BLOUNT International
Diversity That Delivers
May 7, 2000
By: The Analytical Graduates
The Analytical Graduates
TABLE OF CONTENTS
Executive Summary …………………………………………………………….…………………..
3
Current Situation ……….……………………………………………………….…………………..
4
Strategic Posture ………………….…………………………………………….…………………..
5
Blount Intl Corporate Governance ……..……………………………………….…………………..
7
External Analysis ……………………………………………………………….…………………..
9
Internal Analysis …………………….………………………………………….…………………..
20
Financial Analysis ……………………………………………………………….…………………..
24
Strategies ………………………….…………………………………………….…………………..
28
Implementation ………………………………………………………..……….…………………..
35
Evaluation & Control ……………..…………………………………………….…………………..
36
SWOT Analysis …………………..…………………………………………….…………………..
37
Appendix I ………………………..…………………………………………….…………………..
38
Appendix II ………………………..…………………………………………….…………………..
39
Appendix III …………………..…..…………………………………………….…………………..
41
Appendix IV ………………………..…………………………………………….…………………..
43
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The Analytical Graduates
EXECUTIVE SUMMARY
Mission & Vision
Corporate
Mission: Blount
International Inc.
is a diverse global
company that
manufactures
Outdoor Products,
Industrial &
Power Equipment
and Sporting
Equipment. Its
leading position is
a result of the
company's
attributes,
distribution skills
and excellent
Customer service..
Vision: We will be
a one billion dollar
company via a
growing portfolio
of industrial
manufacturing
companies that
control leadership
positions in niche
markets targeted to
Outdoor Products,
Sporting
Equipment, and
other related
product needs.
Objectives
Strategic:
Short Term: Consolidate
operating costs in the Industrial &
Power Group within 3-6 months;
Analyze value chain cost
reductions in the Outdoor
Product and Sporting
Equipment Groups within 6
months; Management will
complete the analysis and
recommendations for a new
target incentive plan; Reevaluate its corporate civic
involvement to establish
guidelines that are in
proportion with profits, the
percentage cap will be no more
than 5% of net income.
Long Term: Management will
restructure the Industrial &
Power Group and divest the
division by year end 2001;
Revenues realized from the
sale of the group will write
down a percentage of longterm debt (short term) and will
be invested in R&D, in
product innovation as well as
acquisition in Outdoor
Products and Sporting
Equipment; The new
incentive plan for employees
will be from 5-30%; Executive
compensation levels for future
hires will be re-designed to
coincide with Industry
average; Executive
compensation levels for future
hires will be redesigned;
Establish a Six-Sigma
initiative throughout the value
chain of all operating groups
by year end 2002 to increase
productivity gain of 6-7%.
Opportunities and
Threats
Opportunities:
 Name
Recognition
 International
Expansion
 Cost
Management
 Quality of
Product &
Service
 Product
Innovation
Threats:
 Economic
Cycles
 Government
Regulations
 Buyer
Switching
 Anti-Gun
Movement
 Mature
Markets
Strengths and
Weaknesses
Strengths:
 Effective
Customer
Service
 Product
Innovation
 ISO 9000
Implementation
 Employee
Relations
Weaknesses:
 Percentage of
Leverage
 Brand Name
Recognition
 Inbound/
Outbound
Logistics
 Market Share
for Industrial
& Power
Equipment





Recommendations
Divestiture
Decrease
Long Term
Debt
Expand
Outdoor &
Sporting
Equipment
Promote
Brand Name
Recognition
Value Chain
Cost
Reductions
Increase Inventory Turnover
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The Analytical Graduates
Mission & Vision
Objectives
Opportunities
and Threats
Financial:
Short Term:
Increase Gross Margin by at
least 11% within 6 – 12 months
Strengths and
Weaknesses
Recommendat
ions
:
Corporate
Increase ROA, ROE, and ROI
by at least 50% within 6 – 12
months
Long Term:
Decrease Long Term Debt no
later than the year 2002.
Increase Inventory Turnover no
later than year end 2002.
You want to increase the number
of times that your inventory
turns in a year, if the number of
days decreases than your turns
increase.
????????????
????????????
????????????
????????????
Business level for each of the three SBUs
????????????
CURRENT SITUATION
BLOUNT PERFORMANCE
Blount is a diversified international company operating in three segments: Outdoor Products,
Sporting Equipment, and Industrial & Power Equipment. Blount manufactures and distributes products in
more than 100 countries around the world. Total sales for 1999 were $809.9 million, a 3% decrease when
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The Analytical Graduates
compared to the 1998 sales figure of $831.9 million. Sales for each group are as follows, Outdoor Products
was $327.6 million an increase of 4% over the 1998 sales; Sporting Equipment was $323.7 million an
increase of 11% over the 1998 sales; and Industrial & Power Equipment was $158.6 million a decrease of
31% from the 1998 sales. Net income for 1999 was ($21.8) million compared to the net income of 1998 of
$61.3 million, this reflects a decrease of 136%. The Long Term Debt to Equity of 1999 has significantly
increased. Blount’s 1999 ratio was (2.52%) compared to the Industry average of 0.59%, resulting in a
(122%) difference. The Gross Margin is also lower than the Industry. Industry ratio is 32.51% compared to
Blount ratio of 29.09, a 10% difference.
The results of 1999 demonstrate the strength in the Outdoor Product and Sporting Equipment
Groups, and the weakness in the Industrial & Power Equipment Group. The substantial increase in the Long
Term Debt to Equity, which has initially increased the percentage of leverage for Blount, is a result of the
merger with Lehman Brothers. Long term debt increased 122% in 1999 compared to 1998 figures.
Therefore, in the short term there is not any positive cash flow out of this merger. This factor needs
immediate attention in order for Blount to survive as a diversified company. However, in the long term, this
merger is expected to give Blount strength especially, if the recommendation of divestiture is implemented.
Currently, the Market Share and Market Size respectively for each group are as follows, Outdoor
Products is 20%, $1.63 billion; Sporting Equipment is 16%, $1.98 billion, and Industrial & Power Equipment
is less than 1%, $61.1 billion. The Market Growth Rate for each is as follows; Outdoor Products 3-4% in
developed countries, 4-5% in emerging countries. Sporting Equipment 6% overall, and Industrial & Power
Equipment is no more than 2% for the medium to long run. . This demonstrates that opportunities for
Outdoor Products and Sporting Equipment are steady in developed countries and ripe for expansion in
emerging countries. Opportunities in Industrial & Power Equipment SBU lie in providing outsource
components and services to heavy equipment industry.
In order to rectify Blount's Long Term Debt and Gross Margin Problems, AG recommends the
divestiture of the Industrial & Power Equipment SBU as a strategic and financial objective.
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The Analytical Graduates
STRATEGIC POSTURE
Mission: Blount International Inc. is a diverse global company that manufactures Outdoor Products,
Industrial & Power Equipment and Sporting Equipment. Its leading position is a result of the
Company’s attributes, distribution skills, and excellent service.
Vision: We will be a one billion dollar company via a growing portfolio of industrial manufacturing
companies that control leadership positions in niche markets targeted to Outdoor Products, Sporting
Equipment, and other related product needs.
Short Term, Strategic Objectives:

Blount will minimize and consolidate its operating costs in the Industrial & power equipment division
through plant consolidations and work force reduction in the next 3-6 months in order to reduce their
costs.

Blount will analyze opportunities in value chain cost reductions in the Outdoor Product and Sporting
Equipment Divisions in the next 6 months.

Within six months Blount management will have completed their analysis and recommendations for a
new target incentive plan for employees. The new plan will be comparable to like industry compensation
packages and geared predominantly to the attainment of results/performance of the individual market
segments as well as the company at large.

Blount International will re-evaluate its corporate civic involvement to establish guidelines that are in
proportion with its profits. The percentage cap for this activity will be no more than 5% of net income.
Short Term, Financial Objectives:

Increase Gross Profit Margin by at least 11% within 6 – 12 months. There are several strategies to
complete this task. Our recommendation is to increase total sales by reducing the selling price. This
strategy may initially reduce the gross margin, however, anticipated sales of each group will increase
enough to raise the absolute amount of gross margin.

Increase ROA, ROE, and ROI by at least 50% within 6- 12 months. The lower than ordinary average for
Blount is an indication of high risk and low profitability.
Long Term, Strategic Objectives:

In anticipation of improving market conditions, Blount management will restructure the Industrial &
Power Equipment division, solicit potential buyers for it, and divest the division in 2001.

Revenues realized from the sale of Industrial & power equipment division will serve a dual purpose. In
the short-term to write down a percentage of the long-term debt.

Blount will use the balance of the revenue to invest in internal growth through R&D, in innovative
products in key market segments, and in additional bolt on acquisitions in similar or related markets of
Outdoor Products and Sporting Equipment.
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The Analytical Graduates

The new incentive plan will be based on the responsibility/contribution level of the individual.
Percentages will be from 5-30%. Executive compensation levels for future hires will be re-designed to
provide base salaries that are at or slightly above mid-range level for the industry.

Blount will establish a Six-Sigma quality initiative throughout the value chain of all its operating
segments. This integration should be completed by year-end 2002. The goal is to improve the quality of
products, internal systems, organizations etc. and realize an annual productivity gain of 6-7%.
Long Term, Financial Objectives:

Decrease Long Term Debt no later than year-end 2002. Our recommendation is to use cash flows
available from each operation and from the proceeds of the divestiture of Industrial & Power Equipment
Group.

Increase Inventory Turnover no later than year-end 2002. Our recommendation is to lower the Average
days’ inventory by 18% to at least meet Industry via the establishment of Six-sigma initiative throughout.
BLOUNT INTERNATIONAL CORPORATE GOVERNANCE
John M. Panettiere
Chairman of the Board and Chief Executive Officer
James S. Osterman
President, Outdoor Products Group
Harold E. Layman
President and Chief Operating Officer
Gerald W. Bersett
President, Sporting Equipment Group
Richard H. Irving, III
Senior Vice President and General Counsel
Donald B. Zorn
President, Industrial & Power Eqpmt Gp
John D. Marshall
Senior Vice President, Administration and Treasurer
Kenneth R. Day
President, Frederick Mftr Corporation
Rodney W. Blankenship
Vice President and Controller
John P. Mowder
President, Dixon Industries, Inc.
Arlin R. Perry
President, Gear Products, Inc.
John M. Panettiere is currently the Chairman of the Board and Chief Executive Officer of Blount
International. Panettiere has held several different positions within Blount since 1986. These positions
include; Senior Executive Vice President, Chief Operating Officer, Chairman, President and CEO of Grove
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Worldwide Company. He attended three different colleges finally receiving his degree from Rockhurst
College in Kansas City, MO. He also received a Honorary Doctorates from Westminster College,
Fulton, MO.
Harold E. Layman, President and Chief Operating Officer. . He had previously worked as a Controller
and Assistant General Manager of White Truck Division of Volvo Corp. In 1981, he held the position of
Financial and Operational Manager of Ford Motor Company.
Richard H. Irving, III is currently the Senior Vice President and General Counsel. He attended
Northwester University and Harvard Law School, cum laude, 1968. He is a member of the American Bar
Association, American Corporate Counsel Association, and the International Bar Association.
James S. Osterman President of Outdoor Products Group. He previously served as the President of the
Oregon Systems Division.
Gerald W. Bersett is President of Sporting Equipment Group. He served as President and Chief
Operating Officer of Sturm Ruger. He also served as President of Ammunition / Winchester Division of
Olin Corporation.
Donald B. Zorn is President of the Industrial & Power Equipment. He previously served as a President
of Forestry and Industrial Equipment Division. He also served as President and Chief Operating Officer of
Grove.

What are top management’s chief characteristics in terms of knowledge, skills, background, and style? If the
corporation has international operations, does top management have international experience? Are executives
from acquired companies considered part of top management?

Has top management been responsible for the corporation’s performance over the past few years? How many
managers have been in their current position for less than 3 years? Were they internal promotions or external
hires?

Has top management established a systematic approach to strategic management?

What is the level of involvement in the strategic management process?

How well does top management interact with lower level managers and with the board of directors?

Are strategic decisions made ethically in a socially responsible manner?

Is top management sufficiently skilled to cope with likely future challenges?
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The Analytical Graduates
EXTERNAL ANALYSIS
Economy
SOCIETAL, POLITICAL, REGULATORY, & COMMUNITY CITIZENSHIP FACTORS
Impact on the company
Impact on the Industry
Opportunities
Threats
Factors
or strategic business unit
 The strong US and
 The Outdoor Product
 Expansion of
 Subject to economy
International
SBU should expand its
product lines in saws
cycles, a recession
economic markets
product line and
and lawnmowers
could hurt sales.
will increase market
improve its brand
geared to
 The economic boom is
size in the Outdoor
name recognition
home/individual use.
eliminating rural areas
Equipment/Sporting
through an extensive
Product innovation,
that supported hunting
Equipment Segments.
marketing effort
high quality, and
and gun club activities.
focused on its #1
competitive pricing
 World wide soft
 The Industrial & Power
ranking and product
will strengthen
markets in the paper
Equipment SBU
quality. to capitalize
worldwide markets.
and pulp industry will
experiences loss of
on the robust
continue to
 Expanding markets
economies of scale and
economy.
negatively effect the
in small arms and
low capacity utilization
Industrial & Power
 The Sporting
ammunition with
rates that negatively
Equipment segments
equipment SBU
women/children gun
impact value chain
that are involved in
should improve its
club members.
efficiencies.
timber harvesting,
brand name
 Acquisition of weak  Company may be
etc.
recognition through an
companies in the
exposed to changes in
extensive marketing
Industrial & Power
interest rates, in
campaign through gun
Equipment SBU by
currency exchange
clubs, the NRA, and
financially stronger,
rates, and in
associations to
more diversified
commodity pricing for
capitalize on the
companies.
raw materials in
robust economy and
economic downturns.
expand its product
base.
 The Industrial &
Power Equipment
SBU needs to
consolidate its
operations, reduce its
workforce to reduce
costs to minimize the
effect of the soft
market Potential
divestiture.
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The Analytical Graduates
Political, Regulatory, Legal





The 3 industry

segments are subject
to costs associated
with comprehensive
US and foreign laws
and regulations
relating to the
protection of the
environment, the

discharge of
pollutants into the air
or water, hazardous
waste material
disposal, and
potential cleanup of
containment sites.
US and International
gun laws may

negatively impact
sales of the sporting
equipment SBU.
Free Trade
agreements and
potential joint
ventures with
International
companies will aid
expansion and
provide further
economies of scale.
US product and
safety laws need to be
met.
ISO 9000 registration
and compliance will
be extremely
important in
International
expansion.
Areas of compliance

in environmental
areas, US safety
regulations, and ISO
readiness that are not
being met must be
identified, budgeted
for, and implemented.
Stringent gun laws in

US and prohibitive
import regulations by
foreign countries mean
lobbying and
marketing effort needs
to be built to
overcome/accommoda
te.
Value chain functions,
one or some, may be
relocated to take
advantage of low cost
production/joint
venture and improve
economies of scale.
Build Company
reputation as "World
Class Industrial
Producer" through
environmental
compliance and
quality products
with high safety
standards
International
expansion



Environmental laws
Gun laws
Ever-changing safety
requirements, tariffs,
and legal
ramifications in the
US and other
countries.
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The Analytical Graduates
Technology
Socio-cultural

The sporting
 Marketing and
equipment segment is
advertising Campaign
effected positively by
to emphasize the
the expanding
attractive aspects of
customer base in
sport/hunting gun
women/children gun
activities.
club enthusiasts. It is  Produce easy to use
effected negatively
quality products that
by anti-gun
are geared to the
movement caused by
sporting use of
current events such as
women/children.
the Columbine
 The Outdoor
massacre, terrorist
Equipment SBU
news items, and
would be supported by
crime stories.
a marketing campaign
 The Outdoor
and by use of
equipment SBU is
demonstrations,
supported by the
particularly helpful in
robustness of the
the growing
home building and
home/individual
home improvement
markets.
industry by
individuals.
 Demand for rapid
 Market research
product innovation
needed to determine
that meets the everneeds of changing
changing needs of the
markets
end user.
 R&D investment
How will the increased
use of technology impact
the pulp and paper
industry and its suppliers
in the I&PE industry?
INDUSTRY COMPETITIVE ANALYSIS


Development of new
products to meet the
needs and
preferences of
emerging customers,
commercial and
individual users.


Innovative products
that are strategically
promoted will result
in SCA.


Anti-Gun lobby
Changing safety
requirements
Private environmental
organizations.
Obsolete inventory
Blount competes in three separate and distinct industries. You should conduct separate industry analyses. I do see
where you have embedded the analysis for each industry in the matrices.
INDUSTRY'S DOMINANT ECONOMIC TRAITS
ECONOMIC TRAIT


Market size

Market growth stage

STRATEGIC IMPLICATION
Outdoor Product Sales
$1.63 Billion
Sporting Equipment Sales
$1.98 Billion
Industrial & Power
Equipment
$61.1Billion
Large customer base in all segments, attracts new
entrants.
Late growth or mature in
Opportunities are in global expansion in Outdoor Product
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The Analytical Graduates
Market growth rate
developed countries for
Outdoor Products and
Sporting Equipment.
Growth stage in these 2
segments in emerging
markets.
 Same conditions hold true
for the Industrial & Power
Equipment Segment
except for those
specializing in timber
harvest equipment, these
markets are in decline
worldwide.
Outdoor products 3-4% in
developed countries, 4-5% in
emerging.
Sporting equipment 6% overall
and big game hunting 13%,
Industrial & Power Equipment
for the medium to long run no
more than 2%
Surplus
Capacity surplus or
shortage
High
Industry profitability
High entry and exit
Entry and exit barriers

Product Cost

Low to medium in the
Outdoor Product and
Sporting Equipment
SBUs.
High in the Industrial &
Power Equipment
segment.
Opportunities for Outdoor products and Sporting
equipment are steady in developed countries and ripe for
expansion in emerging countries.
Opportunities in the Industrial & Power Equipment lie
primarily in providing outsource components and
services to the heavy equipment industry. (This comment
is for those involved in timbering equipment)
Competitive pricing extremely important. Blount is not a
low cost producer, has extreme capacity utilization
problem in the Industrial & Power Equipment SBU
(50%) and a capacity problem in the Sporting Equipment
SBU as well. (72%) This continues to drive up their
costs/inefficiencies.
Attracts new entrants.
This does not apply to the Industrial & Power Equipment
SBU of Blount due to their focus on timber equipment.
Experience and learning curve in International
manufacturing, marketing, and distribution, global
economies of scale, limited access to distribution
channels, brand preference/customer loyalty, and high
capital requirements are entry barriers. Large capital
investment is an exit barrier.


There is a need to keep costs low to be competitive
due to buyer switching possibilities and maturing
markets.
In economic downturns, buyers may purchase or rent
used equipment rather than invest in high cost new
equipment.
Yes
Competitors have similar products. Must supply unique
product/service features to differentiate.
High
Entry barriers for new companies.
Standard product
Capital requirements
and Sporting Equipment SBUs.
Opportunities lie in divesting the Industrial & Power
Equipment SBU, divesting the product lines associated
only with the timber harvesting, acquisition, or joint
venture.
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High
Vertical integration
Economies of scale
Rapid product
innovation
High
High
The larger players in this business have a high degree of
vertical integration. Important for competing with a lowcost strategy.
Appropriate utilization would provide a company with a
sustained competitive advantage of a low cost strategy.
Innovative producer could gain a sustained competitive
advantage.
FIVE FORCES MODEL
Strength
Implication for the
Industry
Competition is
intense.
Strong
Low cost of buyer
switching makes
product innovation
and competitive
pricing a necessity.
Weak
High capital
requirements,
customer loyalty and
brand preferences
make new entries
difficult.
New Entrants
Buyers
Rivals
Strong
Implication for the
company
Focus on product and
marketing innovations
to maintain leading
position in Outdoor
Products and grow
position ranking in
Sports Equipment.
Blount’s weakness in
the Industrial & Power
Equipment SBU
combined with rival
strength may hinder the
ability to compete
effectively.
Technological changes
and improvements will
maintain customer
loyalty.
Combination of quality
products at competitive
prices will be a
necessity.
All 3 SBUs are
participants in an
industry that is in an
oligopoly.
Outdoor products #1
ranking will be
maintained and grown.
Sporting equipment #3
ranking means that
Blount will concentrate
its efforts on the 2
leaders.
Industrial & Power
Equipment SBU has
only 1%.
Opportunities
Threats
Gain new customers
through marketing
innovations and
product R&D and
innovation
Develop quality,
safety, environmental
standards that exceed
industry average.
Loss of sales from
intense competition.
Buyer switching in
Industrial & Power
equipment This
belongs in the buyers
portion of the analysis.
Six sigma will provide
product quality
improvements and
process quality
improvements which
will lower production
costs
Lack of brand name
recognition and
customer loyalty
Switching
Increase market share
in Outdoor products
and Sporting
equipment by making
inroads on established
companies.
None foreseen.
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The Analytical Graduates
Suppliers
Medium
Substitutes


Weak in
Outdoor
Products
and
Sporting
Equipment.
Strong in
Industrial
& Outdoor
Products.
Strong economy
allows for
competitive pricing,
weak economy will
limit competitive
pricing and potential
pool of suppliers.
For Outdoor/Sporting
there are no
competitive substitute
products.
In the
Industrial/Power
SBU, used or rental
equipment is a large
factor.
Build long term binding
relationships with
several suppliers for
Outdoor/Sporting.
Maximize in-bound
logistics.
Strategic partnerships
with Japanese engine
producers and other
Asian optical suppliers
will enable Blount to
compete effectively.
Purchasing power will
be limited in depressed
economic conditions,
which will result in
increased pricing.
Company must
establish brand name
recognition in order to
maintain and grow
customer base in
Outdoor/Sport.
Industrial/Power will
lose customers in Pulp
and Paper Market down
turns.
Aggressive marketing
and product
innovation to attract
new customers and to
retain the current ones.
Industrial/Power will
experience competition
from used or rental
products.
DRIVERS OF CHANGE IN THE INDUSTRY:
Industrial & Power Equipment:
The long-term industry growth rate for niche participants is low, currently forecast at 2%, and
subject to conditions in the paper and pulp industry. The customers in this SBU are commercial loggers,
waste disposal businesses, paper and pulp businesses, dealers, wholesalers and OEMs who historically buy
used or rental equipment in times of economic downturn. The rate of product innovation is rapid and the cost
of product development is capital intensive. Due to the high entry and exit barriers caused by resource
requirements and the strength of the top 4 manufacturers, new competition is limited and increases in market
share for the existing companies outside the top 4 will be difficult to achieve. Success in the industry is
achieved through acquisition, international expansion, and efficient utilization of manufacturing and
distribution capabilities.Good! Stringent environmental protection laws continually increase the cost of doing
business and limit growth opportunities. Risk reduction is found in broad diversity within this capital goods
sector rather than in focused niche.
Outdoor Products:
The long-term industry growth is 3-4% in developed countries and 4-5% in emerging countries. The
customers in this SBU are distributors, dealers, mass merchandisers, OEMs, and individuals who are likely to
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The Analytical Graduates
purchase less in economic downturns. The rate of product innovation is rapid and focused on continual
product improvement efforts to distinguish themselves in the market. Marketing is increasingly done through
a mix of television, radio, print, and direct mail programs. Entry and exit of major firms is difficult due to the
oligopoly and the resource requirements. Companies in this industry seek greater efficiencies and improved
work processes; there is a focus on total quality process to improve product quality and customer response
time, and to reduce overall product cost. Since these products are sold globally, there are different
government standards in safety, environmental protection, tariffs and trade barriers that companies must be
aware of and that they must accommodate. Companies in this sector must take preventive action to hedge
against economic downturns and currency fluctuations.
Sporting Goods:
The shooting sports sector is forecasted to grow at 6% annually and the big game sector to grow at
13%. The customers in this sector are law enforcement agencies, OEMs, national and regional retail
accounts, including sports super stores and mass merchandisers, dealers and distributors. Marketing
initiatives have targeted gun and rifle clubs, organizations such as the NRA, and a new segment of
customers, women and children. International expansion is subject to changes in political/economic
conditions, adverse tax policies, changes in government regulatory, and currency fluctuations/restrictions.
Low cost production efficiencies are key to achieving a sustained competitive advantage. These industries
are subject to various US/Foreign environmental laws, those that deal with air and water pollution, waste
disposal management, and the cleanup of contaminated sites. Firearm regulations in small arms may restrict
the manufacture and sale of ammunition or decrease demand. Recent events in terrorist activity and school
shootings have led to a strong anti-gun movement worldwide.
RIVALS NEXT MOST LIKELY STRATEGIC MOVES
Toro:

Leader in home outdoor lawn and garden market.

World leader in supplying equipment and irrigation systems.
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The Analytical Graduates

Their strategic approach has been to help the customer with their landscapes the way they want it, when
they want it, better than anyone else.

Growth has been through acquisitions and strategic alliances both domestically and internationally.

Toro is expected to maintain and grow its leadership position through a balanced growth in sales and
profitability in fiscal 2000 subject to changes in weather and world economies.

All Toro plants should be ISO 9000 certified by the close of fiscal 2001.

Toro has partnered with the governing bodies of golf to help create The First Tee program, an initiative
to make golf affordable and accessible to urban youth.

The company was the leading sponsor with the National Future Farmers of America (FFA) to develop a
green industry studies program in high schools across the nation.

Toro is a recent recipient of an environmental award for recycling.
Regal-Beloit:

Recent financial setbacks have caused Regal-Beloit to be sold and subsequently divested by
Harmischlager Industries.

Regal-Beloit was put in Chapter 11 and sold to a diverse Canadian company, Groupe LaPierre.

Regal-Beloit has encountered quality problems and is in litigation with a major Asian paper company.

Due to recurring quality problems Regal-Beloit has had cancellations in contract work.
Winchester/Olin:

Is among the largest manufacturers/distributors in the U.S. for ammunition.

Winchester operates the U.S. Army’s Lake City ammunition plant. Contract expires in 2000.

Winchester has a web-site called Black’s Wing and Clay: ultimate guide to shooting and hunting.
Through this web-site they collect information about their customers.

Winchester is targeting the youth and women segment, people new to the sport.

Winchester continues to invest new capital expenditures and operating costs to comply with
environmental safety laws.

Winchester is enrolled in the U.S. EPA’s Voluntary Industrial Toxics Reduction Program
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The Analytical Graduates

Olin uses pollution prevention programs and waste minimization at all its manufacturing sites.
WHAT COMPANIES ARE IN THE STRONGEST AND WEAKEST POSITIONS?
Outdoor Products: The strongest in the saw-blades and hand-saws sector is Blount due to its wide product
line and mix-merchandise, quality, name brand recognition. Blount commands 20% of the market share in
this sector and is the number one manufacturer.
Sporting Equipment: Blount is one of the stronger companies due to its quality, product line and
merchandise mix and the brand name recognition of Federal Cartridge. It has fierce competition from
Winchester, which is owned by Olin Industries. This company has slightly better pricing.
Industrial and Power Tool: The strongest in the construction machinery industrial sector are Caterpillar
Inc., Deere, and Company. They hold the strongest position due to their image, wide breadth of in-depth
products, quality, pricing, durability, product innovation and name brand recognition. Blount and RegalBeloit as niche players are in a very weak position. (See appendices for Bubble)
INDUSTRY'S KEY SUCCESS FACTORS
Industrial/Power Equipment:

Quality

Pricing

Corporate/Brand Name Recognition

Product Service

Product Innovation

Value chain cost containment
Outdoor Products

Quality

Corporate/Brand Name Recognition

Pricing

Flexibility and response to customer needs as reflected in product development, sales and service efforts.

Distribution network strength

Value chain cost containment
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The Analytical Graduates
Sporting Equipment

Customer Service

Pricing

Corporate/Brand Name Recognition and Loyalty

Product Innovation

Strong Market Position

Quality

Value chain cost containment
Industry’s growth
potential
Short Term
US and developed countries have late
growth/mature markets in
Outdoor/Sporting. Expansion and higher
growth rate potential in emerging countries.
Long Term
Outdoor, 3-4% in developed, 4-5% in
emerging.
Sporting 6 % overall, 13% in big game
hunting.
Industrial /Power 2% world wide
Does current
competition permit
adequate
profitability?
Yes. In the Outdoor and Sporting SBUs,
low costs in the value chain are important
factors.
No, in Industrial/Power for niche players.
Product pricing and maximization of value
chain synergies will be key to increased
profitability in Outdoor and Sporting.
Profitability for niche Industrial/Power
continues to be weak.
In Outdoor Products and Sporting Equipment,
stronger players will attempt to gain control of
their competitors and market share.
In Industrial/Power niches weak companies
will not survive or will be taken over.
Will competitive
forces become
stronger, weaker or
the same?
How will the
prevailing driving
forces impact
profitability?
How does the
company’s
competitive position
in the industry
impact profitability?
Can the Company
capitalize on
competitor’s
weaknesses?
Stronger in Outdoor/Sporting due to
increased globalization, and innovative
marketing
Weaker in Industrial/Power due to current
economic conditions that prevail in Pulp
and Paper.
In Outdoor, Sporting, quality, value, service
and product innovation will ensure
customers remain loyal.
Driving forces in the Industrial/Power will
have a negative effect short term as well as
long term.
Blount’s position as #1 in Outdoor and #3 in
the Sporting, in Industry sectors that are in
oligopoly, will allow them to take advantage
of economies of scale.
The Industrial/Power with less than 1%
market share makes it a non-viable
competitor.
Blount’s excellent customer service, product
innovation, and reputation for product
quality will support their capitalization on
competitors’ weaknesses.
Continual improvement in cost management
will be necessary.
Blount’s product innovation, customer service,
and product quality will keep Blount in the
leading position in Outdoor and in the top 3 or
better in Sporting.
The long term shows no improvement for
Industrial/Power.
Six Sigma and improved value chain cost
management will continue the capitalization on
competitors’ weaknesses.
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The Analytical Graduates
Is the Company
insulated from or
able to defend
against driving forces
that makes this
industry
unattractive?
How risky and
uncertain is the
future of this
industry?
How severe are the
problems facing the
industry?
Due to its lack of financial strength and its
high percentage of leverage the company
may experience short-term difficulties.
Through divestiture, improved cost
management, and international expansion,
Blount should be better able to defend against
the driving forces.
Outdoor/Sporting markets are currently
stable and growing due to robust economy.
Industrial/Power extremely risky due to
downturn in Paper and Pulp markets.
Outdoor market will be as risky as the general
economic cycles.
Sporting goods is not as sensitive to changes in
the economic cycle and should remain stable.
Industrial/Power in niche markets will continue
to be risky in the medium to long run.
Outdoor and Sporting will experience growth
through product innovation in international and
domestic markets.
Industrial/Power will continue to suffer
cyclical problems.
Outdoor and Sporting will be largely
effected by the slow growth rate in maturing
countries.
Industrial/Power has severe problems.
SUMMARY OF EXTERNAL FACTORS
External Forces
Opportunity
and Factors
Societal, Political, Quality in product and service and product
innovation that meet changing needs and
Legal and
Regulatory Forces preferences.
and Factors
Industry
Competitive Forces
and Factors
Value chain cost management is critical to
competitiveness within the industry.
Threat
Government Regulations in
safety/environmental protection, tariffs and
trade barriers.
Anti-gun movement
Downturn in economic cycles could result in
loss of sales in Outdoor Products. Mature
markets in developed countries may impact
profitability.
19
The Analytical Graduates
INTERNAL ANALYSIS
Throughout this section you could improve your analysis by specifically indicating if your analysis reveals a strength or
a weakness.
BLOUNT CORPORATION COMPETITIVE CAPABILITIES
1. HOW WELL IS THE CURRENT STRATEGY WORKING?
You should address these sub-questions from the case analysis outline.

3 tests of a winning strategy (competitive advantage, goodness of fit, performance)

portfolio tests This is a key factor in the case. Blount uses an unrelated diversified strategy at
the corporate level. Therefore, is Blount focusing on financial performance and is that
performance better than its competitors and other investment options? If so, their strategy is
working. If not, then their corporate strategy is not working.

strategic and financial objectives met or exceeded

strategic approach (focused or broad// cost or differentiation)

market share

industry position

financial strength

# of stages in the value chain participating in the production-distribution chain

size and diversity of geographic market

size and diversity of the customer base
Currently, Blount is an unrelated diversified firm focusing on leadership positions in a manageable number
of substantial niche markets (Excellent); on developing new products; on acquisition opportunities; on
expansion into international markets, and on reducing costs. Blount is attempting to use the company
diversification to its advantage. Being a diverse organization has its advantages and disadvantages. In the
Outdoor Products Group and the Sporting Equipment Group, sales are high, diversification is strength.
However, in the Industrial & Power Equipment Group, sales are significantly lower, diversification is a
weakness.
2. VALUE CHAIN ANALYSIS
Assess the structural and executional cost/value drivers for each step in the value chain and for the overall
value chain for each of the SBUs. Are these drivers strengths or weaknesses? Repeat case facts only in
support of your analysis.
20
The Analytical Graduates
Purchase Supplies and Inbound Logistics: Blount Groups possess strong relationships with both suppliers
and customers worldwide. In the Outdoor Products Group, the Company primarily has two vendors by whom
they purchase raw material and strip steel. This is part of the reason the Company has been able to sustain an
annual growth of 15% since 1991. Are inbound logistics strengths or weaknesses for each of Blount's
SBUs?
Operations: Currently Blount has several manufacturers ing covering the diverse product lines. They
distribute and sell products in more than 100 countries around the world. Several of the Company’s plants
are certified under ISO 9001 or 9002. The ISO certified divisions include; The Lewiston Idaho operations of
the Sporting Equipment group and the Oregon Cutting Systems division. This maximizes efficiency and
gives an assurance to the customer that they are dealing with a reputable high quality organization.
Outbound Logistics: Due to the large geographic market coverage and customer base, the Company uses a
variety of distribution channels. The distribution channels for Outdoor Products include; distributors, dealers,
and mass merchandisers serving the retail replacement market, and more than 30 original equipment
manufacturer. The Sporting Equipment SBU's channels include two-step distributors, government agencies,
cooperative buying groups, and mass merchants. The Industrial & Power Equipment SBU's channels include
timber harvesting, material handling, construction, land reclamation, utility businesses, and pulp and lumber
mills. The Company currently has five manufacturing locations and 7 distribution, sales, and training centers
supporting the Outdoor Product Group. In Industrial & Power Equipment, there are 6 manufacturing
locations and 2 distribution, sales, and training centers. The Outdoor Sport Group has 6 manufacturing
locations and 2 distribution, sales, and training centers affiliated with them. Refer to the comments at the
beginning of this section. This is where you should have addressed the capacity utilization issues.
Sales and Marketing:
You did not address this part of the value chain. This is where you should have addressed the brand name
recognition issue that you cite throughout the case. There isn't any part of your analysis that provides the
logic for arriving at a brand name recognition problem.
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The Analytical Graduates
Service: Blount is committed to exceptional quality combined with unrivaled customer service and value.
Through the Company’s strong, loyal, and dedicated employees, Blount has had the ability to meet and
exceed the needs and wants of its customers.
Profit Margin: Blount has a profit margin that is 11% lower that the Industry average. In 1999, its profit
margin was 29.09% versus the Industry average of 32.51%. Our recommendation to the Company is to
meet or exceed the Industry average within the next 6 – 12 months.
Product R&D, Technology, and System Development: The Company must be highly innovative to meet
the broad customers needs. A continuing focus on new and better technologies has enabled the Company to
introduce hundreds of new products annually. As an example, Outdoor Products Group offered more than 19
different chain products in 1999. These quality innovations have allowed Blount to maintain a leadership
position over competitors.
Human Resource Management / General Administration: Blount’s employee total in 1999 was
approximately 5,600. The Company workweek consists of a five-day, three-shift structure. It appears to be
working at a deficit for Blount since the capacity utilization for the three segments is; Outdoor Products 87%;
Sporting Equipment 72%; and Industrial & Power Equipment 50% as of year-end 1999. Why does/did
Blount hire their senior managers from outside the company?
3. HOW WELL ARE BLOUNT’S FUNCTIONAL AREAS PERFORMING?
The key parts of this question are how well and performing. You need to address these parts through your
analysis.
Marketing: Since the organization is so diverse, the competition is not congruent to one particular Industry,
but, rather to various Industries. This being the case, Outdoor Product Group marketing personnel is are
strategically placed throughout the United States and foreign countries. Currently the Company expenditures
for research and design are expensed as incurred. The most recent annual investment into research and
design was $7.2 million. This is an operational issue.
Finance: See Financial Analysis.
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The Analytical Graduates
Operations and Logistics: In the current situation, the utilization of only a few vendors may be construed as
a weakness. Each Group should be buying from all the same vendors, this would create an inbound synergy,
which would allow them to save money and time. Blount has put to use suppliers and distribution to their
competitive advantage.
Human Resource Management: As of December 31, 1999, Blount has a total 5,600 employee. The
Company has a high regard for employees and values their worth. It is due to the skills and abilities of the
employees that Blount could meet the high standards within the three Industries. The employees are trained
under Six Sigma requirements and structured via the ISO standards. This is strength for Blount in the present
as well as for the future. See my earlier question regarding management hiring.
Information System: Technological and Information Systems at Blount surpass competitors. Blount has
designers, engineers, plant manufacturing personnel, as well as other staff members who support
manufacturing and technological advancement. The Company has shown major improvements in operating
systems and e-commerce in 1999.
General and Administrative
You did not address this part of the value chain.
4. HOW STRONG IS THE COMPANY’S STRATEGIC POSITION
Industrial & Power Equipment
COMPETITIVE STRENGTH ASSESSMENT
WEIGHTED SCALE
Rating scale: 1 = weak; 10 = very strong
Key success Factor/
Competitive Strength
Measure
Quality
Pricing
Brand Name
Recognition
Product Service
Product Innovation
Value Chain Cost
Containment
Company’s Strategic
Position
Company’s Strategic Position
BLT
R
Weight
BLT
R
7
6
4
4
5
5
15%
15%
20%
1.05
0.90
0.80
0.60
0.75
1.00
8
10
5
5
NA
NA
15%
15%
20%
1.20
1.50
1.00
0.75
NA
NA
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The Analytical Graduates
Overall Strength
Rating

40
19
1
6.45
2.85
BLT = Blount International, R=Regal-Beloit
Outdoor Products
COMPETITIVE STRENGTH ASSESSMENT
WEIGHTED SCALE
Rating scale: 1 = weak; 10 = very strong
Key success Factor/
Competitive Strength
Measure
Quality
Brand Name
Recognition
Pricing
Customer Needs
Distribution Network
Value Chain Cost
Containment
Overall Strength
Rating

Company’s Strategic
Position
Company’s Strategic Position
BLT
T
D
Weight
BLT
T
D
7
4
8
10
NA
NA
15%
20%
1.05
0.80
1.20
2.00
NA
NA
6
8
5
5
7
8
7
7
NA
NA
NA
NA
15%
15%
15%
20%
0.90
1.20
0.75
1.00
1.05
1.20
1.05
1.40
NA
NA
NA
NA
35
47
NA
1
5.65
7.90
NA
BLT = Blount International, T = Toro, D = Deere
Sporting Equipment
COMPETITIVE STRENGTH ASSESSMENT
WEIGHTED SCALE
Rating scale: 1 = weak; 10 = very strong
Key success Factor/
Competitive Strength
Measure
Customer
Pricing
Brand Name
Recognition
Product Innovation
Strong Market Position
Quality
Value Chain Cost
Containment
Overall Strength
Rating

Company’s Strategic
Position
Company’s Strategic Position
BLT
O
Weight
BLT
O
8
6
4
7
8
8
15%
10%
20%
1.20
0.60
0.80
1.05
0.80
1.60
10
4
7
5
8
6
8
7
10%
10%
15%
20%
1.00
0.40
1.05
1.00
0.80
0.60
1.20
1.40
44
52
1
6.05
7.55
BLT = Blount International, O = Olin
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The Analytical Graduates
BLOUNT INTERNATIONAL FINANCIAL ANALYSIS
(Bookmark: AppendixI) The total Revenues in 1999 for Blount were 809.9 million, this reflects a
drop of 3% compared to 1998 revenue. Compared to the Industry average, Blount is considerably lower
with a sales ratio of 10.76 vs. Industry ratio of 19.90. The breakup of revenues is as follows: Outdoor
Product Group was 327.6 million; Sporting Equipment Group was 323.7 million; and Industrial & Power
Equipment was 158.6 million. This analysis shows a need for more aggressive sales, this must be
immediately remedied in order for Blount to be able to keep up with competition.
The following is a breakdown of the essential financial factors: (Bookmark: AppendixII)
This section is very good. You could further improve your financial analysis by addressing trends for each
SBU, its competitors and the industry averages. This approach tends to eliminate one-year aberrations.

Gross margin is 11% lower than Industry average and 19.6% lower than Toro. However, Blount is 45%
higher than Deere, 53% higher that Olin, and 4.5% higher than Regal Beloit. The difference between
net sales and cost of good sold is the gross margin. To be successful, the Company must sell goods for
an amount greater than cost - which is gross margin must be substantial enough to pay operating
expenses and provide an adequate income. The fact that the Gross Margin for Blount is higher than three
of the competitors shows strength, however, compared to the Industry average of gross margin, the lower
figure tells this must increase in order to stay above your competitors.

Return on Assets (ROA), Returns on Equity (ROE), and Return on Investment (ROI) are all lower than
the Industry. The ROA is 145% lower than the Industry, ROE is 262% lower than Industry, and ROI is
140% lower than the Industry. Compared to the major competitors, per Appendix, Blount is failing in
all three aspects. On average, the Blount ROA is 250% lower, ROE is 564% lower, and ROI is 207%.
These figures demonstrate to investors that Blount is not profitable and at high risk.
25
The Analytical Graduates

Current assets for Blount are 336.0 million compared to 327.1 for 1998. That is a 3% increase, which is
a strong factor for the Company. Current liabilities for Blount are 148.5 million compared to 94.9 for
1998. This is a 36% increase, which should be a weakness for Blount. However, assets are greater than
liabilities, and for the short term, the 36% increase is not significant.

Quick ratio for Blount is 10% higher than the Industry. It also is a leader among the competitors, per
figures shown in the Appendix. The Current ratio for Blount is 12% higher than the Industry average.
This analysis shows the Company has the ability to meet short-term debt out of the current assets.

Net Income for Blount was a net loss. The figure for 1999 was (21.8) million compared to the 1998
figure of 61.3 million. The analysis shows a 64.5% drop in income.

Debt-to-assets for Blount is 146%. This indicates there is the Company is carrying a high amount of
long term debt. This issue needs to be resolved for Blount to recover its financial strength.

Inventory turnover is an area in need for Blount. The Industry has an average of 64 days inventory
turnover, Blount has an average of 78 days inventory turnover. This indicates the Company is holding
excess inventory, it means that funds could be invested elsewhere are being tied up inventory. There is a
high carrying cost for storage of goods and the risk of obsolescence. Compared to the competition, we as
split two for two. Blount is lower compared to Deere and Olin, and higher compared to Toro and RegalBeloit per figures in Appendix.

Debt-to-equity for Blount is (3.14) vs. the Industry average is 0.70. Compared to competitors on average
Blount in 437.5% lower, per figures in Appendix. This indicates the Company is at risk of running out
of cash under conditions of adversity. The Company will have greater difficulty obtaining additional
funds during a tight money market.

Long-term-debt to equity for Blount is (2.52) vs. the Industry average of 0.59. Figures compared to
competition on average are also lower for Blount. Blount is 449.8% lower, per figures in Appendix.
This is an indication that the Company is employing too much debt.

Asset turnover for Blount is 6% lower than the Industry and 23.6% lower than Toro. This indicates the
Company is not generating enough business compared to the assets they possess. However, asset
26
The Analytical Graduates
turnover is higher for Blount compared to Deere, Olin, and Regal-Beloit, per Appendix figures. This
shows either the competition is very weak, or Blount is doing something right.

Accounts receivable turnover is 26% lower for Blount than the Industry. This is an indication of slow
collections. They are not employing aggressive credit collection. On the average, it takes Blount 74
days to collect vs. 55 days for the Industry to collect on debt.

Dividend yield for Blount is 25 % higher than the Industry average and 29.9% higher than Toro. This
indicates the commitment to the Company stockholders. Other competitors such as Deere, Olin, and
Regal-Beloit appear to be more committed for on average, Blount, per figures in Appendix, is 23.1%
lower.
Overall, Blount has strength in the short-term analysis but there are weaknesses in the long-term
financials analysis. This weakness for Blount must be controlled to be a viable competitor in the future. The
long-term debt is substantially higher than what is acceptable to any organization to keep competitive. Due
to this factor, the Company is going to have a difficult time borrowing funds for any additional acquisitions.
The debt-to-asset ratio verifies how high the (Somethng is missing here.) actually is. The ROA, ROE, and
ROI are a weakness for the Company. These figures, to investors, show low profitability and high risk.
On the positive side, the commitment to stockholders is shown by the dividend yield that is higher
than the industry. (How are they achieving this dividend yield? The answer is in their approach to
capitalizing the firm and new acquisitions.) The current asset compared to current liabilities is sufficient for
the educated investor. Another verification of successful short-term management is the analysis of both
quick and current ratios. These indicate to investors that the capability of the Company to meet short-term
debt is fine.
Our analysis has indicated gross margin for Blount is 11% lower than industry average. The
Company should obviously increase gross margin. There are several strategies to complete this task. Our
recommendation is to increase total sales by reducing the selling price. This strategy may initially reduce the
gross margin but anticipated sales of each group will increase and production economies of scale will be
realized enough to raise the absolute amount of gross margin. Another recommendation would be to
27
The Analytical Graduates
implement a Portfolio Restructure Strategy (Yes! Why didn't you address this in the first question (portfolio
factor) in the internal analysis?). To substantiate this suggestion, our analysis brings us to the segmented
operating income and sales for Blount. They are as follows: Outdoor Products is 71.8 million; Sporting
Equipment is 40.4 million; and Industrial & Power Equipment is (1.1) million. The figure for Industrial &
Power Equipment may not appear to be a significant loss, but compared to prior years it is. For the past three
years, Industrial & Power Equipment has steadily dropped. The 1997 figure was 15% higher than the 1998
figure, which was 139% higher than current loss of 1999. Sales for each segment are as follows: Outdoor
Products is 327.6 million; Sporting Equipment is 323.7 million; and Industrial & Power Equipment is 158.6
million. The sales figure for Industrial & Power Equipment has declined 31% from the 1998 sales figure.
This is a sign of an underlying problem facing the group.
Our Portfolio Restructuring Strategy focuses on the Industrial & Power Equipment Group. This
SBU is not financially producing the capital needed to lower the long-term debt. If a consolidated
divestiture was cone, the identifiable assets for Industrial & Power Equipment totaling 109.2 million would
be of great value to Blount. Despite the loss the group has historically shown, there is strength in the backlog
they possess. Currently it is at 25.8 million, which has increased 38% since 1998. The backlog shows the
pending orders received by customers indicate this product could exhibit potential within a less diversified
organization.
MANAGEMENT’S PERSONAL AMBITIONS, PHILOSOPHIES AND ETHICAL PRINCIPLES
The ability to diversify your organization insures your commitment to your stockholders a
commitment to them. This trickles over to your top management as well. At the head of each SBU, you
have strategically placed those people who will continually lead your organization to the growth that you
have come to know and expect. You have invested in not only one Industry, but also three industries that are
very different in nature from each other. However, your EPS is considerably lower than that of the Industry
average. This may be looked upon as a weakness in the eyes of your stockholders. To keep your
stockholders, you must implement a plan that will allow your organization to earn at least 20% return in
average stockholder’s equity. (How did you arrive at the 20% figure?)
28
The Analytical Graduates
BLOUNT SHARED VALUES AND CORPORATE CULTURE
Blount’s business roots can be traced to the pre-World War I era. Its corporate culture constitutes an
atmosphere where people can and will come and devote their lives to the organization. As with any effective
organization, the corporate culture must flow evenly down and through the organization. Blount does follow
this organizational flow. Blount realizes how important and crucial its employees are to its success, and its
culture reflects this respect.
SUMMARY OF INTERNAL FACTORS
Internal Factors
Company’s Competitive
Capabilities
Management’s Personal
Ambitions, Philosophies,
and Ethical Principles
Share Values and
Company Culture
Strengths
Effective Customer service;
Product Innovation; ISO 9001 &
9002 implementation; Employee
Relations ions
Management of Blount are
focused on strategic placement of
top management to guide the
Company where needed.
Corporate Culture is based on
respect for your employees.
Weaknesses
Percentage of Leverage; Brand
Name Recognition;
Inbound/Outbound Logistics
(Your analysis does indicate that
logistics is a weakness.) ; Market
Share (Market share is an external
factor.)
EPS is lower than Industry
average, this may be construed as
management not working for
stockholders
None that can be measured at this
time
STRATEGIES
1. GENERIC STRATEGY
Blount International Inc.’s generic (corporate) strategy is to be a (an unrelated) diversified global
company (The SBUs) concentrating on leadership positions in profitable (differentiated) niche markets.
2. DIVERSIFICATION STRATEGIES
Acquisition of an existing business
Repeat case facts only to support your analysis.
In order to expand internationally, to strengthen its financial position, and to better protect the
interests of its investors, Blount International, Inc. has used a strategy of diversification to acquire companies
in several unrelated industries.
29
The Analytical Graduates
The diversification process began in 1967 when Blount Brothers acquired the Benjamin F. Shaw
Company of Wilmington, Delaware. This company manufactured and installed piping systems for power and
chemical plants.
Subsequent acquisitions included a steel fabrication business in Indiana and a mobile home
operation. Although the mobile home operation appeared to be profitable initially, the mortgages assumed by
Blount under the purchase/sale conditions eventually resulted in a $15 million dollar loss.
In 1972, Blount acquired J.P. Burroughs & Sons, which was a manufacturer of agricultural products.
This company had 2000 shareholders and operated profitably in the 70s. This acquisition provided Blount the
opportunity to go public and to be listed on the American Stock Exchange.
In 1976, Blount acquired Modern Farm Systems, which was a manufacturer of grain bins, metal farm
buildings, and storage tanks. Blount made additional acquisitions in other businesses which included York
Foundry and Engine Works, a manufacturer of belt conveyors and bucket elevators, Redex Industries, a
manufacturer of dryers and grain handling equipment, and Mix-Mill Manufacturing Company whose product
lines consisted of feed grinding and mixing equipment. By 1979, these acquisitions accounted for
approximately for 50% of Blount’s operating income.
The acquisition of Washington Steel further strengthened Blount’s position in the construction and
agribusiness markets and initially pushed Blount’s annual revenues to nearly $500 million. Unfortunately,
the agribusiness had to be divested in the mid-80s due to a downturn in the agribusiness economy.
In 1985, Blount acquired Omar Industries, a prominent manufacturer of saw chains, hydraulic
loaders, feller bunchers, and log products.
In the 90s Blount acquired Gear Products, Inc. that makes a wide variety of power transmission
products and hydraulic pump drives. In 1991Blount completed the acquisition of Dixon Industries, Inc,
whose main products were zero-turning-radius-riding lawn mowers.
In 1995 in 2 separate transactions, Blount acquired all the outstanding stock of CTR manufacturing,
a manufacturer of automated forestry harvesting equipment and the operating assets of Ram-Line, Inc, a
manufacturer of stocks, magazine, lens cap, and other products for the shooting sports market. In 1995
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The Analytical Graduates
Blount acquired Simmons Outdoor Corporation, a sports optics distributor. This acquisition helped Blount to
expand its presence in sporting goods. In 1997 Blount acquired Frederick Manufacturing Corporation and
Orbex Inc, suppliers of lawn mower accessories and sporting goods, which gave Blount a competitive
advantage in the lawn mower replacement blade industry.
In 1997, Blount acquired Federal Cartridge Company, a leading maker of ammunition and shooting
sports equipment. This enabled Blount to double its size in the shooting sports business and to become one of
the largest providers of shooting sports equipment in the world. In 1998 Blount purchased a percentage of the
Redfield line that included primarily riflescopes, mounting systems, and related items.
DIVESTURE AND LIQUIDATION STRATEGIES
Refer to the earlier comments about case facts.
In the mid-1980s, Blount spun off its agribusiness operations due to downturns in the agribusiness
economy.
In 1989 German businessman, Dietrich Gross, purchased Washington Steel for $280 million which,
was four times Blount’s purchase price. This divestiture was necessary due to financial difficulties in the
company’s domestic construction division.
In the 1990s, Blount decided to divest the construction business due to the cyclical nature of the
business and consecutive annual losses. In 1994, Blount contracted with Cadell Construction Company, Inc.
to provide it the consulting and construction management services necessary to closing out all construction
business. This agreement included a provision for Cadell to use the Blount name in the construction business
for a certain amount of years and that Blount would remain liable for any losses more than current estimates.
Restructuring Strategies
Blount changed its strategic focus in heavy construction equipment to a more diversified international
strategy. The new focus has been on business sectors that provide profitable leadership opportunities in niche
markets.
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The Analytical Graduates
Multinational Strategy
Blount is a diversified multinational company that has focused on limited segments of large market sectors
resulting in a collection of diverse, unrelated manufacturing endeavors. Blount has achieved its successes
from superior manufacturing technology, International market and sales experience, product development,
and outstanding customer service.
3. STRATEGIES TO GAIN AN MAINTAIN COMPETITIVE ADVANTAGES
Are these applicable for the overall corporation and/or for each industry segment?
A) Offensive Strategies:
1. Initiatives to match or exceed competitor’s strengths:
-
Increase inventory turns and accounts receivable turns.
-
Incorporate world-class standards in environmental, safety, and quality to reinforce Industry
leadership image.
-
Decrease Blount’s long term debt position
4. Initiatives to capitalize on competitor’s weaknesses:
-
Introduce innovative products that meet the customer changing needs and preference to the market in
a quicker time frame than the competition.
-
Expand the Outdoor Product and Sporting Equipment product lines, breadth and depth, to retain and
add customers worldwide.
B) Defensive Strategies:
-
Establish pricing structure to be slightly under targeted competitors to gain competitive advantages
over rivals and to entice more customers.
-
Take advantage of gaps/vacant niches of Blount’s would be rivals by broadening its product line
through product innovation.
-
Establish on line help desk in each SBU to provide on-demand customer assistance for product
information, pricing, service and use questions, and purchasing specifics.
4. MATCHING A STRATEGY TO BLOUNT’S POSITION AND SUMMARY.
Blount has built a leading position in the Outdoor Product market and is currently ranked #3 in the
Sporting Equipment market. Blount’s superior manufacturing technology, global value chain experience,
product development and innovation, and outstanding customer service combined with the organization’s
acquisition history have been responsible for its successes.
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The Analytical Graduates
Blount’s market share in the Industrial and Power Equipment sector, due to its narrow focus on
timbering equipment, has made the company a weak and ineffectual performer in this sector. The repetitious
nature of downturns in the Paper and Pulp Industry has resulted in the periodic draining of Blount’s resources
without an adequate offset in robust markets. Many of Blount’s competitors in this market are larger, more
diversified, and better equipped financially to soften the economic impact. Some competitors are also
involved directly in the Paper and Pulp Industry and thus able to capitalize on the extreme profit
opportunities available when tight paper markets exist.
Although Blount International, Inc. does not have the benefit of name brand recognition at the
corporate level, it has achieved brand name recognition in the Outdoor Product and Sporting Equipment
SBUs, in large part from its acquisitions. (You could have addressed this weakness in several portions of the
internal analysis.) Blount’s goal should be to achieve name brand recognition for all companies, including a
corporate identity. Since much of the long term business risk is associated with Government regulations in
safety, environmental protection, quality, tariffs and trade barriers, Blount should acquire knowledge and
expertise to promote itself as a world class manufacturer in these matters. This aggressive market campaign
would include both Corporate and product brand promotions and would provide Blount a sustained
competitive advantage in image and reputation.
For many of the same underlying reasons that Blount chose to divest itself from the agribusiness and
construction business, it would be prudent at this time to divest the Industrial and Power Tool division.
Blount would then be better positioned financially with the decrease of long term debt, to be better able to
invest in broadening the successful Outdoor Products and Sporting Equipment SBUs, geographically as well
as in products, to be better equipped to invest in R&D for product development and innovation, and to focus
on the restructure its value chains to lower costs overall. (This is a run-on sentence. Break it down into
distinct thoughts.)
STRATEGIC RECOMMENDATIONS
1. Divestiture
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The Analytical Graduates

Industrial & Power Equipment SBU: Blount should consolidate its manufacturing plants and reduce
its workforce to maximize its capacity utilization to reduce fixed/variable costs in the short term. Blount
management should prepare for the divestiture of this SBU either when improved market conditions
prevail or year end whichever comes first.
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The Analytical Graduates
December 31, 1999June 30, 2005
Tranch B Term
Loan
$850,000 per quarter
Total payments due
September 30, 2005
$18,700,000
$80,000,000
January 31, 2006
$80,000,000
March 31, 2006
$80,000,000
June 30, 2006
$80,450,000
Total Tranch B
payment
Divestiture 2001
$339,200,000
December 31, 2001
Divestiture Revenue
Cash-Flow
$318,000,000 $460,000,000
Long-term debt
reduced $172,750,000
$145,300,000$287,300,000 for
investment, R&D, and
expansion
Economic cycles in the paper and pulp market will determine the outcome of the divestiture. We
recommend that Blount divest this SBU as a single unit rather than spinning off its diverse product lines.
Due to the fact Blount is the world leader in hydraulic timber harvesting, has innovative new products, and a
strong performer in Gear products we believe that a large organization with similar product lines will be the
ultimate purchaser. The revenue expected from the sale should range from $316 million to $460 million
based on the prevailing market conditions. The divestiture recommendation was for completion in 2001,
therefore, Blount should pay down a portion of its long-term debt by December 31, 2001. This should be
done no sooner than September of 2001 due to pre-payment penalty clauses. The remaining revenues
$145,300,000 - $287,300,000 should be utilized for investment, R&D, and expansions.
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The Analytical Graduates

Long term debt reduction: Blount should take a percentage, as much as 50%, of the revenue realized
from the Industrial & Power Equipment SBU divestiture to reduce its long term debt.

Expand Outdoor Products and Sporting Equipment SBUs: Blount should invest a percentage of the
revenue realized from the Industrial & Power Equipment SBU divestiture to expand the Outdoor
Products and Sporting Equipment SBUs. This expansion would entail global expansion in emerging
countries and investment in R&D for product innovation.
2. Aggressive Marketing Initiative: Blount should perform worldwide research to ascertain current and
future government regulations in environmental protection, safety, and trade and tariff barriers in each of
its market segments. Once the research is complete, Blount should set benchmarks that would enable it to
meet or exceed industry standards. This aggressive marketing initiative would increase Blount’s brand
name recognition at a corporate level as well as at an individual brand level and should clearly establish
it as “the world class industry leader”.
3. Cost reductions: Blount should consolidate plants and reduce work forces to maximize capacity
utilization and to realize synergies in its value chain. The areas of opportunity in the value chain that
would provide Blount with the best return are improvements in purchased supplies and inbound logistics,
operations, and distribution and outbound logistics.
Blount should fully implement Six Sigma throughout the value chains of each of its SBUs. This
implementation would achieve “virtual” defect free products, would eliminate process redundancies, and
would aid Blount in the restructuring of its value chain.
The company should adjust its pricing structure to become more competitive. Although the company
philosophy has been that, the inherent quality of its products warrants the current higher price, our
analysis has revealed that the customer base is very price sensitive. In the long term, the adjusted pricing
would increase demand, which in turn would increase scales of economy. This pricing recommendation
is predicated on the first 2 initiatives of plant consolidation/workforce reductions and Six-Sigma
implementation being done.
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The Analytical Graduates
Blount should revise its executive compensation and its employee bonus program to be more in line with
the Industry.
IMPLEMENTATION
1. Divestiture: Blount should form a steering committee that will be responsible for all activities
surrounding the divestiture. This committee would be comprised of the corporate CFO, President of the
Industrial and Power Equipment SBU and key functional managers. The committee will report its
progress to the board in monthly written reports and summary quarterly meetings. The responsibilities of
this committee would be to determine, in the short run, plant closures and workforce reductions, in order
to realize to immediate savings in fixed/variable costs. The committee should make recommendations re
the most advantageous timing for the divestiture, should identify potential buyers, and initiate
negotiations with them. If market conditions fail to improve by year end, the company may be forced to
change its divestiture stance, to pursue selling separate pieces of the SBU, or to be in the position of
accepting a less than fair market value.
Once the divestiture is complete, revenue would be available to expand the Outdoor Products and
Sporting Equipment SBUs via product development and addressing new markets in emerging countries.
2. Aggressive Marketing Initiative: Blount should form a permanent committee which will include
marketing, quality, legal, R&D, design, and production personnel. This committee would be responsible
for conducting on-going data mining in worldwide regulations, standards, and laws that cover
environmental protection, safety, and tariff and trade barriers. They should also concentrate on the
competitions’ current standards and future moves in order to establish Blount benchmarks that meet or
exceed them. Due to the committees’ specific knowledge base, Blount’s benchmarks should be designed
to be attainable by all segments of the value chain. The committee will meet with senior management
monthly to report its progress. In 6 months time the committee will unveil the final details of the
benchmarking campaign and how it will materialize into labeling Blount as the Worldwide Leader in
these matters.
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The Analytical Graduates
3. Cost Reductions: The CFO will work with the Blount plant managers, along with their respective
Operations and Financial Managers, to assess all the possibilities of plant consolidations and workforce
reductions. The CFO will present the resulting recommendations and the financials that support it to the
CEO and the Blount board in 90 days.
As part of this process, this task force will also make recommendations on ways to improve the synergies
in purchased supplies and inbound logistics, operations, and distribution and outbound logistics.
The Six-Sigma team will be required to report its progress on a monthly basis to upper management to
ascertain that the completion of Six-Sigma quality in the Outdoor Products SBU will be reached in 6
months time and that the level of productivity and cost efficiencies are consistent with the goals. Upper
management will work hand in hand with this same team to begin implementation in other SBUs.
A team of cost accountants will be charged with analyzing bottom line costs for all products. This team
will determine pricing levels that provide the best combination of return and selling opportunity. This
committee will solicit input from marketing and sales based on the competitions’ pricing and report its
findings and recommendations to the CFO in 60 days.
The Human Resource Director and the Controller will chair a task force to investigate Industry standards
in executive compensation and employee bonus plans. Within 60 days, they will provide the parameters
of the new plan to be implemented at the beginning of the next fiscal year.
EVALUATION AND CONTROL
The Six-Sigma team should conduct monthly meetings with upper management to report their
progress and to enlist management’s aid in solving any potential problems.
Once the new pricing has been in play in the market for a month, the cost accounting group should
analyze the impact on the profitability margin and make adjustments accordingly. This process should
continue to be evaluated on a monthly basis in conjunction with the cost reductions realized by the plant
consolidations and workforce reductions to ensure that financial goals are being met.
The Human Resource Director, the Controller, and the compensation task force should finish the
recommendations for revised executive compensation and employees’ bonus programs in 6 months. Upon
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The Analytical Graduates
Board approval, Human Resources will devise the written policy and an action plan for it to be rolled out to
the employees. The Public Relations Office should be an instrumental part in ensuring that the rollout
communicates an accurate picture of the company’s current situation and the reasons why it is critical to
make these changes. The Human Resource Director and Public Relations Office should emphasize that the
company continues to value its employees and its culture but the current financial circumstances are dictating
that adjustments must be made.
SWOT ANALYSIS
Opportunities

Blount should promote its excellent
customer service reputation to expand its
markets in Outdoor Products and
Sporting Equipment.
Blount should maintain its high
standards of product quality and strive to
exceed industry standards.
 Blount should take immediate steps to
set its benchmarks in safety, environmental
protection, tariffs and trade barriers, to
integrate the benchmarks in all value chain
activities, and to promote the company to
the world as “the World Class Leader” in
these endeavors.
 Blount should strengthen its markets in
emerging countries by expanding its product
lines and in the long term by acquisition of a
known company, this expansion should be
financed by a portion of the divestiture
revenue
 Blount International must initiate an
aggressive marketing campaign to promote
its name brand recognition at a corporate
level as well as the product line level.
 Blount should reduce value chain costs
through plant consolidations, workforce
reductions, Six Sigma implementation, and
changes in executive/employee
compensation packages to improve its profit
margins. This would enable the company to
pursue the strategy to decrease the selling
price of its products.
 Blount should divest Industrial and
Power Equipment Division to combat the
effects of the repetitive economic downturns
in the pulp and paper industries and
Blount’s ineffective market share.
 Blount should reduce its long-term debt
with a percentage (up to 50%) of the
revenue realized from the divestiture.
Strengths

Weaknesses
Threats
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The Analytical Graduates
Appendix 1:
Corporate Financial Data (Bookmark: Financials)
($Mil-Year End December)
1999
1998
1997
1996
1995
Net sales
809.9
831.9
716.9
649.3
621.4
Outdoor Product
Sporting Equip.
Industrial & Power
Equip.
Net income
327.6
323.7
315.4
286.7
319.3
239.1
292.7
209.5
282.0
232.2
158.6
(21.8)
229.8
61.3
158.5
59.1
147.1
55.2
107.2
49.4
Current assets
336.0
327.1
NA
NA
NA
Current liabilities
148.5
94.9
NA
NA
NA
Total assets
688.7
668.8
637.8
533.8
522.4
Total liabilities
1,010.4
314.2
140.3
85.8
108.7
Total shareholder’s equity
(321.7)
354.6
316.1
290.8
244.6
Average shares outstanding
30,795,882
NA
NA
NA
NA
Cash Flow from Operations
19.1
88.9
80.3
NA
NA
Ratios and Growth Rates
Blount International
Industry
Sales – 5 Yr. Growth Rate
6.60
15.04
Current Ratio
2.26
1.99
Total debt to equity
(3.14)
0.71
Gross Margin – 5 Yr. Average
32.13
31.65
Net Profit Margin – 5 Yr. Average
5.97
4.92
Return on Equity – 5 Yr. Average
19.41
16.27
Return on Assets – 5 Yr. Average
6.95
7.43
Return on Investment – 5 Yr. Avg.
9.13
10.26
Net Income/Employee
NM
14,851
Receivable Turnover
4.95
6.66
Inventory Turnover
4.66
5.74
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The Analytical Graduates
Appendix II
Ratio Comparison for Outdoor Products (Bookmark: GrossMargin)
Industry
Blount
Toro
Deere
Valuation Ratios
P/E Ratio (TTM)
18.72
NM
11.23
39.30
P/E High – Last 5 years
30.59
NA
123.67
42.83
P/E Low – Last 5 years
13.51
NA
7.86
7.07
Beta
1.02
NA
1.08
1.01
Price to Sales (TTM)
1.66
0.62
0.30
0.76
Price to Book (MRQ)
3.47
NM
1.33
2.17
Price to Tangible Book (MRQ)
5.25
NM
2.51
2.34
Price to Cash Flow (TTM)
14.64
41.12
5.24
40.25
Price to Free Cash Flow (TTM)
25.01
NM
22.96
9.69
% Owned Institutions
50.08
2.44
57.67
79.53
Dividend Yield
1.72
2.28
1.60
2.32
Dividend Yield – 5 Yr. Avg.
1.42
NA
1.30
2.20
Dividend 5 Year Growth Rate
3.88
(4.37)
0.00
5.19
Payout Ratio
15.64
NM
17.60
90.63
Sales (MRQ) vs. Qtr. 1 Yr. Ago
19.90
10.76
11.76
(4.85)
Sales (TTM) vs. 1 Yr. Ago
11.58
(2.65)
13.32
(13.42)
Sales – 5 Yr. Growth Rate
15.04
6.60
6.45
5.53
EPS (MRQ) vs. Qtr. 1 Yr. Ago
(11.87)
(77.27)
15.00
(24.77)
EPS (TTM) vs. Qtr. 1 Yr. Ago
7.57
NA
527.29
(72.87)
EPS – 5 Yr. Growth Rate
15.41
NM
(1.21)
(15.14)
Capital Spending – 5 Yr. Growth
Rate
Financial Strength
17.86
12.37
1.17
6.70
Quick Ratio (MRQ)
1.10
1.23
0.79
NM
Current Ratio (MRQ)
1.99
2.26
1.55
NM
LT Debt to Equity (MRQ)
0.59
(2.52)
0.69
0.84
Total Debt to Equity (MRQ)
0.71
(3.14)
1.25
2.19
Interest Coverage (TTM)
15.83
0.40
3.05
1.61
Dividends
Growth Rates (%)
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The Analytical Graduates
(cont’d) Outdoor Products
Industry
Blount
Toro
Deere
Gross Margin (TTM)
32.51
29.09
36.15
16.08
Gross Margin – 5 Yr. Avg.
31.65
32.13
36.31
21.07
EBITD Margin (TTM)
13.68
6.38
8.80
7.89
EBITD – 5 Yr. Avg.
12.46
15.32
7.69
16.64
Operating Margin (TTM)
10.61
2.19
5.77
3.00
Operating Margin – 5 Yr. Avg.
9.04
11.60
5.03
9.65
Pre-Tax Margin (TTM)
10.50
(2.79)
4.42
3.00
Pre-Tax – 5 Yr. Avg.
8.54
9.75
4.15
9.65
Net Profit Margin (TTM)
5.35
(2.69)
2.70
1.89
Net Profit Margin – 5 Yr. Avg.
4.92
5.97
2.52
6.13
Effective Tax Rate (TTM)
38.88
NM
38.93
37.01
Effective Tax Rate – 5 Yr. Avg.
37.93
36.94
39.40
36.53
Return on Assets (TTM)
7.01
(3.16)
4.13
1.18
Return on Assets – 5 Yr. Avg.
7.43
6.95
3.98
4.84
Return on Investment (TTM)
9.45
(3.79)
7.28
2.86
Return on Investment – 5 Yr.
Avg.
Return on Equity (TTM)
10.26
9.13
6.72
12.24
15.44
(25.08)
12.52
5.52
Return on Equity – 5 Yr. Avg.
16.27
19.41
10.14
21.05
Revenue/Employee (TTM)
216,694
144,625
279,152
300,561
Net Income/Employee (TTM)
14,851
NM
7,527
5,674
Receivable Turnover (TTM)
6.66
4.95
3.96
1.06
Inventory Turnover (TTM)
5.74
4.66
3.96
5.59
Asset Turnover (TTM)
1.24
1.17
1.53
0.63
Profitability Ratios (%)
Management Effectiveness (%)
Efficiency
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The Analytical Graduates
Appendix III
Ratio Comparison for Sporting Goods
Industry
Blount
Olin
(Winchester)
P/E Ratio (TTM)
18.72
NM
47.14
P/E High – Last 5 years
30.59
NA
NM
P/E Low – Last 5 years
13.51
NA
7.33
Beta
1.02
NA
1.21
Price to Sales (TTM)
1.66
0.62
0.58
Price to Book (MRQ)
3.47
NM
2.43
Price to Tangible Book (MRQ)
5.25
NM
2.43
Price to Cash Flow (TTM)
14.64
41.12
7.81
Price to Free Cash Flow (TTM)
25.01
NM
NM
% Owned Institutions
50.08
2.44
77.00
Dividend Yield
1.72
2.28
4.79
Dividend Yield – 5 Yr. Avg.
1.42
NA
3.60
Dividend 5 Year Growth Rate
3.88
(4.37)
(3.93)
Payout Ratio
15.64
NM
254.24
Sales (MRQ) vs. Qtr. 1 Yr. Ago
19.90
10.76
1.49
Sales (TTM) vs. 1 Yr. Ago
11.58
(2.65)
(7.78)
Sales – 5 Yr. Growth Rate
15.04
6.60
(10.33)
EPS (MRQ) vs. Qtr. 1 Yr. Ago
(11.87)
(77.27)
5.26
EPS (TTM) vs. Qtr. 1 Yr. Ago
7.57
NA
(55.75)
EPS – 5 Yr. Growth Rate
15.41
NM
(25.28)
Capital Spending – 5 Yr. Growth Rate
17.86
12.37
(11.04)
Quick Ratio (MRQ)
1.10
1.23
0.96
Current Ratio (MRQ)
1.99
2.26
2.00
LT Debt to Equity (MRQ)
0.59
(2.52)
0.74
Total Debt to Equity (MRQ)
0.71
(3.14)
0.74
Interest Coverage (TTM)
15.83
0.40
3.19
Valuation Ratios
Dividends
Growth Rates (%)
Financial Strength
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The Analytical Graduates
(cont’d) Sporting Goods
Industry
Blount
Olin
(Winchester)
Gross Margin (TTM)
32.51
29.09
13.69
Gross Margin – 5 Yr. Avg.
31.65
32.13
18.65
EBITD Margin (TTM)
13.68
6.38
9.96
EBITD – 5 Yr. Avg.
12.46
15.32
13.76
Operating Margin (TTM)
10.61
2.19
3.88
Operating Margin – 5 Yr. Avg.
9.04
11.60
8.51
Pre-Tax Margin (TTM)
10.50
(2.79)
2.05
Pre-Tax – 5 Yr. Avg.
8.54
9.75
8.73
Net Profit Margin (TTM)
5.35
(2.69)
1.29
Net Profit Margin – 5 Yr. Avg.
4.92
5.97
5.67
Effective Tax Rate (TTM)
38.88
NM
37.04
Effective Tax Rate – 5 Yr. Avg.
37.93
36.94
35.29
Return on Assets (TTM)
7.01
(3.16)
1.46
Return on Assets – 5 Yr. Avg.
7.43
6.95
4.96
Return on Investment (TTM)
9.45
(3.79)
1.89
Return on Investment – 5 Yr. Avg.
10.26
9.13
7.07
Return on Equity (TTM)
15.44
(25.08)
3.81
Return on Equity – 5 Yr. Avg.
16.27
19.41
12.16
Revenue/Employee (TTM)
216,694
144,625
196,269
Net Income/Employee (TTM)
14,851
NM
2,537
Receivable Turnover (TTM)
6.66
4.95
6.43
Inventory Turnover (TTM)
5.74
4.66
5.56
Asset Turnover (TTM)
1.24
1.17
1.13
Profitability Ratios (%)
Management Effectiveness (%)
Efficiency
44
The Analytical Graduates
Appendix IV
Ratio Comparison for Industrial & Power Equipment
Industry
Blount
Regal-Beloit
Valuation Ratios
P/E Ratio (TTM)
18.72
NM
9.97
P/E High – Last 5 years
30.59
NA
19.35
P/E Low – Last 5 years
13.51
NA
8.95
Beta
1.02
NA
0.74
Price to Sales (TTM)
1.66
0.62
0.70
Price to Book (MRQ)
3.47
NM
1.49
Price to Tangible Book (MRQ)
5.25
NM
3.44
Price to Cash Flow (TTM)
14.64
41.12
6.21
Price to Free Cash Flow (TTM)
25.01
NM
7.79
% Owned Institutions
50.08
2.44
70.13
Dividend Yield
1.72
2.28
2.68
Dividend Yield – 5 Yr. Avg.
1.42
NA
2.00
Dividend 5 Year Growth Rate
3.88
(4.37)
10.23
Payout Ratio
15.64
NM
26.43
Sales (MRQ) vs. Qtr. 1 Yr. Ago
19.90
10.76
7.21
Sales (TTM) vs. 1 Yr. Ago
11.58
(2.65)
0.21
Sales – 5 Yr. Growth Rate
15.04
6.60
17.55
EPS (MRQ) vs. Qtr. 1 Yr. Ago
(11.87)
(77.27)
(6.68)
EPS (TTM) vs. Qtr. 1 Yr. Ago
7.57
NA
(10.90)
EPS – 5 Yr. Growth Rate
15.41
NM
9.70
Capital Spending – 5 Yr. Growth
Rate
Financial Strength
17.86
12.37
8.68
Quick Ratio (MRQ)
1.10
1.23
1.17
Current Ratio (MRQ)
1.99
2.26
2.96
LT Debt to Equity (MRQ)
0.59
(2.52)
0.59
Total Debt to Equity (MRQ)
0.71
(3.14)
0.59
Interest Coverage (TTM)
15.83
0.40
7.70
Dividends
Growth Rates (%)
45
The Analytical Graduates
(cont’d) Industrial & Power
Equipment
Profitability Ratios (%)
Industry
Blount
Regal-Beloit
Gross Margin (TTM)
32.51
29.09
27.81
Gross Margin – 5 Yr. Avg.
31.65
32.13
28.90
EBITD Margin (TTM)
13.68
6.38
17.53
EBITD – 5 Yr. Avg.
12.46
15.32
19.83
Operating Margin (TTM)
10.61
2.19
13.30
Operating Margin – 5 Yr. Avg.
9.04
11.60
15.96
Pre-Tax Margin (TTM)
10.50
(2.79)
11.61
Pre-Tax – 5 Yr. Avg.
8.54
9.75
14.81
Net Profit Margin (TTM)
5.35
(2.69)
6.99
Net Profit Margin – 5 Yr. Avg.
4.92
5.97
9.09
Effective Tax Rate (TTM)
38.88
NM
39.82
Effective Tax Rate – 5 Yr. Avg.
37.93
36.94
38.79
Return on Assets (TTM)
7.01
(3.16)
7.62
Return on Assets – 5 Yr. Avg.
7.43
6.95
12.89
Return on Investment (TTM)
9.45
(3.79)
8.75
Return on Investment – 5 Yr.
Avg.
Return on Equity (TTM)
10.26
9.13
15.43
15.44
(25.08)
15.97
Return on Equity – 5 Yr. Avg.
16.27
19.41
21.49
Revenue/Employee (TTM)
216,694
144,625
117,631
Net Income/Employee (TTM)
14,851
NM
8,222
Receivable Turnover (TTM)
6.66
4.95
7.12
Inventory Turnover (TTM)
5.74
4.66
3.95
Asset Turnover (TTM)
1.24
1.17
1.09
Management Effectiveness (%)
Efficiency
46
The Analytical Graduates
P
R
I
C
E
BLT
RB
R
Deere
W
Toro
Product Line andMerchandise Mix
BLT
Q
U
A
L
I
T
Y
Deere
R
W
Toro
RB
Product Line and Merchandise Mix
Toro
I
M
A
G
E
R
Deere
W
BLT
RB
47
The Analytical Graduates
48