount of $150 million maturing on June 15, 2005. The senior
notes are fully and unconditionally guaranteed by Blount International, Inc.
Approximately $8.3 million, reflecting the price discount and the cost to
extinguish an interest rate contract accounted for as a hedge of future interest
on the debt, is being amortized to expense over the life of the senior notes.
The senior notes are redeemable at a premium, in whole or in part, at the option
of the Company at any time. The debt indenture contains restrictions on secured
debt, sale and lease-back transactions, and the consolidation, merger and sale
of assets.

In August 1999, Blount, Inc., a wholly-owned subsidiary of Blount International,
Inc., issued senior subordinated notes ("the senior subordinated notes") with an
interest rate of 13% in the principal amount of $325 million. The senior
subordinated notes provided for a premium for the redemption of an aggregate of
35% of the senior subordinated notes until August 1, 2002, and for redemption at
a premium of all or part of the senior subordinated notes after August 1, 2004
until August 1, 2007, when the senior subordinated notes are redeemable at par.
In connection with the $325 million senior subordinated notes, the Company filed
a registration statement on Form S-4 on July 15, 1999. Blount, Inc. also entered
into new credit facilities with an aggregate principal amount of $500.0 million,
comprised of a $60.0 million Tranche A Term Loan (which has been paid in full),
a $340.0 million Tranche B Term Loan ($134.4 million outstanding at December 31,
2002), and a $100.0 million revolving credit facility. On December 7, 2001, the
Company amended the credit agreement to incorporate the impact of the sale of
SEG to ATK. The amendment addressed, among other things, the repayment of a
portion of the outstanding debt with the net proceeds from the SEG sale,
revisions to the consolidated leverage and interest coverage ratios, a reduction
in the revolving credit facility to $75 million, and certain prepayment and
amendment fees. The agreement also cured any event of default under the credit
agreement that had been communicated to the lenders on October 30, 2001.

The Tranche B Term Loan repayments as a result of the amendment are $850,000
each quarter until June 30, 2005, then increasing to $80.0 million on September
30, 2005, and a final payment of $45.9 million on December 31, 2005. The Tranche
B borrowings can be repaid, in whole or in part, at anytime. The Company and all
of the Company's domestic subsidiaries other than Blount, Inc. guarantee Blount,
Inc.'s obligations under the debt issued to finance the merger and
recapitalization of August 19, 1999. In addition, Blount, Inc. has pledged 65%
of the stock of its non-domestic subsidiaries as further collateral. Blount,
Inc.'s obligations and its domestic subsidiaries' guarantee obligations under
the new credit facilities are collateralized by a first priority security
interest in substantially all of their

                                   Page 37

<PAGE>


respective assets. The Company's guarantee obligations in respect of the new
credit facilities are collateralized by a pledge of all of Blount, Inc.'s
capital stock. The 7.0% senior notes share in parri passu and ratably in the
first priority interest in certain of the collateral securing the new credit
facilities. The Company was required to enter into hedge agreements within 180
days of the Tranche B borrowing and maintain such hedge agreements in place
until the second anniversary of the Tranche B borrowing such that at least 33%
of the aggregate principal amount of the Tranche B borrowing is subject to a
fixed rate of interest. The Company had in place an interest rate cap at an
immaterial cost to comply with this requirement.

In August 1999, the Company replaced its $150 million revolving credit agreement
expiring April 1, 2002, with a new $100 million revolving credit agreement
expiring on August 19, 2004. The amount available under the revolving credit
agreement was reduced by amendment on December 7, 2001 to $75 million. At
December 31, 2002, there were no amounts outstanding under the revolving credit
agreement. The revolving credit agreement provides for interest rates to be
determined at the time of borrowings based on a choice of formulas as specified
in the agreement. The interest rates may vary based on LIBOR and base interest
rates. The revolving credit agreement and the term loan facilities contain
covenants relating to indebtedness, liens, mergers, consolidations, disposals of
property, payment of dividends, capital expenditures, investments, optional
payments and modifications of the agreements, transactions with affiliates,
sales and leasebacks, changes in fiscal periods, negative pledges, subsidiary
distributions, lines of business, hedge agreements and activities of the Company
and require the Company to maintain certain leverage and interest coverage
ratios. In January 2001, the Company amended the credit agreement in part to
avoid a potential default under the leverage and interest coverage ratios of the
credit facilities.

On March 2, 2001, in connection with the amendment, an affiliate of Lehman
Brothers, Inc., the Company's principal shareholder, invested $20 million in the
form of a preferred equivalent security, together with warrants to acquire
1,000,000 shares of Blount common stock (or approximately 3% of the Company)
that are exercisable immediately at a price of $0.01 a share. The security has a
12% annual interest rate that is compounded annually and is paid in
payments-in-kind ("PIK") for the first five years of the term. The security can
be converted into convertible preferred stock at the option of the holder as a
result of the Company's stockholders passing an amendment to the Certificate of
Incorporation authorizing the issuance of preferred stock. The Company recorded
the fair value of the warrants of $7 million as a credit to additional paid-in
capital and a debt discount to the $20 million security. The debt portion of
this security at December 31, 2002, is $18.7 million and increased during 2002
through accretion of the discount and the accrual of interest.

During 2001, the Company would not have been in compliance with certain of its
debt covenants except for the fact that, in connection with the sale of SEG, the
Company and its lenders amended the covenants as of and for the year ended
December 31, 2001. The Company was in compliance with all debt covenants
throughout 2002. While there can be no assurance, management believes the
Company will comply with all debt covenants during 2003. Should the Company not
comply with the covenants during 2003, additional significant actions will be
required. These actions may include, among others, attempting to re-negotiate
its debt facilities, sales of assets, additional restructurings and reductions
in capital expenditures.

There were no short-term borrowings as of December 31, 2002. The weighted
average interest rate on outstanding foreign short-term borrowings on December
31, 2001 was 3.3%.

                                   Page 38

<PAGE>


NOTE 4:
GOODWILL AND OTHER INTANGIBLE ASSETS

The Company adopted the provisions of SFAS No. 142, "Goodwill and Other
Intangible Assets," effective January 1, 2002. The provisions of SFAS No. 142
prohibit the amortization of goodwill and indefinite-lived intangible assets;
require that goodwill and indefinite-lived intangible assets be tested at least
annually for impairment; require reporting units to be identified for the
purpose of assessing potential future impairments of goodwill; and remove the
forty-year limitation on the amortization period of intangible assets that have
finite lives.

In connection with the adoption of SFAS No. 142, during the second quarter 2002,
the Company performed the transitional impairment test on its goodwill as
required upon adoption of this Statement, and determined that no impairment of
goodwill existed as of January 1, 2002. The Company completed its annual testing
of goodwill for impairment in the fourth quarter 2002 and determined that no
impairment existed as of December 31, 2002. The Company plans to continue its
annual testing of goodwill and indefinite-lived intangible assets for impairment
in the fourth quarter of each year, unless events warrant more frequent testing.

As of January 1, 2002, the Company's goodwill balance of $76.9 million was
comprised of $48.8 million related to the Outdoor Products segment and $28.1
million related to the Industrial and Power Equipment segment. There were no
intangible assets reclassified into goodwill at January 1, 2002, nor were there
any adjustments to the goodwill balance during 2002.

As a result of the nonamortization provisions of SFAS No. 142, the Company will
no longer record approximately $3 million of annual amortization relating to
goodwill and indefinite-lived intangibles, as adjusted for the reclassifications
just mentioned.

The following table presents prior year earnings and earnings per share as if
the nonamortization provisions of SFAS No. 142 had been applied in the prior
year.

                                                         Twelve Months Ended
                                                             December 31,
                                                        -----------------------
(Dollars in millions)                                     2002    2001    2000
------------------------------------------------------  ------- ------- -------


Reported net income (loss) from continuing operations   $ (4.5) $(32.1) $(11.7)
Add back goodwill amortization, net of tax                         3.1     2.5
------------------------------------------------------  ------- ------- -------
Adjusted net earnings (loss)                            $ (4.5) $(29.0) $ (9.2)
------------------------------------------------------  ======= ======= =======
Basic earnings income (loss) per share from continuing
operations
Reported basic earnings (loss) per share                $(0.15) $(1.04) $(0.38)
Add back goodwill amortization, net of tax                        0.10    0.08
------------------------------------------------------  ------- ------- -------
Adjusted net earnings (loss) per share                  $(0.15) $(0.94) $(0.30)
======================================================  ======= ======= =======

Diluted earnings income (loss) per share from           $(0.15) $(1.04) $(0.38)
continuing operations
Add back goodwill amortization, net of tax                        0.10    0.08
------------------------------------------------------  ------- ------- -------
Adjusted net earnings (loss) per share                  $(0.15) $(0.94) $(0.30)
======================================================  ======= ======= =======

                                   Page 39

<PAGE>


Upon adoption of SFAS 142, the gross carrying value of indefinite-lived
intangible assets excluding goodwill was $0.9 million and was fully amortized.

NOTE 5:
ACQUISITIONS AND DISPOSALS

The Company has accounted for acquisitions by the purchase method, and the net
assets and results of operations of the acquired companies have been included in
the Company's consolidated financial statements since the date of acquisition.
Through December 31, 2001, the excess of the purchase price over the fair value
of the net assets acquired was being amortized on a straight-line basis over a
period of between 5 and 40 years. Effective January 1, 2002, the Company adopted
SFAS 142 and it no longer amortizes this difference.

On December 7, 2001, the Company sold its Sporting Equipment Group ("SEG") to
Alliant Techsystems, Inc. ("ATK"). See Note 1 for transaction details.

NOTE 6:
CAPITAL STOCK, STOCK OPTIONS AND EARNINGS PER SHARE DATA

The Company has authorized 100 million shares of common stock.

The number of shares used in the denominators of the basic and diluted earnings
(loss) per share computations were as follows (in thousands):

                                                            Twelve Months Ended
                                                                December 31,
                                                          ----------------------
                                                           2002     2001    2000
                                                          ------   ------  -----


Shares for basic earnings (loss) per share computation -
   weighted average common shares outstanding            30,796   30,796  30,796
Dilutive effect of stock options
-------------------------------------------------------- ------   ------  ------
Shares for diluted earnings (loss) per
   share computation                                     30,796   30,796  30,796
-------------------------------------------------------- ------   ------  ------

No adjustment was required to reported amounts for inclusion in the numerators
of the share computations. The Company has excluded its stock option plan, as
well as the warrants held by an affiliate of its controlling shareholder for the
computation of diluted EPS because to do so would be anti-dilutive for the years
ended December 31, 2002, 2001 and 2000.

During 1999 and 2000, the Company's Board of Directors adopted new stock option
plans under which options, either incentive stock options or non-qualified stock
options, to purchase the Company's common stock may be granted to employees,
directors, and other persons who perform services for the Company. The number of
shares which may be issued under these plans may not exceed 5,875,000 shares.
The option price per share for incentive stock options may not be less than 100%
of fair value, generally calculated as the average closing sale price for ten
consecutive trading days ended on the trading day immediately prior to the date
of grant. The option price for each grant of a non-qualified stock option shall
be established on the date of grant and may be less than the fair market value
of one share of common stock on the date of grant. In 2000, options were granted
to purchase 120,000 shares at an average price of $11.52 per share. In 2001,
options were granted to purchase 634,700 shares at an average price of $4.96 per
share. In 2002, options were granted to purchase 1,571,145 shares at an average
price of $3.60 per share. As of December 31, 2002, 2001, and 2000, there were
options for 2,414,187, 3,733,500 shares, and 3,603,680 shares available for
grant.

                                   Page 40

<PAGE>


A summary of the status of the Company's fixed stock option plans as of December
31, 2002, 2001, and 2000, and the changes during the periods ending on those
dates is presented below:

<TABLE>
<CAPTION>
                                                              Twelve Months
                                                              Ended December 31,
                           -------------------------------------------------------------------------------------
                                       2002                         2001                            2000
                           ---------------------------   --------------------------   --------------------------
                                           Weighted-                    Weighted-                    Weighted-
                                           Average                      Average                      Average
                             Shares        Exercise        shares       Exercise        Shares       Exercise
                           (in 000's)        Price       (in 000's)     Price         (in 000's)      Price
---------------------      ----------     ----------     -----------    ----------    -----------    -----------
<S>                        <C>             <C>           <C>            <C>           <C>            <C>

Outstanding at
beginning of period          2,141          $12.30         2,271          $14.82        2,251          $15.00
   Granted                   1,571            3.60           635            4.96          120           11.52
   Exercised
   Forfeited                  (251)          14.82          (765)          13.67         (100)          15.00
   Canceled
---------------------      ----------     ----------    -----------      ----------  -----------    -----------
Outstanding at
end of period                3,461         $  8.17         2,141          $12.30        2,271          $14.82
---------------------      ----------     ----------    -----------      ----------  -----------    -----------
Options exercisable
at end of period             1,587                            829                          289
---------------------      ----------                   -----------                  -----------

</TABLE>

Options outstanding at December 31, 2002, have an average exercise price of
$8.17 per share, vest over periods to six years and have a remaining contractual
life of approximately 7.7 years.

For purposes of computing the pro forma amounts above, the Black-Scholes option-
pricing model was used with the following weighted-average assumptions:

                                             Twelve Months Ended
                                                 December 31,
                                        -----------------------------
                                          2002      2001      2000
                                        --------  --------  ---------


Estimated lives of plan options         5 years   5 years   6 years
Risk-free interest rates                   3.4%      4.8%      6.3%
Expected volatility                       36.0%     37.0%     33.0%
Dividend yield                             0.0%      0.0%      0.0%
--------------------------------------  --------  --------  ---------


The weighted average estimated fair value of options granted during 2002, 2001,
and 2000 was $1.34, $2.01, and $4.92, respectively.

On March 2, 2001, an affiliate of Lehman Brothers, Inc., the Company's principal
shareholder, invested $20 million in the Company in the form of a mezzanine
security together with warrants to acquire 1,000,000 shares of Blount common
stock that are exercisable immediately at $0.01 a share.

                                   Page 41

<PAGE>


NOTE 7:
PENSION AND POST-RETIREMENT BENEFIT PLANS

The changes in benefit obligations, changes in plan assets and funded status of
the Company's defined benefit pension plans and other post-retirement medical
and life benefit plans for the periods ended December 31, 2002 and 2001, were as
follows:

<TABLE>
<CAPTION>
                                                                             Other
                                                        Pension        Post-retirement
                                                        Benefits           Benefits
FUNDED PLANS                                       -----------------  -----------------
(Dollar amounts in millions)                         2002     2001      2002     2001
-----------------------------------------------    -------- --------  -------- --------
<S>                                                <C>      <C>       <C>      <C>

Change in Benefit Obligation:
Benefit obligation at beginning of period         $(105.8) $(139.5)   $  (3.9)  $ (3.1)
Service cost                                         (3.8)    (5.9)
Interest cost                                        (7.5)   (10.1)      (0.2)    (0.2)
Plan participants' contributions                                         (0.1)    (0.1)
Actuarial gains (losses)                             (5.7)    (6.1)       0.6     (0.9)
Benefits and plan expenses paid                       5.2      5.3        0.5      0.4
Plan Amendment                                       (4.9)
Curtailment/settlement                                        50.5
------------------------------------------------   --------  -------  --------  -------
Benefit obligation at end of period                (122.5)  (105.8)      (3.1)    (3.9)
------------------------------------------------   --------  -------  --------  -------

Change in Plan Assets:
Fair value of plan assets at beginning of period     84.5    131.0        1.6      1.8
Actual return on plan assets                        (10.2)   (14.7)      (0.2)     0.1
Company contributions                                 1.0      2.7
Plan participants' contributions                                          0.1      0.1
Benefits and plan expenses paid                      (5.2)    (5.3)      (0.4)    (0.4)
Settlements                                          (0.4)   (29.2)
-------------------------------------------------  --------  -------  --------  -------
Fair value of plan assets at end of period           69.7     84.5        1.1      1.6
-------------------------------------------------  --------  -------  --------  ------
Funded status                                       (52.9)   (21.3)      (2.0)    (2.3)
Unrecognized actuarial (gains) losses                40.3     17.0        1.8      2.3
Unrecognized transition asset                         4.5     (0.1)
Unrecognized prior service cost                                0.1
-------------------------------------------------  --------  -------  --------  ------
Net amount recognized                              $ (8.1)  $ (4.3)   $  (0.2)  $  0.0
-------------------------------------------------  --------  -------  --------  ------

Net amount recognized:
Prepaid benefits                                   $  3.3   $  3.2
Accrued benefits                                    (38.1)    (7.5)   $  (0.2)
Accumulated other comprehensive income               22.2
Intangible asset                                      4.5
-------------------------------------------------  --------  -------  --------  ------
Net amount recognized                              $ (8.1)  $ (4.3)   $  (0.2)  $  0.0
-------------------------------------------------  --------  -------  --------  ------
</TABLE>

                                   Page 42

<PAGE>


<TABLE>
<CAPTION>
                                                                           Other
                                                        Pension        Post-retirement
                                                        Benefits           Benefits
OTHER PLANS                                        -----------------  -----------------
(Dollar amounts in millions)                         2002     2001      2002     2001
-----------------------------------------------    -------- --------  -------- --------

<S>                                               <C>       <C>       <C>       <C>

Change in Benefit Obligation:
Benefit obligation at beginning of period          $ (8.9)  $(12.6)   $ (21.9)  $(19.6)
Service cost                                         (0.2)    (0.8)      (0.3)    (0.5)
Interest cost                                        (0.7)    (1.1)      (1.7)    (1.9)
Plan participants' contributions                                         (0.5)    (0.9)
Actuarial gains (losses)                             (1.4)    (2.2)      (3.8)    (8.1)
Benefits and plan expenses paid                       0.6      0.5        1.3      2.4
Curtailment/settlement                                4.1      7.3                 6.7
-----------------------------------------------    -------- -------   --------  ------
Benefit obligation at end of period                  (6.5)    (8.9)     (26.9)   (21.9)
Unrecognized actuarial (gains) losses                 1.0      1.3       10.0      6.6
Unrecognized prior service cost                      (0.1)     1.8        0.1      0.1
-----------------------------------------------    -------- -------   --------  ------
Net amount recognized                              $ (5.6)  $ (5.8)   $ (16.8)  $(15.2)
-----------------------------------------------    -------- -------   --------  ------
Net amount recognized:
Accrued benefits                                   $ (6.4)  $ (7.0)   $ (16.8)  $(15.2)
Accumulated other comprehensive income                0.7
Intangible asset                                      0.1      1.2
-----------------------------------------------    -------- -------   --------  -------
                                                   $ (5.6)  $ (5.8)   $ (16.8)   (15.2)
-----------------------------------------------    -------- -------   --------  -------
</TABLE>

The accumulated pension benefit obligation of supplemental non-qualified defined
benefit pension plans was $6.3 million and $7.9 million at December 31, 2002 and
2001, respectively. Two rabbi trusts, whose assets are not included in the table
above, have been established to fund part of these non-qualified benefits.

These two rabbi trusts required the funding of certain executive benefits upon a
change in control or threatened change in control such as the merger and
recapitalization described in Note 1 of the Notes to Consolidated Financial
Statements. At December 31, 2002 and 2001, approximately $5.6 million and $11.1
million, respectively, were held in these trusts and is included in "Other
assets" in the Consolidated Balance Sheets.

The curtailment and settlement amounts related to 2001 are the result of the
sale of SEG to ATK. As defined in the purchase agreement, ATK retains the
obligation for all active employees of SEG as of December 7, 2001 and retired
employees of the Federal Cartridge Company. The Company retains the obligation
for the remaining retired employees of SEG. The curtailment and settlement
amounts for 2002 related to the payment or obligation to certain current and
former executives of the Company during 2002.

Primarily due to a decline in the market value of assets held in the Company's
defined benefit pension plan, the Company was required to record a minimum
pension liability adjustment in 2002. The amount recorded to equity as other
comprehensive income net of taxes for the tax year ended December 31, 2002 was
$14.2 million.

                                   Page 43

<PAGE>


The components of net periodic benefit cost and the weighted average assumptions
used in accounting for pension and other post-retirement benefits follow:

<TABLE>
<CAPTION>
                                                        Pension Benefits               Other Post-Retirement Benefits
                                               ---------------------------------       ------------------------------
                                                      Twelve Months Ended                   Twelve Months Ended
                                                          December 31,                          December 31,
                                               ---------------------------------       ------------------------------
(Dollar amounts in millions)                      2002       2001       2000              2002      2001      2000
----------------------------------------       ----------  ---------  ----------       ---------  ---------  --------
<S>                                            <C>         <C>        <C>              <C>        <C>        <C>

Components of net periodic benefit cost:
Service cost                                   $  4.1      $  6.7     $  6.7            $  0.3    $  0.5     $  0.4
Interest cost                                     8.1        11.1       10.8               1.9       2.1        1.6
Expected return on plan assets                   (7.2)      (11.6)     (12.3)             (0.1)     (0.1)      (0.1)
Amortization of actuarial (gains) losses          0.5         0.4       (0.2)              0.5       0.4        0.1
Amortization of transition asset                 (0.1)       (0.1)      (0.1)
Amortization of prior service cost                1.3         1.0        1.0
Curtailment/settlement (gain) loss                2.4        (0.1)
                                               ----------  ---------  ----------       ---------  ---------  --------
                                               $  9.1      $  7.4     $  5.9            $  2.6    $  2.9     $  2.0
                                               ----------  ---------  ----------       ---------  ---------  --------
Weighted average assumptions:
Discount rate                                     6.5%        7.2%       7.4%              6.5%      7.2%       7.5%
Expected return on plan assets                    8.9%        8.9%       8.9%              9.0%      9.0%       9.0%
Rate of compensation increase                     3.6%        3.6%       4.0%
----------------------------------------       ----------  ---------  ----------       ---------  ---------  --------
</TABLE>

A 12.0% annual rate of increase in the cost of health care benefits was assumed
for 2002; the rate was assumed to decrease 1.0% per year until 5.0% is reached.
A 1% change in assumed health care cost trend rates would have the following
effects:

<TABLE>
<CAPTION>

(Dollar amounts in millions)                                  1% Increase    1% Decrease
-------------------------------------------------------       -----------    -----------
<S>                                                           <C>            <C>

Effect on service and interest cost components                   $ 0.2         $ (0.2)
Effect on other post-retirement benefit obligations                2.5           (2.2)
-------------------------------------------------------       -----------    -----------
</TABLE>

The Company sponsors a defined contribution 401(k) plan and matches a portion of
employee contributions. The expense for the match was $2.4 million, $4.6 million
and $4.7 million in 2002, 2001 and 2000.

NOTE 8:
COMMITMENTS AND CONTINGENT LIABILITIES

The Company leases office space and equipment under operating leases expiring in
1 to 8 years. Most leases include renewal options and some contain purchase
options and escalation clauses. Future minimum rental commitments required under
operating leases having initial or remaining non-cancelable lease terms in
excess of one year as of December 31, 2002, are as follows (in millions):
2003--$2.7; 2004--$1.5; 2005--$1.2; 2006--$0.7; 2007--$0.4; 2008 and
beyond--$0.2. Rentals charged to continuing operations costs and expenses under
cancelable and non-cancelable lease arrangements were $2.5 million, $2.7 million
and $2.3 million for 2002, 2001 and 2000, respectively.

Certain customers of the Company's Outdoor Products and Industrial and Power
Equipment segments finance their purchases through third party finance
companies. Under the terms of these financing arrangements, the Company may be
required to repurchase certain equipment from the finance companies. The
aggregate repurchase amount included in the agreements outstanding as of
December 31, 2002 and 2001 is $4.0 million and $3.2 million respectively. These
arrangements have not had a

                                   Page 44

<PAGE>


material adverse effect on the Company's operating results in the past. The
Company does not expect to incur any material charges related to these
agreements in future periods, as any repurchased equipment will likely be resold
for approximately the same value.

The Company reserves for product liability, environmental remediation and other
legal matters as it becomes aware of such matters. A portion of these lawsuits
may be covered by insurance policies that generally contain both deductible and
coverage limits. The Company monitors the progress of each legal case to ensure
that the appropriate reserve for its obligation has been recognized and
disclosed in the financial statements. The Company also monitors trends in case
types to determine if there are any specific issues that relate to the Company
that may result in additional future exposure on an aggregate basis. As of
December 31, 2002 and December 31, 2001, the Company believes it has
appropriately recorded and disclosed all material costs for its obligation in
regard to known matters. The estimated cost of each claim is determined by a
third party administrator who works with the Company's counsel and the insurance
carriers. The Company has assumed that the recoverability of the costs of claims
from insurance companies will continue in the future. The Company periodically
assesses these insurance companies to monitor their ability to pay such claims.

Blount was named a potentially liable person ("PLP") by the Washington State
Department of Ecology ("WDOE") in connection with the Pasco Sanitary Landfil
Site ("Site"). This site has been monitored by WDOE since 1988. From available
records, the Company believes that it sent 26 drums of chromic hydroxide sludge
in a non-toxic, trivalent state to the site. It further believes that the site
contains more than 50,000 drums in total and millions of gallons of additional
wastes, some potentially highly toxic in nature. Accordingly, based both on
volume and on nature of the waste, the Company believes that it is a de minimis
contributor.

The current on-site monitoring program is being conducted with the WDOE by, and
being funded by, certain PLPs, excluding the Company and several other PLPs. It
is estimated that this study will cost between $7 million and $10 million.
Depending upon the results of this study, further studies or remediation could
be required. The Company may or may not be required to pay a share of the
current study, or to contribute costs of subsequent studies or remediation, if
any. The Company is unable to estimate such costs, or the likelihood of being
assessed any portion thereof. However, during the most recent negotiations with
those PLPs that are funding the work at the Site, the Company's potential share
ranged from approximately $20,000 to $250,000 with estimates of approximately
$90,000 being the "reasonably most probable scenario".

The Company has accrued $75,000 at December 31, 2002 and 2001 for the potential
costs of any clean-up. The Company spent $3,000 and $5,600 in the years ended
December 31, 2001 and 2002 respectively to administer compliance in regards to
the Pasco site, which are primarily the cost of outside counsel to provide
updates on the Site status.

In July 2001, the Company's former Federal Cartridge Company subsidiary
("Federal") received notice from the Region 5 Office of the United States
Environmental Protection Agency ("EPA") that it intended to file an
administrative proceeding for civil penalties in connection with alleged
violations of applicable statutes, rules, and regulations or permit conditions
at Federal's Anoka, Minnesota ammunition manufacturing plant. The alleged
violations include (i) unpermitted treatment of hazardous wastes, (ii) improper
management of hazardous wastes, (iii) permit violations, and (iv) improper
training of certain responsible personnel. Blount retained the liability for
this notice under the terms of the sale of its SEG segment (including Federal)
to Alliant Techsystems, Inc. ("ATK") as discussed in Note 5.

To the knowledge of the Company, Federal has corrected the alleged violations.
The Company has tendered this matter for partial indemnification to a prior
owner of

                                   Page 45

<PAGE>


Federal. In March 2002, EPA served an Administrative Complaint and
Compliance Order ("Complaint") on Federal. The Complaint proposes civil
penalties in the amount of $258,593. Federal answered the Complaint, denied
liability and opposed the proposed penalties. In August 2002, Federal and the
EPA filed cross motions for Accelerated Decision on both liability and penalties
issues with the assigned Administrative Law Judge. On December 6, 2002 the
Administrative Law Judge issued an Order Granting in Part and Denying in Part
EPA's Motion for Accelerated Decision and Denying Federal's Motion for
Accelerated Decision ("Order"). The Order established that Federal is liable for
$6,270 in civil penalties and stated the remaining issues of liability and
proposed penalties totaling $252,323 would be ruled on after an administrative
hearing. On January 28, 2003, EPA and Federal held an administrative hearing on
both liability and penalties issues not resolved by the Order. The
Administrative Law Judge will make a decision on liability and penalties
following submission by EPA and Federal of Findings of Fact and Conclusions of
Law ("Findings"). No due date for the Findings has been set and as such the
rulings on liability and penalties are still pending. Nonetheless, at the
current time the Company does not believe payment of the civil penalties sought
by the EPA will have a materially adverse effect on its consolidated financial
condition or operating results.

The Company is a defendant in a number of product liability lawsuits, some of
which seek significant or unspecified damages, involving serious personal
injuries for which there are retentions or deductible amounts under the
Company's insurance policies. In addition, the Company is a party to a number of
other suits arising out of the conduct of its business. While there can be no
assurance as to their ultimate outcome, management does not believe these
lawsuits will have a material adverse effect on consolidated financial condition
or operating results.

NOTE 9:
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION

The Company has manufacturing or distribution operations in Brazil, Canada,
Europe, Japan, Russia and the United States. The Company sells to customers in
these locations, primarily in the United States, and other countries throughout
the world (see Note 9). At December 31, 2002, approximately 56% of trade
accounts receivable were from customers within the United States. Trade accounts
receivable are principally from service and dealer groups, distributors, mass
merchants, chain saw and other original equipment manufacturers, and are
normally not collateralized. The Company has an arrangement through a
third-party financing company whereby Dixon and FIED customers can finance
purchases of equipment with minimal recourse to the Company.

The estimated fair values of certain financial instruments at December 31, 2002
and 2001, are as follows:

<TABLE>
<CAPTION>

                                                    2002                     2001
                                           --------------------   --------------------
                                           Carrying     Fair       Carrying     Fair
(Dollar amounts in millions)                Amount      Value       Amount      Value
------------------------------------       --------   ---------   ---------   --------
<S>                                        <C>        <C>         <C>         <C>

Cash and short-term investments             $ 26.4     $ 26.4     $  47.6     $  47.6
Other assets (restricted trust
  funds and notes receivable)                  6.2        6.2        12.1        12.1
Notes payable and long-term debt
  (see Note 3)                               627.5      478.1       641.0       443.3
------------------------------------        -------    --------   --------    --------
</TABLE>

The carrying amount of cash and short-term investments approximates fair value
because of the short maturity of those instruments. The fair value of notes
receivable is estimated based on the discounted value of estimated future cash
flows. The fair value of restricted trust funds approximates the carrying amount
for short-term instruments and is estimated by obtaining market quotes for
longer term

                                   Page 46

<PAGE>


instruments. The fair value of long-term debt is estimated based on recent
market transaction prices or on current rates available for debt with similar
terms and maturities.

NOTE 10:
SEGMENT INFORMATION

The Company identifies operating segments based on management responsibility.
The Company has two reportable segments: Outdoor Products and Industrial and
Power Equipment. Outdoor Products produces or markets chain saw components
(chain, bars and sprockets), lawn mowers and related products and other outdoor
care products. Industrial and Power Equipment produces timber harvesting and
industrial loading equipment and power transmission and gear components.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Inter-segment sales are not
significant.

                                   Page 47

<PAGE>


Information on Segments:

<TABLE>
<CAPTION>
                                                          Twelve Months Ended
                                                              December 31,
                                                        ---------------------------
(Dollar amounts in millions)                             2002      2001      2000
----------------------------------------------------    ------    ------    -------
<S>                                                     <C>       <C>       <C>

Sales:
  Outdoor Products                                      $347.8    $348.1    $360.7
  Industrial and Power Equipment                         131.7     120.6     153.2
----------------------------------------------------    ------    ------    -------
                                                        $479.5    $468.7    $513.9
----------------------------------------------------    ------    ------    -------
Operating income (loss):
  Outdoor Products                                      $ 70.7    $ 70.3    $ 81.0
  Industrial and Power Equipment                           5.2      (1.7)      1.1
----------------------------------------------------    ------    ------    -------
  Operating income from segments                          75.9      68.6      82.1
Corporate office expenses                                 (6.2)     (7.7)    (10.3)
Restructuring expenses                                    (7.2)    (16.2)
----------------------------------------------------    ------    ------    -------
Income from continuing operations                         62.5      44.7      71.8
Interest expense                                         (72.2)    (95.9)    (99.7)
Interest income                                            1.1       1.4       1.5
Other income (expense), net                               (0.2)     (0.7)      6.6
----------------------------------------------------    ------    ------    -------
Loss from continuing operations before income taxes      $(8.8)   $(50.5)   $(19.8)
----------------------------------------------------    ------    ------    -------

Identifiable assets:
  Outdoor Products                                      $218.5    $203.4    $224.7
  Industrial and Power Equipment                          87.4      94.3     117.5
  Corporate office/discontinued operations               122.1     147.1     361.7
----------------------------------------------------    ------    ------    -------
                                                        $428.0    $444.8    $703.9
----------------------------------------------------    ------    ------    -------
Depreciation and amortization:
  Outdoor Products                                      $ 10.4    $ 12.4    $ 10.8
  Industrial and Power Equipment                           3.3       4.5       4.1
  Corporate office                                         5.2       6.7       6.3
----------------------------------------------------    ------    ------    -------
                                                        $ 18.9    $ 23.6    $ 21.2
----------------------------------------------------    ------    ------    -------
Capital expenditures:
  Outdoor Products                                      $ 15.7    $ 10.5    $ 12.4
  Industrial and Power Equipment                           1.4       1.0       2.3
  Corporate office                                                             5.9
----------------------------------------------------    ------    ------    -------
                                                        $ 17.1    $ 11.5    $ 20.6
----------------------------------------------------    ------    ------    -------
</TABLE>

                                   Page 48

<PAGE>


Information on Sales by Significant Product Groups:


                                                   Twelve Months Ended
                                                       December 31,
                                                 ---------------------------
(Dollar amounts in millions)                      2002      2001      2000
---------------------------------------------    ------    ------    -------


Chain saw components                             $221.8    $230.3    $230.8
Timber harvesting and loading equipment           115.9     101.7     127.8
Lawn mowers and related products                   80.8      78.8      89.6
All others, less than 5% each                      61.0      57.9      65.7
---------------------------------------------    ------    ------    -------
         Total sales                             $479.5    $468.7    $513.9
---------------------------------------------    ======    ======    =======


Information on Geographic Areas:

                                                   Twelve Months Ended
                                                       December 31,
                                                 ---------------------------
(Dollar amounts in millions)                      2002      2001      2000
---------------------------------------------    ------    ------    -------

Sales:
  United States                                  $289.4    $280.6    $308.6
  European Union                                   85.2      81.5      92.2
  Canada                                           21.9      18.8      22.0
  All others, less than 3% each                    83.0      87.8      91.1
---------------------------------------------    ------    ------    -------
         Total sales                             $479.5    $468.7    $513.9
---------------------------------------------    ======    ======    =======

Long-Lived Assets:
  United States                                  $ 55.3    $ 64.0    $148.7
  Canada                                           24.3      22.4      20.3
  European Union                                    6.4       5.3       4.1
  Brazil                                            4.3       4.1       3.9
  All others, less than 1% each                     0.4       0.4       0.4
--------------------------------------------     ------    ------    -------
         Total long-lived assets                 $ 90.7    $ 96.2    $177.4
--------------------------------------------     ======    ======    =======


The geographic sales information is by country of destination. Long-lived assets
exclude goodwill. One customer, The Electrolux Group accounted for more than 10%
of consolidated sales in both 2002 and 2001, and no customer accounted for more
than 10% in 2000. While the Company expects this business relationship to
continue, the loss of this customer could affect the operations of the Outdoor
Products segments. Each of the Company's segments purchases certain important
materials from a limited number of suppliers that meet quality criteria.
Although alternative sources of supply are available, the sudden elimination of
certain suppliers could result in manufacturing delays, a reduction in product
quality and a possible loss of sales in the near term.

NOTE 11:
CONSOLIDATING FINANCIAL INFORMATION

Blount, Inc., a wholly-owned subsidiary of the Company, has two registered debt
securities that have different guarantees: 1) 7% Senior notes due June 15, 2005,
and 2) 13% Senior Subordinated notes due August 1, 2009. The 7% Senior notes are
fully and unconditionally, jointly and severally guaranteed by the Company.
Holders have first priority interest in all the shares or other equity interest
of all domestic subsidiaries and other entities, first priority mortgage on all
principal domestic

                                   Page 49

<PAGE>


properties, 65% of outstanding shares of first tier foreign subsidiaries, and
are held in parri passu, ratably, with the Company's secured bank lenders. The
13% Senior Subordinated notes are unconditionally guaranteed by the Company and
all of the Company's domestic subsidiaries ("guarantor subsidiaries"). All
guarantor subsidiaries of the 13% Senior Subordinated notes are 100% owned,
directly or indirectly, by the Company. While the Company and all of the
Company's domestic subsidiaries guarantee the 13% Senior Subordinated notes,
none of Blount's existing foreign subsidiaries ("non-guarantor subsidiaries")
guarantee the 13% Senior Subordinated notes. The following consolidating
financial information sets forth condensed consolidating financial information,
statements of operation, and the balance sheets and cash flows of Blount
International, Inc., Blount, Inc., the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries (in millions).

BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL INFORMATION

For the Twelve Months
Ended December 31, 2002

<TABLE>
<CAPTION>
                                                  Blount                               Non-
                                             International,  Blount,   Guarantor    Guarantor
                                                  Inc.        Inc.    Subsidiaries Subsidiaries Eliminations Consolidated
                                             --------------  -------  ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS
-----------------------
<S>                                          <C>             <C>      <C>          <C>          <C>          <C>

Sales                                                        $ 305.4      $ 121.5      $ 167.8      $(115.2)    $  479.5
Cost of sales                                                  209.4         94.4        128.8       (114.3)       318.3
                                                             -------      -------      -------      -------      --------
Gross profit                                                    96.0         27.1         39.0         (0.9)       161.2
Selling, general and administrative expenses        $  0.5      53.2         17.1         20.7                      91.5
Restructuring expenses                                           7.2                                                 7.2
                                                    -------  -------      -------      -------      -------      --------
Income (loss) from operations                         (0.5)     35.6         10.0         18.3         (0.9)        62.5
Interest expense                                     (21.0)    (50.4)        (0.4)        (0.4)                    (72.2)
Interest income                                                  0.6                       0.5                       1.1
Other income (expense), net                                      0.6                      (0.8)                     (0.2)
                                                    -------  -------      -------      -------      -------      --------
Income (loss) from continuing operations
  before income taxes                                (21.5)    (13.6)         9.6         17.6         (0.9)        (8.8)
Provision (benefit) for income taxes                 (10.7)     (3.7)         3.7          6.4                      (4.3)
                                                    -------  -------      -------      -------      -------      -------
Income (loss) from continuing operations             (10.8)     (9.9)         5.9         11.2         (0.9)        (4.5)
Discontinued operations:
  Net income (loss) from operations                              0.5                                                 0.5
  Income (loss) on disposal, net                                (1.4)                                               (1.4)
                                                    -------  -------      -------      -------      -------      -------
Income (loss) before extraordinary items             (10.8)    (10.8)         5.9         11.2         (0.9)        (5.4)
  Extraordinary loss                                            (0.3)                                               (0.3)
                                                    -------  -------      -------      -------      -------      -------
Income (loss) before earnings (losses)
  Of affiliated companies                            (10.8)    (11.1)         5.9         11.2         (0.9)        (5.7)
Equity in earnings (losses) of
  affiliated companies, net                            4.9      15.1          0.1                     (20.1)
                                                    -------  -------      -------      -------      -------      -------
Net income (loss)                                   $ (5.9)  $   4.0      $   6.0      $  11.2      $ (21.0)    $  (5.7)
                                                    =======  =======      =======      =======      =======      =======
</TABLE>

                                   Page 50

<PAGE>


For the Twelve Months
Ended December 31, 2001

<TABLE>
<CAPTION>

                                                  Blount                               Non-
                                             International,  Blount,   Guarantor    Guarantor
                                                  Inc.        Inc.    Subsidiaries Subsidiaries Eliminations Consolidated
                                             --------------  -------  ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS
-----------------------
<S>                                          <C>             <C>      <C>          <C>          <C>          <C>

Sales                                                        $ 301.5      $ 123.8      $ 160.2     $(116.8)     $ 468.7
Cost of sales                                                  205.8         97.6        124.3      (115.4)       312.3
                                                             -------      -------      -------     -------      -------
Gross profit                                                    95.7         26.2         35.9        (1.4)       156.4
Selling, general and administrative expenses        $ 0.7       54.4         20.6         19.8                     95.5
Restructuring expenses                                          16.2                                               16.2
                                                  -------    -------      -------      -------     -------      -------
Income (loss) from operations                        (0.7)      25.1          5.6         16.1        (1.4)        44.7
Interest expense                                    (31.6)     (93.0)        (0.8)        (0.4)       29.9        (95.9)
Interest income                                       0.1       30.4          0.2          0.6        29.9)         1.4
Other income (expense), net                                      1.2         (1.3)        (0.6)                    (0.7)
                                                  -------    -------      -------      -------     -------      -------
Income (loss) before continuing operations
  Before income taxes                               (32.2)     (36.3)         3.7         15.7        (1.4)       (50.5)
Provision (benefit) for income taxes                (11.7)     (14.5)         1.5          6.3                    (18.4)
                                                  -------    -------      -------      -------     -------      -------
Income (loss) from continuing operations            (20.5)     (21.8)         2.2          9.4        (1.4)       (32.1)
Discontinued operations:
  Net income (loss) from operations                              2.8         (0.3)                                  2.5
  Income (loss) on disposal, net                                (2.3)        (6.2)                                 (8.5)
                                                  -------    -------      -------      -------     -------      -------
Income (loss) before extraordinary items            (20.5)     (21.3)        (4.3)         9.4                     (1.4)
  Extraordinary loss                                            (5.5)                                              (5.5)

Income (loss) before earnings (losses)
  of affiliated companies                           (20.5)     (26.8)        (4.3)         9.4        (1.4)       (43.6)
Equity in earnings (losses) of
  Affiliated companies, net                         (23.1)       3.7         (0.3)                    19.7
                                                  -------    -------      -------      -------     -------      -------
Net income (loss)                                 $ (43.6)   $ (23.1)     $  (4.6)     $   9.4     $  18.3      $ (43.6)
                                                  =======    =======      =======      =======     =======      =======
</TABLE>

                                   Page 51

<PAGE>


For the Twelve Months
Ended December 31, 2000

<TABLE>
<CAPTION>

                                                  Blount                               Non-
                                             International,  Blount,   Guarantor    Guarantor
                                                  Inc.        Inc.    Subsidiaries Subsidiaries Eliminations Consolidated
                                             --------------  -------  ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS
-----------------------
<S>                                          <C>             <C>      <C>          <C>          <C>          <C>

Sales                                                        $ 328.8      $ 133.7      $ 190.2      $(138.8)     $ 513.9
Cost of sales                                                  252.6         94.5        131.8       (139.1)       339.8
                                                             -------      -------      -------      -------      -------
Gross profit                                                    76.2         39.2         58.4          0.3        174.1
Selling, general and administrative expenses       $   0.9      42.6         19.8         39.0                     102.3
                                                   -------   -------      -------      -------      -------      -------
Income (loss) from operations                         (0.9)     33.6         19.4         19.4          0.3         71.8
Interest expense                                     (34.0)    (99.3)        (2.7)        (0.4)        36.7        (99.7)
Interest income                                        0.2      37.3          0.4          0.3        (36.7)         1.5
Other income (expense), net                                      8.5         (1.6)        (0.3)                      6.6
                                                   -------   -------      -------      -------      -------      -------
Income (loss)  before income taxes                   (34.7)    (19.9)        15.5         19.0          0.3         19.8
Provision (benefit) for income taxes                 (15.3)     (6.0)         6.1          7.1                      (8.1)
                                                   -------   -------      -------      -------      -------      -------
Income (loss) from continuing operations             (19.4)    (13.9)         9.4         11.9          0.3        (11.7)
Discontinued operations:
  Net income (loss) from operations                              8.9         13.6                                   22.5
                                                   -------   -------      -------      -------      -------      -------
Income (loss) before earnings (losses)
  Of affiliated companies                            (19.4)     (5.0)        23.0         11.9          0.3         10.8
Equity in earnings (losses) of
  affiliated companies, net                           30.2      35.2         (0.3)                    (65.1)
                                                   -------   -------      -------      -------      -------      -------
Net income (loss)                                  $  10.8   $  30.2      $  22.7      $  11.9      $ (64.8)     $  10.8
                                                   =======   =======      =======      =======      =======      =======
</TABLE>

                                   Page 52

<PAGE>


December 31, 2002
<TABLE>
<CAPTION>
                                                Blount                               Non-
                                           International,  Blount,   Guarantor    Guarantor
                                                Inc.        Inc.    Subsidiaries Subsidiaries Eliminations Consolidated
                                           --------------  -------  ------------ ------------ ------------ ------------
BALANCE SHEET
-------------
<S>                                        <C>             <C>      <C>          <C>          <C>          <C>

ASSETS
Current assets:
  Cash and cash equivalents                                $  16.3       $ (0.1)      $ 10.2                   $  26.4
  Accounts receivable, net                                    26.2         15.1         17.2                      58.5
  Intercompany receivables                                   274.7         39.3          7.3     $(321.3)
  Inventories                                                 27.5         21.4         15.9                      64.8
  Deferred income taxes                                       30.4                       0.1                      30.5
  Other current assets                                         9.2          0.5          1.3                      11.0
                                                           -------      -------      -------     --------      -------
    Total current assets                                     384.3         76.2         52.0      (321.3)        191.2
Investments in affiliated companies             $  (25.7)    201.6                       0.2      (176.1)
Property, plant and equipment, net                            35.6         26.4         28.7                      90.7
Cost in excess of net assets of acquired
  businesses, net                                             30.2         40.2          6.5                      76.9
Other assets                                                  65.9                       3.3                      69.2
                                                 -------   -------      -------      -------      -------      -------
    Total Assets                                 $ (25.7)  $ 717.6      $ 142.8      $  90.7      $(497.4)    $  428.0
                                                 =======   =======      =======      =======      =======      =======


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Notes payable and current maturities
    of long-term debt                                      $   3.4                                            $    3.4
Accounts payable                                              14.0      $   5.5      $   6.0                      25.5
  Intercompany payables                         $  321.3                                          $(321.3)
  Accrued expenses                                            55.6          6.9          8.8                      71.3
                                                 -------   -------      -------      -------      -------      -------
    Total current liabilities                      321.3      73.0         12.4         14.8       (321.3)       100.2
Long-term debt, exclusive of current maturities     18.7     605.4                                               624.1
Intercompany notes payable
Deferred income taxes, exclusive of
  current portion                                             (1.9)                      1.9
Other liabilities                                    3.2      66.9          1.6           .9                      72.6
                                                 -------   -------      -------      -------      -------      -------
    Total Liabilities                              343.2     743.4         14.0         17.6       (321.3)       796.9
                                                 -------   -------      -------      -------      -------      -------
Stockholders Equity (Deficit)                     (368.9)    (25.8)       128.8         73.1       (176.1)      (368.9)
    Total Liabilities and                        -------   -------      -------      -------      -------      -------
      Stockholders' Equity (Deficit)             $ (25.7)  $ 717.6      $ 142.8      $  90.7      $(497.4)     $ 428.0
                                                 =======   =======      =======      =======      =======      =======
</TABLE>

                                   Page 53

<PAGE>


December 31, 2001
<TABLE>
<CAPTION>
                                                   Blount                                 Non-
                                                International,  Blount,   Guarantor    Guarantor
                                                    Inc.        Inc.     Subsidiaries Subsidiaries Eliminations Consolidated
                                                --------------  -------  ------------ ------------ ------------ ------------

BALANCE SHEET
-------------
<S>                                             <C>             <C>      <C>          <C>          <C>          <C>

ASSETS
Current assets:
  Cash and cash equivalents                                     $  43.9      $  (1.1)    $    4.8                   $  47.6
  Accounts receivable, net                                         26.3         14.7         16.3                      57.3
  Intercompany receivables                                        282.2         28.6          6.0      $(316.8)
  Inventories                                                      29.1         22.7         16.3                      68.1
  Deferred income taxes                                            22.9                                                22.9
  Other current assets                                              6.5          0.4          1.3                       8.2
                                                                -------      -------     --------      -------      -------
    Total current assets                                          410.9         65.3         44.7       (316.8)       204.1
Investments in affiliated companies                   $ (17.5)    186.9                       0.2       (169.6)
Property, plant and equipment, net                                 42.0         27.4         26.8                      96.2
Cost in excess of net assets of acquired
  businesses, net                                                  30.2         40.2          6.5                      76.9
Intercompany notes receivable                                                                 5.0         (5.0)
Other assets                                                       64.0          0.5          3.1                      67.6
                                                      -------   -------      -------     --------      -------      -------
    Total Assets                                      $ (17.5)  $ 734.0      $ 133.4      $  86.3      $(491.4)     $ 444.8
                                                      =======   =======      =======     ========      =======      =======


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Notes payable and current maturities
    of long-term debt                                           $   3.4                  $    5.1                   $   8.5
Accounts payable                                      $   0.1      10.3          4.9          4.4                      19.7
  Intercompany payables                                 316.8                                          $(316.8)
  Accrued expenses                                                 78.5          5.9          8.8                      93.2
                                                      -------   -------      -------     --------      -------      -------
    Total current liabilities                           316.9      92.2         10.8         18.3       (316.8)       121.4
Long-term debt, exclusive of current maturities          15.5     617.0                                               632.5
Intercompany notes payable                                          5.0                                   (5.0)
Deferred income taxes, exclusive of
  current portion                                                   0.9                       1.9                       2.8
Other liabilities                                                  36.4          0.9          0.7                      38.0
                                                      -------   -------      -------     --------      -------      -------
    Total Liabilities                                   332.4     751.5         11.7         20.9       (321.8)       794.7
                                                      -------   -------      -------     --------      -------      -------
Stockholders Equity (Deficit)                          (349.9)    (17.5)       121.7         65.4       (169.6)      (349.9)
                                                      -------   -------      -------     --------      -------      -------
    Total Liabilities and
      Stockholders' Equity (Deficit)                  $(17.5)   $ 734.0      $ 133.4     $   86.3      $(491.4)     $ 444.8
                                                      =======   =======      =======     ========      =======      =======
</TABLE>

                                   Page 54

<PAGE>


For the Twelve Months
Ended December 31, 2002
<TABLE>
<CAPTION>

                                                    Blount                               Non-
                                                International,  Blount,   Guarantor    Guarantor
                                                     Inc.        Inc.    Subsidiaries Subsidiaries Eliminations Consolidated
                                               --------------  -------  ------------ ------------ ------------ ------------
STATEMENT OF CASH FLOWS
-----------------------
<S>                                             <C>             <C>      <C>          <C>          <C>          <C>

Net cash provided by (used in) continuing
  operations                                          $  (4.5)  $  13.7    $   3.8     $    14.6                    $  27.6
Net cash provided by discontinued operations                        1.2                                                 1.2
                                                      -------   -------    -------        -------      -------       -------
Net cash provided by (used in) operating
 Activities                                              (4.5)     14.9        3.8          14.6                       28.8
                                                      -------   -------    -------        -------      -------       -------
Cash flows from investing activities:
Proceeds from sales of property, plant
  and equipment                                                     8.0                                                 8.0
Purchases of property, plant and equipment                         (8.4)      (2.4)         (6.3)                     (17.1)
                                                      -------   -------      -------      -------      -------       -------
Net cash provided by (used in) continuing
  operations                                                       (0.4)      (2.4)         (6.3)                      (9.1)
Net cash used in discontinued operations                          (23.8)                                              (23.8)
                                                      -------   -------     -------       -------      -------       -------

Net cash (used in) investing activities                           (24.2)      (2.4)         (6.3)                     (32.9)
                                                      -------   -------      -------      -------      -------      -------
Cash flows from financing activities:
Increase in short-term borrowings                                                           (5.1)                      (5.1)
Reduction of long-term debt                                       (11.8)                                              (11.8)
Advances from (to) affiliated companies                   4.5      (4.0)      (0.5)
Other                                                              (0.2)                                               (0.2)
                                                      -------   -------      -------      --------     -------      -------
Net cash provided by (used in) financing
  activities                                              4.5     (16.0)      (0.5)         (5.1)                     (17.1)
                                                      -------   -------      -------      -------      -------      -------
Net increase (decrease) in cash and cash
  equivalents                                                     (25.3)       0.9           3.2                      (21.2)
Cash and cash equivalents at beginning of period                   43.9       (1.1)          4.8                       47.6
                                                      -------   -------      -------      -------      -------      -------
Cash and cash equivalents at end of period            $   0.0   $  18.6      $(0.2)       $  8.0                    $  26.4
                                                      =======   =======      =======      =======      =======      =======
</TABLE>

                                   Page 55

<PAGE>


For the Twelve Months
Ended December 31, 2001
<TABLE>
<CAPTION>

                                                     Blount                               Non-
                                                International,  Blount,   Guarantor    Guarantor
                                                     Inc.        Inc.    Subsidiaries Subsidiaries Eliminations Consolidated
                                                --------------  -------  ------------ ------------ ------------ ------------
STATEMENT OF CASH FLOWS
-----------------------
<S>                                             <C>             <C>      <C>          <C>          <C>          <C>

Net cash provided by (used in) continuing
  operations                                         $  34.2    $  27.7      $   2.4      $   9.2     $  (55.5)   $  18.0
Net cash provided by discontinued operations                       20.6          9.2                                 29.8
                                                     -------    -------      -------      -------      -------    -------
Net cash provided by (used in) operating
  activities                                            34.2       48.3         11.6          9.2        (55.5)      47.8
                                                     -------    -------      -------      -------      -------    -------
Cash flows from investing activities:
Proceeds from sales of property, plant
  and equipment                                                     2.6                       0.1                     2.7
Purchases of property, plant and equipment                         (4.7)        (2.2)        (4.6)                  (11.5)
Acquisitions of businesses                                         (1.3)                                             (1.3)
                                                     -------    -------      -------      -------      -------     -------
Net cash provided by (used in) continuing
  operations                                                       (3.4)        (2.2)        (4.5)                  (10.1)
Net cash used in discontinued operations                           51.7        147.5                                199.2
                                                     -------    -------      -------      -------      -------     -------

Net cash (used in) investing activities                            48.3        145.3         (4.5)                  189.1
                                                     -------    -------      -------      -------      -------     -------
Cash flows from financing activities:
Issuance of long-term debt                              13.0                                                         13.0
Reduction of long-term debt                                      (211.1)                     (0.1)                 (211.2)
Dividends paid                                                    (52.1)                     (3.4)        55.5
Capital contributions                                    7.0       20.0                                  (20.0)        7.0
Advances from (to) affiliated companies                (54.2)     191.4       (157.2)                     20.0
Other                                                              (2.9)                                             (2.9)
                                                     -------    -------      -------      --------     -------     -------
Net cash provided by (used in) financing
  activities                                           (34.2)     (54.7)      (157.2)        (3.5)        55.5     (194.1)
                                                     -------    -------      -------      -------      -------     -------
Net increase (decrease) in cash and cash
  equivalents                                                      41.9         (0.3)         1.2                    42.8
Cash and cash equivalents at beginning of period                    1.9         (0.8)         3.7                     4.8
                                                     -------    -------      -------      -------      -------     -------
Cash and cash equivalents at end of period           $   0.0    $  43.8      $  (1.1)     $   4.9      $   0.0     $ 47.6
                                                     =======    =======      =======      =======      =======     =======
</TABLE>

                                   Page 56

<PAGE>


For the Twelve Months
Ended December 31, 2000
<TABLE>
<CAPTION>

                                                  Blount                               Non-
                                             International,  Blount,   Guarantor    Guarantor
                                                  Inc.        Inc.    Subsidiaries Subsidiaries Eliminations Consolidated
                                             --------------  -------  ------------ ------------ ------------ ------------
STATEMENT OF CASH FLOWS
-----------------------
<S>                                          <C>             <C>      <C>          <C>          <C>          <C>

Net cash provided by (used in) continuing
  operations                                    $ 355.6        $ 2.7     $  21.0      $   7.9      $(380.2)    $   7.0
Net cash provided by discontinued operations                    25.6        (2.8)                                 22.8
                                                -------      -------     -------      -------      -------     -------
Net cash provided by (used in) operating
  activities                                      355.6         28.3        18.2          7.9       (380.2)       29.8
                                                -------      -------     -------      -------      -------     -------
Cash flows from investing activities:
Proceeds from sales of property, plant
  and equipment                                                 15.5         1.5          0.1                     17.1
Purchases of property, plant and equipment                      (8.2)       (6.5)        (5.9)                   (20.6)
Acquisitions of businesses                                     (32.6)                                            (32.6)
                                                -------      -------     -------      -------      -------     -------
Net cash used in continuing operations                         (25.3)       (5.0)        (5.8)                   (36.1)
Net cash used in discontinued operations                       (11.4)       (4.2)                                (15.6)
                                                -------      -------     -------      -------      -------     -------

Net cash (used in) investing activities                        (36.7)       (9.2)        (5.8)                   (51.7)
                                                -------      -------     -------      -------      -------     -------
Cash flows from financing activities:
Net increase in short-term borrowings                                                     2.0                      2.0
Issuance of long-term debt                                      18.1                                              18.1
Reduction of long-term debt                                     (3.4)                    (0.1)                    (3.5)
Dividends paid                                                (375.0)                    (5.2)       380.2
Advances from (to) affiliated companies          (355.6)       365.7       (10.1)
Other                                                           (0.4)                                             (0.4)
                                                -------      -------     -------      -------      -------     -------
Net cash provided by (used in) financing
  activities                                     (355.6)         5.0       (10.1)       (3.3)        380.2        16.2
                                                -------      -------     -------      -------      -------     -------
Net decrease in cash and cash
  equivalents                                                   (3.4)       (1.1)        (1.2)                    (5.7)
Cash and cash equivalents at beginning of period                 5.3         0.3          4.9                     10.5
                                                -------      -------      -------      -------      -------    -------
Cash and cash equivalents at end of period      $   0.0      $   1.9     $  (0.8)     $   3.7      $   0.0     $   4.8
                                                =======      =======     =======      =======      =======     =======
</TABLE>

                                   Page 57

<PAGE>


NOTE 12:
OTHER INFORMATION

At December 31, 2002 and 2001, the following balance sheet captions are
comprised of the items specified below:

(Dollar amounts in millions)                      2002       2001
-------------------------------------------     --------   --------

Accounts receivable:
  Trade accounts                                $  60.1    $  58.3
  Other                                             2.7        2.5
  Allowance for doubtful accounts                  (4.3)      (3.5)
-------------------------------------------     --------   --------
                                                $  58.5    $  57.3
-------------------------------------------     --------   --------
Inventories:
  Finished goods                                $  31.8    $  32.1
  Work in progress                                  9.3        9.8
  Raw materials and supplies                       23.7       26.2
-------------------------------------------     --------   --------
                                                $  64.8    $  68.1
-------------------------------------------     --------   --------
Property, plant and equipment:
  Land                                          $   4.8    $   5.6
  Buildings and improvements                       64.7       75.7
  Machinery and equipment                         170.8      169.4
  Furniture, fixtures and office equipment         20.2       20.7
  Transportation equipment                          1.6        4.8
  Construction in progress                          9.1        5.2
  Accumulated depreciation                       (180.5)    (185.2)
-------------------------------------------     --------   --------
                                                $  90.7    $  96.2
-------------------------------------------     --------   --------
Other Assets:
  Deferred financing costs                      $ 18.3     $  23.9
  Rabbi trusts (see Note 6)                        5.6        11.1
  Escrow for SEG sale                             25.0        25.0
  Deferred income taxes                            9.8         0.0
  Other                                           10.5         7.6
-------------------------------------------     --------   --------
                                                $  69.2    $  67.6
-------------------------------------------     --------   --------
Accrued expenses:
  Salaries, wages and related withholdings      $  17.8    $  21.8
  Employee benefits                                 6.9        6.7
  Casualty insurance costs                          3.8        5.6
  Accrued interest                                 22.2       22.5
  Other                                            20.6       36.6
-------------------------------------------     --------   --------
                                                $  71.3    $  93.2
-------------------------------------------     --------   --------
Other liabilities:
  Employee benefits                             $  66.7    $  33.5
  Casualty insurance costs                          0.8        2.1
  Other                                             5.1        2.4
-------------------------------------------     --------   --------
                                                $  72.6    $  38.0
-------------------------------------------     --------   --------

                                   Page 58

<PAGE>


Supplemental cash flow information is as follows:

                                                      Twelve Months Ended
                                                          December 31,
                                                -------------------------------
(Dollar amounts in millions)                     2002       2001         2000
-------------------------------------------     -------    -------      -------

Interest paid                                   $ 64.9     $ 92.5       $ 90.8
Income taxes paid                                  5.2       (1.3)         6.5
Noncash investing and financing activities:
Fair value assets acquired                                                 46.1
Cash paid                                                                 (40.4)
Liabilities assumed and incurred                                            5.7
-------------------------------------------     -------    -------      -------


NOTE 13:
NEW ACCOUNTING PRONOUNCEMENTS

In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No.143 applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and/or normal use of the asset. The
Company will adopt the provisions of SFAS No. 143 on January 1, 2003. Upon
initial application of the provisions of SFAS No. 143, entities are required to
recognize a liability for any asset retirement obligations adjusted for the
cumulative accretion to the date of the adoption of this Statement, an asset
retirement cost capitalized as an increase to the carrying amount of the
associated long-lived asset, and accumulated depreciation on that capitalized
cost. The cumulative effect, if any, of initially applying this Statement will
be recognized as a change in accounting principle. The Company is evaluating the
effect this statement will have on its future financial statements.

In October 2001, the FASB issued Statement of Financial Accounting Standards
No.144, "Accounting for the Impairment or Disposal of Long-lived Assets." SFAS
No. 144 addresses financial accounting and reporting for the impairment of
long-lived assets and for assets to be disposed of and broadens the presentation
of discontinued operations to include more disposal transactions. The provisions
of this Statement, which were adopted by the Company January 1, 2002, have not
had a material impact on its financial condition or results of operations.

In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145, "Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections." This Statement, which updates, clarifies and
simplifies existing accounting pronouncements, addresses the reporting of debt
extinguishments and accounting for certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. The provisions
of this Statement are generally effective for the Company's 2003 fiscal year, or
in the case of specific provisions, for transactions occurring after May 15,
2002 or for financial statements issued on or after May 15, 2002. The Company
does not expect that the adoption of SFAS 145 will have a material impact on its
financial statements, however, it will require the Company to reclassify prior
years debt extinguishment expense in future reports.

In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS
No. 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3,

                                   Page 59

<PAGE>


"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)". This
Statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred, and concludes
that an entity's commitment to an exit plan does not by itself create a present
obligation that meets the definition of a liability. This Statement also
establishes that fair value is the objective of initial measurement of the
liability. The provisions of this Statement are effective for exit or disposal
activities that are initiated after December 31, 2002, with early application
encouraged. The Company believes that the adoption of SFAS No. 146 will impact
the timing of the recognition of costs associated with an exit or disposal
activity but is not expected to have a material impact on the financial
statements.

In November 2002, the FASB issued Financial Accounting Standards Board
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others, an
interpretation of FASB Statements No. 5, 57 and 107 and Rescission of FASB
Interpretation No.34." FIN 45 clarifies the requirements of SFAS No. 5,
"Accounting for Contingencies," relating to the guarantor's accounting for, and
disclosure of, the issuance of certain types of guarantees. The disclosure
provisions of FIN 45 are effective for the current fiscal year. However, the
provisions for initial recognition and measurement are effective on a
prospective basis for guarantees that are issued or modified after December
31,2002, irrespective of a guarantor's year-end.

Information related to the Company's guarantees and other commercial commitments
are summarized in the following table (in millions):

                                                    Total at
                                                December 31, 2002
----------------------------------------        -----------------

Product Warranty                                    $   3.3
Letters of Credit Outstanding                          11.4
Third Party Financing Projections(1)                    4.0
Accounts Receivable Securitization(2)                   0.4
----------------------------------------        ------------------
         Total                                      $    19.1
========================================        ==================


(1)  Applicable to the third party financing agreements for customer equipment
     purchases of Dixon lawnmowers and FIED equipment. See Note 8 to the
     Consolidated Financial Statement.
(2)  Included the guarantees of certain accounts receivable of Dixon's
     receivable to a third party financing company. See Note 8 to the
     Consolidated Financial Statement.

In addition to these amounts, Blount International, Inc. also guarantees certain
debt of its subsidiaries (see Note 11 to the Consolidated Financial Statements).

Warranty Accruals:
The Company offers certain warranties with the sale of its products. The
warranty obligation is recorded as a liability on the balance sheet and is
estimated through historical customer claims, supplier performance, and new
product performance. Should a change in trend occur in customer claims, an
increase or decrease in the warranty liability may be necessary. Changes in the
Company's warranty reserve for

                                   Page 60

<PAGE>


the period ended December 31, 2002 are as follows (in millions):


Balance as of December 31, 2001       $    3.3
Accrued                                    5.7
Payments made (in cash or in-kind)        (5.7)
-------------------------------       ---------
Balance as of December 31, 2002       $    3.3
===============================       =========


Other Guarantees:
Guarantees and claims arise during the ordinary course of business from
relationships with suppliers, customers and non-consolidated affiliates when the
Company undertakes an obligation to guarantee the performance of others if
specified triggering events occur. Nonperformance under a contract could trigger
an obligation of the Company. In addition, certain guarantees relate to
contractual indemnification provisions in connection with transactions involving
the purchase or sale of stock or assets. These claims include actions based upon
intellectual property and environmental matters and other indemnifications. The
ultimate effect on future financial results is not subject to reasonable
estimation because considerable uncertainty exists as to the final outcome of
these claims. However, while the ultimate liabilities resulting from such claims
may be significant to results of operations in the period recognized, management
does not anticipate they will have a material adverse effect on the Company's
consolidated financial position or liquidity.

In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure".
This Statement provides additional transition guidance for those entities that
elect to voluntarily adopt the provisions of SFAS No. 123, "Accounting for Stock
Based Compensation." Furthermore, SFAS No. 148 mandates new disclosures in both
interim and year-end financial statements within the Company's Significant
Accounting Policies footnote. The Company has elected not to adopt the
recognition provisions of SFAS No. 123, as amended by SFAS No. 148. However, the
Company has adopted the disclosure provisions for the current fiscal year and
has included this information in Note 1 to the Company's Consolidated Financial
Statements.

In January 2003, the FASB issued Financial Accounting Standards Boards
Interpretation No. 46, "Consolidation of Variable Interest Entities." FIN 46
clarifies the application of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 applies
immediately to variable interest entities created after January 31, 2003, and to
variable interest entities (VIEs)in which an enterprise obtains an interest
after that date. It applies in the first fiscal year or interim period beginning
after June 15, 2003, to variable interest entities in which an enterprise holds
a variable interest that it acquired before February 1, 2003. FIN 46 applies to
public enterprises as of the beginning of the applicable interim or annual
periods. The Company has not identified any VIEs for which it is the primary
beneficiary or has significant involvement.

                                   Page 61

<PAGE>


SUPPLEMENTARY DATA
QUARTERLY RESULTS OF OPERATIONS
(Unaudited)

The following tables set forth a summary of the unaudited quarterly results of
operations for the twelve-month periods ended December 31, 2002 and 2001.

<TABLE>
<CAPTION>

(Dollar amounts             1st Quarter       2nd Quarter       3rd Quarter         4th Quarter
in millions, except           Ended              Ended             Ended               Ended
per share data)           March 31, 2002    June 30, 2002   September 30, 2002   December 31, 2002    Total
-----------------------   --------------    -------------   ------------------   -----------------  ----------
<S>                       <C>               <C>             <C>                  <C>                  <C>

2002
Sales                          $106.6            $123.3           $121.5                $128.1        $479.5
Gross profit                     36.9              42.1             40.8                  41.4         161.2
Net income (loss)                (6.5)              0.5             (3.5)                  3.8          (5.7)
Earnings (loss) per
  share:
    Basic                       (0.21)             0.02            (0.11)                 0.12         (0.19)
    Diluted                     (0.21)             0.02            (0.11)                 0.12         (0.19)

</TABLE>

The first quarter includes restructuring expense associated with closing the
corporate office of $5.6 million and extraordinary loss on early extinguishment
of debt of $0.3 million. The second quarter includes restructuring expense and
loss on assets associated with closing the corporate office of $0.5 million. The
third quarter includes expenses related to restructuring and loss on sale of the
corporate office building of $0.8 million, and an adjustment on the net loss on
sale of the Sporting Equipment Group of $1.7 million. The fourth quarter
includes restructuring expense of $1.4 million associated with the relocation of
certain manufacturing assets and production among the Company's Oregon Cutting
Systems' facilities and $0.8 million in net income primarily from discontinued
operations due to the final settlement of a claim related to one of the
Company's discontinued operations.

The 2002 results reflect the non-amortization of goodwill due to the Company's
adoption of Statement of Financial Accounting Standards No. 142 "Goodwill and
Other Intangible Assets" as of January 1, 2002. 2001 results included $3.1
million of goodwill amortization expense.

<TABLE>
<CAPTION>

(Dollar amounts             1st Quarter       2nd Quarter       3rd Quarter          4th Quarter
in millions, except           Ended              Ended             Ended               Ended
per share data)           March 31, 2001    June 30, 2001   September 30, 2001   December 31, 2001    Total
-----------------------   --------------    -------------   ------------------   -----------------  ----------
<S>                       <C>               <C>             <C>                  <C>                <C>

2001
Sales                          $119.1            $117.1           $113.6                $119.0        $468.7
Gross profit                     40.2              37.9             38.3                  40.0         156.4
Net loss                        (13.8)             (4.8)            (6.2)                (18.9)        (43.6)
Earnings (loss) per
  share:
    Basic                       (0.45)            (0.15)           (0.20)                (0.61)        (1.42)
    Diluted                     (0.45)            (0.15)           (0.20)                (0.61)        (1.42)

</TABLE>

The first quarter includes restructuring expense of $16.2 million. The fourth
quarter includes the loss on the sale of the Sporting Equipment Group of $8.5
million ($.28 per share) and a $5.5 million extraordinary loss ($.18 per share)
associated with the early payment of debt.



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

None.

                                   Page 62

<PAGE>


PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
         REGISTRANT

See the "Election of Directors", "Executive Officers" and "Filing Disclosure"
sections of the proxy statement for the 2003 Annual Meeting of Stockholders of
Blount International, Inc., which sections are incorporated herein by reference.


ITEM 11.  EXECUTIVE COMPENSATION

See the "Executive Compensation", "Compensation of Directors", "Compensation
Committee Interlocks and Insider Participation" and "Employment Contracts,
Termination of Employment and Change in Control Arrangements" sections of the
proxy statement for the Annual Meeting of Stockholders of Blount International,
Inc., which sections are incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDERS MATTERS

See the "Principal Stockholders" section of the proxy statement for the 2003
Annual Meeting of Stockholders of Blount International, Inc., which section is
incorporated herein by reference.

EQUITY COMPENSATION PLANS

Equity Compensation Plans Approved by Stockholders:

  1999 Stock Incentive Plan
  2000 Stock Incentive Plan

Equity Compensation Plans Not Approved by Stockholders:

   Stockholders have approved all compensation plans under which shares of
   Blount common stock may be issued.

                                   Page 63

<PAGE>


Summary Table:
The following table sets forth certain information as of December 31, 2002 with
respect to compensation plans under which shares of Blount common stock may be
issued:

<TABLE>
<CAPTION>

                                                              No. Shares Remaining
                           No. Shares to be     Weighted-      Available for Future
                             Issued upon         Average       Issuance Under Equity
                             Exercise of     Exercise Price    Compensation Plans
                             Outstanding     of Outstanding    (Excluding Shares in
Plan Category                  Options          Options              Column 1)
---------------            ---------------   --------------   ---------------------
<S>                        <C>               <C>              <C>

Equity compensation
  Plans approved by
  Stockholders              3,460,813 (1)         $8.17           2,414,187 (2)

Equity compensation
  Plans not approved
  stockholders
---------------            ---------------   --------------   ---------------------
TOTAL                       3,460,813             $8.17           2,414,187
</TABLE>

(1)  Represents shares of common stock issuable upon exercise of outstanding
     options granted under Blount's 1999 and 2000 plans.

(2)  Includes shares of common stock available for future grants under Blount's
     1999 and 2000 plans.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See the "Certain Transactions and Other Matters" section of the proxy statement
for the 2003 Annual Meeting of Stockholders of Blount International, Inc., which
section is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

The Company maintains a set of disclosure controls and procedures designed to
ensure that information required to be disclosed by the Company in reports that
it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. Within the 90-day period
prior to the filing of this report, an evaluation was carried out under the
supervision and with the participation of the Company's management, including
the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the
effectiveness of our disclosure controls and procedures. Based on that
evaluation, the CEO and CFO have concluded that the Company's disclosure
controls and procedures are effective.

Subsequent to the date of their evaluation, there were no significant changes in
the Company's internal controls or in other factors that could significantly
affect these controls.

                                   Page 64

<PAGE>


PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>


                                                                              Page
                                                                           Reference
                                                                           ----------
<S>                                                                        <C>
(a)  Certain documents filed as part of Form 10-K

     (1)  Financial Statements and Supplementary Data

     Report of Independent Accountants                                          23

     Consolidated Statements of Income (Loss) for the years ended
     December 31, 2002, 2001 and 2000                                           25

     Consolidated Balance Sheets as of December 31, 2002 and 2001               26

     Consolidated Statements of Cash Flows for the years ended
     December 31, 2002, 2001 and 2000                                           27

     Consolidated Statements of Changes in Stockholders' Equity (Deficit)
     for the years ended December 31, 2002, 2001 and 2000                       28

     Notes to Consolidated Financial Statements                                 29-61

     Supplementary Data                                                         62

     (2)  Financial Statement Schedules

     Schedule II - Valuation and qualifying accounts for the years ended
     December 31, 2002, 2001 and 2000                                           74

</TABLE>


     All other schedules have been omitted because they are not required or
     because the Information is presented in the Notes to Consolidated Financial
     Statements.

(b)  Reports on Form 8-K in the Fourth Quarter

     None.

(c)  Exhibits required by Item 601 of Regulation S-K:

     * 2(a) Plan and Agreement of Merger among Blount International, Inc., HBC
Transaction Subsidiary, Inc. and Blount, Inc., dated August 17, 1995 filed as
part of Registration Statement on Form S-4 (Reg. No. 33-63141) of Blount
International, Inc., including amendments and exhibits, which became effective
on October 4, 1995 (Commission File No. 33-63141).

     * 2(b) Stock Purchase Agreement, dated November 4, 1997, by and among
Blount, Inc., Hoffman Enclosures, Inc., Pentair, Inc., and Federal-Hoffman, Inc.
which was filed as Exhibit No. 2 to the Form 8-K filed by Blount International,
Inc. on November 19, 1997 (Commission File No. 001-11549).

     * 2(c) Agreement and Plan of Merger and Recapitalization, dated as of April
18, 1999, between Blount International, Inc., and Red Dog Acquisition, Corp.
(included as Appendix A to the Proxy Statement-Prospectus which forms a part of
the Registration State-ment) previously filed on July 15, 1999, by Blount
International, Inc. (Reg. No. 333-82973).

     *3(c) Post-Merger Restated Certificate of Incorporation of Blount
International, Inc. (included as Exhibit A to the Agreement and Plan of Merger
and Recapitalization which is Exhibit 2.1) filed as part of the Proxy
Statement-Prospectus which forms a part of the Registration Statement on Form
S-4 (Reg. No. 333-82973) previously filed on July 15, 1999, by Blount
International, Inc. *3(d) Post-Merger Bylaws of Blount International, Inc.
(included as Exhibit B to the Agreement and Plan of Merger and Recapitalization
which is Exhibit 2.1) filed as part of the Proxy Statement-Prospectus which
forms a part of the Registration Statement on Form S-4 (Reg. No. 333-82973).

                                   Page 65

<PAGE>


     *4(a) Registration Rights and Stock Transfer Restriction agreement filed as
part of Registration Statement on Form S-4 (Reg. No. 33-63141) of Blount
International, Inc., including amendments and exhibits, which became effective
on October 4, 1995 (Commission File No. 33-63141).

     *4(b) Registration Statement on Form S-3 (Reg. Nos. 333-42481 and
333-42481-01), with respect to the 7% $150 million Senior Notes due 2005 of
Blount, Inc. which are guaranteed by Blount International, Inc., including
amendments and exhibits, which became effective on June 17, 1998.

     *4(c) Form of stock certificate of New Blount common stock filed as part of
the Proxy Statement-Prospectus which forms a part of the previously filed on
July 15, 1999, by Blount International, Inc., Registration Statement on Form S-4
(Reg. No. 333-82973).

     *4(d) $500,000,000 Credit Agreement dated as of August 19, 1999 among
Blount International Inc., Blount, Inc., as Borrower, and the Several Lenders
from time to time Parties Hereto which was filed as Exhibit 4 to the report on
Form 10-Q for the third quarter ended September 30, 1999.

     *4(e) Indenture between Blount, Inc., as issuer, Blount International,
Inc., BI Holdings Corp., Benjamin F. Shaw Company, BI, L.L.C., Blount
Development Corp., Omark Properties, Inc., 4520 Corp., Inc., Gear Products,
Inc., Dixon Industries, Inc., Frederick Manufacturing Corporation, Federal
Cartridge Company, Simmons Outdoor Corporation, Mocenplaza Development Corp.,
and CTR Manufacturing, Inc., as Guarantors, and United States Trust Company of
New York, dated as of August 19, 1999, (including exhibits) which was filed as
Exhibit 4.1 to the report on Form 10-Q for the third quarter ended September 30,
1999.

     *4(f) Registration Right Agreement by and among Blount, Inc., Blount
International, Inc., BI Holdings Corp., Benjamin F. Shaw Company, BI. L.L.C.,
Blount Development Corp., Omark Properties, Inc., Gear Products, Inc., Dixon
Industries, Inc., Frederick Manufacturing Corporation, Federal Cartridge
Company, Simmons Outdoor Corporation, Mocenplaza Development Corp., CTR
Manufacturing, Inc., and Lehman Brothers, Inc. dated as of August 19, 1999,
filed as Exhibit 4.2 to the report on Form 10-Q for the third quarter ended
September 30, 1999.

     *4(g) Registration Statement on Form S-4 (Reg. No. 333-92481) which respect
to the 13% $325 million Senior Subordinated Notes of Blount, Inc. guaranteed by
Blount Inter-national, Inc., including amendments and exhibits, effective on
January 19, 2000.

     *4(h) Amendment to $500,000,000 Credit Agreement dated as of January 31,
2001 as filed on Form 8-K on February 8, 2001.

     *4(i) Purchase Agreement between Blount International, Inc., and an
affiliate of Lehman Brothers Merchant Banking Partners II, L.P. for sale of
$20,000,000 of a convertible preferred equivalent security, together with
warrants for common stock, as filed on Form 8-K on March 13, 2001.

     *4(j) Amendment to $500,000,000 Credit Agreement dated as of December 3,
2001.

     *9(a) Stockholder Agreement, dated as of April 18, 1999, between Red Dog
Acquisition, corp., a Delaware corporation and a wholly-owned subsidiary of
Lehman Brothers Merchant Banking Partners II L.P., a Delaware limited
partnership, and The Blount Holding Company, L.P., a Delaware limited
partnership which was filed as Exhibit 9 to the Form 8-K/A filed April 20, 1999.

                                   Page 66

<PAGE>


     *10(a) Form of Indemnification Agreement between Blount International,
Inc., and The Blount Holding Company, L.P. filed as part of Registration
Statement on Form S-4 (Reg. No. 33-63141) of Blount International, Inc.,
including amendments and exhibits, which became effective on October 4, 1995
(Commission File No. 33-63141). *10(b) Supplemental Retirement and Disability
Plan of Blount, Inc. which was filed as Exhibit 10(e) to the Annual Report of
Blount, Inc., on Form 10-K for the fiscal year ended February 29, 1992
(Commission File No. 1-7002).

     *10(c) Written description of the Management Incentive Plan of Blount,
Inc., which was included within the Proxy Statement of Blount, Inc. for the
Annual Meeting of Stockholders held June 27, 1994 (Commission File No. 1-7002).

     *10(d) Supplemental Retirement Savings Plan of Blount, Inc. which was filed
as Exhibit 10(i) to the Annual Report of Blount, Inc. on Form 10-K for the
fiscal year ended February 29, 1992 (Commission File No. 1-7002).

     *10(e) Supplemental Executive Retirement Plan between Blount, Inc. and John
M. Panettiere which was filed as Exhibit 10(t) to the Annual Report of Blount,
Inc. on Form 10-K for the fiscal year ended February 28, 1993 (Commission File
No. 1-7002).

     *10(f) Executive Management Target Incentive Plan of Blount, Inc. which was
filed as Exhibit B to the Proxy Statement of Blount, Inc. for the Annual Meeting
of Stockholders held June 27, 1994 (Commission File No. 1-7002).

     *10(g) Blount, Inc. Executive Benefit Plans Trust Agreement and Amendment
to and Assumption of Blount, Inc. Executive Benefit Plans Trust which were filed
as Exhibits 10(x)(i) and 10(x)(ii) to the Annual Report of Blount International,
Inc. on Form 10-K for the fiscal year ended February 29, 1996 (Commission File
No. 001-11549).

     *10(h) Blount, Inc. Benefits Protection Trust Agreement and Amendment To ad
Assumption of Blount, Inc. Benefits Protection Trust which were filed as
Exhibits 10(y)(i) and 10(y)(ii) to the Annual Report of Blount International,
Inc. on Form 10-K for the fiscal year ended February 29, 1996 (Commission File
No. 001-11549).

     *10(i) 1998 Blount Long-Term Executive Stock Option Plan of Blount
International, Inc. filed as part of Registration Statement on Form S-8 (Reg.
No. 333-56701), including exhibits, which became effective on June 12, 1998.

     *10(j) Supplemental Executive Retirement Plan between Blount, Inc. and
Gerald W. Bersett which was filed as Exhibit 10(z) to the Annual Report of
Blount International, Inc. on Form 10-K for the year ended December 31, 1998
(Commission File No. 001-11549).

     *10(k) The Blount Deferred Compensation Plan which was filed as Exhibit
10(cc) to the Annual Report of Blount International, Inc. on Form 10-K for the
year ended December 31, 1998 (Commission File No. 001-11549).

     *10(l) Employment Agreement, dated as of April 18, 1999, between Blount
International, Inc. and John M. Panettiere filed as part of Registration
Statement on Form S-4 (Reg. No. 333-92481) of Blount International, Inc.,
including amendments and exhibits, which became effective January 19, 2000.

     *10(m) Employment Agreement, dated as of April 18, 1999 , between Blount
International, Inc. and Gerald W. Bersett filed as part of Registration
Statement on Form S-4 (Reg. No. 333-92481) of Blount International, Inc.,
including amendments and exhibits, which became effective January 19, 2000.

     *10(n) Employment Agreement, dated as of April 18, 1999, between Blount
International, Inc. and James S. Osterman filed as part of Registration
Statement on Form S-4 (Reg. No. 333-92481) of Blount International, Inc.,
including amendments and exhibits, which became effective January 19, 2000.

     *10(o) Employment Agreement, dated as of April 18, 1999, between Blount
International, Inc. and Richard H. Irving filed as part of Registration
Statement on Form S-4 (Reg. No. 333-92481) of Blount International, Inc.,
including amendments and exhibits, which became effective January 19, 2000.

                                   Page 67

<PAGE>


     *10(p) Employment Agreement, dated as of April 18, 1999, between Blount
International, Inc. and Harold E. Layman filed as part of Registration Statement
on Form S-4 (Reg. No. 333-92481) of Blount International, Inc., including
amendments and exhibits, which became effective January 19, 2000.

     *10(q) Employee Stockholder Agreement dated as of August 19, 1999, among
Blount International, Inc., Lehman Brothers Merchant Banking Partners II L.P.
and Certain Employee Stockholders.

     *10(r) Amendment to Harold E. Layman Employment Agreement dated February 3,
2000, as filed as Exhibit 10(t) to the Report on Form 10-Q for the second
quarter ended June 30, 2000.

     *10(s) Employment Agreement, effective as of August 15, 2000, between
Blount International, Inc. and Dennis E. Eagan and filed as Exhibit 10(s) on
Form 10K for the year ended December 31, 2001.

     *10(t) Amendment to Employment Agreement between Blount International, Inc.
and James S. Osterman dated February 2, 2001 filed as Exhibit 10(u) to the
report on Form 10-Q for the quarter ended March 31, 2001.

     *10(u) Supplemental Executive Retirement Plan between Blount, Inc. and
Richard H. Irving, III, dated May 17, 2000 and filed as Exhibit 10(u) on Form
10K for the year ended December 31, 2001.

     *10(v) Amendment to employment agreement between Blount International, Inc.
and Harold E. Layman dated July 2, 2002 and filed as Exhibit 10(v) on Form 10Q
for the quarter ended June 30, 2002.

     *10(w) Amendment to employment agreement between Blount International, Inc.
and James S. Osterman dated March 15, 2002 and executed on July 3, 2002 and
filed as Exhibit 10(w) on Form 10Q for the quarter ended June 30, 2002.

     *10(x) 1999 Stock Incentive Plan and 2000 Stock Incentive Plan of Blount
International, Inc. filed as part of Registration Statement on Form S-8 (Reg.
No. 333-913-90) exhibits, which became effective June 27, 2002.

     **10(y) Amendment to employment agreement between Blount Inc. and Kenneth
O. Saito dated October 1, 2002.

     **10(z) Admendment to employment agreement between Blount International and
Calvin E. Jenness dated February 14, 2002.

     **10(aa) Amendment to employment agreement between Blount International and
Richard H. Irving, III dated February 14, 2002.

     **10(bb) Amendment to employment agreement between Blount International and
Richard H. Irving, III dated August 19, 2002.

     **10(cc) Amendment to employment agreement between Blount International and
Rodney W. Blankenship, dated February 14, 2002.

     **10(dd) Amendment to employment agreement between Blount International and
Rodney W. Blankenship dated July 2, 2002.

     **10(ee) Employment agreement between Blount International, Inc. and Calvin
E. Jenness dated September 11, 2000.

     **10(ff) Employment agreement between Blount, Inc. and Kenneth O. Saito
dated June 1, 1999.

     **99(.1) Certification pursuant to section 906 of the Sarbanes-Oxley Act of
2002 by James O. Osterman, Chief Executive Officer.

                                   Page 68

<PAGE>


     **99(.2) Certification pursuant to section 906 of the Sarbanes-Oxley Act of
2002 by Calvin E. Jenness Chief Financial Officer.

Item 6(b)   Reports on Form 8K

     On September 9, 2002 the Company filed a Form 8K regarding the issuance of
a press release announcing organizational changes.

21.  A list of the significant subsidiaries of Blount International, Inc.
     included herein on page 74.

23.  Consent of Independent Accountants included herein on page 75.

*    Incorporated by reference

**   Filed electronically herewith. Copies of such exhibits may be obtained upon
     written request from:

                  Blount International, Inc.
                  P.O. Box 22127
                  Portland, Oregon  97269-2127






















                                   Page 69

<PAGE>


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant had duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

BLOUNT INTERNATIONAL, INC.

By:  /s/ Calvin E. Jenness
Calvin E. Jenness
Senior Vice President
and Chief Financial Officer

Dated:  March 10, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
is signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

Dated:  March 10, 2003


/s/ Eliot M. Fried                          /s/ William A. Shutzer
Eliot M. Fried                              William A. Shutzer
Chairman of the Board and Director          Director


/s/ Harold E. Layman                        /s/ E. Daniel James
Harold E. Layman                            E. Daniel James
Director                                    Director


/s/ R. Eugene Cartledge                     /s/ H. Corbin Day
R. Eugene Cartledge                         H. Corbin Day
Director                                    Director


/s/James S. Osterman
James S. Osterman
President and Chief Executive Officer
and Director








                                   Page 70

<PAGE>


                           CERTIFICATIONS PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002


I, James S. Osterman, certify that:

1.   I have reviewed this annual report on Form 10-K of Blount International,
     Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a.   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     b.   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c.   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a.   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and


     b.   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date: March 10, 2003
/s/ James S. Osterman
_______________________________
James S. Osterman
President and
Chief Executive Officer

                                   Page 71

<PAGE>


                           CERTIFICATIONS PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002



I, Calvin E. Jenness, certify that:

1.   I have reviewed this annual report on Form 10-K of Blount International,
     Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a.   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     b.   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c.   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     a.   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b.   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:  March 10, 2003

/s/ Calvin E. Jenness
____________________________________
Calvin E. Jenness
Senior Vice President and
Chief Financial Officer

                                   Page 72

<PAGE>


BLOUNT INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II
CONSOLIDATED SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS


(Dollar amounts in millions)
----------------------------
<TABLE>
<CAPTION>

       Column A            Column B       Column C        Column D (1)        Column E
    -------------       -------------  --------------  ----------------  -------------
<S>                     <C>            <C>             <C>               <C>
                                            Additions
                                       --------------
                          Balance at     Charged to                         Balance at
                         Beginning of     Cost and                            End of
     Description            Period        Expenses        Deductions          Period
    -------------       -------------  --------------  ----------------  -------------


Year ended
December 31, 2002
-----------------
Allowance for doubtful
accounts receivable          $ 3.5           $ 1.5           $ 0.7           $ 4.3
                             =====           =====           =====           =====

Year ended
December 31, 2001
-----------------
Allowance for doubtful
accounts receivable          $ 3.8           $ 1.3           $ 1.6          $ 3.5
                             =====           =====           =====          =====

Year ended
December 31, 2000
-----------------
Allowance for doubtful
accounts receivable          $ 4.2             $ 0.8         $ 1.2         $ 3.8
                             =====             =====         =====         =====
</TABLE>


(1)  Principally amounts written-off less recoveries of amounts previously
     written-off.

                                   Page 73

<PAGE>


                                                                    EXHIBIT 21


                        SUBSIDIARIES OF THE REGISTRANT


At December 31, 2002, consolidated, directly or indirectly, wholly-owned
subsidiaries of Blount International, Inc. were as follows:


NAME OF                                              PLACE OF
SUBSIDIARY                                         INCORPORATION
----------                                         -------------

Blount, Inc.                                       Delaware

Blount Holdings Ltd.                               Canada

Blount Canada Ltd.                                 Canada

Dixon Industries Inc.                              Kansas

Gear Products, Inc.                                Oklahoma

Frederick Manufacturing Corporation                Delaware

Blount Industrial LTDA                             Brazil


The names of particular subsidiaries have been omitted because when considered
in the aggregate or as a single subsidiary they would not constitute a
"Significant Subsidiary" as of December 31, 2002.









                                   Page 74

<PAGE>


                                                                    EXHIBIT 23


                      CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement of
Blount International, Inc. on Form S-4 (File No. 333-92481) of our report dated
February 28, 2003, on our audits of the consolidated financial statements and
financial statement schedules of Blount International, Inc. and subsidiaries as
of December 31, 2002 and 2001, and for the three years ended December 31, 2002,
which report is included in this Annual Report on Form 10-K.




PricewaterhouseCoopers LLP

Atlanta, Georgia
February 28, 2003





                                   Page 75