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, 2003

                                       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
statementsincorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.



                                  ----------



At June 30, 2003, the aggregate market value of the voting and non-voting
common stock held by non-affiliates was $25,042,967.

Common stock $0.01 par value as of December 31, 2003:  30,827,738 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 on April 20, 2004, are incorporated by reference in Part III.


                                    Page 2


<PAGE>


                               Table of Contents
                               -----------------

                                                                          Page
Part I

           Item 1.   Business                                               5

              Outdoor Products
              Lawnmower
              Industrial and Power Equipment
              Capacity Utilization
              Backlog
              Acquisitions and Dispositions
              Employees
              Environmental Matters
              Financial Information about Industrial Segments and
                         Foreign and Domestic Operations
              Seasonality
              Available Information

           Item 2.    Properties                                           10

           Item 3.    Legal Proceedings                                    11

           Item 4.    Submission of Matters to a Vote of Security Holders  11


Part II

           Item 5.    Market for Registrant's Common Equity and Related
                      Stockholder Matters                                  11

           Item 6.    Selected Financial Data                              12

           Item 7.    Management's Discussion and Analysis of Results of
                      Operations and Financial Condition                   13

              Overview
              Critical Accounting Policies and Estimates
              Operating Results
              Financial Condition, Liquidity, and Capital Resources
              Off Balance Sheet Arrangements
              Market Risk
              Recent Accounting Pronouncements
              Related Party Transactions
              Forward Looking Statements

           Item 7A.   Quantitative and Qualitative Disclosures about
                      Market Risk                                          26

           Item 8.    Financial Statements and Supplementary Data          27

              Report of Independent Auditors
              Management Responsibility
              Consolidated Statements of Income (Loss)
              Consolidated Balance Sheets
              Consolidated Statements of Cash Flows
              Consolidated Statements of Changes in Stockholders'
                         Equity (Deficit)
              Notes to Consolidated Financial Statements

           Item 9.    Changes in and Disagreements with Accountants on
                      Accounting and Financial Disclosure                  68

           Item 9A.   Controls and Procedures                              69


                                       Page 3


<PAGE>


Part III

           Item 10.   Directors, Executive Officers, Promoters and
                      Persons of the Registrant Control                    69

           Item 11.   Executive Compensation                               69

           Item 12.   Security Ownership of Certain Beneficial Owners and
                      Management and Related Stockholders Matters          69

           Item 13.   Certain Relationships and Related Transactions       70

           Item 14.   Principal Accountant Fees and Services               70

Part IV.

           Item 15.   Exhibits, Financial Statement Schedules and
                      Reports on Form 8-K                                  71


                                    Page 4


<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 three business segments: Outdoor Products, Lawnmower, and
Industrial and Power Equipment.

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 specializes in attachments and
components for cutting a variety of media from wood to concrete to brush,
grass, and weeds. These products are sold primarily under the Oregon, ICS and
Windsor brand names.

The Oregon product line includes a broad range of cutting chain, chainsaw
guide bars, cutting chain drive sprockets and maintenance tools used primarily
on portable gasoline and electric chainsaws, and mechanical timber harvesting
equipment. The Oregon product line also includes a variety of cutting
attachments and spare parts to service the lawn and garden industry. This
Outdoor Equipment parts line-up is composed of lawnmower blades to fit a
variety of machines and cutting conditions, as well as replacement parts that
either meet or exceed the requirements of original equipment manufacturers
(OEMs).

The Windsor product line includes guide bars for chainsaws, cutting chain, and
sprockets for chainsaws as well as products to support mechanical harvesting
equipment. The Company also sells a variety of handheld garden tools under the
Windsor label.

The ICS brand product line provides specialized concrete cutting equipment for
construction markets around the globe. The principal product in the ICS
line-up is a proprietary diamond-segmented chain, which is used on
gasoline-powered and hydraulic-based saws and equipment. ICS also distributes
gasoline and hydraulic powered saws to its customers. These saws are
manufactured through an agreement with a third party.

The Company believes that it is the world leader in the production of cutting
chain. Oregon and Windsor branded cutting chain and related products are used
primarily by professional loggers, farmers, arborists and homeowners.
Additionally, the Oregon line of lawnmower-related parts and accessories has
an extensive following among commercial landscape companies and homeowners.
The Company's ICS products are used by rental contractors, general contractors
and concrete cutting specialists.

The Company sells its products to wholesale distributors, independent dealers
and mass merchandisers serving the retail replacement market. In addition,
Oregon brand chainsaw cutting chain and guide bars are currently sold to more
than 30 chainsaw original equipment manufacturers. Much of this is privately
branded for the OEM customer. More than 60% of the Outdoor Products segment's
sales were outside of the United States in 2003.

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 brand cutting
chain as original equipment on chainsaws is also promoted through cooperation
with OEMs in improving the design and specifications of chain and saws.

Weather influences the Company's sales cycle. For example, severe weather
patterns and events such as hurricanes, tornadoes or ice storms generally
result in greater chainsaw use, and therefore, stronger sales of saw chain and
guide bars. Seasonal rainfall plays a role in demand for the Company's
lawnmower blades and


                                    Page 5


<PAGE>


garden-related products. Above-average rainfall drives greater demand for
products in this category.

Marketing personnel are located throughout the United States and in a number
of foreign countries. The Company manufactures its products in Milwaukie,
Oregon; Milan and Dyer, Tennessee; Guelph, Ontario Canada; Curitiba, Parana,
Brazil, and in Kansas City, Missouri. A portion of its accessories and spare
parts, as well as the saws distributed by ICS, are sourced from vendors in
various locations around the world.

A small number of other cutting chain manufacturers, as well as a small number
of international chainsaw manufacturers, compete against the Company's Oregon
and Windsor brands. The Company also supplies products and/or components to
some of its competitors.

This segment's principal raw material, cold-rolled strip steel, is generally
purchased from six main intermediate steel processors, and can be obtained
from other sources.


LAWNMOWER

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

Initially, Dixon units featured a patented rear wheel drive system identified
as a "friction drive" transaxle, which worked best on smaller and mid-size
units. As the equipment line grew to increase the size of cutting area and
horsepower, there was an increased need to offer more hydrostatic models. In
late 1997, Dixon introduced the "Estate Line", a family of mowers that were
designed for large homeowner lawns (42 inch - 60 inch cut widths) but priced
lower than commercial hydrostatic units. The component that allowed Dixon to
move into this segment was a low-cost self- contained hydro drive unit, the
IZT (integrated zero turn). The IZT units were positioned between Dixon's
existing Estate hydrostatic and friction drive models and were designed for
the residential user. These units featured models with cut widths of 42 to 50
inches.

In 2002 Dixon responded to market demand for lower-cost units by introducing
the new "Zeeter", an entry-level friction-drive machine with a suggested
retail price under $2,000. In 2003 Dixon introduced a series of entry level
residential models utilizing the EZT (Economy Zero Turn) hydro drive, and the
RAM, Dixon's first all-steel bodied residential mower. The RAM model has been
very well received and will become the foundation for the 2005 season product
line. 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.

The Company produces its products in a single manufacturing facility in
Coffeyville, Kansas.

Dixon's competitors include general lawnmower manufacturers such as John Deere
and Snapper, as well as zero-turning riding lawnmower manufacturers such as
Ariens, Simplicity, Toro, MTD, Cadet, Electrolux and Yardman.


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,


                                    Page 6


<PAGE>


utility contractors, building materials distributors 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 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; rubber-tired feller bunchers and related attachments under the
Hydro-Ax brand name; and delimbers, slashers and skidders 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 also 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 additional 9 offshore dealers, primarily in the timber
harvesting regions of South America. Gear Products, Inc. sells its products to
over 265 original equipment manufacturers servicing the utility, construction,
forestry and marine industries. Approximately 93% of this segment's sales in
2003 were in North America, primarily in the southeastern and south central
states of the United 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, Komatsu, which markets the
Timbco and Valmet brands, and numerous smaller manufacturers including Barko,
Tigercat, Hood, and Serco. Gear Products' competitors in the fragmented
industry include SKF, Avon, Kaydon, Rotec, Fairfield, Auburn, Tulsa Winch,
Funk and Braden.

In March of 2003, the Industrial & Power Equipment segment entered into a
marketing, licensing and supply agreement with Caterpillar, Inc., under which
the Company began selling equipment manufactured by both Caterpillar and the
Company under its Blount brands through the Blount dealer network and under
Caterpillar's Timberking brand through Caterpillar dealer network.

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, 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 Inc., 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 8% of the Industrial
and Power Equipment segment's sales in 2003.

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. The


                                    Page 7


<PAGE>


Company also has in place marketing and sales agreements with Caterpillar Inc.
These agreements allow for the manufacture and distribution of the Timberking
brand of purpose built forestry equipment. The manufacture of the Timberking
branded products occurs at both the Company's and Caterpillar's plants with
distribution of the product being the responsibility of the Company in
conjunction with the Caterpillar dealer network.


CAPACITY UTILIZATION

Based on a five-day, three-shift work week, capacity utilization for the year
ended December 31, 2003 by segment was as follows:

                                            % of Capacity
------------------------------              -------------
Outdoor Products                                  96%
Lawnmower                                         49%
Industrial and Power Equipment                    48%
------------------------------


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,
                                            ----------------------------------
                                             2003     2002     2001     2000
------------------------------------------  -------  -------  -------  -------
Outdoor Products                            $ 66.7   $ 42.9   $ 32.9   $ 44.6
Lawnmower                                      4.9      3.1      3.1      4.4
Industrial and Power Equipment                47.7     10.3     12.9     15.0
------------------------------------------  -------  -------  -------  -------
         Total backlog                      $119.3   $ 56.3   $ 48.9   $ 64.0
------------------------------------------  =======  =======  =======  =======

The total backlog as of December 31, 2003 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 as required by the Stock Purchase Agreement between the
Company and ATK. The escrow amount, which is included in Other Assets at
December 31, 2002, was collected in whole in 2003.

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


                                    Page 8


<PAGE>


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).


EMPLOYEES

At December 31, 2003, the Company employed approximately 3,300 individuals.
None of the Company's domestic employees are 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 51 through 54.

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. The Company expects to spend approximately $0.2
million per year in years 2004 through 2006 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 certain 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 clean up 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 an equivalent state agency) can either (a) allow such
parties 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 13 through 26 and Note 10 of Notes to
Consolidated Financial Statements on Pages 54 through 56.


                                    Page 9


<PAGE>


SEASONALITY

The Company's three 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.


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 are located in Europe,
Japan and Russia. Lawnmower blades are manufactured in Kansas City, Missouri,
and lawnmowers 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                       918,779       287,691
         Lawnmower                              161,000             0
         Industrial and Power Equipment         738,740             0
         Corporate                                    0        12,400
         --------------------------------     ---------     ---------
              Total                           1,818,519       300,091
         --------------------------------     =========     =========


                                    Page 10


<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

For information regarding legal proceedings see Note 8 of Notes to
Consolidated Financial Statements on pages 51 through 54.


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 closing prices for the
Company's common stock for the last two years. Cash dividends have not been
declared for the Company's common stock in the last four years. The Company
had approximately 6,850 shareholders as of February 20, 2004.

                                                        Common Stock
                                                     ------------------
                                                        High      Low
         ----------------------------------          --------  --------
         Year Ended December 31, 2003

         First quarter                                $ 6.43     $ 3.87
         Second quarter                                 7.87       5.44
         Third quarter                                  5.83       4.25
         Fourth quarter                                 7.87       4.75

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


                                    Page 11


<PAGE>

<TABLE>
<CAPTION>


ITEM 6.  SELECTED FINANCIAL DATA

                                                                        Year Ended December 31,
Dollar amounts in millions,                          ---------------------------------------------------------
Except per share data                                 2003(4)     2002(4)      2001        2000        1999
-----------------------------------------------      ---------   ---------   ---------   ---------   ---------
<S>                                                  <C>         <C>         <C>         <C>         <C>
Operating Results (1):
Sales                                               $  559.1    $  479.5    $  468.7    $  513.9    $  486.2
Operating income from segments                          96.7        75.9        68.6        82.1        70.7
Income (loss) from continuing operations
  before extraordinary loss                            (33.7)       (4.8)      (37.6)      (11.7)      (46.8)
Net income (loss)                                      (33.7)       (5.7)      (43.6)       10.8       (21.8)
Earnings per share:
  Basic:
    Income (loss) from continuing
      operations before extraordinary loss              (1.09)      (0.16)      (1.22)      (0.38)      (0.80)
    Net income (loss)                                   (1.09)      (0.19)      (1.42)       0.35       (0.37)
  Diluted:
    Income (loss) from continuing
      operations before extraordinary loss              (1.09)      (0.16)      (1.22)      (0.38)      (0.80)
    Net income (loss)                                   (1.09)      (0.19)      (1.42)       0.35       (0.37)
-----------------------------------------------     ---------   ---------   ---------   ---------   ---------
End of period Financial Position:
Total assets                                        $  400.4    $  428.0    $  444.8    $  703.9    $  688.7
Working capital                                         83.4        91.0        82.7       191.8       187.5
Property, plant and equipment-gross                    283.1       271.2       281.4       428.1       402.7
Property, plant and equipment-net                       92.0        90.7        96.2       177.4       172.3
Long-term debt                                         603.9       624.1       632.5       824.5       809.7
Total debt                                             610.5       627.5       641.0       833.0       816.2
Stockholders' equity (deficit)                        (397.3)     (368.9)     (349.9)     (312.2)     (321.7)
Current ratio                                       1.8 to 1    1.9 to 1    1.7 to 1    2.3 to 1    2.3 to 1
-----------------------------------------------     ---------   ---------   ---------   ---------   ---------
Other data:
Property, plant and equipment additions (2)         $   16.5    $   17.1    $   11.5    $   39.8    $   18.5
Depreciation and amortization                           18.7        18.9        23.6        32.7        34.0
Interest Expense, net of interest income                69.0        71.1        94.5        98.2        41.1
Stock price (3):                Common high              7.87        4.92        8.13       15.88       17.69
                                Common low               3.87        2.74        2.01        7.44       10.50
Stock price (3):                Class A high                                                            14.97
                                Class A low                                                             11.94
Stock price (3):                Class B high                                                            14.78
                                Class B low                                                             11.91
Per common share dividends (3): Class A                                                                   .072
                                Class B                                                                   .067
Shares used in earnings per share
  computations (in millions) (3): Basic                 30.8        30.8        30.8        30.8        58.2
                                  Diluted               30.8        30.8        30.8        30.8        58.2
Employees (approximate continuing operations)(1)     3,300       3,134       3,209       3,455       3,461
-----------------------------------------------     ---------   ---------   ---------   ---------   ---------


(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 in
     the twelve months ended December 31, 2000. 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 years 2002 and
     2003 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.

</TABLE>


                                    Page 12


<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.


OVERVIEW

The Company is an international industrial company with three business
segments: Outdoor Products, Lawnmower, and Industrial and Power Equipment
("IPEG"). Operating independently from one another, these segments focus on
the manufacture and marketing of branded products to industrial companies and
consumers. The Company believes it is the worldwide leader in the sale of saw
chain accessories and zero-turning riding lawnmowers. It is also a leading
distributor of timber harvesting equipment in the United States.

The Company's largest segment, Outdoor Products, accounted for 64% of the
Company's revenue in 2003. This segment manufactures and markets chain, bars
and sprockets and accessories for chainsaw use, concrete cutting equipment,
and lawnmower blades and accessories for outdoor care. The segment's products
are sold to original equipment manufacturers ("OEM"s) for use on new
chainsaws, and the retail replacement market through distributors, dealers and
mass merchants. During 2003 approximately 24% of the segment's sales were to
OEMs, with the remaining 76% sold into the replacement market. Approximately
60% of the segment's sales were outside of the United States in 2003. The
Outdoor Products segment's performance can be impacted by trends in the
forestry industry, weather patterns, including natural disasters, foreign
currency fluctuations and general economic conditions. The segment faces
competitive price pressure from competitors on a worldwide basis. The
efficient manufacture of the segment's products is critical to ensuring that
the Company can be competitive with its selling prices. There are three
manufacturing plants in the United States, one in Canada and one in Brazil
that are focused on continuous cost improvement. Timely capital investment
into these plants for capacity and cost reductions, as well as securing
critical raw material sourcing and pricing, are required to remain
competitive.

The Lawnmower segment represented 6% of the Company's sales in 2003. This
segment manufactures and markets riding lawnmowers and related accessories
under the Dixon brand name. Dixon was the pioneer in zero-turning technology.
This technology allows for more efficient grass cutting compared to
conventional "tractor style" riding lawnmowers. The segment's products are
sold through full-service dealers and distributors. International sales were
5% of the total segment sales in 2003. The performance of the Lawnmower
segment is impacted by domestic economic conditions, seasonal weather patterns
and, recently, an influx of competitive offerings. Operating income and cash
flow in this segment are dependent on providing quality products at a
competitive price point. Critical to the success of the segment is the
offering of enhancements to existing models on an annual basis and the
periodic introduction of new products in response to market demand. The
Lawnmower segment operates a single facility for the manufacture and
distribution of its products.

The Industrial and Power Equipment segment manufactures and markets timber
harvesting equipment, industrial tractors and loaders, rotation bearings and
mechanical power transmission units. Sales in this segment accounted for 30%
of the total Company sales in 2003. Sales are made through a distribution
network to customers in the timber harvesting, material handling,
construction, land reclamation and utility businesses, as well as to pulp and
lumber mills, contractors and scrap yard operators. The segment's customer
base is concentrated in the Southeastern United States with international
sales amounting to 7% of segment sales in 2003. The performance of IPEG is
aligned with overall trends in the forestry industry, including the
import/export balance of wood products, the utilization of lumber and paper
mill capacity in the United States, and the level of logging production. The
cyclical nature of the forestry industry can significantly impact the
operating income and cash flow of IPEG from year to year. To react to such
trends, the segment must consistently manage its four manufacturing plants on
a lean


                                    Page 13


<PAGE>


basis, tightly control the discounting of its products and maximize working
capital turns.

The Company maintains a small corporate staff at its headquarters located in
Portland Oregon. In addition to providing management oversight for the three
business segments, the corporate staff manages the Company's capital
structure, administers various health and welfare plans and coordinates
compliance and legal matters. The Company's capital structure includes a
significant amount of debt outstanding and a concentration of common stock
ownership by affiliates of Lehman Brothers Holding, Inc., including a
wholly-owned subsidiary of Lehman Brothers Merchant Banking Partners II, L.P.
("Lehman Merchant Banking") which owns 85% of the stock outstanding. The
Company's capital structure requires the conservation of cash in order to
reduce debt and increase shareholder value. In order to conserve cash, the
Company places a high priority in minimizing working capital, appropriately
allocating capital spending to higher return projects and leveraging existing
assets for additional product throughput.


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 of 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 on account of product liability claims as a result
of alleged product malfunctions or defects. 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


                                    Page 14


<PAGE>


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 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 2003 and
the Company anticipates the same rate to be utilized in 2004. The Company
believes this rate is reasonable given the asset composition and historical
trends. The Company lowered its discount rate assumption to 6.1% to determine
its plan liabilities at December 31, 2003 from 6.5% in the previous year due
to the market declines in benchmark interest rates. The Company assumed that
health care costs in 2003 would increase by 10% per year and future increases
would decline by 2% 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 $0.9 million. A 1%
change in the discount rate as of December 31, 2003 results in $1.2 million in
increased pension expenses in 2004 and a 1% change in health care costs will
change annual post retirement medical costs by $0.3 million a year.

The Company accounts for income taxes under the asset and liability method.
Accordingly, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be realized. The Company currently maintains a 100% deferred tax
asset valuation allowance.


OPERATING RESULTS

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

Sales for 2003 were $559.1 million compared to $479.5 million in 2002. Income
from continuing operations increased to $83.8 million from $62.5 million in
2002. Net loss in 2003 was $33.7 million ($1.09 per share) compared to $5.7
million ($.19 per share) for 2002.

The 34% improvement in income from operations is primarily due to a year over
year sales increase of 17% as our two largest segments, Outdoor Products and
Industrial and Power Equipment, benefited from both improved economic and
industry specific conditions as well as a weaker US dollar. These conditions
resulted in an 18% increase in the Company's gross profit to $189.7 million
from $161.2 million in 2002. A 16% increase in selling, general and
administrative costs to $105.7 million from $91.5 million in 2002 tempered
some of the gross profit increase as higher benefits expense, incentive costs,
employment levels and the impact of a weaker US dollar had a negative effect.
Included in the higher net loss in 2003 is a $49.4 million increase in income
tax expense primarily from the recognition of a deferred income tax valuation
allowance of $41.0.

The following table reflects segment sales and operating income for the years
ended December 31, 2003 and 2002:


                                    Page 15


<PAGE>



                                                Year Ended December 31,
                                          ------------------------------------
                                                                    2003 as %
 (Dollar amounts in millions)                2003        2002        of 2002
------------------------------------------------------------------------------
Sales:
  Outdoor Products                        $ 358.8     $ 307.4         117%
  Lawnmower                                  35.7        41.4          86%
  Industrial and Power Equipment            165.0       131.7         125%
  Inter-Segment Elimination                  (0.4)       (1.0)         40%
------------------------------------------------------------------------------
         Total Sales                      $ 559.1     $ 479.5         117%
------------------------------------------------------------------------------
Operating income (loss):
  Outdoor Products                        $  86.2     $  67.7         127%
  Lawnmower                                  (1.2)        2.7         N/A
  Industrial and Power Equipment             11.7         5.2         225%
  Inter-Segment Elimination                               0.3         N/A
------------------------------------------------------------------------------
  Operating income from segments             96.7        75.9         127%
Corporate office expenses                   (12.7)       (6.2)        205%
Restructuring expenses                       (0.2)       (7.2)          3%
------------------------------------------------------------------------------
Income from continuing operations         $  83.8     $  62.5         134%
------------------------------------------------------------------------------


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 2003 were $358.8 million compared
to $307.4 million in 2002, a 17% increase. Income from operations in 2003 was
$86.2 million compared to $67.7 million in 2002, a 27% increase. The increase
in sales was driven by stronger demand across all product lines and major
geographical markets and in both the OEM and replacement channels.

The Outdoor Products segment's sales results were favorably impacted by a
weaker US dollar in 2003 compared to 2002. This weaker dollar trend makes the
Company's products more competitive in foreign markets, including the European
region, which experienced a 19% increase in sales revenue in 2003. Worldwide,
the year over year effect of translating foreign currency sales during 2003
resulted in incremental sales of $9.3 million. OEM channel sales also showed
improvement over 2002, which was negatively impacted by inventory levels.

Income from operations for the Outdoor Products segment increased by $18.5
million in 2003 due to a $ 24.3 million, or 20%, increase in gross profit,
partially offset by a $5.8 million, or 10%, increase in selling, general and
administrative expenses. The improvement in gross profit reflects higher sales
volume, improved plant utilization and the favorable impact of currency
trends. The net translation impact of currency on gross profit was $5.1
million, primarily from a stronger euro, partially offset by the effect of a
stronger Canadian dollar on our Canadian manufacturing plant. Selling, general
and administrative costs increased due to higher benefits, insurance and
incentive compensation costs, an increase in headcount and the effects of
currency translation on the international operations.

Sales in the Lawnmower segment declined $5.7 million in 2003 to $35.7 million
from $41.4 million in 2002. The segment had an operating loss of $1.2 million
in 2003 compared to an operating profit of $2.7 million in 2002. The decline
in sales was primarily due to a reduction in unit volume, as increased
competition has resulted in a reduction in the Company's market share of
zero-turning riding mowers. In addition to the increase in competition, the
Company experienced a weaker than normal spring selling season due to
unfavorable weather conditions.

The $3.9 million reduction in Lawnmower operating income in 2003 from 2002 was
primarily due to the unit volume decline. The segment's plant operated at
approximately 49% of capacity in 2003, resulting in higher average production
costs.

                                    Page 16

<PAGE>


Additionally, manufacturing costs were impacted by higher health care trends
and other benefit costs.

Sales for the Industrial and Power Equipment segment for 2003 were $165.0
million compared to $131.7 million in 2002, a 25% increase. Income from
operations in 2003 was $11.7 million compared to $5.2 million in 2002, a 125%
increase. 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). During 2003 the industry conditions in this segment trended upward,
resulting in an improved demand for the Company's products and contributing to
a 31% increase in timber harvesting equipment sales. In addition to an
improvement in market demand, the Company benefited from a joint marketing
agreement with Caterpillar that was initiated during 2003. Sales of power
transmission components declined by 10% in 2003 from 2002 as improvements in
the utility and construction markets that the segment serves lagged the
recovery experienced in the forestry industry.

Income from operations for this segment in 2003 increased by $6.5 million
compared to 2002. The increase in profitability was the result of the higher
sales levels. Gross profit increased $8.3 million, or 32% as increased sales
and more efficient manufacturing operations contributed. Selling, general and
administrative increased by $1.8 million or 9% due to incremental marketing
costs from the Caterpillar agreement and higher benefit costs.

Corporate office expenses for 2003 increased to $12.7 million from $6.2
million in 2002. The increase in expense was due, in part, to the reassignment
of certain functions from the Outdoor Products segment to corporate during
2003. The impact of this reassignment was approximately $2.8 million.
Additional increases were incurred in 2003 for pension and post retirement
expenses of $0.7 million, accrued incentive compensation of $0.8 million,
legal costs of $0.8 million, compliance costs of $0.2 million, and increased
insurance costs of $0.2 million. Restructuring expense in 2003 of $0.2 million
was related to severance benefits in conjunction with the movement of Company
assets between manufacturing facilities. During 2002 the Company incurred $1.4
million in restructuring expense for the movement of manufacturing assets and
$5.8 million for the relocation of the Company's headquarters from Montgomery,
Alabama to Portland, Oregon (See Note 1 of the Notes to the Consolidated
Financial Statements).

Net Interest expense in 2003 was $69.0 million in comparison to $71.1 million in
2002. The lower interest expense was due to a combination of lower average debt
outstanding and lower interest rates on the term loans.

Other expense for 2003 was $3.6 million and included an expense of $2.8
million related to the early retirement of debt in conjunction with the
Company's extinguishment of its prior term loan and revolver facility (See
Note 3 of the Notes to the Consolidated Financial Statements). Other expense
for 2002 was $0.7 million and included 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, $0.5 million for 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, and a $0.5 million loss on an
executive benefit trust, offset by $2.1 million in income from life insurance
proceeds.

The Company's effective income tax rate in 2003 was 400.7% compared to 48.4%
in 2002. This significant increase was primarily due to the recognition of a
deferred tax asset valuation allowance of $41.0 million as the Company
determined it will not likely be able to utilize its deferred tax benefits
(See Note 2 of the Notes to the Consolidated Financial Statements).

The Company did not record any income from discontinued operations for the
year ended December 31, 2003. Net 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.

                                    Page 17

<PAGE>


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR 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 for 2002 was
$4.8 million ($0.16 per share), compared to $37.6 million ($1.22 per share)
for 2001.

These resulted 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 reflected
an increase of $17.8 million (40%) from $44.7 million in 2001. Included in
this increase were 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 following table reflects segment sales and operating income for the years
ended December 31, 2002 and 2001

                                                Year Ended December 31,
                                        --------------------------------------
                                                                   2002 as %
 (Dollar amounts in millions)             2002           2001        of 2001
------------------------------------------------------------------------------
Sales:
  Outdoor Products                      $ 307.4       $ 307.4          100%
  Lawnmower                                41.4          43.0           96%
  Industrial and Power Equipment          131.7         120.6          109%
  Inter Segment Elimination                (1.0)         (2.3)          43%
------------------------------------------------------------------------------
         Total Sales                    $ 479.5       $ 468.7          102%
------------------------------------------------------------------------------
Operating income (loss):
  Outdoor Products                      $  67.7       $  69.4           98%
  Lawnmower                                 2.7           0.9          300%
  Industrial and Power Equipment            5.2          (1.7)         N/A
  Inter Segment Elimination                 0.3                        N/A
------------------------------------------------------------------------------
  Operating income from segments           75.9          68.6          110%
Corporate office expenses/Elimination      (6.2)         (7.7)          81%
Restructuring expenses                     (7.2)        (16.2)          44%
------------------------------------------------------------------------------
Income from continuing operations       $  62.5       $  44.7          140%
------------------------------------------------------------------------------

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 $307.4 million, the same
as reported in 2001. Income from operations in 2002 was $67.7 million compared
to $69.4 million in 2001. The flat year over year results in sales included
lower sales of chainsaw components that were offset by increased sales of
outdoor care accessories and concrete cutting saws.

The decline in chainsaw components in 2002 was in part due to weaker demand
from original equipment manufacturers (OEMs) resulting from a reduction in
inventories from prior year levels and selective competitive price discounting
in response to the strength of the United States dollar. Other sales increased
primarily through the successful introduction of a new gas saw for our ICS
concrete cutting saw product line.

Income from operations for the Outdoor Products segment decreased by $1.7
million in 2002 due to higher post retirement costs and an unfavorable product
mix. These costs were partially offset by the adoption of SFAS 142 which had a
favorable impact of reducing amortization expense by $1.6 million.


                                    Page 18


<PAGE>


Sales for the Lawnmower segment for 2002 were $41.4 million compared to $43.0
million in 2001. The 4% decline reflected a 1% decrease in unit sales. The
balance was due to a weaker mix as demand shifted towards a lower priced unit
that was introduced in 2002. Income from operations for the Lawnmower segment
was $2.7 million in 2002 compared to $0.9 million in 2001. The increase
reflected a $1.7 million decrease in SG&A expense due to lower marketing
expense of $0.9 million and $0.4 million due to the adoption of SFAS No. 142.

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 much of
2002, the forestry industry operated within a cyclical downturn environment.
Sales of the Company's timber harvesting and loading equipment increased by
14% due primarily to the introduction of new products and some improvement in
market conditions. 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.

Income from operations for this segment in 2002 increased by $6.9 million as
compared to 2001. The increase in profitability was 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 of $6.2 million in 2002 compared $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 Outdoor Products segment. The restructuring expense
for 2001 was 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 was 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 $0.7 million and included 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, $0.5 million for 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, 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 $9.1 million in other expense for 2001 which
included $8.4 million for the write-off of unamortized deferred financing
costs, together with prepayment penalties related to the early payment of debt
associate with the sale of SEG and the sale of corporate assets, 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.

The Company's effective income tax rate increased in 2002 to 48.4% from 36.2%
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.

Net income from discontinued operations in 2002 of $0.5 million was primarily
due to proceeds on a settlement of a claim from the Company's former
construction business and compared to $2.5 million of after tax income for
2001, which reflected the


                                    Page 19


<PAGE>


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 recognition of the final purchase price
adjustment net of tax for the sale of SEG. This compared to a loss of $8.5
million in 2001, which was the estimated loss as of December 31, 2001.


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2003, as a result of the 1999 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, 2003 was
$610.5 million compared with total debt at December 31, 2002 of $627.5
million.

The Company continues to be substantially leveraged, which may adversely
affect its operations. This could have important consequences, including the
following:

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

2. 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;

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

4. the ability to obtain additional financing to fund the Company's
operational needs may be impaired or may not be available on favorable terms.

The Company's outstanding debt as of December 31, 2003 consisted of term loans
of $115.5 million, Senior Notes of $149.7 million, Senior Subordinated Notes
of $323.2 million and $22.1 million in a preferred equivalent security. The
annual cash interest and principal payments on the outstanding debt are
significant to the Company. During 2003 the Company paid $61.4 million in
interest and $3.4 million in scheduled principal payments to its lenders.
During 2004 the Company anticipates payments of $60.1 million for interest and
$6.6 million in scheduled principal payments. The Company believes that its
cash flow from operations will be sufficient to meet these required payments.
The Company's term loan is subject to certain reporting and financial covenant
compliance requirements. The Company was in compliance with these covenants as
of December 31, 2003 and anticipates to be in compliance during 2004.
Non-compliance with these covenants could result in severe limitations to the
Company's overall liquidity. The term loan lenders could require actions for
immediate repayment of outstanding amounts, including the potential sale of
Company assets. The Company's debt is not subject to any triggers that would
require early payment of debt due to any adverse change in the Company's
credit rating.

The term loans were originated on May 15, 2003 when the Company entered into a
new senior credit facility to replace a previous credit facility. The new
credit facility consists of a $67.0 million revolving credit facility, a Term
A loan of up to $38.0 million and a Term B loan of up to $85.0 million. The
loans are secured by certain Company assets; some of which are held in trust
in parri passu, ratably, with the Company's 7% Senior Notes. Specifically, the
revolving credit facility is secured by certain inventory and accounts
receivable of the Company. On a semi-monthly basis the Company calculates the
amount available under the revolving credit facility. During 2003 the average
amount available under this facility was $38.2 million net of outstanding
letters of credit and threshold minimum availability requirements. As of
December 31, 2003 there were no amounts drawn on the revolving credit
facility.


                                    Page 20


<PAGE>


The Company has senior notes outstanding in the principal amount of $150
million and maturing in June 2005. The Company also has senior subordinated
notes outstanding in the principal amount of $323.2 million maturing 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 anticipates that it will refinance the outstanding
senior notes prior to March of 2005 through the issuance of new debt, the
issuance of additional shares of the Company's stock or the sale of non-core
assets or any combination of these actions.

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, 2003, the maximum repurchase obligation was
$3.3 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 $0.7 million. 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, cash
available as of December 31, 2003, and from the revolving credit facility. The
revolving credit facility had an availability of $43.8 million as of December
31, 2003 net of the outstanding letters of credit issued of $7.8 million and a
minimum threshold availability requirement of $10.0 million. 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.

Cash balances at December 31, 2003 were $35.2 million compared to $26.4
million at December 31, 2002. Cash flow from continuing operations increased
by $28.2 million to $55.8 million primarily due to higher income from
continuing operations of $21.3 million and the refund of $25.0 million in
escrowed funds related to the 2001 sale of the Company's Sporting Equipment
Segment. This is partially offset by increased working capital needs for
receivables and inventory with a combined effect of $10.6 million over 2002.
Also, 2002 included one-time receipts of $3.5 million for insurance proceeds
and $3.1 million for funds held in escrow.

Accounts receivable at December 31, 2003 and December 31, 2002, and sales by
segment for the fourth quarter of 2003 compared to the fourth quarter of 2002,
are as follows (in millions):


                                    Page 21


<PAGE>


                                  December 31,    December 31,      Increase
                                      2003            2002         (Decrease)
-------------------------------   ------------    ------------     ----------
Accounts Receivable
  Outdoor Products                   $ 42.6          $ 37.9          $  4.7
  Lawnmower                             2.9             3.4            (0.5)
  Industrial & Power Equipment         19.1            16.1             3.0
-------------------------------   ------------    ------------     ----------
    Total segment receivables        $ 64.6          $ 57.4          $  7.2
-------------------------------   ============    ============     ==========

                                              Three Months Ended
                                  -------------------------------------------
                                  December 31,    December 31,      Increase
                                      2003            2002         (Decrease)
-------------------------------   ------------    ------------     ----------
Sales
  Outdoor Products                   $ 93.2          $ 83.1          $ 10.1
  Lawnmower                             9.3             9.2             0.1
  Industrial & Power Equipment         56.8            35.8            21.0
  Inter Segment Elimination            (0.1)                           (0.1)
-------------------------------   ------------    ------------     ----------
    Total segment sales              $159.2          $128.1          $ 31.1
-------------------------------   ============    ============     ==========


The increase from last year in Outdoor Product's accounts receivable was
proportionate to the increase in sales. Accounts receivable within the
Industrial and Power Equipment segment increased from last year due to the
increase in sales, and partially offset by improved collection efforts. The
Company's allowance for doubtful accounts declined by $1.3 million in 2003 to
$3.0 million. The decrease is due to the resolution of certain customer
payments within the Outdoor Products segment and the Company's former Sporting
Equipment segment.

Net cash used for investing activities for 2003 was $17.1 million compared to
$32.9 million for 2002. Purchases of property, plant and equipment during 2003
were $16.5 million compared to $17.1 million for last year. Payments
associated with the sales of assets during 2003 were $0.6 million and were
related to the 2002 sale of an office building in Montgomery, Alabama. This
was $8.6 million less than receipts of $8.0 million in 2002 that were due
primarily to the sales of a storage warehouse, a fractional interest in an
aircraft and the office building. In 2003 there were less than $0.1 million in
expenses associated with the sale of discontinued operations compared to $23.8
million in 2002, which were primarily related to contractual amounts owed from
the sale of SEG.

Cash used in financing activities for 2003 was $29.9 million compared to $17.1
million for 2002. In the second quarter, the Company, utilizing $149.9 million
of its new credit facility, extinguished its old term loan with an outstanding
balance of $133.5 million. The Company also used $1.5 million to extinguish
$1.8 million of its 13% notes. The borrowings on the new facility consisted of
$118.0 million from new term loans and $31.9 million from the new revolver
facility. Included in other financing activities is $9.8 million for fees and
expenses paid as part of the transaction. The revolver was subsequently fully
paid down, in part with $25.0 million returned to the Company that was
previously held in escrow as part of the sale of the Company's Sporting
Equipment segment in 2001. In the third and fourth quarters the Company made
scheduled payments totaling $2.5 million on the new term loans. Cash used in
2002 for financing activities included scheduled debt payment of $3.4 million
and additional payments of $8.4 million resulting from the application of
proceeds generated from the sale of corporate assets.


                                    Page 22


<PAGE>


As of December 31, 2003 the Company's contractual obligations, including
payments due by period, are as follows:


                                                       2005     2007    There-
                                    Total     2004    -2006    -2008    after
                                  --------  -------- -------- -------- --------
Current Maturities of
  Long-Term Debt                  $    6.6  $   6.6
Long Term Debt                       603.9           $ 174.9  $  83.7  $ 345.3
Estimated Interest Payments (1)      355.4     60.1    103.1     92.3     99.9
Purchase Commitments (2)              29.9     29.9
Operating Lease Obligations            4.9      2.1      2.1      0.6      0.1
Other Long Term Liabilities (3)        0.9      0.3      0.4      0.2
                                  --------  -------  -------  -------  -------
Total Contractual Obligations     $1,001.6  $  99.0  $ 280.5  $ 176.8  $ 445.3
                                  ========  =======  =======  =======  =======


     (1)  Expected future interest payments based on existing debt. Variable
          interest rate debt payments based on assumed interest rate
          increases.

     (2)  Primarily related to the receipt of various goods and services as of
          December 31, 2003.

     (3)  Advisory and consulting fees for certain current and former officers
          and directors of the Company.

Due to a decline in asset values of the Company's sponsored defined benefit
plan during 2001 and 2002, the Company's annual cash contributions to the
pension fund increased in 2003 and will increase further in 2004. The decline
in asset value is due to overall weakness in the stock and bond markets prior
to 2003. Cash contributions for domestic plans were $3.5 million for 2003 and
are expected to be approximately $14.0 million for 2004. Furthermore, the
Company adjusted its minimum pension liability at the end of 2003 in
accordance with SFAS 87 "Employers' Accounting for Pensions". The adjustment
resulted in a non-cash increase of shareholders' equity of $2.5 million
compared to a reduction of $14.2 million recorded at the end of 2002. The
Company believes that cash flow from operations and amounts available under
its revolving credit agreement will be sufficient to cover the higher pension
contribution levels.

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 financial performance
covenants during 2004. Should the Company not comply with the covenants during
2004, additional significant actions will be required. These actions may
include, among others, attempting to renegotiate its debt facilities, sales of
assets, additional restructuring and reductions in capital expenditures.


OFF BALANCE SHEET ARRANGEMENTS

In January 2003, the FASB issued Financial Accounting Standards Board
Interpretation No. 46, "Consolidation of Variable Interest Entities." The
Company does not have any off balance sheet arrangements as defined by this
pronouncement.


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.


                                    Page 23


<PAGE>


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, 2003 and 2002,
no derivative financial instruments were outstanding to hedge interest rate
risk. A hypothetical immediate 10% increase in interest rates would decrease
the fair value of the Company's fixed rate long-term debt outstanding at
December 31, 2003, by $16.4 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 $0.6 million in
2004.

Foreign Currency Exchange Risk:

Approximately 34% of Outdoor Products segment's sales and 39% of its operating
costs and expenses were transacted in foreign currencies in 2003. As a result,
fluctuations in exchange rates impact the amount of the Outdoor Products
Segment'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, 2003, no foreign currency exchange derivatives were outstanding.
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):

                                        Effect of 10% Weaker US Dollar
                                       --------------------------------
                                                   Cost of         Operating
  (In millions)                    Sales             Sales           Income
--------------------------       --------          --------         --------
Major Currencies
  Euro                            $ 3.1            $ (0.1)           $ 0.6
  Canadian Dollar                   1.2              (3.7)            (2.8)
  Brazilian Real                    0.1              (0.6)            (0.6)
--------------------------       --------          --------         --------

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
$4.5 million on pre-tax income in 2004.


RECENT 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. 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 is recognized as a change in accounting principle. The


                                    Page 24


<PAGE>


Company adopted SFAS No. 143 on January 1, 2003. The adoption of SFAS No. 143
has not had a material impact on the 2003 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 the Statement, which were adopted by the Company on 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, "Rescissions 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, which were adopted by the
Company on January 1, 2003, have not had a material impact on its financial
condition or results of operation but did result in the reclassification of
prior years' debt extinguishment expenses.

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, "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 were
adopted by the Company January 1, 2003. The Company believes that the adoption
of SFAS No. 146 will impact the timing of the recognition of costs associated
with exit or disposal activities but is not expected to have a material impact
on the financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation, Transition and Disclosure." SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. SFAS No. 148 also requires
that disclosures of the pro forma effect of using the fair value method of
accounting for stock-based employee compensation be displayed more prominently
and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the
pro forma effect in interim financial statements. The transition and annual
disclosure requirements of SFAS No. 148 are effective for fiscal years ended
after December 15, 2002 and the interim disclosure requirements are effective
for interim periods beginning after December 15, 2002. The Company adopted the
annual disclosure requirements for the year ended December 31, 2002 and the
interim disclosure requirements on January 1, 2003. The adoption of this
Statement did not have a material impact on the Company's results of
operations, financial position or cash flows.

In January 2003, the FASB issued Financial Accounting Standards Board
Interpretation No. 46, "Consolidation of Variable Interest Entities"("VIE"s).
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. Application of this interpretation is required in financial
statements for periods ending after March 15, 2004. The Company has not
identified any VIEs for which it is the primary beneficiary or has significant
involvement.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies


                                    Page 25


<PAGE>


accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 amends SFAS No. 133 to require contracts with comparable
characteristics to be accounted for similarly. SFAS No. 149 clarifies the
circumstances under which a contract with an initial net investment meets the
characteristic of a derivative and clarifies when a derivative contains a
financing component that warrants special reporting in the statement of cash
flows. This statement was effective for contracts entered into or modified
after September 30, 2003, except for hedging relationships designated after
September 30, 2003, where the guidance is required to be applied
prospectively. The adoption of this statement did not have a material impact
on the Company's results of operations and financial condition.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, by requiring
those instruments to be classified as liabilities (or assets in some
circumstances) in the statement of financial position. SFAS No. 150 requires
disclosure regarding the terms of those instruments and settlement
alternatives. This statement was effective for all financial instruments
entered into or modified after May 31, 2003, and was otherwise effective at
the beginning of the first interim period beginning after September 15, 2003.
On November 7, 2003, FASB issued FASB Staff Position No. SFAS 150-3 (FSP
150-3), "Effective Date, Disclosures, and Transition for Mandatory Redeemable
Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests under FASB Statements No. 150, Accounting
for Certain Financial Instruments with Characteristics of Both Liabilities and
Equity." FSP 150-3 deferred certain aspects of SFAS 150. The adoption of SFAS
150 on January 1, 2003 and subsequent adoption of FSP 150-3 did not have a
material impact on the Company's results of operations, financial position or
cash flows.


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
influence significantly 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 the following: 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; and in 2004, $1.0 million, for assistance with
the 2003 refinancing of the Company's term loans. This amount was capitalized
as deferred financing costs on December 31, 2003.


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.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Management's Discussion and Analysis of Results of Operations and
Financial Condition - Market Risk" on pages 13 through 26.


                                    Page 26


<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                        REPORT OF INDEPENDENT AUDITORS
                        ------------------------------


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


In our opinion, the consolidated financial statements listed in the
accompanying index under item 15(a)(1) present fairly, in all material
respects, the financial position of Blount International, Inc. and its
subsidiaries at December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2003 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 accompanying index 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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the Consolidated Financial Statements, the Company
changed the manner in which it accounts for goodwill as of January 1, 2002.

PricewaterhouseCoopers LLP
Portland, Oregon
February 20, 2004


                                    Page 27


<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 auditors and by the internal audit department.
Management implements those recommendations that it believes would improve the
system of internal controls and be cost justified.

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 auditors 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
auditors of the Company to ensure free access by the independent auditors to
the committee.

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


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


                                    Page 28


<PAGE>


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


                                                            Year Ended
                                                           December 31,
(Dollar amounts in millions,                        --------------------------
except share data)                                    2003     2002     2001
--------------------------------------------------- -------- -------- --------
Sales                                                $559.1   $479.5   $468.7
Cost of Sales                                         369.4    318.3    312.3
---------------------------------------------------  -------  -------  -------
Gross Profit                                          189.7    161.2    156.4
Selling, general and administrative expenses          105.7     91.5     95.5
Restructuring expenses                                  0.2      7.2     16.2
---------------------------------------------------  -------  -------  -------
Income from continuing operations                      83.8     62.5     44.7
Interest expense                                      (69.8)   (72.2)   (95.9)
Interest income                                         0.8      1.1      1.4
Other income (expense)                                 (3.6)    (0.7)    (9.1)
---------------------------------------------------  -------  -------  -------
Income (loss) from continuing operations
  before income taxes                                  11.2     (9.3)   (58.9)
Provision (benefit) for income taxes                   44.9     (4.5)   (21.3)
---------------------------------------------------  -------  -------  -------
Net loss from continuing operations                   (33.7)    (4.8)   (37.6)
Discontinued operations:
  Net income from operations, net of taxes of
    $0.3 and $2.3                                                0.5      2.5
  Loss on disposal, net of taxes of $0.9 and $16.2              (1.4)    (8.5)
---------------------------------------------------  -------  -------  -------
Net loss                                             $(33.7)  $ (5.7)  $(43.6)
---------------------------------------------------  =======  =======  =======
Basic loss per share:
  Continuing operations                              $ (1.09) $ (0.16) $ (1.22)
  Discontinued operations                                       (0.03)   (0.20)
---------------------------------------------------  -------  -------  -------
Net loss                                             $ (1.09) $ (0.19) $ (1.42)
---------------------------------------------------  =======  =======  =======
Diluted loss per share:
  Continuing operations                              $ (1.09) $ (0.16) $ (1.22)
  Discontinued operations                                       (0.03)   (0.20)
---------------------------------------------------  -------- -------- --------
Net loss                                             $ (1.09) $ (0.19) $ (1.42)
---------------------------------------------------  ======== ======== ========



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


                                    Page 29


<PAGE>


CONSOLIDATED BALANCE SHEETS
Blount International, Inc. and Subsidiaries

                                                                December 31,
                                                              ----------------
(Dollar amounts in millions, except share and per share data)   2003     2002
------------------------------------------------------------  -------  -------
Assets
------------------------------------------------------------  -------  -------
Current assets:
  Cash and cash equivalents                                   $ 35.2  $  26.4
  Accounts receivable, net of allowance for
    doubtful accounts of $3.0 and $4.3                          64.4     58.5
  Inventories                                                   67.7     64.8
  Deferred income taxes                                                  30.5
  Other current assets                                          26.1     11.0
------------------------------------------------------------  ------  -------
    Total current assets                                       193.4    191.2
Property, plant and equipment, net of accumulated
  depreciation of $191.1 and $180.5                             92.0     90.7
Goodwill                                                        76.9     76.9
Other assets                                                    38.1     69.2
------------------------------------------------------------  ------  -------
Total Assets                                                  $400.4  $ 428.0
------------------------------------------------------------  ======  =======
Liabilities and Stockholders' Equity (Deficit)
------------------------------------------------------------  ------  -------
Current liabilities:
  Notes payable and current maturities of long-term debt      $  6.6  $   3.4
  Accounts payable                                              29.7     25.5
  Accrued expenses                                              73.7     71.3
------------------------------------------------------------  ------  -------
    Total current liabilities                                  110.0    100.2
Long-term debt, exclusive of current maturities                603.9    624.1
Deferred income taxes, exclusive of current portion              2.8
Other liabilities                                               81.0     72.6
------------------------------------------------------------  ------  -------
Total Liabilities                                              797.7    796.9
------------------------------------------------------------  ------  -------
Commitments and Contingent Liabilities
------------------------------------------------------------  ------  -------
Stockholders' equity (deficit):
Common stock: par value $0.01 per share, 100,000,000 shares
  authorized, 30,827,738 and 30,795,882 outstanding              0.3      0.3
Capital in excess of par value of stock                        424.6    424.3
Accumulated deficit                                           (820.0)  (786.3)
Accumulated other comprehensive income                          (2.2)    (7.2)
------------------------------------------------------------  ------  -------
Total Stockholder's Deficit                                   (397.3)  (368.9)
------------------------------------------------------------  ------  -------
Total Liabilities and Stockholders' Equity (Deficit)          $400.4  $ 428.0
------------------------------------------------------------  ======  =======

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


                                    Page 30


<PAGE>


<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Blount International, Inc. and Subsidiaries
                                                                Year Ended December 31,
                                                              ------------------------------
(Dollar amounts in millions)                                    2003       2002       2001
-------------------------------------------------------       --------   --------   --------
<S>                                                           <C>        <C>        <C>
Cash flows from operating activities:
Net loss                                                      $ (33.7)   $  (5.7)   $ (43.6)
Adjustments to reconcile net loss to net cash
provided by operating activities:
  Loss from discontinued operations                                          0.9        6.0
  Early extinguishment of debt                                    2.8        0.5        8.4
  Depreciation, amortization and other non-cash charges          21.6       22.2       25.6
  Deferred income taxes                                          43.1      (10.8)     (19.5)
  Loss on disposals of property, plant & equipment                0.8        1.6        0.5
  Changes in assets and liabilities, net of
    effects of businesses acquired and sold:
    (Increase) decrease in accounts receivable                   (6.0)      (1.6)      21.8
    (Increase) decrease in inventories                           (2.9)       3.3       19.1
    Decrease in other assets                                      8.2        3.2        9.7
    Increase (decrease) in accounts payable                       4.3        5.8       (5.4)
    Increase(decrease) in accrued expenses                        4.3       (1.5)      (5.6)
    Increase in other liabilities                                13.3        9.7        1.0
-------------------------------------------------------       -------    -------    -------
Net cash provided by continuing operations                       55.8       27.6       18.0
  Net cash provided by discontinued operations                               1.2       29.8
-------------------------------------------------------       -------    -------    -------
Net cash provided by operating activities                        55.8       28.8       47.8
-------------------------------------------------------       --------   -------    -------
Cash flows from investing activities:
(Payments for) proceeds from sales of
    property, plant & equipment                                  (0.6)       8.0        2.7
Purchases of property, plant & equipment                        (16.5)     (17.1)     (11.5)
Acquisitions of businesses                                                             (1.3)
-------------------------------------------------------       -------    -------    -------
  Net cash used in continuing operations                        (17.1)      (9.1)     (10.1)
  Net cash provided by (used in) discontinued operations                   (23.8)     199.2
-------------------------------------------------------       -------    -------    -------
Net cash provided by (used in) investing activities             (17.1)     (32.9)     189.1
-------------------------------------------------------       -------    -------    -------
Cash flows from financing activities:
Net increase in short-term borrowings                                       (5.1)
Issuance of long-term debt                                      118.0                  13.0
Reduction of long-term debt                                    (138.3)     (11.8)    (211.2)
Capital contribution                                                                    7.0
Other                                                            (9.6)      (0.2)      (2.9)
-------------------------------------------------------       -------    -------    -------
  Net cash provided by (used in) financing activities           (29.9)     (17.1)    (194.1)
-------------------------------------------------------       -------    -------    -------
Net increase (decrease) in cash and cash equivalents              8.8      (21.2)      42.8
-------------------------------------------------------       -------    -------    -------

Cash and cash equivalents at beginning of period                 26.4       47.6        4.8
-------------------------------------------------------       -------    -------    -------
Cash and cash equivalents at end of period                    $  35.2    $  26.4    $  47.6
-------------------------------------------------------       =======    =======    =======
</TABLE>


                                    Page 31


<PAGE>



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Blount International, Inc. and Subsidiaries
<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                                     Capital     Retained    Other Comp-
                                                         Common     In Excess    Earnings    rehensive
(Dollar amounts in millions)                              Stock      of Par      (Deficit)     Income         Total
------------------------------------------             ---------   -----------  ----------  -------------   --------
<S>                                                    <C>         <C>          <C>         <C>             <C>
Balance December 31, 2000                                 $ 0.3      $417.3      $(737.0)     $  7.3        $(312.1)
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)
Net loss                                                                           (33.7)                     (33.7)
Other comprehensive income, net:
  Foreign currency translation adjustment                                                        2.1            2.1
  Unrealized gains                                                                               0.4            0.4
  Minimum pension liability adjustment                                                           2.5            2.5
                                                                                                            -------
      Comprehensive income                                                                                    (28.7)
Exercise of stock options                                               0.3                                     0.3
------------------------------------------                -------    -------     -------      -------       -------
Balance December 31, 2003                                 $ 0.3      $424.6      $(820.0)     $ (2.2)       $(397.3)
------------------------------------------                =======    =======     =======      =======       =======
</TABLE>


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


                                    Page 32


<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 term
loan facility had an aggregate principal amount of $500.0 million, comprised
of a $60.0 million Tranche A Term Loan and a $340.0 million Tranche B Term
Loan, and a $100.0 million revolving credit facility. 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. On May 15, 2003 a new
credit facility was established and the existing term loan facility was
extinguished. The new credit facility involved an aggregate principal amount
of $190.0 million, consists of a Term A loan of up to $38.0 million (of which
$35.5 million was outstanding as of December 31, 2003), a Term B loan of up to
$85.0 million (of which $80.0 million was outstanding as of December 31,
2003), and a revolving credit facility of up to $67.0 million (with no amount
outstanding as of December 31, 2003). For additional information on the new
credit agreement see Note 3 of the Notes to the Consolidated Financial
Statements.

Basis of Presentation:

In the opinion of management, the accompanying audited consolidated financial
statements of the Company contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position at
December 31, 2003 and 2002 and the results of operations and cash flows for
the periods ended December 31, 2003, 2002 and 2001. These financial statements
must be read in conjunction with the notes to the financial statements.

Certain amounts in the prior years' financial statements have been
reclassified to conform to the current year's presentation, including the
reclassification of extraordinary losses in accordance with the Company's
adoption of SFAS No. 145,


                                    Page 33


<PAGE>


"Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections," and the realignment of business segments.
The reclassification of extraordinary losses for penalties and write-off of
unamortized deferred financing costs associated with the extinguishment of
debt resulted in increases in other expense of $0.5 million and benefit for
income taxes of $0.2 million for 2002, and an increase in other expense of
$8.4 million and provision for income taxes of $2.9 million in 2001.

The Company has realigned its business segments effective January 1, 2003 and
now reports results in three segments: Outdoor Products, Lawnmower, and
Industrial and Power Equipment.

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).

Effective January 1, 2003, the Company adopted SFAS No. 145, "Rescission of
FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." This Statement addresses, among several other items,
the reporting of debt extinguishments. As a result of the adoption of SFAS No.
145, the Company has reclassified prior years' extraordinary items
attributable to debt extinguishment to other income (expense) in this and all
subsequent reports.

Effective January 1, 2003, the Company's method of accounting for initial
recognition and measurement of guarantees changed as a result of the adoption
of FASB Interpretation No. 45 ("FIN 45") "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." The interpretation expands on the accounting guidance
of FASB Statements No. 5, 57 and 107 and incorporates without change the
provisions of FASB Interpretation No. 34, which was superseded by FIN 45.
Under the provisions of FIN 45, at the time a guarantee is issued, the Company
will recognize an initial liability for the fair value or market value of the
obligation it assumes. The adoption of FIN 45 has not had a material impact on
the 2003 financial statements.

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 the disclosure
of contingent assets and liabilities at the dates of the financial statements,
as well as 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 liabilities and related expenses,
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.


                                    Page 34


<PAGE>


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 $13.4 million, $13.7 million, and $14.4 million in 2003, 2002
and 2001 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, 2003.

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 may occur that could create underperformance relative to
projected future cash flows which would create further future impairments.

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 are separately identifiable
and are less than its carrying value. In that event, a loss is recognized
based on the amount by which the carrying value exceeds 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.


                                    Page 35


<PAGE>


Insurance Accruals:

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

Foreign Currency:

For foreign subsidiaries whose operations are principally conducted in U.S.
dollars, monetary assets and liabilities are translated into U.S. dollars at
the current exchange rate, while other assets (principally property, plant and
equipment and inventories) and related costs and expenses are generally
translated at historic exchange rates. Sales and other costs and expenses are
translated at the average exchange rate for the period and the resulting
foreign exchange adjustments are recognized in income. Assets and liabilities
of the remaining foreign operations are translated to 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 2003, 2002
and 2001.

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, 2003, 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 using the interest method. In the case of an early debt repayment the
Company will adjust the value of corresponding deferred assets.

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 has been
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 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".


                                    Page 36


<PAGE>


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 $7.4 million, $6.7 million, and $7.0 million for 2003, 2002,
and 2001 respectively.

Research and Development:

Expenditures for research and development are expensed as incurred. These
costs from continuing operations were $2.9 million, $3.0 million, and $2.5
million for 2003, 2002, and 2001 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, and 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 defects 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.

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:


                                    Page 37


<PAGE>


<TABLE>
<CAPTION>
                                                    Year Ended December 31
                                                 ----------------------------
                                                   2003      2002      2001
                                                 --------  --------  --------
(Dollars in millions, except per share amounts)
-----------------------------------------------
<S>                                              <C>       <C>        <C>
Net income (loss), as reported                    $(33.7)   $ (5.7)    $(43.6)

Add: stock-based employee compensation cost,
Net of tax, included in the net loss                 0.1

Deduct: total stock-based employee
compensation cost, net of tax,
that would have been included
in net income (loss) under
fair value method                                   (1.1)     (1.2)      (0.7)
-----------------------------------------------   -------   -------    -------
Pro forma Net Income (Loss)                       $(34.7)   $ (6.9)    $(44.3)
-----------------------------------------------   =======   =======    =======
Basic earnings (loss) per share
as reported                                       $ (1.09)  $ (0.19)   $ (1.42)

Pro forma                                           (1.12)    (0.22)     (1.44)

Diluted earnings (loss) per share
as reported                                       $ (1.09)  $ (0.19)   $ (1.42)

Pro forma                                           (1.12)    (0.22)     (1.44)
-----------------------------------------------   -------   -------    -------

</TABLE>

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. The manufacturing facility closure directly impacted 39 hourly
employees and three salaried employees, and the corporate action impacted five
employees.

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 the Company incurred an additional $0.7 million in transition
expenses during the year. The reserve was subsequently adjusted to reflect a
revision of estimates. Eighteen corporate employees were impacted by this
restructuring action.

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 the Outdoor Products segment. In the first
quarter of 2003 an additional charge of $0.2 million for this relocation
project was incurred for severance expense affecting 19 hourly employees and 4
salaried employees.

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


                                    Page 38


<PAGE>


                                                Restructuring Actions
                                      ----------------------------------------
                                      Plant Closure/
                                        Headcount
                                        reduction/     Corporate
                                         Benefit        Office         Asset
                                       Modification   Relocation    Relocation
                                          Q1/2001       Q1/2002       Q4/2002
                                      --------------  ----------    ----------
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         $ 4.7
         2003                               0.6           0.4         $ 1.1

Increase (reduction) to liability
         2001
         2002                                            (0.5)
         2003                              (0.1)          0.1
                                         ------         ------        ------
Balance at December 31, 2003             $  0.4         $ 0.1         $ 0.3
                                         ======         ======        ======

Income Taxes:

The Company accounts for income taxes under the asset and liability method.
Accordingly, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be realized.

Reclassifications:

Certain reclassifications have been made to prior year balances in order to
conform to the current year presentation. Such reclassifications had no impact
on net loss or net stockholders' equity.


                                    Page 39


<PAGE>


NOTE 2:
INCOME TAXES

Income (loss) from continuing operations before provision (benefit) for income
taxes was as follows:

                                                      Year Ended December 31,
                                                     -------------------------
(Dollar amounts in millions)                          2003     2002     2001
------------------------------------------------     -------  -------  -------
Income (loss) from continuing operations
  before income taxes:
    Domestic                                         $(13.5)  $(29.2)  $(77.2)
    Foreign                                            24.7     19.9     18.3
------------------------------------------------     ------   ------   ------
      Total income (loss) from continuing
           operations before income taxes:           $ 11.2   $ (9.3)  $(58.9)
------------------------------------------------     ------   ------   ------

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

                                                      Year Ended December 31,
                                                     -------------------------
(Dollar amounts in millions)                          2003     2002     2001
------------------------------------------------     -------  -------  -------
Current
    Federal                                          $(27.4)  $(13.3)  $(27.6)
    State                                               0.1      1.0     (0.4)
    Foreign                                            14.3      6.5      6.4
Deferred
    Federal                                            58.7      1.3      1.3
    State                                              (3.0)     0.1     (0.3)
    Foreign                                             2.2     (0.1)    (0.7)
-----------------------------------------------      ------   ------   ------
      Provision (benefit) for taxes                  $ 44.9   $ (4.5)  $(21.3)
===============================================      ======   ======   ======

With the January 1, 2003, adoption of SFAS No. 145, "Rescission of FASB
Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections," the Company has restated income (loss) before tax provision
(benefit) for the years ended December 31, 2002 and 2001. The effect was to
increase the losses before tax by $0.5 million and $8.4 million respectively
for 2002 and 2001, and to increase the benefit for tax by $0.2 million in 2002
and $2.9 million in 2001.

In the year ended December 31, 2003 there were no other tax provisions
included in the financial statements. 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, and a $0.6 million benefit related to discontinued
operations. In the year ended December 31, 2001 there was no tax expense or
benefit for a minimum pension liability recorded, $2.3 million provision for
income from discontinued operations and $16.2 million provision for the gain
on sale of the Company's Sporting Equipment segment.

A reconciliation of the provision (benefit) for income taxes to the amount
computed by applying the statutory federal income tax rate to income (loss)
from continuing operations before income taxes is as follows:


                                   Page 40


<PAGE>


<TABLE>
<CAPTION>
<S>                                                      <C>      <C>      <C>
                                                      % of income (loss) before tax
                                                      ----------------------------
                                                         2003     2002     2001
                                                        ------   ------   ------
Statutory tax rate                                       35.0    (35.0)   (35.0)
Impact of earnings of foreign operations                 12.3     (8.5)    (1.1)
Resolution of Canadian Competent Authority issues       (13.7)
Reduction of previously accrued foreign taxes           (21.3)
State income taxes, net of federal tax benefit          (26.2)     9.5      0.1
Permanent differences                                     3.6      1.3      1.4
Contingency                                             (23.2)   (15.7)    (1.6)
----------------------------------------------------    ------   ------   ------
Effective income tax rate before valuation allowance    (33.5)   (48.4)   (36.2)
Valuation Allowance                                     434.2
----------------------------------------------------    ------   ------   ------
Effective Income Tax rate after Valuation Allowance     400.7    (48.4)   (36.2)
----------------------------------------------------    ------   ------   ------
</TABLE>

The Company's effective tax rate increased to 400.7% in 2003 from a benefit
rate of 48.4% in 2002. This change in the effective rate was caused primarily
by the creation of a valuation allowance to reduce the deferred tax assets,
the beneficial impact of activities associated with foreign operations and an
adjustment to the tax contingency.

The Company's effective income tax rate increased in 2002 to 48.4% from 36.2%
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.

The components of deferred income tax assets (liabilities) applicable to
temporary and permanent differences at December 31, 2003 and 2002 are as
follows:

 (Dollar amounts in millions)                                2003     2002
--------------------------------------------------         -------- --------

Deferred tax assets:
  Property, Plant and Equipment basis differences          $(11.1)  $ (9.4)
  Employee benefits                                          30.4     31.4
  Other accrued expenses                                     13.0     14.5
  Net Operating loss and capital loss carryforwards          13.8     17.9
  Other-net                                                   2.5    (14.1)
--------------------------------------------------         ------   ------
  Sub-total before valuation allowance                       48.6     40.3
--------------------------------------------------         ------   ------
  Less valuation allowance                                 $(48.6)
--------------------------------------------------         ------   ------
  Net deferred tax assets                                           $ 40.3
--------------------------------------------------         ======   ======

Deferred tax liabilities:
  Foreign - net                                            $ (2.8)
--------------------------------------------------         ------   ------
  Net deferred tax liabilities                             $ (2.8)
--------------------------------------------------         ======   ======

The net deferred income tax asset as of December 31, 2002 was 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 the third quarter of 2003, the Company recorded a valuation allowance
against its deferred tax assets in the United States. The deferred tax assets
are comprised principally of domestic net operating losses generated during
2001 and 2003, state net operating losses generated from 1998 forward, a
domestic capital loss carryforward from 2001 and other expenses not currently
deductible for tax. Subsequent to the third quarter, additional deferred tax
assets and valuation allowances were recorded for net operating losses and
other expenses not currently deductible for tax.


                                    Page 41


<PAGE>


Subsequent to the third quarter, additional deferred tax assets and valuation
allowances were recorded for net operating losses and other expenses not
currently deductible for tax. The total deferred tax asset as of December 31,
2003, before this valuation allowance, was recorded in the Company's balance
sheet as a current asset of $24.9 million, and a remaining $23.7 million
included in other long term assets. The ultimate realization of these deferred
tax assets is dependent upon the generation of future taxable income before
these items expire. Although the Company anticipates future sustained
profitability, SFAS No. 109 requires that recent historical operating losses
must weigh heavily in assessing the realizability of deferred tax assets.

As of December 31, 2003, the Company has approximately $21.6 million in
federal income taxes receivable relating to domestic net operating loss
carrybacks and income tax refund claims associated with the Competent
Authority process between the United States of America and Canada for the
years 1994 through 1999. This is included on the Consolidated Balance Sheets
in other current assets.

As of December 31, 2003, the Company has domestic net operating loss
carryforwards of $28.4 million and state net operating loss carryforwards of
$72.5 million that expire at various dates from 2008 through 2023.
Additionally, the Company has a domestic capital loss carryforward for $0.5
Million that expires in 2007.

United States income taxes have not been provided on undistributed earnings of
international subsidiaries. The Company's intention is to reinvest these
earnings and repatriate the earnings only when it is tax efficient to do so.
As of December 31, 2003, undistributed earnings of international subsidiaries
were $64.5 million.

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. As of December 31, 2003, Revenue
Canada has initiated an examination of tax years 2000, 2001 and 2002. 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, 2003 and 2002, consists of the following:

                                         December 31,      December 31,
(Dollars in millions)                       2003              2002
---------------------------------        ----------        ----------
13% Senior subordinated notes             $ 323.2           $ 325.0
7% Senior notes                             149.7             149.4
Term loans                                  115.5             134.4
Revolving credit facility
12% preferred equivalent security            22.1              18.7
---------------------------------         -------           -------
Total Debt                                  610.5             627.5
Less current maturities                      (6.6)             (3.4)
---------------------------------         -------           -------
Total long-term debt                      $ 603.9             624.1
---------------------------------         =======           =======


                                   Page 42


<PAGE>


Maturities of long-term debt:

(Dollar amounts in millions)       Payments
--------------------------------------------
2004                               $   6.6
2005                                 160.4
2006                                  14.5
2007                                  15.7
2008 and beyond                      413.3
--------------------------------------------
         Total                     $ 610.5
============================================

Included in the debt payable in 2008 and beyond is a balance of $22.1 million
at December 31, 2003 representing a 12% convertible preferred equivalent
security dated March 2, 2001 and due on March 2, 2013. The balance as of
December 31, 2002 was $18.7 million. Interest in the first five years is
payable in "PIKs", or payments-in-kind.

As of December 31, 2003 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 a credit facility with an
aggregate principal amount of $500.0 million, comprised of a $60.0 million
Tranche A Term Loan, a $340.0 million Tranche B Term Loan, 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. On May 15, 2003
the Company entered into a new credit facility in the amount of $190.0 million
to extinguish the previous senior credit facility including the revolving
credit facility. The Company utilized $149.9 million of the new facility,
including $31.9 million on the revolver to repay the previous credit facility
of $133.5, pay $7.7 million towards fees and expenses for the loan agent and
others, and provide $7.7 million cash to temporarily collateralize outstanding
letters of credit. Prior to the end of the second quarter of 2003, the Company
paid off the revolver balance in full by, among other sources, using the $25.0
million returned to the Company that was previously held in escrow as part of
the sale of the Company's Sporting Equipment segment in 2001.


                                   Page 43


<PAGE>


The new senior credit facility consists of a $67.0 million revolving credit
facility (none outstanding as of December 31, 2003), a Term A loan of up to
$38.0 million ($35.5 million outstanding as of December 31, 2003) and a Term B
loan of up $85.0 million ($80.0 million outstanding as of December 31, 2003).
The term of the new credit facility is for five years with scheduled quarterly
repayments as follows: the Term A loan requires quarterly repayments of $1.3
million until April 1, 2004, and then increasing to $2.1 million per quarter
on July 1, 2004 until the last payment on May 14, 2008; Term B requires
quarterly payments of $1.3 million beginning July 1, 2005 until April 1, 2006
and then increasing to $1.9 million per quarter until January 1, 2008, with
the final payment of $66.9 million due on May 14, 2008. The term loans can be
repaid at anytime but are subject to a prepayment premium during the initial
two years of the credit agreement. There can also be additional mandatory
repayment amounts related to the sale of Company assets under certain
circumstances and upon the Company's annual generation of excess cash flow as
determined by the credit agreement. The new credit facility provides for term
loan interest rate margins to vary based on the Company's leverage ratio. The
leverage ratio is defined as the ratio of total outstanding debt to earnings
before interest, taxes, depreciation and amortization (EBITDA) utilizing a
choice of formulas as described in the credit agreement. Interest rates also
change based upon changes in LIBOR and/or prime rates. The amount available on
the revolving credit facility is determined semi-monthly from the Company's
outstanding accounts receivable and inventory levels, less outstanding letters
of credit and a minimum availability threshold. As of December 31, 2003 the
Company had the ability to borrow $43.8 million under the terms of the
revolving credit agreement.

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 and the new credit facility of
May 15, 2003. 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 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 new credit facility contains covenants relating to indebtedness, liens,
mergers, consolidations, disposals of property, payment of dividends, capital
expenditures, investments, optional payments and modifications of 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 minimum EBITDA levels and fixed coverage ratios.

On March 2, 2001, 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 in 2001 to the Certificate of
Incorporation authorizing the issuance of preferred stock. The Company
recorded the fair value of the warrants at $7.0 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, 2003, is $22.1 million and
increased during 2003 through accretion of the discount and the accrual of
interest.


                                   Page 44


<PAGE>


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 2003. While there can be no assurance, management believes the
Company will comply with all debt covenants during 2004. Should the Company
not comply with the covenants during 2004 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, 2003 and 2002.


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 2003 and determined
that no impairment existed as of December 31, 2003. 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 non-amortization provisions of SFAS No. 142, the Company
will no longer record approximately $3 million of annual amortization relating
to goodwill and indefinite-lived intangibles.

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


                                   Page 45


<PAGE>


<TABLE>
<CAPTION>
<S>                                                             <C>          <C>      <C>
                                                                    Year Ended December 31,
                                                              --------------------------------
(Dollars in millions)                                          2003         2002        2001
------------------------------------------------------        --------------------------------
Reported net income (loss) from continuing operations         $(33.7)     $ (4.8)      $(37.6)
Add back goodwill amortization, net of tax                                                3.1
------------------------------------------------------        -------      -------     -------
Adjusted net earnings (loss)                                  $(33.7)     $ (4.8)      $(34.5)
------------------------------------------------------        =======      =======     =======
Basic earnings income (loss) per share from
  continuing operations                                       $ (1.09)     $(0.16)     $ (1.22)
  Add back goodwill amortization, net of tax                                              0.10
------------------------------------------------------        -------      -------     -------
Adjusted net earnings (loss) per share                        $ (1.09)     $(0.16)     $ (1.12)
------------------------------------------------------        =======      =======     =======

Diluted earnings income (loss) per share from                 $ (1.09)     $(0.16)     $ (1.22)
  continuing operations
  Add back goodwill amortization, net of tax                                              0.10
------------------------------------------------------        -------      -------     -------
Adjusted net earnings (loss) per share                        $ (1.09)     $(0.16)     $ (1.12)
------------------------------------------------------        =======      =======     =======
</TABLE>

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 of The Notes to the Consolidated
Financial statements 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):

<TABLE>
<CAPTION>
<S>                                                        <C>      <C>      <C>
                                                            Year Ended December 31,
                                                          --------------------------
                                                           2003     2002     2001
------------------------------------------------------    --------------------------
Shares for basic earnings (loss) per share
     computation - weighted average common
     shares outstanding                                   30,809   30,796   30,796
Dilutive effect of stock options
------------------------------------------------------    ------   ------   ------
Shares for diluted earnings (loss) per
     shares outstanding                                   30,809   30,796   30,796
------------------------------------------------------    ======   ======   ======
</TABLE>

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


                                   Page 46


<PAGE>


the warrants held by an affiliate of its controlling shareholder for
the computation of diluted EPS because to include would be anti-dilutive for
the years ended December 31, 2003, 2002 and 2001.

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 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. In 2003,
options were granted to purchase 665,000 shares at an average price of $5.01
per share. As of December 31, 2003, 2002, and 2001, there were options for
1,786,253 shares, 2,414,187 shares, and 3,733,500 shares available for grant.

A summary of the status of the Company's fixed stock option plans as of
December 31, 2003, 2002, and 2001, and the changes during the periods ending
on those dates are presented in the following table:

<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                           ----------------------------------------------------------------------
                                   2003                    2002                   2001
                            --------------------    --------------------    --------------------
                                       Weighted-               Weighted-               Weighted-
                                        Average                 Average                 Average
                            Shares     Exercise     Shares     Exercise     Shares     Exercise
                          (in 000's)    Price     (in 000's)    Price     (in 000's)    Price
--------------------       --------    --------    --------    --------    --------    --------
<S>                        <C>         <C>         <C>         <C>         <C>         <C>
Outstanding at
beginning of period         3,461       $ 8.17      2,141       $12.30      2,271      $14.82
   Granted                    665         5.01      1,571         3.60        635        4.96
   Exercised                  (32)        3.54
   Forfeited                  (37)       10.19       (251)       14.82       (765)      13.67
   Canceled
--------------------       --------    --------    --------     --------   --------    --------
Outstanding at
end of period               4,057       $ 7.67      3,461       $ 8.17      2,141      $12.30
--------------------       --------    --------    --------     --------   --------    --------
Options exercisable
end of period               2,231                   1,587                     829
--------------------       --------    --------    --------     --------   --------    --------
</TABLE>

Options outstanding at December 31, 2003, have an average exercise price of
$7.67 per share, vest over periods to six years and have a remaining
contractual life of approximately 7.2 years.

For purposes of computing the pro forma amounts in Note 1, the Black-Scholes
option- pricing model was used with the following weighted-average
assumptions:

                                                Year Ended December 31,
                                           ---------------------------------
                                             2003        2002        2001
---------------------------------------    ---------   ---------   ---------
Estimated lives of plan options             5 years     5 years     5 years
Risk-free interest rates                      3.3%        3.4%        4.8%
Expected volatility                          38.0%       36.0%       37.0%
Dividend yield                                0.0%        0.0%        0.0%
---------------------------------------    ---------   ---------   ---------


                                   Page 47


<PAGE>


The weighted average estimated fair value of options granted during 2003,
2002, and 2001 was $2.06, $1.34, and $2.01 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, which is convertible into preferred stock in turn
convertible into common stock, together with warrants to acquire 1,000,000
shares of Blount common stock that are exercisable immediately at $0.01 a
share.


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, 2003 and
2002, were as follows:
<TABLE>
<CAPTION>
                                                                     Other
                                                Pension          Post-retirement
                                                Benefits            Benefits
FUNDED PLANS                                ------------------  -----------------
(Dollar amounts in millions)                  2003      2002      2003      2002
------------------------------------------  --------  --------  --------  --------
<S>                                         <C>       <C>       <C>       <C>
Change in Benefit Obligation:
Benefit obligation at beginning of period   $(122.5)  $(105.8)   $ (3.1)  $  (3.9)
Service cost                                   (4.6)     (3.8)
Interest cost                                  (8.0)     (7.5)     (0.2)     (0.2)
Plan participants' contributions                                   (0.1)     (0.1)
Actuarial gains (losses)                      (14.7)     (5.7)                0.6
Benefits and plan expenses paid                 5.8       5.2       0.4       0.5
Plan Amendment                                           (4.9)
------------------------------------------  -------   -------    ------   -------
Benefit obligation at end of period          (144.0)   (122.5)     (3.0)     (3.1)
------------------------------------------  -------   -------    ------   -------



Change in Plan Assets:
Fair value of plan assets at beginning
  of period                                    69.7      84.5       1.1       1.6
Actual return on plan assets                   16.9     (10.2)      0.1      (0.2)
Company contributions                           5.6       1.0
Plan participants' contributions                                    0.1       0.1
Benefits and plan expenses paid                (5.8)     (5.2)     (0.4)     (0.4)
Settlements                                              (0.4)
------------------------------------------  -------   -------    ------   -------
Fair value of plan assets at end of period     86.4      69.7       0.9       1.1
------------------------------------------  -------   -------    ------   -------
Funded status                                 (57.6)    (52.9)     (2.1)     (2.0)
Unrecognized actuarial (gains) losses          42.9      40.3       1.7       1.8
Unrecognized prior service cost                 4.1       4.5
------------------------------------------  -------   -------    ------   -------
Net amount recognized                       $ (10.6)  $  (8.1)  $  (0.4)  $  (0.2)
------------------------------------------  -------   -------    ------   -------

Net amount recognized:
Prepaid benefits                            $   4.8   $   3.3
Accrued benefits                              (39.0)    (38.1)  $  (0.4)  $  (0.2)
Accumulated other comprehensive income         19.5      22.2
Intangible asset                                4.1       4.5
------------------------------------------  -------   -------    ------   -------
Net amount recognized                       $ (10.6)  $  (8.1)  $  (0.4)  $  (0.2)
------------------------------------------  -------   -------   -------   -------
</TABLE>


                                   Page 48


<PAGE>


<TABLE>
<CAPTION>
                                                                     Other
                                                Pension          Post-retirement
                                                Benefits            Benefits
FUNDED PLANS                                ------------------  -----------------
(Dollar amounts in millions)                  2003      2002      2003      2002
------------------------------------------  --------  --------  --------  -------
<S>                                         <C>       <C>       <C>       <C>

Change in Benefit Obligation:
Benefit obligation at beginning of period   $ (6.5)   $  (8.9)  $ (26.9)  $ (21.9)
Service cost                                  (0.1)      (0.2)     (0.4)     (0.3)
Interest cost                                 (0.4)      (0.7)     (1.8)     (1.7)
Plan participants' contributions                                   (1.3)     (0.5)
Actuarial gains (losses)                      (0.3)      (1.4)     (4.5)     (3.8)
Benefits and plan expenses paid                0.6        0.6       3.4       1.3
Curtailment/settlement                                              4.1
------------------------------------------  --------  --------  --------  -------
Benefit obligation at end of period           (6.7)      (6.5)    (31.5)    (26.9)
Unrecognized actuarial (gains) losses          1.3        1.0      13.8      10.0
Unrecognized prior service cost               (0.1)      (0.1)                0.1
------------------------------------------  --------  --------  --------  -------
Net amount recognized                       $ (5.5)   $  (5.6)  $ (17.7)  $ (16.8)
------------------------------------------  --------  --------  --------  -------
Net amount recognized:
Accrued benefits                            $ (6.4)   $  (6.4)  $ (17.7)  $ (16.8)
Accumulated other comprehensive income         0.8        0.7
Intangible asset                               0.1        0.1
------------------------------------------  --------  --------  --------  -------
Net amount recognized                       $ (5.5)   $  (5.6)  $ (17.7)  $ (16.8)
------------------------------------------  --------  --------  --------  -------
</TABLE>

The accumulated pension benefit obligation of supplemental non-qualified
defined benefit pension plans was $6.4 million and $6.3 million at December
31, 2003 and 2002, 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 require 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, 2003 and 2002, approximately $4.6 million and $5.6
million, respectively, were held in these trusts and is included in other
assets in the Consolidated Balance Sheets.

The curtailment and settlement amounts for 2002 related to the payment of
obligations 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. For the year ended December 31, 2003 the minimum pension
liability adjustment resulted in an increase of $2.5 million to equity as
other comprehensive income.

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


                                   Page 49


<PAGE>


<TABLE>
<CAPTION>
                                                     Pension                 Other Post-Retirement
                                                     Benefits                       Benefits
                                            --------------------------    ----------------------------
                                                    Year Ended                     Year Ended
                                                   December 31,                   December 31,
                                            --------------------------    ----------------------------
(Dollar amounts in millions)                  2003      2002      2001     2003       2002      2001
----------------------------------------     ------    ------    ------    ------     ------    ------
<S>                                         <C>       <C>       <C>       <C>        <C>       <C>
Components of net periodic benefit cost:
Service cost                                $  4.7    $  4.1    $  6.7    $ 0.4      $ 0.3     $ 0.5
Interest cost                                  8.4       8.1      11.1      2.0        1.9       2.1
Expected return on plan assets                (6.4)     (7.2)    (11.6)    (0.1)      (0.1)     (0.1)
Amortization of actuarial (gains) losses       2.3       0.5       0.4      0.9        0.5       0.4
Amortization of transition asset                        (0.1)     (0.1)
Amortization of prior service cost             0.4       1.3       1.0
Curtailment/settlement (gain) loss                       2.4      (0.1)
----------------------------------------     ------    ------    ------    ------     ------    ------
Total net periodic benefit cost             $  9.4    $  9.1    $  7.4    $ 3.2      $ 2.6     $ 2.9
----------------------------------------     ------    ------    ------    ------     ------    ------
Weighted average assumptions:
Discount rate                                  6.1%      6.5%      7.2%     6.0%       6.5%      7.2%
Expected return on plan assets                 8.9%      8.9%      8.9%     9.0%       9.0%      9.0%
Rate of compensation increase                  3.4%      3.6%      3.6%
----------------------------------------     ------    ------    ------    ------     ------    ------
</TABLE>

The Company's domestic defined benefit pension plan is included in the
preceding tables. As of December 31, 2003 the asset value of this plan was
$61.6 million. Also included in the preceding tables is $0.9 million in assets
related to a post-retirement medical plan related to a certain discontinued
business. The expected long-term rate of return on these assets was chosen
from the range of likely results of compound average annual returns over a
twenty year time horizon based on the plan's current investment policy. The
expected return and volatility for each asset class was based on historical
equity, bond and cash returns during the period 1926 to 2002. While this
approach gives appropriate consideration to recent fund performance and
historical returns, the assumption is primarily a long-term, prospective rate.
Based on this analysis, the expected long-term return assumption for our
domestic funded pension plan and the post retirement medical plan will remain
at 9.0%.

The Company maintains target allocation percentages among various asset
classes based on an investment policy established for the domestic pension
plan and the post-retirement medical plan. The target allocation is designed
to achieve long term objectives of return, while mitigating against downside
risk and considering expected cash flows. The current weighted-average target
asset allocation for the domestic pension plan and the post retirement plan is
as follows: equity securities 60%, debt securities 35%, real estate 0% and
other 5%.

The Company expects to contribute approximately $14 million to its domestic
pension plan in 2004. The Company does not expect to make any contributions to
the post retirement medical plan during 2004.

A 10.0% annual rate of increase in the cost of health care benefits was
assumed for 2003; the rate was assumed to decrease 2.0% per year until 5.0% is
reached. A 1% change in assumed health care cost trend rates would have the
following effects:

(Dollar amounts in millions)                          1% Increase   1% Decrease
---------------------------------------------------   -----------   -----------
Effect on service and interest cost components           $ 0.3        $ (0.2)
Effect on other post-retirement benefit obligations        3.4          (2.8)
---------------------------------------------------   -----------   -----------

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, $2.4
million and $4.6 million in 2003, 2002 and 2001.


                                   Page 50


<PAGE>


NOTE 8:
COMMITMENTS AND CONTINGENT LIABILITIES

The Company leases office space and equipment under operating leases expiring
in one to eight 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, 2003, are as follows (in
millions): 2004--$2.1; 2005--$1.4; 2006--$0.7; 2007--$0.4; 2008--$0.2; 2009
and beyond--$0.1. Rentals charged to continuing operations costs and expenses
under cancelable and non-cancelable lease arrangements were $2.3 million, $2.5
million and $2.7 million for 2003, 2002 and 2001, respectively. In addition,
in 2003 the Company also signed a letter of intent on a parcel of land in The
Peoples Republic of China for an amount of $1.0 million.

Certain customers of the Company's Lawnmower 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 both
December 31, 2003 and 2002 is $4.0 million. These arrangements have not had a
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, since any repurchased equipment will likely be
resold for approximately the same value.

The Company provides guarantees and other commercial commitments summarized in
the following table (in millions):

                                                         Total at
                                                     December 31, 2003
-------------------------------                      -----------------
Product Warranty                                        $  4.1
Letters of Credit Outstanding                              7.9
Third Party Financing Projections(1)                       4.0
Accounts Receivable Securitization(2)                      0.4
--------------------------------------------         -----------------
Total                                                   $ 16.4
============================================         =================

(1)  Applicable to the third party financing agreements for customer equipment
     purchases of Dixon lawnmowers and FIED equipment.

(2)  Included the guarantees of certain accounts receivable of Dixon's
     receivable to a third party financing company.

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

Product 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, 2003 are as
follows (in millions):

----------------------------------    ---------
Balance as of December 31, 2002         $ 3.3
Accrued                                   3.6
Payments made (in cash or in-kind)       (2.8)
----------------------------------    ---------
Balance as of December 31, 2003         $ 4.1
==================================    =========

Other 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


                                   Page 51


<PAGE>


specified triggering events occur. Nonperformance of 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, environmental, product liability and
other indemnification matters. The ultimate effect on future financial results
is not subject to reasonable estimation because considerable uncertainty
exists as to the occurrence or, if triggered, final outcome of these claims.
However, while the ultimate liabilities resulting from such claims may be
potentially 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.

The Company reserves for product liability, environmental remediation and
other legal matters as it becomes aware of such matters. A portion of these
claims or lawsuits may be covered by insurance policies that generally contain
both deductible and coverage limits. The Company monitors the progress of each
legal matter 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, 2003 and December 31, 2002, the Company
believes it has appropriately recorded and disclosed all material costs for
its obligations in regard to known matters. In the case of product liability
matters, the estimated cost of each claim is determined by a third party
administrator who works with the Company's legal department 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 Landfill
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 "most reasonably probable
scenario".

The Company has accrued $75,000 at December 31, 2003 and 2002 for the
potential costs of any clean-up. The Company spent zero and $5,600 in the
years ended December 31, 2003 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 V 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 matter under the terms of the sale of its Sporting


                                   Page 52


<PAGE>


Equipment Group segment (including Federal) to Alliant Techsystems, Inc. as
discussed in Note 5 of the 2002 Annual Report on Form 10-K.

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 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 the 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 attended 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").
The EPA and Federal submitted proposed findings to the Administrative Law
Judge on May 7, 2003. It is anticipated that a ruling will be made in the near
future. 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.

On September 12, 2003, the Company received a General Notice Letter as a
Potentially Responsible De Minimis Party from Region IX of the United States
Environmental Protection Agency ("EPA") regarding the Operating Industries,
Inc. Superfund Site in Monterey Park, California. The notice stated that the
EPA would submit an offer to settle and an explanation as to why it believes
the Company or a predecessor unit is a de minimis participant at the site in
mid-November. However, the Company was subsequently informed by the EPA that
its report would be delayed, and the Company has not received the offer or
explanation as of this date. The site was operated as a landfill from 1948 to
1984, and received wastes from over 4,000 generators during this time. At the
present time, the Company has no knowledge of which of its units, if any, was
involved at the site, or the amounts, if any, sent there. However, based upon
its current knowledge, and its alleged status as a Potentially Responsible De
Minimis Party, the Company does not believe that any settlement or
participation in any remediation will have a material adverse effect on its
consolidated financial condition or operating results.

On February 10, 2004, the Company received a Notice of Non-Compliance from the
Oregon Department of Environmental Quality ("DEQ") regarding alleged
violations of state and federal hazardous waste management regulations at the
Company's Oregon Cutting Systems facility in Milwaukie, Oregon. None of the
alleged violations concern a release or discharge into the environment.

In response to the Notice, the Company has taken certain corrective actions,
has asked for further explanation of some of the alleged violations and may
contest the remaining alleged violations. Under applicable procedures, the
Company and DEQ will confer on these issues; however, after considering the
Company's response, the DEQ could issue a Notice of Violation and, if so, the
possibility for civil penalties exists.

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. One such suit resulted in the Company paying its
self-insured retention of $1.0 million during the second quarter of 2003. In
addition, the Company is a party to a number of other suits arising out of the
normal course 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. The Company accrues, by a charge to income, an amount related to a
matter deemed by management and its counsel as a probable loss


                                   Page 53


<PAGE>


contingency in light of all of the then known circumstances. The Company does
not accrue a charge to income for a matter deemed by management and its
counsel to be a reasonably possible loss contingency in light of all of the
current circumstances.


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. At December 31, 2003, approximately 63% of trade
accounts receivable were from customers within the United States. Trade
accounts receivable are principally from service and dealer groups,
distributors, mass merchants, chainsaw 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,
2003 and 2002, are as follows:

                                              2003                   2002
                                        ------------------   ------------------
                                        Carrying    Fair     Carrying    Fair
(Dollar amounts in millions)             Amount     Value     Amount     Value
------------------------------------    --------  --------   --------  --------
Cash and short-term investments         $ 35.2    $ 35.2     $ 26.4    $ 26.4
Other assets (restricted trust
  funds and notes receivable)              4.6       4.6        6.2       6.2
Notes payable and long-term debt
  (see Note 3)                           610.5     633.9      627.5     478.1
------------------------------------    --------  --------   --------  --------

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 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 three reportable segments: Outdoor Products, Lawnmower and
Industrial and Power Equipment. Outdoor Products manufactures and markets
chain, bars, sprockets, and accessories for chainsaw use, concrete cutting
equipment, and lawnmower blades and accessories for outdoor care. The
Lawnmower segment manufactures and markets riding lawnmowers and related
accessories. Industrial and Power Equipment manufactures and markets timber
harvesting equipment, industrial tractors and loaders, rotation bearings and
mechanical power transmission units.

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 54


<PAGE>


Information on Segments:

                                                       Year Ended December 31,
                                                     --------------------------
(Dollar amounts in millions)                          2003     2002     2001
---------------------------------------------------  -------- -------- --------
Sales:
  Outdoor Products                                   $ 358.8  $ 307.4  $ 307.4
  Lawnmower                                             35.7     41.4     43.0
  Industrial and Power Equipment                       165.0    131.7    120.6
  Inter Segment Elimination                             (0.4)    (1.0)    (2.3)
---------------------------------------------------  -------- -------- --------
         Total Sales                                 $ 559.1  $ 479.5  $ 468.7
---------------------------------------------------  -------- -------- --------
Operating income (loss):
  Outdoor Products                                   $  86.2  $  67.7  $  69.4
  Lawnmower                                             (1.2)     2.7      0.9
  Industrial and Power Equipment                        11.7      5.2     (1.7)
  Inter Segment Elimination                                       0.3
---------------------------------------------------  -------- -------- --------
  Operating income from segments                        96.7     75.9     68.6
Corporate office expenses                              (12.7)    (6.2)    (7.7)
Restructuring expenses                                  (0.2)    (7.2)   (16.2)
---------------------------------------------------  -------- -------- --------
Income from continuing operations                       83.8     62.5     44.7
Interest expense                                       (69.8)   (72.2)   (95.9)
Interest income                                          0.8      1.1      1.4
Other income (expense), net                             (3.6)    (0.7)    (9.1)
---------------------------------------------------  -------- -------- --------
Loss from continuing operations before income taxes  $  11.2  $  (9.3) $ (58.9)
---------------------------------------------------  -------- -------- --------

Identifiable assets:
  Outdoor Products                                   $ 227.1  $ 199.2  $ 182.9
  Lawnmower                                             18.7     19.3     20.8
  Industrial and Power Equipment                        83.4     87.4     94.3
  Corporate office/elimination/discont. operations      71.2    122.1    146.8
---------------------------------------------------  -------- -------- --------
         Total assets                                $ 400.4  $ 428.0  $ 444.8
---------------------------------------------------  -------- -------- --------
Depreciation and amortization:
  Outdoor Products                                   $   9.5  $   9.6  $  11.1
  Lawnmower                                              0.7      0.8      1.3
  Industrial and Power Equipment                         3.3      3.3      4.5
  Corporate office                                       5.2      5.2      6.7
---------------------------------------------------  -------- -------- --------
         Total depreciation and amortization         $  18.7  $  18.9  $  23.6
---------------------------------------------------  -------- -------- --------
Capital expenditures:
  Outdoor Products                                   $  15.0  $  15.3  $  10.3
  Lawnmower                                              0.6      0.4      0.2
  Industrial and Power Equipment                         0.9      1.4      1.0
  Corporate office
---------------------------------------------------  -------- -------- --------
         Total capital expenditures                  $  16.5  $  17.1  $  11.5
---------------------------------------------------  -------- -------- --------



                                   Page 55


<PAGE>


Information on Sales by Significant Product Groups:
                                                      Year Ended December 31,
                                                     -------------------------
(Dollar amounts in millions)                          2003      2002     2001
---------------------------------------------------  -------  -------  -------
Chainsaw components and accessories                  $ 283.0  $ 243.0  $ 249.5
Timber harvesting and loading equipment                151.7    115.9    101.7
Outdoor care parts and accessories                      57.5     48.9     45.3
Lawnmowers                                              35.7     40.9     40.7
All others, less than 5% each                           31.2     30.8     31.5
---------------------------------------------------  -------  -------  -------
         Total Sales                                 $ 559.1  $ 479.5  $ 468.7
---------------------------------------------------  =======  =======  =======

Information on Geographic Areas:
                                                      Year Ended December 31,
                                                     -------------------------
(Dollar amounts in millions)                          2003      2002    2001
---------------------------------------------------  -------  -------  -------
Sales:
  United States                                      $ 331.3  $ 289.4  $ 280.6
  European Union                                        99.7     85.2     81.5
  Canada                                                23.1     21.9     18.8
  Brazil                                                17.1     13.8     13.8
  All others, less than 3% each                         87.9     69.2     74.0
---------------------------------------------------  -------  -------  -------
         Total Sales                                 $ 559.1  $ 479.5  $ 468.7
---------------------------------------------------  =======  =======  =======

Property, plant & equipment-net:
  United States                                      $  53.8  $  55.3  $  64.0
  Canada                                                26.1     24.3     22.4
  European Union                                         7.3      6.4      5.3
  Brazil                                                 4.4      4.3      4.1
  All others, less than 1% each                          0.4      0.4      0.4
---------------------------------------------------  -------  -------  -------
         Property, plant & equipment-net             $  92.0  $  90.7  $  96.2
---------------------------------------------------  =======  =======  =======

The geographic sales information is by country of destination. Property, plant
and equipment is net of accumulated depreciation. One customer, The Electrolux
Group, accounted for more than 10% of consolidated sales in all three years.
While the Company expects this business relationship to continue, the loss of
this customer could affect the operations of the Outdoor Products segment.
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 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


                                   Page 56


<PAGE>


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 Year
Ended December 31, 2003
<TABLE>
<CAPTION>
                                                  Blount                                Non-
                                              International,  Blount,   Guarantor     Guarantor
                                                   Inc.        Inc.    Subsidiaries   Subsidiaries    Eliminations   Consolidated
                                              --------------  -------  ------------   ------------    ------------   ------------
STATEMENT OF OPERATIONS
-----------------------
<S>                                           <C>             <C>      <C>            <C>              <C>           <C>
Sale                                                          $ 364.6     $ 127.3        $ 201.4        $ (134.2)       $ 559.1
Cost of sales                                                   258.6       100.5          148.2          (137.9)         369.4
                                                              --------    --------       --------       ---------       --------
Gross profit                                                    106.0        26.8           53.2             3.7          189.7
Selling, general and administrative expenses                     64.1        16.7           24.9                          105.7
Restructuring expenses                                                        0.2                                           0.2
                                                              --------    --------       --------       ---------       --------
Income (loss) from operations                                    41.9         9.9           28.3             3.7           83.8
Interest expense                                 $  (19.7)      (46.2)       (0.4)          (3.5)                         (69.8)
Interest income                                                   0.4                        0.4                            0.8
Other income (expense), net                                       0.7        (3.1)          (1.2)                          (3.6)
                                                 ---------    --------    --------       --------       ---------       --------
Income (loss) from continuing operations
  before income taxes                               (19.7)       (3.2)        6.4           24.0             3.7           11.2
Provision (benefit) for income taxes                            (26.8)       (3.5)         (14.6)                         (44.9)
                                                 ---------    --------    --------       --------       ---------       --------

Income (loss) from continuing operations            (19.7)      (30.0)        2.9            9.4             3.7          (33.7)

Equity in earnings (losses) of
  affiliated companies, net                         (13.9)       16.0         0.2                           (2.3)
                                                 ---------    --------    --------       --------       ---------       --------
Net income (loss)                                $  (33.6)    $ (14.0)    $   3.1        $   9.4        $    1.4        $ (33.7)
                                                 =========    ========    ========       ========       =========       ========
</TABLE>


                                                                       Page 57


<PAGE>


For the Year
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
                                                 ---------    --------    --------       --------       ---------       --------
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                                       0.1                       (0.8)                          (0.7)
                                                 ---------    --------    --------       --------       ---------       --------
Income (loss) from continuing operations
  before income taxes                               (21.5)      (14.1)        9.6           17.6            (0.9)          (9.3)
Provision (benefit) for income taxes                (10.7)       (3.9)        3.7            6.4                           (4.5)
                                                 ---------    --------    --------       --------       ---------       --------

Income (loss) from continuing operations            (10.8)      (10.2)        5.9           11.2            (0.9)          (4.8)
Discontinued operations:
  Net income (loss) from operations                               0.5                                                       0.5
  Income (loss) on disposal, net                                 (1.4)                                                     (1.4)
                                                 ---------    --------    --------       --------       ---------       --------
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 58


<PAGE>


For the Year
Ended December 31, 2001

<TABLE>
<CAPTION>
                                              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                                       7.2        (1.3)          (0.6)                          (9.1)
                                                 ---------    --------    --------       --------       ---------       --------
Income (loss) from continuing operations
  before income taxes                               (32.2)      (44.7)        3.7           15.7            (1.4)         (58.9)
Provision (benefit) for income taxes                (11.7)      (17.4)        1.5            6.3                          (21.3)
                                                 ---------    --------    --------       --------       ---------       --------

Income (loss) from continuing operations            (20.5)      (27.3)        2.2            9.4            (1.4)         (37.6)
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 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 59


<PAGE>


December 31, 2003


<TABLE>
<CAPTION>
                                              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                                   $  13.7     $  (0.6)       $  22.1                        $  35.2
  Accounts receivable, net                                       36.4        10.0           18.0                           64.4
  Intercompany receivables                                      289.7        37.6           10.6        $ (337.9)
  Inventories                                                    28.4        21.1           18.2                           67.7
  Other current assets                                           24.5         0.6            1.2            (0.2)          26.1
                                                 ---------    --------    --------       --------       ---------       --------
    Total current assets                                        392.7        68.7           70.1          (338.1)         193.4
Investments in affiliated companies              $  (34.7)      201.0                        0.2          (166.5)
Property, plant and equipment, net                               27.6        33.5           30.9                           92.0
Cost in excess of net assets of acquired
  businesses, net                                                39.7        30.7            6.5                           76.9
Other assets                                                     33.0                        5.1                           38.1
                                                 ---------    --------    --------       --------       ---------       --------
    Total Assets                                 $  (34.7)    $  694.0    $ 132.9        $ 112.8        $ (504.6)       $ 400.4
                                                 =========    ========    ========       ========       =========       ========


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Notes payable and current maturities
    of long-term debt                                         $   5.6                    $   1.0                        $   6.6
Accounts payable                                                 17.0     $   5.8            6.9                           29.7
  Intercompany payables                          $  337.9                                               $ (337.9)
  Accrued expenses                                               54.0         8.1           11.8            (0.2)          73.7
                                                 ---------    --------    --------       --------       ---------       --------
    Total current liabilities                       337.9        76.6        13.9           19.7          (338.1)         110.0
Long-term debt, exclusive of current maturities      22.2       581.7                                                     603.9
Deferred income taxes, exclusive of
  current portion                                                 0.4                        2.4                            2.8
Other liabilities                                     2.6        70.0         2.9            5.5                           81.0
                                                 ---------    --------    --------       --------       ---------       --------
    Total Liabilities                               362.7       728.7        16.8           27.6          (338.1)         797.7
                                                 ---------    --------    --------       --------       ---------       --------
Stockholders Equity (Deficit)                      (397.4)      (34.7)      116.1           85.2          (166.5)        (397.3)
                                                 ---------    --------    --------       --------       ---------       --------
Total Liabilities and
    Stockholders' Equity (Deficit)               $  (34.7)    $ 694.0     $ 132.9        $ 112.8        $ (504.6)       $ 400.4
                                                 =========    ========    ========       ========       =========       ========
</TABLE>


                                                                      Page 60


<PAGE>


December 31, 2002
<TABLE>
<CAPTION>
                                              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
Deferred income taxes, exclusive of
  current portion                                                (1.9)                       1.9
Other liabilities                                     3.2        66.9         1.6            0.9                           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 61


<PAGE>


For the Year
Ended December 31, 2003
<TABLE>
<CAPTION>
                                              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                                     $  (16.6)    $  56.8     $   2.2        $  13.4                        $  55.8
Net cash provided by discontinued operations
Net cash provided by (used in) operating
 Activities                                         (16.6)       56.8         2.2           13.4                           55.8
                                                 ---------    --------    --------       --------       ---------       --------
Cash flows from investing activities:
(Payments for) proceeds from sales of property,
 Plant and equipment                                             (0.7)                       0.1                           (0.6)
Purchases of property, plant and equipment                       (7.1)       (2.2)          (7.2)                         (16.5)
Net cash provided by (used in) continuing
  Operations                                                     (7.8)       (2.2)          (7.1)                         (17.1)
Net cash used in discontinued operations
                                                 ---------    --------    --------       --------       ---------       --------

Net cash (used in) investing activities                          (7.8)       (2.2)          (7.1)                         (17.1)
                                                 ---------    --------    --------       --------       ---------       --------
Cash flows from financing activities:
Issuance of long-term debt                                      112.0                        6.0                          118.0
Reduction of long-term debt                                    (137.9)                      (0.4)                        (138.3)
Advances from (to) affiliated companies              16.6       (16.1)       (0.5)
Other                                                            (9.6)                                                     (9.6)
                                                 ---------    --------    --------       --------       ---------       --------
Net cash provided by (used in) financing
  Activities                                         16.6       (51.6)       (0.5)           5.6                          (29.9)
                                                 ---------    --------    --------       --------       ---------       --------
Net increase (decrease) in cash and cash
  Equivalents                                                    (2.6)       (0.5)          11.9                            8.8
Cash and cash equivalents at beginning of period                 16.3        (0.1)          10.2                           26.4
                                                 ---------    --------    --------       --------       ---------       --------
Cash and cash equivalents at end of period       $    0.0     $  13.7     $  (0.6)       $  22.1                        $  35.2
                                                 ---------    --------    --------       --------       ---------       --------
</TABLE>


                                                                      Page 62


<PAGE>


For the Year
Ended December 31, 2002
<TABLE>
<CAPTION>
                                              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)    $  11.4     $   3.9        $  16.8                        $ 27.6
Net cash provided by discontinued operations                      1.2                                                      1.2
Net cash provided by (used in) operating
 Activities                                          (4.5)       12.6         3.9           16.8                          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                                                   (27.6)        1.0            5.4                          (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     $  16.3     $  (0.1)       $  10.2                        $  26.4
                                                 ---------    --------    --------       --------       ---------       --------
</TABLE>


                                                                       Page 63


<PAGE>


For the Year
Ended December 31, 2001
<TABLE>
<CAPTION>
<S>                                               <C>          <C>          <C>          <C>              <C>           <C>
                                                  Blount                                Non-
                                              International,  Blount,   Guarantor     Guarantor
                                                   Inc.        Inc.    Subsidiaries   Subsidiaries    Eliminations   Consolidated
                                              --------------  -------  ------------   ------------    ------------   ------------
STATEMENT OF CASH FLOWS
-----------------------
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 Business                                         (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
Capitol 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 64


<PAGE>


NOTE 12:
OTHER INFORMATION

At December 31, 2003 and 2002, the following balance sheet captions are
comprised of the items specified below:

(Dollar amounts in millions)                              2003     2002
------------------------------------------------        --------   --------
Accounts receivable:
  Trade accounts                                        $  62.5    $  60.1
  Other                                                     4.9        2.7
  Allowance for doubtful accounts                          (3.0)      (4.3)
------------------------------------------------        --------   --------
  Total accounts receivable                             $  64.4    $  58.5
------------------------------------------------        --------   --------
Inventories:
  Finished goods                                        $  34.8    $  31.8
  Work in progress                                         10.7        9.3
  Raw materials and supplies                               22.2       23.7
------------------------------------------------        --------   --------
  Total inventories                                     $  67.7    $  64.8
------------------------------------------------        --------   --------
Other current assets:
  Refund of income taxes                                $  21.6    $   6.8
  Other                                                     4.5        4.2
------------------------------------------------        --------   --------
  Total other current assets                            $  26.1    $  11.0
------------------------------------------------        --------   --------
Property, plant and equipment:
  Land                                                  $   4.8    $   4.8
  Buildings and improvements                               64.9       64.7
  Machinery and equipment                                 173.5      170.8
  Furniture, fixtures and office equipment                 32.7       20.2
  Transportation equipment                                  1.3        1.6
  Construction in progress                                  5.9        9.1
  Accumulated depreciation                               (191.1)    (180.5)
------------------------------------------------        --------   --------
  Total property, plant and equipment                   $  92.0    $  90.7
------------------------------------------------        --------   --------
Other Assets:
  Deferred financing costs                              $  21.5    $  18.3
  Rabbi trusts (see Note 7)                                 4.6        5.6
  Escrow for SEG sale                                                 25.0
  Deferred income taxes                                                9.8
  Other                                                    12.0       10.5
------------------------------------------------        --------   --------
  Total other assets                                       38.1       69.2
------------------------------------------------        --------   --------
Accrued expenses:
  Salaries, wages and related withholdings              $  22.7    $  17.8
  Employee benefits                                         8.1        6.9
  Casualty insurance costs                                  4.0        3.8
  Accrued interest                                         19.9       22.2
  Other                                                    19.0       20.6
------------------------------------------------        --------   --------
  Total accrued expenses                                $  73.7    $  71.3
------------------------------------------------        --------   --------
Other liabilities:
  Employee benefits                                     $  67.4    $  66.7
  Other                                                    13.6        5.9
------------------------------------------------        --------   --------
  Total other liabilities                               $  81.0    $  72.6
------------------------------------------------        --------   --------


                                    Page 65


<PAGE>


Supplemental cash flow information is as follows:
                                                      Year Ended December 31,
                                                     -------------------------
(Dollar amounts in millions)                           2003     2002     2001
--------------------------------------------------   -------  -------  -------
Interest Paid                                        $ 63.9   $ 64.9   $ 92.5
Income Taxes Paid                                       9.0      5.2     (1.3)
--------------------------------------------------   -------  -------  -------


NOTE 13:
RECENT 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. 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 is recognized as a change in accounting principle. The Company
adopted SFAS No. 143 on January 1, 2003. The adoption of SFAS No. 143 has not
had a material impact on the 2003 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 the Statement, which were adopted by the Company on 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, "Rescissions 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, which were adopted by the
Company on January 1, 2003, have not had a material impact on its financial
condition or results of operation but did result in the reclassification of
prior years' debt extinguishment expenses.

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, "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 were
adopted by the Company January 1, 2003. The Company believes that the adoption
of SFAS No. 146 will impact the timing of the recognition of costs associated
with exit or disposal activities but is not expected to have a material impact
on the financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation, Transition and Disclosure." SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting


                                   Page 66


<PAGE>


for stock-based employee compensation. SFAS No. 148 also requires that
disclosures of the pro forma effect of using the fair value method of
accounting for stock-based employee compensation be displayed more prominently
and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the
pro forma effect in interim financial statements. The transition and annual
disclosure requirements of SFAS No. 148 are effective for fiscal years ended
after December 15, 2002 and the interim disclosure requirements are effective
for interim periods beginning after December 15, 2002. The Company adopted the
annual disclosure requirements for the year ended December 31, 2002 and the
interim disclosure requirements on January 1, 2003. The adoption of this
Statement did not have a material impact on the Company's results of
operations, financial position or cash flows.

In January 2003, the FASB issued Financial Accounting Standards Board
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. Application of this interpretation is required in financial
statements for periods ending after March 15, 2004. The Company has not
identified any VIEs for which it is the primary beneficiary or has significant
involvement.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 amends SFAS No. 133 to require contracts with comparable
characteristics to be accounted for similarly. SFAS No. 149 clarifies the
circumstances under which a contract with an initial net investment meets the
characteristic of a derivative and clarifies when a derivative contains a
financing component that warrants special reporting in the statement of cash
flows. This statement was effective for contracts entered into or modified
after September 30, 2003, except for hedging relationships designated after
September 30, 2003, where the guidance is required to be applied
prospectively. The adoption of this statement did not have a material impact
on the Company's results of operations and financial condition.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, by requiring
those instruments to be classified as liabilities (or assets in some
circumstances) in the statement of financial position. SFAS No. 150 requires
disclosure regarding the terms of those instruments and settlement
alternatives. This statement was effective for all financial instruments
entered into or modified after May 31, 2003, and was otherwise effective at
the beginning of the first interim period beginning after September 15, 2003.
On November 7, 2003, FASB issued FASB Staff Position No. SFAS 150-3 (FSP
150-3), "Effective Date, Disclosures, and Transition for Mandatory Redeemable
Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests under FASB Statements No. 150, Accounting
for Certain Financial Instruments with Characteristics of Both Liabilities and
Equity." FSP 150-3 deferred certain aspects of SFAS 150. The adoption of SFAS
150 on January 1, 2003 and subsequent adoption of FSP 150-3 did not have a
material impact on the Company's results of operations, financial position or
cash flows.


                                   Page 67


<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, 2003 and 2002. For
2003 results were as follows:

<TABLE>
<CAPTION>
(Dollar amounts                 1st Quarter    2nd Quarter    3rd Quarter    4th Quarter
in millions, except                Ended          Ended          Ended          Ended        Total
per share data)                  March 31,      June 30,     September 30,   December 31,    2003
-------------------            -------------  -------------  -------------  -------------  ----------
<S>                            <C>            <C>            <C>            <C>            <C>
Sales                           $ 122.9         $ 131.2         $ 145.8        $ 159.2      $ 559.1
Gross profit                       42.8            44.7            50.2           52.0        189.7
Net income (loss)                   0.5            (0.7)          (37.6)           4.1        (33.7)
Earnings (loss) per share:
  Basic                         $   0.02        $  (0.02)       $  (1.22)      $   0.13     $  (1.09)
  Diluted                           0.01           (0.02)          (1.22)          0.13        (1.09)
</TABLE>

The first quarter includes restructuring expense of $0.2 million associated
with the relocation of certain manufacturing assets and production among the
Company's Outdoor Products facilities. The second quarter includes other
expense of $2.8 million related to the early extinguishment of debt in
conjunction with the Company's refinancing in May. The third quarter tax
provision includes a $41.0 million valuation allowance taken against the
Company's deferred tax assets.

For comparison purposes 2002 results are as follows:
<TABLE>
<CAPTION>
<S>                                <C>            <C>            <C>             <C>            <C>
(Dollar amounts                 1st Quarter    2nd Quarter    3rd Quarter    4th Quarter
in millions, except                Ended          Ended          Ended          Ended         Total
per share data)                  March 31,      June 30,     September 30,  December 31,      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 and
relocation of the corporate office of $5.6 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 Outdoor Products 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.


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

There has been no change in the Company's independent auditors during the past
two fiscal years. There have been no disagreements with the Company's
independent auditors on our accounting or financial reporting or auditing
scope of procedures that would require the Company's independent auditors to
make reference to such disagreement in their report on our consolidated
financial statements and financials statement schedules, or otherwise require
disclosure in this Annual Report on Form 10-K.


                                   Page 68


<PAGE>


ITEM 9A.  CONTROLS AND PROCEDURES

Under the supervision and with the participation of its management, including
Chief Executive Officer and its Chief Financial Officer, the Company has
evaluated the effectiveness of the Company's disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-14(e)), and has
concluded that, as of December 31, 2003, the Company's disclosure controls and
procedures were adequate and effective to ensure that material information
relating to the Company and its consolidated subsidiaries would be made known
to them by others within those entities.

There were no significant changes in the Company's internal controls or in
other factors that could significantly affect the Company's disclosure
controls and procedures subsequent to the date of their evaluation, nor were
there any significant deficiencies or material weaknesses in the Company's
internal controls. As a result, no corrective actions were required or
undertaken.


PART III

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

See the "Election of Directors", "Executive Officers", "Audit Committee
Disclosure" and "Filing Disclosure" sections of the proxy statement for the
2004 Annual Meeting of Stockholders of Blount International, Inc., which
sections are incorporated herein by reference.

At its February 2, 2004 meeting, the Audit Committee approved and adopted the
Company's Code of Ethics for the Chief Executive Officer, Chief Financial
Officer, Principal Accounting Officer, Controller and those persons performing
similar functions involving financial reporting and financial controls.

The Company has not finalized a revision to its Code of Business Conduct
applicable to all directors, officers and employees at this time. The Company
intends to have a revised Code of Business Ethics in place by the Annual
Meeting of Stockholders, the date by which such policy is required. The
policy, as revised, will be posted on the Company's website at www.blount.com.


ITEM 11.  EXECUTIVE COMPENSATION

See the "Executive Compensation", "Compensation of Directors", "Compensation
Committee Interlocks and Insider Participation" and "Employment Contracts"
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


                                   Page 69


<PAGE>


Equity Compensation Plans Not Approved by Stockholders:

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

Summary Table:

The following table sets forth certain information as of December 31, 2003
with respect to compensation plans under which shares of Blount common stock
may be issued:


<TABLE>
<CAPTION>
<S>                             <C>                     <C>                <C>
                                                                        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)
---------------             ----------------     ----------------     ----------------------
Equity compensation
  Plans approved by
  Stockholders               4,056,891  (1)           $7.67               1,786,253 (2)

Equity compensation
  Plans not approved
  Stockholders
---------------             ----------------     ----------------     ----------------------
TOTAL                        4,056,891                $7.67               1,786,253
</TABLE>

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

(2) Includes shares of common stock available for future grants under the
Company'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.  PRINICIPAL ACCOUNTANT FEES AND SERVICES

The information under the heading "Ratify the Appointment of Independent
Auditors" in the Company's 2004 Proxy Statement is incorporated herein by
reference.


                                   Page 70


<PAGE>


PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S>                                                                                     <C>
                                                                                         Page
                                                                                       Reference
                                                                                       ---------
(A) Certain documents filed as part of Form 10-K

    (1) Financial Statements and Supplementary Data
    Report of Independent Auditors                                                       27

    Consolidated Statements of Income (Loss) for the years ended                         29
    December 31, 2003, 2002 and 2001

    Consolidated Balance Sheets as of December 31, 2003 and 2002                         30

    Consolidated Statements of Cash Flows for the years ended                            31
    December 31, 2003, 2002 and 2001
    Consolidated Statements of Changes in Stockholders' Equity (Deficit) for             32
    the years ended December 31, 2003, 2002 and 2001

    Notes to Consolidated Financial Statements                                           33
    Supplementary Data                                                                   68

    (2) Financial Statement Schedules

    Schedule II - Valuation and qualifying accounts for the years ended                  77
    December 31, 2003, 2002 and 2001 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

    On November 20, 2003 the Company filed an 8-K regarding the availability
    of certain data presented by one of its Executive Officers at the Lehman
    Brothers 2003 Merchant Banking Partners II Annual Meeting.

    On December 23, 2003, the Company filed an 8-K naming Thomas J. Fruechtel
    to the Board of Directors.

    On February 20, 2004, the Company filed an 8-K with its financial results
    and public release for the year ended December 31, 2003.

(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 Statement)
    previously filed on July 15, 1999, by Blount International, Inc. (Reg.
    No. 333-82973).
</TABLE>


                                   Page 71


<PAGE>


    *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).

    *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) 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(e) 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(f) 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 International, Inc., including amendments and
    exhibits, effective on January 19, 2000.

    *4(g) 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(h) Credit Agreement, dated as of May 15, 2003 among Blount, Inc., the
    other parties named therein as credit parties, the several banks and
    financial institutions or entities named therein as lenders, General
    Electric Capital Canada, Inc., as Canadian agent, and General Electric
    Capital Corporation, as agent and collateral agent, which was filed as
    Exhibit 99.2 to the report on Form 8-K filed by Blount International,
    Inc., on May 19, 2003.

    *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


                                   Page 72


<PAGE>


    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.

    *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.


                                   Page 73


<PAGE>


    *10(n) 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.

    *10(o) 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(p) 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(q) 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(r) 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(s) 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(t) 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(u) 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(v) Amendment to Employment Agreement between Blount Inc. and Kenneth
    O. Saito dated August 16, 2002, 2002.

    *10(w) Amendment to Employment Agreement between Blount International and
    Richard H. Irving, III dated February 14, 2002.

    *10(x) Amendment to Employment Agreement between Blount International and
    Richard H. Irving, III dated August 19, 2002.

    *10(y) Amendment to Employment Agreement between Blount International and
    Rodney W. Blankenship, dated February 14, 2002.

    *10(z) Amendment to Employment Agreement between Blount International and
    Rodney W. Blankenship dated July 2, 2002.


                                   Page 74


<PAGE>


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

    **10(bb) Amended and Restated Employment Agreement between Blount
    International, Inc. and James S. Osterman dated February 2, 2004.

    **10(cc) Amended and Restated Employment Agreement between Blount
    International, Inc. and Calvin E. Jenness dated March 1, 2004.

    **14 Code of Ethics for Covered Officers as approved by Audit Committee
    on February 2, 2004.

    21 A list of the significant subsidiaries of Blount International, Inc.
    included herein on page 78.

    23  Consent of Independent Accountants included herein on page 79.

    **31.1 Certification pursuant to section 302 of the Sarbanes-Oxley Act of
    2002 by James O. Osterman, Chief Executive Officer.

    **31.2 Certification pursuant to section 302 of the Sarbanes-Oxley Act of
    2002 by Calvin E. Jenness, Chief Financial Officer.

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

    **32.2 Certification pursuant to section 906 of the Sarbanes-Oxley Act of
    2002 by Calvin E. Jenness, Chief Financial Officer.


*    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 75


<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, Chief
Financial Officer and Treasurer

Dated:  March 10, 2004

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, 2004


/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/ Thomas J. Fruechtel
R. Eugene Cartledge                         Thomas J. Fruechtel
Director                                    Director


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


                                   Page 76


<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
------------                    ------------    ------------      ------------     ------------
                                                 Additions
                                                 ---------
                                 Balance at      Charged to                         Balance at
                                Beginning of      Cost and                            End of
Description                        Period         Expenses         Deductions         Period
------------                    ------------    ------------      ------------     ------------
<S>                              <C>             <C>               <C>              <C>
Year Ended
December 31, 2003
-----------------
Allowance for doubtful
accounts receivable                $  4.3         $  0.6             $  1.9          $  3.0
                                   =======        =======            =======         =======

Allowance for valuation
of deferred tax assets             $  0.0         $ 48.6             $  0.0          $ 48.6
                                   =======        =======            =======         =======


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
                                   =======        =======            =======         =======
</TABLE>

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


                                   Page 77


<PAGE>


EXHIBIT 21


SUBSIDIARIES OF THE REGISTRANT


At December 31, 2003, consolidated, directly or indirectly, wholly-owned
Significant 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

Frederick Manufacturing Corporation        Delaware

Blount Industrial LTDA                     Brazil

Blount Europe, S.A.                        Belgium


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, 2003.


                                   Page 78


<PAGE>


EXHIBIT 23


CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-4 (File No. 333-92481) of Blount International, Inc. of
our report dated February 20, 2004 relating to the financial statements and
financial statement schedules which appears in this Form 10-K.



PricewaterhouseCoopers LLP

Portland, Oregon
March 3, 2004


                                   Page 79