UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From _____ to _____ Commission File Number 000-22973 CTB INTERNATIONAL CORP. (Exact name of registrant as specified in its charter) INDIANA 35-1970751 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 611 N. Higbee Street P.O. Box 2000 Milford, IN 46542-2000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 574-658-4191 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of common stock held by non-affiliates of the registrant as of March 13, 2002 was approximately $57,799,987 The number of shares outstanding of the registrant's common stock as of March 13, 2002 was 10,872,162 DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held April 30, 2002 are incorporated by reference into Part III. CTB INTERNATIONAL CORP. FORM 10-K For the Fiscal Year Ended December 31, 2001 INDEX ITEM DESCRIPTION PAGE PART I 1. Business.............................................................1 Disclosure Regarding Forward-Looking Statements .....................1 a. General Development of Business ................................1 b. Financial Information about Industry Segments ..................3 c. Narrative Description of Business ..............................3 - Market Overview ............................................3 - Company Products ...........................................3 - Product Distribution .......................................6 - Sources and Availability of Raw Materials ..................6 - Patents and Trademarks .....................................7 - Seasonality ................................................7 - Backlog ....................................................7 - Competition ................................................7 - Research and Development Activities ........................7 - Employees ..................................................8 d. Financial Information about Foreign and Domestic Operations and Export Sales ...............................................8 2. Properties ..........................................................8 3. Legal Proceedings ...................................................8 4. Submission of Matters to a Vote of Security Holders .................8 Executive Officers of the Registrant.................................9 PART II 5. Market for Registrant's Common Equity and Related Shareholder Matters ............................................................11 6. Selected Financial Data ............................................12 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ..............................................13 7A. Quantitative and Qualitative Disclosures About Market Risk .........20 8. Financial Statements and Supplementary Data ........................21 - Notes to Consolidated Financial Statements .......................26 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...............................................41 PART III 10. Directors and Executive Officers of the Registrant .................42 11. Executive Compensation .............................................42 12. Security Ownership of Certain Beneficial Owners and Management .....42 13. Certain Relationships and Related Transactions .....................42 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ....43 PART I -------------------------------------------------------------------------------- ITEM 1. BUSINESS -------------------------------------------------------------------------------- Disclosure Regarding Forward-Looking Statements In addition to historical information, this document contains certain statements representing the Company's expectations or beliefs concerning future events. These statements are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which provides a safe harbor for such statements. The use of words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "projects," "could," "may," "will" or similar expressions are intended to identify these statements. The forward-looking statements contained in this document include, without limitation, statements related to rising demand for and production of meat protein, eggs and grain; increased demand for the Company's equipment used in such production; implementation of operational improvements and lean manufacturing techniques; achievement of sales and earnings growth; execution of business plans and growth strategy; expanding global physical presence and servicing markets outside the United States; leveraging global distribution capabilities, market strength and brand names; developing and introducing innovative products and product packages; growing through acquisitions and developing strategic business arrangements; maintaining and enhancing financial strength; improving manufacturing costs, reducing expenses, and improving productivity; development and acceptability of biotech and/or value-enhanced grain; resolution of certain claims and legal proceedings; the adequacy and availability of liquidity and capital resources to meet the Company's needs; track record of profitability; ability to manage operating expenses; improved utilization of working capital; estimated impact of changes in interest rates and foreign currency exchange rates; and the effects of implementing new accounting standards. They also involve certain risks and uncertainties regarding CTB International Corp.'s business and operations and the agriculture industry. The Company's actual results could differ materially from those expressed or implied by such forward-looking statements. The Company cautions that these statements are further qualified by other important factors, including, but not limited to the following: (1) risks associated with the agricultural industry such as feed, grain and animal price fluctuation; crop yields; consumption trends; demand; market trends; weather; government regulations, policies and programs; social and political trends and outbreaks of disease; (2) risks associated with acquisitions such as incurring significantly higher-than-anticipated capital expenditures and operating expenses, failing to assimilate the operations and personnel of acquired businesses, losing customers, entering markets in which the Company has no or limited experience, disrupting the Company's ongoing business, dissipating the Company's management resources and the possibility the Company will not complete contemplated acquisitions; (3) risks common to international operations including unexpected changes in tariffs and other trade barriers, difficulties in staffing and managing foreign operations, political and economic instability, and fluctuations in currency exchange rates; and (4) other risks including, but not limited to development of less industrialized nations, impact of inflation, and seasonality of the Company's business, as well as those detailed from time to time in the Company's periodic reports and other filings with the Securities and Exchange Commission. The Company does not undertake any obligation to update this information. (a) General Development of Business CTB International Corp. ("CTB" or the "Company") is a leading designer, manufacturer and marketer of systems used in the grain industry and in the production of poultry, hogs and eggs. Its Protein Group and Grain Segments serve these industries primarily in the U.S. and Canada, while its International Segment serves the same industries primarily in the rest of the world. The Company believes that it is one of the largest global providers of poultry production systems, hog production systems, egg production systems and grain storage bins. The Company's poultry and hog production equipment consists of feeders, drinkers, environmental systems (heating, cooling and ventilation), system controls and growing facility management software, and poultry nests. This equipment is used primarily by growers that raise poultry and hogs commercially. CTB's egg production systems consist of feeders, drinkers, environmental systems, system controls and growing facility management software, cages, egg handling systems and manure handling equipment used primarily by commercial producers of eggs. The Company's grain systems include commercial and on-farm storage and holding bins as well as handling and conditioning systems for feed and grain. These are used primarily by farmers and by commercial businesses such as feed mills, grain elevators, port storage facilities and commercial grain processing facilities. CTB operates from facilities in the U.S.A., Europe and Latin America as well as through a worldwide distribution network. It markets its agricultural products on a worldwide basis primarily under the BROCK(R), CHORE-TIME(R), ENERGY MISER(R), FANCOM(R), ROXELL(R), SIBLEY(R) and STACO(R) brand names. CTB International Corp.'s initial predecessor, Chore-Time Equipment, Inc. ("Chore-Time Equipment"), was founded in 1952 by Howard S. Brembeck who also established Brock Manufacturing, Inc. ("Brock") in 1957. In 1976, Chore-Time Equipment and Brock came under common ownership and in 1985 were merged into a single corporation, CTB, Inc. (the "Predecessor Company"). The Predecessor Company was acquired by affiliates of American Securities Capital Partners L.P. ("ASCP") and certain members of the Predecessor Company's senior management in January, 1996. In August 1997, the Company completed the initial public offering of its common stock. Additionally, the Company made two acquisitions and a divestiture in 1997. In May, it acquired all of the capital stock of Fancom Holding B.V., a Netherlands-based manufacturer of agricultural climate control systems and software applications. In June, the Company acquired substantially all of the assets and certain specified ordinary course liabilities of the Kansas City Grain Systems Division of Butler Manufacturing Company ("Kansas City Grain Systems Division"), a Missouri-based manufacturer of grain storage bins. The Company divested substantially all assets (other than accounts receivable) of its vinyl products division to a subsidiary of Royal Group Technologies Limited in May. In conjunction with the sale, the Company entered into a five-year joint venture with the acquirer to produce certain extruded PVC agricultural equipment component parts for the Company. In 1998, the Company made two acquisitions. In July, it acquired Sibley Industries, Inc., a Missouri-based manufacturer of animal brooders and heaters. In September, it acquired STACO, Inc., a Pennsylvania-based manufacturer of hog feeders and other related equipment. Also in 1998, the Company established a Brazilian joint venture and subsequently recognized a $3.1 million charge for impairment in value of the investment. In 1999, CTB acquired Roxell N.V. ("Roxell") of Maldegem, Belgium. Roxell is a leading manufacturer of automated feeding and watering systems as well as feed storage bins for the poultry and hog production markets. Also in 1999, CTB and Rota Industria de Maquinas Agricolas dissolved their 1998 Brazilian joint venture, and CTB completed its reincorporation in Indiana. During 2000, CTB had one acquisition and one divestiture during the year. In November, CTB acquired certain assets of ABC Industries, a manufacturer of dry bulk material handling equipment and dust control devices associated with the grain industry. In December, the Company sold non-core product lines carried by its Sibley Industries unit in Anderson, Missouri. During 2001, the Company consolidated its Anderson, Missouri, and Springdale, Arkansas, facilities in Anderson. Also, in the fourth quarter, the Company settled various legal proceedings and claims in Alabama, which impacted earnings by approximately six cents per diluted share. In early 2002, the Company completed two acquisitions. On January 22, 2002, CTB announced the establishment of Chore-Time Europe B.V., a European logistics center, in Asten, the Netherlands. The new logistics center was established through the purchase of a controlling interest in Veldmaster B.V., a master distributor in the Netherlands. Chore-Time Europe B.V. will sell primarily Chore-Time's products for raising poultry throughout Europe, the Middle East and in northern Africa. CTB has closed its Chore-Time Brock B.V. sales and service facility in Deurne, the Netherlands, and transferred its operations to the new company. Chore-Time Europe B.V. also has a wholly-owned subsidiary in Poland, which has now been designated Chore-Time Europe Sp. z.o.o. On February 1, 2002, the Company acquired substantially all of the operating assets of Beard Industries, Inc., a leading grain dryer manufacturer producing more than 45 different models of dryers for both farm and commercial use under the brand name ENERGY MISER(R). The company, based in Frankfort, Indiana, is also an industry leader in innovative electronic grain drying controls. (b) Financial Information about Industry Segments For certain financial information about the Company's industry segments, see Note 15 to CTB's consolidated financial statements included under Item 8, which is incorportated herein by reference. (c) Narrative Description of Business MARKET OVERVIEW The Company serves the global agricultural market through three primary business segments: the Protein Group Segment (equipment for the production of poultry, hogs and eggs), the Grain Segment (products for the storage, handling and conditioning of grain), and the International Segment (all CTB product lines). Its Protein Group and Grain Segments focus their activities primarily in the U.S. and Canada, while its International Segment is active primarily in the rest of the world. Demand for the Company's products is driven principally by the increasing global focus on improving productivity in these industries. The poultry, hog, egg and grain production industries themselves are driven by a number of factors including worldwide consumption trends, economic and population growth, and the impact of government policies on local production and import/export levels. Other factors such as weather conditions can also have a major influence on local and worldwide demand for the Company's products. Demand for meat, eggs and grain tends to increase in developing countries as consumers experience increasing levels of income. In various parts of the world, history has shown that as their level of affluence has increased, consumers have devoted a larger portion of their income to improved and higher protein diets. Poultry meat and pork are frequently the beneficiaries of this trend as these meats are more cost-effective sources of animal protein than beef. Consequently, a primary driver expected to impact demand for the Company's products is economic and population growth in developing areas of the world including parts of Asia, Latin America, Central Europe and Eastern Europe. Another factor the Company expects to affect demand for its products is the increasing need for more efficient production of animal protein. This demand is anticipated to be particularly concentrated in developing countries where much production is still accomplished manually. In such areas, the use of automated equipment will become increasingly important for more efficient use of resources such as feed grains and the land on which they are grown. Demand for grain, including the use of grain as feed to support meat and egg production, and the required infrastructure for grain storage, conditioning and handling is driven by several factors. The Company believes production levels in the meat and egg production markets are likely to have some impact on future levels of grain production and the resultant need for storage facilities. Demand for additional storage could also be impacted by the further development and acceptability of biotech and value-enhanced grains and the need for identity preservation in storage. COMPANY PRODUCTS CTB designs, manufactures and markets systems used in the grain industry and in the production of protein (poultry, hogs and eggs). Its Protein Group and Grain Segments serve these industries primarily in the U.S. and Canada, while its International Segment serves the same industries principally in countries outside the U.S. and Canada. The Company's equipment for poultry and hogs consists of feeders, drinkers, environmental systems (heating, cooling and ventilation), system controls and growing facility management software, and poultry nests. CTB's egg production systems consist of feeders, drinkers, environmental systems, system controls and growing facility management software, cages, egg handling systems and manure handling equipment. The Company's grain systems include commercial and on-farm storage and holding bins as well as conditioning and handling systems for feed and grain. The Company manufactures and sells its systems for protein production under the CHORE-TIME(R), FANCOM(R), ROXELL(R), SIBLEY(R) and STACO(R) brand names and its complete line of galvanized steel grain storage bins, handling and conditioning systems under the BROCK(R) and ENERGY MISER(R) names. Systems for Poultry and Hogs The Company's products for poultry and hogs consist of complete systems that deliver feed and water, and provide a comfortable in-house climate for the animals, thereby creating the optimum growing environment for efficient production. The feeding process typically starts with feed storage bins, which hold several days' rations of feed and are located outside the animal or poultry buildings or houses. Feed is transported via an enclosed auger system, which conveys the feed from the feed storage bin to an internal feed distribution network inside the house. The internal feeding system, in turn, delivers the feed to feeders conveniently located near the birds or hogs. The feeding process is a "closed" system, which protects the feed from exposure to weather and other detrimental influences from the time it is delivered to the feed storage bin until it appears in front of the animals for consumption. Feeders are adjustable so that the optimum amount of feed can be provided based on the age and size of the poultry or hogs. The poultry or hog building may also be equipped with the Company's enclosed water delivery systems, environmental systems for complete control of the internal house climate, computer-based feeding and climate control devices, and other items needed to achieve top production levels. The Company also offers mechanical nest systems through an exclusive marketing arrangement. Nests are used in poultry breeder operations for the purpose of efficiently gathering and handling fertile eggs. In addition, the Company offers software to help users of the Company's systems better manage their poultry or hog operations from the farm site and/or from remote locations. The Company believes that feed accounts for 60 to 70 percent of the total cost of raising poultry and hogs. The profitability of growers of broiler chickens and turkeys (both raised for meat) is largely dependent on the efficiency with which they convert feed to meat ("feed-to-meat ratio"). The profitability of growers of breeder chickens (raised to produce fertile hatching eggs) is dependent in great part upon the total amount of feed required to maximize egg production. The Company's integrated production systems for broilers and turkeys are designed to maximize the feed-to-meat ratio by making feed and water attractive and easily accessible, by limiting feed waste, and by keeping birds comfortable. The ability of each bird to obtain water easily and immediately is an essential factor in facilitating weight gain. Proper ventilation systems are crucial for maximizing feed-to-meat ratios by reducing stress caused by extreme temperature fluctuation. Proper ventilation also allows for higher density production and creates an environment conducive to optimum bird health. Birds that are too hot, too cold, or that have too much airflow over them do not convert feed-to-meat as efficiently. Similarly, CTB's integrated systems for breeder chickens are designed to maximize fertile egg production by delivering appropriate diets at scheduled times, by reducing competition for feed among breeders, by separately feeding hens and roosters (thereby reducing stress and enhancing the productivity of both) and by providing ample water and a comfortable environment. The profitability of hog producers also depends largely on the feed-to-meat ratio as well as on the number of pounds of lean pork produced. For sow operations (hogs produced for breeding purposes), profitability is determined by the size and number of litters per sow per year. The Company's integrated systems for hogs are designed to maximize the feed-to-meat ratio of hogs by delivering appropriate diets at scheduled times. This prevents hogs from eating continuously, thus reducing feed waste and improving feed conversion and utilization. The Company's feeding systems for sows are designed to maximize the production of piglets by lowering animal stress, limiting feed waste and minimizing farm labor costs. The Company also manufactures watering attachments for some models of hog feeders, which minimize feed and water waste by keeping hogs at the feeders while drinking. Adequate water and a comfortable environment provide similar improvements in the efficiency of feed-to-meat conversion for hogs as they do for poultry. The Company believes its products for poultry and hog production are further distinguished by a number of unique, patented features designed for optimum productivity and easy management. These products are provided to the end users through members of the Company's independent distributor/dealer networks who sell, install and service the equipment. Systems for Egg Production The Company's products for egg production consist of complete systems that deliver feed and water and provide a comfortable in-house climate for poultry. These systems create the optimum growing environment for egg producing birds, both when they are young as well as after they begin laying eggs. The feeding process typically begins with feed storage bins holding several days' rations of feed and located outside the poultry buildings or houses. Feed is transported via an enclosed auger system, which conveys the feed from the feed storage bin to an internal feed distribution network inside the house. The internal feeding system, in turn, delivers the feed to feeders which are conveniently located in front of the multi-tiered galvanized wire mesh cages housing the birds. The feeding process is a "closed" system, which protects the feed from exposure to weather and other detrimental influences from the time it is delivered to the feed storage bin until it appears in front of the birds for consumption. The cage system housing the birds can be provided in a variety of sizes and styles suitable to match current production guidelines. They may also be equipped with the Company's enclosed water delivery systems while the production building may be equipped with environmental systems for complete control of the internal house climate; computer-based feeding, climate control and egg-counting devices; waste removal systems and other items needed to achieve top production levels. The profitability of egg producers is determined in large part by feed use efficiency as well as by the number and size of eggs produced by each bird, the shell quality of the eggs and the length of each bird's laying cycle. Egg production is optimized by product features such as periodic customized feeding, easy access to water and adequate ventilation, which distinguish the Company's egg production systems. In addition, egg producer profitability also depends on the gentle handling of eggs to minimize breakage. The Company's patented egg collection and handling system is distinguished by its design, which handles eggs more gently, resulting in fewer cracked or broken eggs. In addition, because the Company manufactures all the necessary equipment for an egg production house, it can offer fully integrated egg production systems, which can be monitored and operated locally or remotely using the Company's automated controls. The Company believes its products for egg production are further distinguished by a number of unique, patented features designed for optimum productivity and easy management. These products for egg production are provided to end users directly, or through members of the Company's independent dealer network depending on which organization is in the best position to provide installation and service. Grain Storage and Handling Systems The Company manufactures a wide variety of models of grain storage bins for on-farm and commercial grain storage in diameters ranging from 12 to 105 feet (3.7 to 32 meters) with capacities up to 680,000 bushels (22,700 cubic meters) as well as grain handling and conditioning systems. The Company also manufactures and markets a line of industrial bulk storage bins and conveying equipment and markets various related accessory items. In addition to the products marketed under the BROCK(R) and ENERGY MISER(R) brand names, the Company produces grain storage bins on a private-label basis. The Company's grain storage bins are distinguished by the availability of a wide variety of bin models designed to meet diverse farm and commercial storage needs and configurations. In addition, the Company believes that it has developed a reputation in the marketplace as the grain industry leader in producing storage bins known for superior roof strength, ease of installation, special engineering for durability, reliable operation and superior cosmetic appearance. Grain handling systems manufactured by the Company include its enclosed roller belt conveyor system. Belt conveyors convey grain over long distances gently and efficiently and have relatively low installation, maintenance and operation costs. CTB also manufactures bin sweeps for use in grain bin unloading, and a unique dust control product used at grain and industrial receiving facilities called the DUSTMASTER(R) System. CTB also manufactures grain conditioning equipment used to maintain the quality and enhance the marketability of stored grain. The Company developed a line of fans and heaters for grain conditioning in 2001, and, with the acquisition of Beard Industries in early 2002, the Company has added production of Beard's industry-leading ENERGY MISER(R) grain dryers to its grain conditioning line. Grain producers are subject to many input costs over which they have little control. The aspects of their profitability that they can control include the ability to condition grain appropriately for long-term storage, the ability to maintain the grain at a high level of quality throughout the time it is stored and the flexibility to determine their own time to market. Through conditioning and protecting the grain and by facilitating the ability to time the sale of grain to achieve a more advantageous price, the Company's grain storage systems help grain producers maximize their income when they sell their grain. The Company believes its grain storage and handling products are further distinguished by a number of unique, patented features designed to make storage, conditioning and handling more manageable and trouble-free. These products for grain storage, handling and conditioning are sometimes provided to commercial users directly, but most often through members of the Company's independent dealer network. PRODUCT DISTRIBUTION The Company sells its agricultural products primarily through a global network of independent distributors/dealers who offer targeted geographic coverage in key poultry, hog, egg and grain-producing markets throughout the world. The Company's distributors or dealers, and in some cases their sub-agents, sell products to poultry, egg, hog and grain producers as well as to agricultural companies and other end users. These independent distributors and dealers install and service the Company's products. Many also offer additional technical support and service to the end user as well as maintaining warehouse facilities for systems and spare parts. Some of the Company's distributors sell products directly to end users and others sell products through their own dealer networks. The Company provides training to its distributors and dealers, qualifying distributors and dealers to install and service the Company's products and systems. The Company believes that its distribution network is the strongest in the industry, providing its customers with a high level of top-quality service. The Company has maintained long-standing relationships with much of its distribution network. SOURCES AND AVAILABILITY OF RAW MATERIALS The Company manufactures its products primarily from galvanized steel, steel wire, stainless steel and polymer materials, including polyvinylchloride (PVC), polypropylene and polyethylene. In addition, it purchases certain components including electric motors and PVC pipe for incorporation in some of its products. The Company is not dependent on any one of its suppliers and has not experienced difficulty in obtaining any parts or materials. The Company purchases galvanized steel from a variety of integrated mills and galvanizing processors, many of which have experienced operating losses in recent years. These losses, coupled with recent actions by the U.S. government to impose tariffs on foreign steel may result in significant increases in the company's cost of raw material. In addition, the components or substitute components, materials and parts purchased by the Company are readily available from alternative suppliers. PATENTS AND TRADEMARKS The Company has numerous patents covering innovations in poultry and livestock feeding and other agricultural equipment and has applied for additional patents. The Company aggressively seeks patent protection for its technological developments. The Company also has numerous trademarks and has submitted applications for additional trademarks. While the Company believes its patents and trademarks have significant value, the Company does not believe that its competitive position is dependent on patent protection or that its operations are dependent on any individual patent or group of related patents. SEASONALITY Sales of agricultural equipment are seasonal, with poultry, hog and egg producers purchasing equipment during prime construction periods in the spring, summer and fall, and farmers and commercial storage installations traditionally purchasing grain storage bins, handling and conditioning equipment in the late spring and summer in order for them to be constructed and ready for use in conjunction with the fall harvesting season. The Company's net sales and net income have historically been lower during the first and fourth fiscal quarters as compared to the second and third quarters when distributors and dealers increase purchases to meet the seasonal demands of end users. BACKLOG Backlog is not a significant factor in the Company's business taken as a whole, because most of the Company's products are delivered within a few weeks of being ordered. The Company's backlog on or about January 31, 2002, and 2001, was $25.7 million and $33.1 million, respectively. COMPETITION The market for the Company's products is competitive. Domestically and internationally, the Company competes with a variety of manufacturers and suppliers, many of which offer only a limited number of the products offered by the Company and two of which offer products across most of the Company's product lines. Competition is based on the price, value, reputation, quality and design of the products offered and the customer service provided by distributors, dealers and manufacturers of the products. The Company believes that its leading brand names, strong distribution network, diversified product line, product support and high-quality products enable it to compete effectively. The Company further believes that its ability to offer poultry, egg and hog producers integrated systems, which lower total production costs and help producers achieve further productivity gains and profitability, provides it with an additional competitive advantage. The Company has expanded its package offering for grain producers through both acquisition and business alliances. It believes that the existing package is competitive and is easily supplemented with additional complementary systems when desired. The Company also believes that integrated equipment systems offer significant benefits to distributors/dealers, including lower administrative and shipping costs and the ease of dealing with a single supplier for all of their customers' needs. In addition, the Company believes its distributors and dealers provide producers with high-quality service, installation and repair. RESEARCH AND DEVELOPMENT ACTIVITIES The Company has research and product development and design engineering located in Milford, Indiana; Panningen, the Netherlands; Maldegem, Belgium; and to a lesser extent, certain of its other locations. Expenditures by the Company for product research and development amounted to approximately $5.0 million, $4.7 million and $5.6 million for the years ended December 31, 2001, 2000 and 1999, respectively. EMPLOYEES As of December 31, 2001, the Company had approximately 1,100 employees. At December 31, 2001 the Kansas City Grain Systems Division had approximately 50 hourly employees that are subject to a collective bargaining agreement, which expires February 11, 2004. Management believes that its relationships with the Company's employees are good. (d) Financial Information about Foreign and Domestic Operations and Export Sales For certain financial information about the Company's U.S. and foreign operations and export sales, see Note 15 to CTB's consolidated financial statements included under Item 8, which is incorporated herein by reference. ITEM 2. PROPERTIES

~~ITEM~~-------------------------------------------------------------------------------------------------------------- ~~DESCRIPTION~~The ~~PAGE~~following ~~PART~~table Isets 1.forth ~~Business.............................................................................................1~~information ~~Disclosure~~regarding ~~Regarding~~the ~~Forward-Looking~~principal ~~Statements~~properties ~~.....................................................1 a. General Development~~ of ~~Business~~the ~~................................................................1~~Company: b.Location ~~Financial~~Facility ~~Information about Industry Segments ..................................................2 c. Narrative~~ Description ofSquare ~~Business~~Feet ~~..............................................................2~~Owned/Leased - ~~Market Overview ............................................................................2~~ - ~~Company Products ...........................................................................3~~ - ~~Product Distribution .......................................................................6~~ - ~~Sources and Availability of Raw Materials ..................................................6~~ - ~~Patents and Trademarks .....................................................................6~~ - ~~Seasonality ................................................................................7~~ - ~~Backlog ....................................................................................7~~ - ~~Competition ................................................................................7~~ - ~~Research and Development Activities ........................................................7~~ ----------------------------------------------------------------------------------------------------- ~~Employees~~Milford, ~~..................................................................................7~~Indiana d.Plant, ~~Financial~~corporate ~~Information~~headquarters ~~about~~611,000 ~~Foreign~~Owned and ~~Domestic~~miscellaneous ~~Operations~~areas ~~and~~Kansas ~~Export~~City, ~~Sales~~Missouri ~~...................8~~Plant 2.and ~~Properties~~office ~~..........................................................................................8~~394,000 3.Owned ~~Legal~~Maldegem, ~~Proceedings~~Belgium ~~...................................................................................8~~Plant 4.and ~~Submission~~office of161,400 ~~Matters~~Owned toDecatur, aAlabama ~~Vote~~Plant ofand ~~Security~~office ~~Holders~~120,000 ~~.................................................8~~Owned ~~PART~~Panningen, IIThe 5.Netherlands ~~Market~~Plant ~~for Registrant's Common Equity~~ and ~~Related~~office ~~Shareholder~~88,000 ~~Matters~~Owned ~~...............................9~~Anderson, 6.Missouri ~~Selected~~Plant ~~Financial~~and ~~Data~~office ~~............................................................................10~~66,000 7.Owned ~~Management's~~Frankfort, ~~Discussion~~Indiana ~~and~~Plant ~~Analysis of Financial Condition~~ and ~~Results~~office of61,446 ~~Operations~~Owned ~~..............11~~Schaefferstown, ~~7A.~~Pennsylvania ~~Quantitative~~Plant and ~~Qualitative~~office ~~Disclosures~~31,800 ~~About~~Leased ~~Market~~Indianapolis, ~~Risk~~Indiana ~~.........................................15~~Plant ~~8. Financial Statements~~ and ~~Supplementary~~office ~~Data~~27,500 ~~........................................................16~~Leased -Asten, ~~Notes~~The toNetherlands ~~Consolidated~~Plant ~~Financial Statements .......................................................21 9. Changes in~~ and ~~Disagreements~~Office ~~with~~24,500 ~~Accountants~~Leased onVitre, ~~Accounting~~France ~~and~~Warehouse ~~Financial Disclosure ...............35 PART III 10. Directors~~ and ~~Executive~~office ~~Officers~~15,000 ofOwned ~~the~~Londrina, ~~Registrant~~Brazil ~~.................................................36~~Plant ~~11. Executive Compensation .............................................................................37 12. Security Ownership of Certain Beneficial Owners~~ and ~~Management~~office ~~.....................................37 13. Certain Relationships and Related Transactions .....................................................37 PART IV~~ 14~~. Exhibits~~,000 ~~Financial~~Leased ~~Statement~~Strykowo, ~~Schedules~~Poland Plant and ~~Reports~~office on10,100 ~~Form 8-K ....................................39~~Owned

Management believes that its facilities and equipment are generally well maintained and are in good operating condition and that its capacity for the manufacture of its products is adequate to satisfy anticipated demands for the foreseeable future. ITEM 3. LEGAL PROCEEDINGS -------------------------------------------------------------------------------- For information regarding legal proceedings and claims settled in the fourth quarter of 2001, see Note 8, which is incorporated herein by reference. -------------------------------------------------------------------------------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders.

~~Location~~EXECUTIVE ~~Facility~~OFFICERS ~~Description~~OF ~~Square~~THE ~~Feet~~REGISTRANT ~~Owned/Leased~~ ---------------------------------------------------------------------------------------------------------------- ~~Milford,~~Executive ~~Indiana~~Officers ~~Plant,~~of ~~corporate~~the ~~headquarters~~Company ~~611,000~~Name ~~Owned~~Age ~~and~~Position ~~miscellaneous~~with ~~areas~~Company ~~Kansas~~Officer ~~City,~~Since ~~Missouri~~J. ~~Plant~~Christopher ~~and~~Chocola ~~office~~40 ~~394,000~~Chairman ~~Owned~~of ~~Maldegem,~~the ~~Belgium~~Board ~~Plant~~1991 Victor A. Mancinelli 58 President and ~~office~~Chief ~~161~~Executive Officer,~~400~~ ~~Owned~~Director ~~Decatur,~~1999 ~~Alabama~~Danny ~~Plant~~DeRouck ~~and~~38 ~~office~~Managing ~~120~~Director,~~000~~ ~~Owned~~Roxell ~~Panningen,~~N.V. ~~The~~2000 ~~Netherlands~~Randy ~~Plant~~S. ~~and~~Eveler ~~office~~37 ~~88,000~~Vice ~~Owned~~President ~~Anderson~~& Corporate Controller, ~~Missouri~~CTB, ~~Plant~~Inc. ~~and~~1999 ~~office~~Michael ~~66,000~~J. ~~Owned~~Kissane ~~Schaefferstown~~44 Vice President, ~~Pennsylvania~~General ~~Plant~~Counsel ~~and~~& ~~office~~Secretary ~~31,800~~1993 ~~Leased~~Mark ~~Wierden,~~A. ~~The~~Lantz ~~Netherlands~~41 ~~Plant~~Vice ~~and~~President ~~office~~& 25General Manager,~~800~~ ~~Leased Springdale~~CTB, ~~Arkansas~~Inc. ~~Plant~~1996 ~~and~~Donald ~~office~~C. ~~15,000~~Mueller ~~Leased~~52 ~~Vitre,~~Vice ~~France~~President ~~Warehouse~~& ~~and~~General ~~office~~Manager, 15CTB,~~000~~ ~~Owned~~Inc. ~~Londrina,~~2001 ~~Brazil~~George ~~Plant~~W. ~~and~~Murdoch ~~office~~42 ~~14,000~~Executive ~~Leased~~Vice ~~Deurne~~President & General Manager, ~~The~~CTB, ~~Netherlands~~Inc. ~~Warehouse~~1998 ~~and~~Douglas ~~office~~J. 8Niemeyer 54 Vice President & General Manager,~~300~~ ~~Leased~~CTB, Inc. 2000 Don J. Steinhilber 44 Vice President & Chief Financial Officer 1994

The following is biographical information for the Company's executive officers. J. Christopher Chocola - Chairman of the Board since April 1999. Mr. Chocola served as President of the Company from February 1996 to April 1999 and Chief Executive Officer of the Company from April 1997 to April 1999. Mr. Chocola has served as Chief Executive Officer of CTB (prior to January 1996, the Predecessor Company) from March 1994 to April 1999. From July 1993 to February 1994, Mr. Chocola served as Executive Vice President of the Predecessor Company. From November 1993 to July 1996, Mr. Chocola served as the General Manager of the Chore-Time division. From October 1991 to November 1993, Mr. Chocola served as the General Manager of the Brock division. Mr. Chocola joined the Predecessor Company in 1988. Mr. Chocola was elected to the Board of Directors of the Predecessor Company in February 1991 and of the Company in February 1996. Victor A. Mancinelli - President and Chief Executive Officer of the Company since April 1999. Prior to joining the Company, Mr. Mancinelli was Chief Operating Officer of Gehl Company since November 1992. From 1990 to 1992, Mr. Mancinelli served as Group Vice President of W.H. Brady Co. From 1987 to 1990, Mr. Mancinelli served as President and Chief Operating Officer of Syracuse China Corp., a subsidiary of Canadian Pacific Ltd. From 1985 to 1987, Mr. Mancinelli served as Vice President International Business for Simplex Time Record Co. Prior to 1985, Mr. Mancinelli served in a variety of management positions with Cummins Engine Company, Inc. Danny DeRouck - Managing Director of Roxell N.V., Maldegem, Belgium since June 2000. Mr. DeRouck served as Commercial-Director of Roxell N.V. from 1995 until June 2000. Prior to 1995, Mr. DeRouck served in various sales related functions at Roxell N.V. Randy S. Eveler - Vice President and Corporate Controller of CTB since October 1998. Mr. Eveler served as Division Controller of CTB from August 1998 until October 1998. Prior to joining the Company, Mr. Eveler was Finance Manager of Accra Pac, Inc. from October 1993. Michael J. Kissane - General Counsel and Secretary of the Company since April 1997 and Vice President of the Company since December 1995. Mr. Kissane has been a Vice President of CTB (prior to January 1996, the Predecessor Company) since July 1993, the Secretary of CTB (prior to January 1996, the Predecessor Company) since March 1994 and has served as General Counsel of CTB (prior to January 1996, the Predecessor Company) since joining the Predecessor Company in January 1992. Mark A. Lantz - Vice President and General Manager - Grain Systems Business of CTB since June 2000. Mr. Lantz served as Vice President and General Manager - Egg Production Systems of CTB from February 1996 until June 2000. Mr. Lantz served as Vice President-Operations of CTB from February 1996 until May 1997. Mr. Lantz served as Operations Manager of CTB (prior to January 1996, the Predecessor Company) from November 1993 until February 1996, as Vice President-Manufacturing of the Predecessor Company from July 1993 until November 1993 and as Plant Manager of CTB (prior to January 1996, the Predecessor Company) from October 1991 until July 1993. Mr. Lantz joined the Predecessor Company in 1989. Donald C. Mueller - Vice President and General Manager - Poultry Production Systems of CTB since August 2001. From 2000 until joining the Company, Mr. Mueller was an independent management consultant. From 1998 to 2000, Mr. Mueller was Vice President & General Manager for APV Americas in Goldsboro, North Carolina. From 1994 to 1998, Mr. Mueller was Director of Operations for Raypak, Inc., a Division of Rheem Manufacturing Company, in Westlake Village, California. George W. Murdoch - Executive Vice President and General Manager - International Business of CTB since January 1998. Mr. Murdoch served as Vice President of International Marketing of CTB from September 1996 to January 1998, as European Sales Manager of CTB from August 1994 to September 1996, as Sales Manager-Latin America of CTB from January 1994 to August 1994, and Regional Sales Manager from January 1991 to January 1994. Douglas J. Niemeyer - Vice President and General Manager - Egg Production Systems of CTB since September 2000. Prior to joining the Company, Mr. Niemeyer was President and General Manager of ABB's North American Fan Group from 1991. Don J. Steinhilber - Vice President, Chief Financial Officer and Treasurer of the Company from April 1997 to September 2000 and since December 2000. Mr. Steinhilber served as Vice President of Business Planning and Development from September 2000 to December 2000. Mr. Steinhilber served as Vice President and Assistant Treasurer of the Company from December 1995 until April 1997. Since December 1996, Mr. Steinhilber has served as Vice President, Chief Financial Officer and Treasurer of CTB. From July 1993 to December 1996, Mr. Steinhilber served as Vice President and Treasurer of CTB (prior to January 1996, the Predecessor Company). From July 1991 to July 1993, Mr. Steinhilber served as International Controller of the Predecessor Company. Mr. Steinhilber joined the Predecessor Company in July 1991. (Pursuant to General Instruction G(3) of Form 10-K, the foregoing information regarding executive officers is included as an unnumbered Item in Part I of this Annual Report in lieu of being included in the Company's Proxy Statement for its 2002 Annual Meeting of Shareholders.) ================================================================================ PART II -------------------------------------------------------------------------------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED -------------------------------------------------------------------------------- SHAREHOLDER MATTERS CTB International Corp. common stock began trading on The Nasdaq Stock Market(R) under the symbol "CTBC" on August 21, 1997. As of February 28, 2002, there were approximately 107 shareholders of record. The following table sets forth the quarterly high and low closing prices for the Company's common stock as reported by The Nasdaq Stock Market(R). 2001 High Low ----------------------- ----------------- ---------------- First Quarter $9.125 $7.313 ----------------------- ----------------- ---------------- Second Quarter $9.380 $8.520 ----------------------- ----------------- ---------------- Third Quarter $10.210 $8.850 ----------------------- ----------------- ---------------- Fourth Quarter $11.500 $9.790 ----------------------- ----------------- ---------------- 2000 High Low ----------------------- ----------------- ---------------- First Quarter $9.250 $6.188 ----------------------- ----------------- ---------------- Second Quarter $8.125 $6.500 ----------------------- ----------------- ---------------- Third Quarter $8.250 $6.688 ----------------------- ----------------- ---------------- Fourth Quarter $8.875 $7.000 ----------------------- ----------------- ---------------- The Company has not paid any dividends on its common stock over the past two years. The Company does not anticipate paying any dividends in the foreseeable future, and intends to retain all earnings, if any, for general corporate purposes. The declaration and payment of dividends, if any, by the Company will be dependent upon the Company's results of operations, financial condition, cash requirements and other relevant factors, subject to the discretion of the Board of Directors. The Company's credit agreement contains certain restrictions on CTB's ability to pay dividends or make other distributions. (See Note 7 of CTB's consolidated financial statements included under Item 8 for a description of the Company's credit arrangements that restrict its ability to pay dividends or make other distributions.) The Company issued 62,560; 36,280 and 11,256 shares in 2001, 2000 and 1999, respectively, of its common stock to certain employees of the Company who exercised stock options to purchase such shares. The Company believes that the issuance of these securities is exempt from registration under the exception provided in Section 4 (2) of the Securities Act of 1933, as amended. The Company received proceeds in an aggregate amount of about $54,000; $30,000 and $9,000 from these issuances in 2001, 2000 and 1999, respectively, which it used for general corporate purposes.

ITEM 6. SELECTED FINANCIAL DATA --------------------------------------------------------------------------------------------------- ~~Year Ended December 31,~~ -------------------------------------------------------------------------------------------------- ~~(in~~Year ~~thousands,~~Ended ~~except~~December ~~per~~31, ~~share amounts) 2000 1999 1998 1997 1996~~ ------------------------------ ---- -------- ------------ ------------ ------------ ------------------ (in thousands, except per 2001 2000 1999 1998 1997 share amounts) Income Statement Data: Net sales $232,869 $259,115 $272,603 $272,180 $202,063 ~~$148,853~~ Cost of sales 166,220 189,894 202,534 211,496 148,345 ~~110,303~~ Gross profit 66,649 69,221 70,069 60,684 53,718 ~~38,550~~ Selling, general and administrative expenses 38,558 40,~~795~~853 42,~~331~~374 35,~~315~~377 26,~~420~~409 ~~18,257~~ Amortization of goodwill 2,~~388~~319 2,~~513~~330 2,470 1,~~837~~775 1,~~373~~384 ~~959~~ Operating income 25,772 26,038 25,225 23,532 25,925 ~~19,334~~ Interest expense, net (2,299) (4,349) (6,205) (4,153) (5,003) ~~(5,332)~~ Foreign exchange loss (188) (22) (1,858) (330) (86) -- Gain on sale of Vinyl Division -- -- -- -- 3,562 -- Joint venture loss (61) (17) (126) (3,673) -- -- Income before income taxes 23,224 21,650 17,036 15,376 24,398 ~~14,002~~ Income taxes 9,053 8,660 6,820 6,180 10,499 ~~5,500~~ ------------------------------ ------------- ------------- ------------ ------------- ------------ Net income $14,171 $12,990 $10,216 $9,196 $13,899 ~~$ 8,502~~ ------------------------------ ------------- ------------- ------------ ------------- ------------ Basic earnings per share $1.30 $1.18 $0.85 $0.73 $1.49 ~~$1.17~~ Basic weighted average shares 10,886 11,015 12,037 12,655 9,310 ~~7,256~~ Diluted earnings per share $1.28 $1.16 $0.83 $0.71 $1.43 ~~$1.12~~ Diluted weighted average ~~shares~~11,082 11,227 12,273 12,999 9,716 ~~7,569~~shares Other Financial Data: EBITDA (1) $35,761 $36,~~252~~194 $33,~~235~~192 $30,~~718~~656 (2) $32,~~085~~096 (2) ~~$24,902~~ Depreciation 7,919 7,865 7,481 5,739 4,873 ~~4,609~~ Capital expenditures 5,039 4,~~452~~252 6,759 7,004 4,437 ~~3,402~~ Gross profit margin 28.6% 26.7% 25.7% 22.3% 26.6% ~~25.9%~~ EBITDA margin 15.4% 14.0% 12.2% 11.3% 15.9% ~~16.7%~~ Cash Flow Data: Net cash flows from: Operating activities $30,408 $23,020 $37,106 $2,805 $17,498 ~~$11,714~~ Investing activities (4,835) (4,874) (40,397) (11,565) (42,104) ~~(106,606)~~ Financing activities (24,454) (17,902) 6,731 8,284 25,670 ~~95,150~~ ------------------------------ ------------------------------------------------------------------- At December 31, 2001 2000 1999 1998 1997 ~~1996~~ ------------------------------ ------------- ------------- ------------ ------------- ------------ Balance Sheet Data: Working capital $23,909 $28,861 $29,770 $ 40,910 $ 26,318 ~~$10,773~~ Total assets 178,279 195,357 207,562 195,126 167,641 ~~103,351~~ Debt 37,829 63,174 77,855 71,365 49,164 ~~65,150~~ Total shareholders' equity 99,488 87,013 80,754 76,825 73,546 ~~13,741~~ ------------------------------ ------------- ------------- ------------ ------------- ---------------- (1) EBITDA represents earnings before interest, income taxes, depreciation and amortization of goodwill. (2) EBITDA for the years ending December 31, 1998 and 1997 excludes a non-recurring charge for write-down and losses on a joint venture investment of $3,613 and the gain on sale of the Vinyl Division of $3,562.

(1) EBITDA represents earnings before interest, income taxes, depreciation and amortization of goodwill. (2) EBITDA for the years ending December 31, 1998 and 1997 excludes a non-recurring charge for write-down and losses on a joint venture investment of $3,613 and the gain on sale of the Vinyl Division of $3,562; respectively. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -------------------------------------------------------------------------------- OVERVIEW CTB had another good year in 2001. Despite lower revenues that resulted from adverse market conditions, the Company was able to continue making ongoing operational improvements, as evidenced by rising operating margins, and to increased earnings per share performance. CTB had a strong year in its International Segment, largely due to strength from its European operations and U.S. exports to Latin America. These positive factors were offset by sluggish market conditions in the U.S. for the Company's Protein Group and Grain Segments throughout much of the year. Other items of note in 2001 include: o Consolidation of the Anderson, Missouri, and Springdale, Arkansas, facilities in Anderson. o Settlement of various legal proceedings and claims in Alabama, which reduced earnings by approximately six cents per diluted share in the fourth quarter. RESULTS OF OPERATIONS The following table shows the percentage relationship to net sales of items derived from the Consolidated Statements of Income and the percentage change from year to year.

------------------------------- ---------------- ----------------- ---------------- ----------------------------------~~----~~ Percentage Increase (Decrease) 2001 2000 1999 ~~1998~~2001 ~~2000~~ vs. ~~1999~~2000 ~~1999~~2000 vs. ~~1998~~1999 ------------------------------- ---------------- ----------------- ---------------- ----------------- ---------------- Net sales 100.0% 100.0% 100.0% (510)% --(5)% Cost of sales 71.4 73.3 74.3 ~~77.7~~ (613) (46) Gross profit 28.6 26.7 25.7 ~~22.3~~(4) (1) 15 Selling, general and administrative expenses 16.6 15.8 15.5 ~~13.0~~(6) (4) 20 Amortization of goodwill 0.9 0.9 0.79 -- (5) 37 Operating income 11.1 10.0 9.3 ~~8.6~~(1) 3 7 Interest expense, net (1.0) (1.7) (2.3) (~~1.5~~47) (30) 49Other ~~Joint~~expense ~~venture loss -- --~~ (10.31) ~~(87) (97) Other~~ -- (0.8) ~~(0.1)~~539 (98) ~~463~~ Income before income taxes 10.0 8.3 6.2 5.7 27 11 Income taxes 3.9 3.3 2.5 ~~2.4~~5 27 10 Net income 6.1 5.0 3.7 ~~3.3~~9 27 11 ------------------------------- ---------------- ----------------- ---------------- ----------------- ----------------~~-----~~

2001 Compared to 2000 Net sales decreased 10.1% to $232.9 million in 2001 compared to $259.1 million in 2000. The decline in sales is attributed largely to the Grain Segment which was down 28.7 percent compared to last year, primarily as a result of a slowdown in commercial bin orders, lower levels of farm bin sales, and reductions in feed bin sales. Protein Group Segment sales declined 9.3 percent largely from poor conditions in the U.S. poultry market. The International Segment improved 8.8 percent due to strength from the Company's European operations, U.S. exports to Latin America, offset somewhat by weakness in Brazil and in U.S. exports to Europe. Sales of the Company's products to markets outside the U.S. and Canada were $89.9 million in 2001 compared to $82.8 million in 2000, an increase of $7.1 million or 8.6%. Gross profit decreased 3.7% to $66.6 million in 2001 or 28.6% of net sales compared to $69.2 million in 2000 or 26.7% of net sales. The gross profit margin increase of 1.9 percentage points resulted primarily from operational improvement and cost containment actions, including reductions in certain raw material costs, improved sales mix and reduced profit sharing and warranty costs of $1.1 million in 2000 that did not recur in 2001. Gross profit declined due to a decline in sales volume, offset somewhat by the improvement in the gross profit rate. Selling, general and administrative expenses decreased 5.6% or $2.3 million to $38.6 million in 2001 from $40.9 million in 2000. As a percent of net sales, selling, general and administrative expenses were 16.6% in 2001 and 15.8% in 2000. The dollar decrease is primarily attributable to decreased profit sharing resulting from higher performance targets in 2001 and reductions through restructuring and cost-savings efforts, offset somewhat by a $0.6 million charge to increase the allowance for doubtful accounts receivable and legal settlements of various proceedings and claims in Alabama, which resulted in a $1.1 million charge to earnings in 2001. Additionally, expense in 2000 was favorably impacted by a $0.9 million gain on the curtailment of postretirement medical benefits, offset somewhat by a $0.5 million restructuring charge. Selling, general and administrative expenses as a percent of sales increased slightly due to declining sales, largely offset by reduced costs. Amortization of goodwill remained the same at $2.3 million in 2001 and 2000. Operating income decreased 1.0% or $0.2 million to $25.8 million in 2001 compared to $26.0 million in 2000. Operating income margins increased to 11.1% of net sales in 2001 from 10.0% of net sales in 2000. The decrease in operating income was a result of lower sales volumes, largely offset by a higher gross profit margin rate and lower selling, general and administrative expenses. The increase in operating income margins is due primarily to the improvement in gross profit margins as discussed above. Interest expense decreased to $2.3 million in 2001 or 47.1% from $4.3 million in 2000. The decrease is primarily due to lower average borrowings and lower borrowing costs in 2001. Borrowing rates have declined as a result of lower market interest rates on variable rate debt and reductions in the Company's rate structure due to financial performance. Other expense includes foreign exchange and joint venture losses. Other expense increased by $0.2 million from 2000. The increase is due primarily to the 2001 impact of non-cash foreign exchange losses on U.S. dollar-denominated intercompany debt. This charge was a result of the continuing devaluation of the Brazilian and euro currencies versus the U.S. dollar. Net income increased 9.1% or $1.2 million to $14.2 million ($1.28 per weighted average diluted share) in 2001 from $13.0 million ($1.16 per weighted average diluted share) in 2000. The increase was attributable to improved operating income margins, lower interest expense and a lower effective tax rate, which was 39.0% for 2001 and 40.0% for 2000. Diluted weighted average common and common equivalent shares outstanding during 2001 were 11.1 million shares compared to 11.2 million shares in 2000, a decrease of 1.3%. The diluted shares outstanding at December 31, 2001 and December 31, 2000, were 11.1 million shares. 2000 Compared to 1999 Net sales decreased 4.9% to $259.1 million in 2000 compared to $272.6 million in 1999. The decline in sales is attributed to a combination of continued market softness and currency weakness in Western Europe in 2000, and to the completion of the poultry building sales in 1999, which contributed $5.8 million of revenue that year. Sales of the Company's products to markets outside the U.S. and Canada were $82.8 million in 2000, a decrease of $3.1 million or 3.6%. Gross profit decreased 1.2% to $69.2 million in 2000 or 26.7% of net sales compared to $70.1 million in 1999 or 25.7% of net sales. The gross profit margin increase of 1.0 percentage point was attributable to operational improvements as well as to the completion of the poultry building sales in 1999, which represented $5.8 million in building sales at essentially no margin, a restructuring charge of $0.6 million in 1999 and a one-time, non-cash purchase accounting charge of $0.4 million in 1999 related to the Roxell N.V. acquisition. These improvements were offset somewhat by a restructuring charge of $0.2 million in 2000, $1.6 million in unusual warranty charges for repairs expected to be made over the next three to five years related to two specific warranty programs initiated in 2000 and increased profit-sharing costs resulting from improved earnings. Selling, general and administrative expenses decreased 3.6% or $1.5 million to $40.9 million in 2000 from $42.4 million in 1999. As a percent of net sales, selling, general and administrative expenses were 15.8% in 2000 and 15.5% in 1999. The dollar decrease is primarily attributable to reductions through restructuring and cost savings efforts, a gain on the curtailment of postretirement medical benefits of $0.9 million, and a 1999 restructuring charge of $0.3 million offset somewhat by a restructuring charge of $0.5 million in 2000 and increased profit-sharing costs resulting from improved earnings. The slight increase in selling, general and administrative costs as a percent of sales was caused by lower sales volumes. Amortization of goodwill decreased to $2.3 million in 2000 or 5.7% from $2.5 million in 1999 primarily from changes in foreign exchange rates. Operating income increased 3.2% or $0.8 million to $26.0 million in 2000 compared to $25.2 million in 1999. Operating income margins increased to 10.0% of net sales in 2000 from 9.3% of net sales in 1999. The increase in operating income was a result of decreased selling, general and administrative expenses and amortization of goodwill offset somewhat by lower gross profit. The increase in operating income margins is due to the improved gross profit margins offset slightly by the increased selling, general and administrative expenses as a percent of sales as discussed above. Interest expense decreased to $4.3 million in 2000 or 29.9% from $6.2 million in 1999. The decrease is due primarily to lower average borrowings from repayment of debt and lower average all-in borrowing costs as financial measurements improved, resulting in lower borrowing rates on fixed rate debt. Other expense includes foreign exchange and joint venture losses. Other expense improved by $1.9 million from 1999. The improvement is due primarily to the 1999 impact of a non-cash foreign exchange loss from U.S. dollar-denominated intercompany debt. This charge was a result of the devaluation of the Brazilian currency versus the U.S. dollar. Net income increased 27.2% or $2.8 million to $13.0 million ($1.16 per weighted average diluted share) in 2000 from $10.2 million ($0.83 per weighted average diluted share) in 1999. The increase was attributable to improved operating income, lower interest expense and reduction of foreign currency losses as discussed above, net of related income tax effects. Diluted weighted average common and common equivalent shares outstanding during 2000 were 11.2 million shares compared to 12.3 million shares in 1999, a decrease of 8.5%. The diluted shares outstanding at December 31, 2000, were 11.1 million shares, a decrease of 0.8 million shares or 6.7% compared to 11.9 million diluted shares outstanding at December 31, 1999. The decrease in shares outstanding is attributable to the repurchase of 0.8 million shares of common stock during 2000. Financial Position Changes in the financial position of the Company from 2000 to 2001 were due primarily to operating activities. Total assets decreased from $195.4 million at December 31, 2000, to $178.3 million at December 31, 2001. Accounts receivable decreased by $5.4 million from December 31, 2000, to December 31, 2001, due to income tax refunds of $2.3 million, lower sales volumes and improved management of accounts receivable. Inventories at December 31, 2001, decreased $3.0 million due to lower sales volumes and improved management of inventory levels. Net property, plant and equipment decreased $4.0 million from December 31, 2000 to December 31, 2001. The net decrease was due primarily to depreciation and fluctuations in foreign exchange rates offset somewhat by capital outlays that were less than depreciation charges. Intangibles decreased by $4.3 million from December 31, 2000 to December 31, 2001, due primarily to amortization and foreign currency changes. Total liabilities decreased $29.5 million from $108.3 million at December 31, 2000, to $78.8 at December 31, 2001. Accounts payable and accrued liabilities decreased $4.4 million during this period; primarily from lower accounts payable and profit-sharing accruals. Deferred revenue increased $0.5 million to $2.9 million at December 31, 2001. Total debt decreased $25.3 million primarily due to cash provided by operating activities used to reduce debt, offset somewhat by borrowings to purchase property, plant and equipment and to fund the purchase of treasury stock. Total shareholders' equity increased $12.5 million due largely to net income for the period offset by treasury stock purchases and changes in foreign currency translation adjustment. Liquidity and Capital Resources As of December 31, 2001, the Company had $23.9 million of working capital, a decrease of $5.0 million from working capital of $28.9 million as of December 31, 2000. Net cash provided from operating activities in 2001 was $30.4 million. Cash flow from operations was provided by net income and working capital changes. Net cash provided by operating activities in 2000 was $23.0 million, driven primarily by net income and working capital changes. In 2001, cash used in investing activities was $4.8 million, which was used primarily for acquisition of property, plant and equipment. In 2000, cash used in investing activities was $4.9 million, which was used primarily for acquisition of property, plant and equipment. In 2001, net cash used in financing activities was $24.5 million. During 2001, there was a net $23.7 million repayment on revolver borrowings and $0.8 million use of cash for treasury stock purchases. Cash used in financing activities in 2000 was $17.9 million resulting from a net $12.5 million repayment on revolver borrowings and $5.5 million use of cash for treasury stock purchases. During 2001, the Company's Board of Directors approved an increase in its stock repurchase program by 500,000 shares, increasing the total authorization to 3,000,000 shares. As of December 31, 2001, the Company had repurchased 2,463,964 shares for approximately $18.7 million. A total of 87,899 shares were purchased in 2001 at a cost of approximately $0.8 million. During 2001, 2000 and 1999, stock option holders exercised options to purchase 62,560; 36,280 and 11,256 shares for $54,000; $30,000 and $9,000. A significant portion of the Company's liquidity is derived from operating cash flows, with net income adjusted for depreciation and amortization and improvements in working capital the primary drivers offset by acquisition of property, plant and equipment. The Company believes that risks to current liquidity are not significant given the Company's past track record of profitability, ability to manage operating expenses in periods of declining sales, improved utilization of working capital, annual investment in capital expenditures which typically run at or below annual depreciation expense and significant available borrowings under the Company's revolving credit facility. The revolving credit facility, as amended, provides the Company $135 million in borrowing capability. There is no mandatory principal amortization prior to maturity in January 2004; however, the Company remains subject to certain financial and business covenants customary for credit facilities of this type. Of the $135 million line of credit, approximately $116 million was available for use at December 31, 2001, with approximately $80 million of unused availability to satisfy capital and/or liquidity needs. Availability is defined as the lower of debt divided by EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) not to exceed a ratio of 3.25:1 or debt divided by total capitalization (debt plus shareholders' equity), not to exceed 60%. The Company's ability to borrow is related to the amount of EBITDA on a rolling four-quarter basis and/or total capitalization as calculated at each quarter end. Significant financial and business covenants of the revolving credit facility include, but are not limited to timely reporting of financial results to its syndicate lenders; maintenance of minimum net worth requirements; maintenance of a minimum interest coverage ratio (a measure of the Company's ability to make interest payments from cash generated by its operations); potential limits on acquisitions and/or divestitures; limits on increased indebtedness outside the revolving credit facility; and maintenance of appropriate corporate insurances, payments of tax obligations, compliance with environmental laws and other business covenants established for the prudent operation of the Company's business. Risks to the Company's ability to borrow funds can occur from things including, but not limited to, declines in EBITDA or total capitalization or a failure to meet financial or business covenants. The Company believes that existing cash, cash flows from operations and available borrowings will be sufficient to support its working capital, capital expenditures, debt service requirements and stock repurchases for the foreseeable future. The Company participates in the agricultural market where risks such as feed, grain and animal price fluctuations; crop yields; consumption trends; demand; market trends; weather; government regulations, policies and programs; social and political trends and outbreaks of disease can all impact the Company's financial situation. Additionally, the Company is subject to seasonal fluctuations in demand for its products. Sales of agricultural equipment are seasonal, with poultry, hog and egg producers purchasing equipment during prime construction periods in the spring, summer and fall, and farmers and commercial storage installations traditionally purchasing grain storage bins, handling and conditioning equipment in the late spring and summer in order for them to be constructed and ready for use in conjunction with the fall harvesting season. The Company's net sales and net income have historically been lower during the first and fourth fiscal quarters as compared to the second and third quarters when distributors and dealers increase purchases to meet the seasonal demands of end users. The Company's liquidity is not dependent on the use of off-balance-sheet financing arrangements. The Company uses off-balance-sheet financing primarily as a tool to provide customers with extended financing arrangements without adversely impacting the Company's working capital levels. Beginning in May 2001, the Company entered into certain transactions, with respect to a portion of its accounts receivable from international customers, with financing organizations. These transactions have been treated as sales pursuant to the provisions of SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." At December 31, 2001, the balance of accounts receivable funded with financing organizations was $2.1 million. Total accounts receivable sold since inception of the program have been $9.5 million. The maximum availability under this accounts receivable sales facility is $6.0 million. The Company is the collection agent on behalf of the financing organization for many of these arrangements and has no significant retained interests or servicing liabilities related to accounts receivable that it has sold. No other significant off-balance-sheet arrangements were entered into during 2001 or existed at December 31, 2001. The Company has not entered into arrangements with unconsolidated entities other than a 50-50 joint venture, under which the Company purchases products used in the manufacturing of some finished components. The Company is not obligated to continue its joint venture arrangement beyond 2002, and has the ability to purchase similar products from other third-party entities, if pricing and quality standards are more competitive than those provided by the joint venture. The Company participates in joint venture earnings and losses. The Company's portion of joint venture losses has been $61,000; $17,000 and $126,000 in 2001, 2000 and 1999, respectively. The Company made payments in 2001 of $1.4 million for the purchase of extruded plastic products from the joint venture. Other material arrangements with related parties are disclosed in Note 17 to the consolidated financial statements included in Item 8. The Company does not generally enter into lease agreements with arrangements that could trigger early payment, additional collateral, changes in terms, acceleration of maturities or additional financial obligations. No material guarantees of debt or other commitments to third parties exist, unless noted below. Total outstanding commitments at December 31, 2001 were as follows:

(in thousands) ----------------------- ---------------- ---------------- --------------- ---------------- ---------------- Less than 1 Total year 1-3 years 4-5 years After 5 years ----------------------- ~~YEARS~~---------------- ~~ENDED DECEMBER 31, 2000, 1999 and 1998 (in thousands, except per share amounts) 2000 1999 1998~~ ---------------- --------------- ---------------- ---------------- ----------------------- ---------------- ---------------- --------------- ---------------- ~~NET~~---------------- ~~SALES~~Long-term debt $~~259~~ 37,~~115~~829 $~~272,603~~ 670 $~~272~~ 35,~~180~~838 ~~COST~~$ OF121 ~~SALES~~$ ~~189~~1,~~894~~200 ~~202,534 211,496~~ ----------------------- ---------------- ---------------- ---- ----------- -------- -------- ---------------- ----------------------- ~~Gross profit 69,221 70,069 60,684 OTHER OPERATING EXPENSE: Selling, general and administrative expenses 40,795 42,331 35,315 Amortization of goodwill 2,388 2,513 1,837~~ ---------------- ---------------- --------------- ---------------- ---------------- Capital lease 282 190 92 -- -- obligations ------------------ ----- ---------------- ~~OPERATING INCOME 26,038 25,225 23,532 OTHER EXPENSE: Interest expense, net (4,349) (6,205) (4,153) Foreign exchange loss (22) (1,858) (330) Joint venture loss (17) (126) (3,673)~~ ---------------- --------------- ---------------- ---------------- ----------------------- ---------------- ---------------- --------------- ---------------- ~~INCOME~~---------------- ~~BEFORE~~Operating ~~INCOME~~leases ~~TAXES 21~~1,~~650~~787 ~~17,036~~653 ~~15,376~~847 ~~INCOME~~287 ~~TAXES~~-- ~~8,660 6,820 6,180~~ ----------------------- ---------------- ---------------- ---- ----------- -------- -------- ---------------- ----------------------- ~~NET INCOME $12,990 $10,216 $9,196~~ ---------------- ---------------- --------------- ------------ ---- ---------------- Unconditional 3,169 2,140 855 174 -- purchase obligations ---------------- ------- ---------------- ~~EARNINGS PER SHARE: Basic: Earnings per share $1.18 $0.85 $0.73 Weighted average shares 11,015 12,037 12,655~~ ---------------- --------------- ---------------- ---------------- ----------------------- ---------------- ---------------- --------------- ---------------- ~~Diluted:Earnings per share $1.16 $0.83 $0.71 Weighted average shares 11,227 12,273 12,999~~ ---------------- Total $ 43,067 $ 3,653 $ 37,632 $ 582 $ 1,200 ----------------------- ---------------- ---------------- --------------- ---------------- ----------------

The Company does not have any other significant long-term obligations, contractual obligations, lines of credit, standby letters of credit, guarantees, standby repurchase obligations or other commercial commitments. There are no commitments or guarantees that provide for the potential issuance of Company stock. Seasonality Sales of agricultural equipment are seasonal, with poultry, hog and egg producers purchasing equipment during prime construction periods in the spring, summer and fall, and farmers and commercial storage installations traditionally purchasing grain storage bins, handling and conditioning equipment in the late spring and summer in order for them to be constructed and ready for use in conjunction with the fall harvesting season. The Company's net sales and net income have historically been lower during the first and fourth fiscal quarters as compared to the second and third quarters when distributors and dealers increase purchases to meet the seasonal demands of end users. Impact of Inflation The Company attempts to minimize the impact of inflation through cost reductions and by improving productivity. In addition, the Company principally uses the last-in, first-out (LIFO) method of accounting for inventories (whereby the cost of products sold approximates current costs), which substantially includes the impact of inflation in cost of sales. The Company does not believe that inflation has had a material effect on its results of operations for the periods presented. Euro Conversion The Company has European-based operations that were required to transact business in the euro currency no later than January 1, 2002. System changes to accommodate euro transactions were completed before the required date. Implementation costs were not significant. New Accounting Pronouncements The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." These statements establish new accounting and reporting standards for business combinations and associated goodwill and intangible assets. They require, among other things, elimination of the pooling of interests method of accounting, no amortization of acquired goodwill, and a periodic assessment for impairment of all goodwill and intangible assets acquired in a business combination. SFAS No. 141 is effective for all business combinations accounted for by the purchase method that are completed after June 30, 2001. SFAS No. 142 will be effective for the Company's fiscal year beginning January 1, 2002. At December 31, 2001, the Company had recorded approximately $76.7 million of goodwill, net of accumulated amortization, on its consolidated balance sheet and the related goodwill amortization expense was approximately $2.3 million for the years ended December 31, 2001 and 2000 and $2.5 million for the year ended December 31, 1999. Although the effects of implementing the new accounting standard have not yet been finalized, the Company expects to record a one-time, non-cash, goodwill impairment charge currently estimated to be in the range of $6.0 to $8.0 million during the first quarter of 2002. This anticipated charge would reflect the cumulative effect of adopting the accounting change in the income statement, but does not affect the Company's operations and has no impact on cash flows. Under the new standard, goodwill will be subject to an annual assessment for impairment using a prescribed fair-value-based test. Additionally, since the Company will no longer amortize goodwill, the Company's pre-tax income, excluding any impairment charges, is expected to increase by approximately $2.3 million on an annual basis. On August 16, 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." The pronouncement addresses the recognition and remeasurement of obligations associated with the retirement of tangible long-lived assets. On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144, which supercedes SFAS No. 121 "Accounting for Long-lived Assets and for Long-Lived Assets to be Disposed Of" and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual, and Infrequently Occurring Events and Transactions," applies to long-lived assets (including discontinued operations) and it develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS No. 143 will be effective for the Company's fiscal year beginning January 1, 2003. SFAS No. 144 will be effective for the Company's fiscal year beginning January 1, 2002. The Company has evaluated SFAS No. 143 and SFAS No. 144 and determined that there will be no impact on the consolidated financial statements. Critical Accounting Policies The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. The Company believes its estimates and assumptions are reasonable; however, actual results and the timing of the recognition of such amounts could differ from those estimates. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumption conditions. The Company has identified the following critical accounting policies and estimates utilized by management in the preparation of the Company's financial statements: the allowance for doubtful accounts; excess, obsolete and slow-moving inventory reserves; goodwill impairment; income taxes; and warranty accruals. Allowance for doubtful accounts. Management specifically analyzes the aging of accounts receivable, historical bad debt experience, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts. At December 31, 2001 accounts receivable were $23.9 million, net of the allowance for doubtful accounts of $2.2 million. Excess, obsolete and slow-moving inventory reserves. Inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) method for domestic subsidiaries and the first-in, first-out (FIFO) and weighted average method for foreign subsidiaries. Reserves for excess, obsolete and slow-moving inventories are provided based on historical experience and current product demand. Management applies a specific methodology in determining inventory reserves based on historical usage and sales patterns, but also considers the physical condition of products and other specific circumstances in evaluating the reserve. These reserves are estimated and could vary, either favorably or unfavorably, from actual requirements if future results differ from historical usage and sales patterns. At December 31, 2001 inventories were $23.7 million, net of reserves of $1.7 million. Goodwill impairment. The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." These statements establish new accounting and reporting standards for business combinations and associated goodwill and intangible assets. They require, among other things, elimination of the pooling of interests method of accounting, no amortization of acquired goodwill, and a periodic assessment for impairment of all goodwill and intangible assets acquired in a business combination. SFAS No. 141 is effective for all business combinations accounted for by the purchase method that are completed after June 30, 2001. SFAS No. 142 will be effective for the Company's fiscal year beginning January 1, 2002. At December 31, 2001, the Company had recorded approximately $76.7 million of goodwill, net of accumulated amortization, on its consolidated balance sheet and the related goodwill amortization expense was approximately $2.3 million for the years ended December 31, 2001 and 2000 and $2.5 million for the year ended December 31, 1999. Although the effects of implementing the new accounting standard have not yet been finalized, the Company expects to record a one-time, non-cash, goodwill impairment charge currently estimated to be in the range of $6.0 to $8.0 million during the first quarter of 2002. This anticipated charge would reflect the cumulative effect of adopting the accounting change in the income statement, but does not affect the Company's operations and has no impact on cash flows. Under the new standard, goodwill will be subject to an annual assessment for impairment using a prescribed fair-value-based test. Additionally, since the Company will no longer amortize goodwill, the Company's pre-tax income, excluding any impairment charges, is expected to increase by approximately $2.3 million on an annual basis. Income taxes. As part of the process of preparing consolidated financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing book and tax treatments for certain accrued liabilities; inventory reserves; property, plant and equipment; goodwill and other assets and liabilities. These differences result in deferred tax assets and liabilities, which are included in the consolidated balance sheets. Significant judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and in evaluating any valuation allowances to be recorded against deferred tax assets. The Company has recorded a valuation allowance of $0.9 million as of December 31, 2001, due to uncertainties related to the Company's ability to utilize foreign tax credits, prior to their expiration. Warranty accruals. Depending on the product, the Company provides its customers with a one- to five-year warranty, from the date of purchase, or longer for certain components. Estimated warranty costs are accrued at the time revenue is recognized for potential product deficiencies. Management utilizes historical experience, considers new product introductions and other specific facts and circumstances when appropriate, in estimating future warranty exposures. The warranty accrual at December 31, 2001 was $3.0 million. The above listing is not intended to be a comprehensive list of all of the Company's accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management's judgment in their application. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result. See Note 1 to CTB's consolidated financial statements included under Item 8, which is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to market risk associated with adverse changes in interest rates and foreign currency exchange rates, but does not hold any market risk-sensitive instruments for trading purposes. The Company utilizes interest rate swap agreements to reduce its exposure to changes in borrowing rates. Principal exposed to interest rate risk at December 31, 2001, is $2.7 million in variable rate debt exclusive of $32.6 million of variable rate debt covered by interest rate swap agreements. The Company measures its interest rate risk by estimating the net amount by which potential future net earnings would be impacted by hypothetical changes in market interest rates related to all interest-rate-sensitive assets and liabilities. Assuming a hypothetical 20% increase in interest rates as of December 31, 2001, the estimated reduction in earnings, net of tax, is expected to be approximately $0.1 million. The Company periodically utilizes foreign exchange contracts to minimize its exposure to currency risk for the payment of its interest obligations on non-U.S.-dollar-denominated debt. Foreign currency payments are received periodically from its foreign subsidiaries to permit repayment of non-U.S.-dollar-denominated debt owed by the parent company. Upon receipt of cash from foreign subsidiaries, forward contracts are purchased as a hedge against exchange rate fluctuations that may occur between the date cash is received and the date the interest payment is made. The Company mitigates its foreign currency exchange rate risk principally by establishing local production facilities in the markets it serves and by invoicing customers in the same currency as the source of the products. The Company also monitors its foreign currency exposure in each country and implements strategies to respond to changing economic and political environments. The Company's exposure to foreign currency exchange rate risk relates primarily to U.S.-dollar-denominated intercompany loans. The Company's exposure related to such transactions is not material to cash flows. However, exposure related to such transactions to the Company's financial position and results of operations is anticipated to be adversely impacted by approximately $45,000, net of tax, for every 10% devaluation of the Brazilian real per U.S. dollar and up to $80,000 net of tax, for every 10% depreciation of the euro and its fixed legacy currencies. These amounts are estimates only and are difficult to accurately project due to factors such as the inherent fluctuation of intercompany account balances and the existing economic uncertainty and unpredictable future economic conditions in the international marketplace. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Directors of CTB International Corp.: We have audited the accompanying consolidated balance sheets of CTB International Corp. and its subsidiaries (the "Company") as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedules listed in the Index at Item 14. 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 in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Chicago, Illinois February 5, 2002

CONSOLIDATED STATEMENTS OF INCOME --------------------------------------------------------- ------------ ------------- -------------~~-----------------------~~ YEARS ENDED DECEMBER 31, 2001, 2000 and 1999 (in thousands, except ~~share and~~ per share amounts) 2001 2000 1999 --------------------------------------------------------- ------------~~----~~ -------------~~--------~~ -------------~~---------~~ ~~ASSETS~~NET ~~CURRENT~~SALES ~~ASSETS: Cash and cash equivalents~~ $ 2232,~~009~~869 $ 2259,~~439~~115 ~~Accounts receivable, less allowance for doubtful accounts of~~ $~~1,907~~ ~~and $1~~272,~~086~~603 ~~respectively~~COST ~~29,324~~OF ~~29,787~~SALES ~~Inventories 26~~166,~~706~~220 29189,~~695~~894 ~~Deferred income taxes 1~~202,~~372~~534 ~~900 Prepaid expenses and other current assets 2,957 2,811~~ --------------------------------------------------------- ------------~~----~~ -------------~~--------~~ -------------~~---------~~ ~~Total~~Gross ~~current~~profit ~~assets~~66,649 6269,~~368~~221 6570,~~632~~069 ~~PROPERTY~~OTHER OPERATING EXPENSE: Selling, ~~PLANT~~general ~~AND~~and ~~EQUIPMENT~~administrative -expenses ~~Net~~38,558 5040,~~399~~853 5542,~~515~~374 ~~INTANGIBLES~~Amortization -of ~~Net~~goodwill 812,~~848~~319 862,~~157~~330 ~~OTHER~~2,470 ~~ASSETS 742 258~~ --------------------------------------------------------- ------------~~----~~ -------------~~--------~~ -------------~~---------~~ ~~TOTAL~~OPERATING ~~ASSETS~~INCOME $25,772 ~~195~~26,~~357~~038 $25,225 ~~207~~OTHER EXPENSE: Interest expense,~~562~~ net (2,299) (4,349) (6,205) Foreign exchange loss (188) (22) (1,858) Joint venture loss (61) (17) (126) --------------------------------------------------------- ------------~~----~~ -------------~~--------~~ -------------~~---------~~ ~~LIABILITIES~~INCOME ~~AND~~BEFORE ~~SHAREHOLDERS'~~INCOME ~~EQUITY~~TAXES ~~CURRENT LIABILITIES: Accounts payable $ 10~~23,~~596~~224 ~~$ 13~~21,~~564~~650 ~~Current portion of long-term debt 669 795 Accrued Earn-Out -- 1~~17,~~809~~036 ~~Accrued~~INCOME ~~liabilities~~TAXES 199,~~753~~053 178,~~076~~660 ~~Deferred revenue 2~~6,~~489~~820 ~~2,618~~ --------------------------------------------------------- ------------~~----~~ -------------~~--------~~ -------------~~---------~~ ~~Total~~NET ~~current liabilities 33,507 35,862 LONG-TERM DEBT 62,505 77,060 DEFERRED~~ INCOME ~~TAXES 8,982 9,449 ACCRUED POSTRETIREMENT BENEFIT COST AND OTHER 3,350 4,437 COMMITMENTS AND CONTINGENCIES (See Note 9) -- -- SHAREHOLDERS' EQUITY: Common stock,~~ $~~0.01 par value; 40~~14,~~000,000~~171 ~~shares authorized;~~ $12,~~924,~~990 ~~shares issued 129 129 Preferred stock - 6.0% cumulative,~~ $~~0.01 par value; 4~~10,~~000,000~~216 ~~shares authorized; 0 shares issued and outstanding Additional paid~~-~~in capital 76,562 76,818 Treasury stock, at cost; 2000~~ - ~~2,031,530; 1999~~ - 1,257,113 shares; (14,420) (9,251) Reduction for carryover of predecessor cost basis (26,964) (26,964) Accumulated other comprehensive loss: Foreign currency translation adjustment (3,097) (1,791) Retained earnings 54,803 41,813 ------------------------------------------------------ ------------~~-------~~ -------------~~--------~~ -------------~~---------~~ ~~Total~~EARNINGS ~~shareholders'~~PER ~~equity~~SHARE: 87Basic: Earnings per share $1.30 $1.18 $0.85 Weighted average shares 10,~~013~~886 8011,~~754~~015 12,037 --------------------------------------------------------- ------------~~----~~ -------------~~--------~~ -------------~~---------~~ ~~TOTAL~~Diluted: ~~LIABILITIES~~Earnings ~~AND~~per ~~SHAREHOLDERS'~~share ~~EQUITY~~$1.28 $1.16 ~~195~~$0.83 Weighted average shares 11,~~357~~082 $11,227 ~~207~~12,~~562~~273 --------------------------------------------------------- ------------ ------------- -------------~~-----------------------~~

See notes to consolidated financial statements.

CONSOLIDATED BALANCE SHEETS ---------------------------------------------------------------------------- ------------------- ---------------------~~--------------~~ ~~Reduction~~YEARS ~~for~~ENDED ~~Accumulated~~DECEMBER ~~Additional~~31, ~~Carryover~~(in ofthousands, ~~Other~~except ~~Comprehenive~~share ~~Common~~and ~~Preferred~~per ~~Paid-In~~share ~~Treasury~~amounts) ~~Predecessor~~2001 ~~Comprehensive~~2000 ~~Retained Income Stock Stock Capital Stock Cost Basis Income Earnings Total~~ ------------------------- ---------- -------- -------- --------- ---------- ------ ------- ------------- ---------- ----------- ~~BALANCE,~~CURRENT ~~January~~ASSETS: 1,Cash ~~1998~~and ~~$129~~cash ~~$--~~equivalents $78 3,~~440~~242 $-- ~~($26~~2,~~871)~~009 ~~($553)~~Accounts ~~$22~~receivable,~~401~~ ~~$73,546~~less ~~TREASURY~~allowance ~~STOCK:~~for ~~Purchased~~doubtful (accounts of $82,~~484)~~235 (8and $1,~~484)~~907 ~~Stock~~respectively ~~Options Exercised (1~~23,~~275)~~945 129,~~415~~324 ~~140~~Inventories ~~Acquisitions (268) 1~~23,~~679~~743 126,~~411~~706 ~~REDUCTION~~Deferred ~~FOR~~income ~~CARRYOVER~~taxes ~~OF PREDECESSOR COST BASIS (93) (93) COMPREHENSIVE INCOME: NET INCOME $9~~1,~~196~~176 91,~~196~~372 ~~9,196~~Prepaid ~~FOREIGN~~expenses ~~CURRENCY~~and ~~TRANSLATION~~other ~~ADJUSTMENT~~current ~~1,109~~assets 1,~~109~~372 12,~~109~~957 ---------------------------------------------------------------------------- ~~COMPREHENSIVE~~------------------- ~~INCOME~~--------------------- ~~$10,305~~Total ~~==========~~current ~~BALANCE~~assets 53,478 ~~December~~62,368 31PROPERTY, ~~1998~~PLANT ~~$129~~AND $EQUIPMENT -- ~~$76,897~~Net ~~($5~~46,~~390)~~412 ~~($26~~50,~~964)~~399 ~~$556~~INTANGIBLES ~~$31~~- Net 77,~~597~~527 ~~$76~~81,~~825~~848 OTHER ASSETS 862 742 -------- -------- --------- ---------- ------------- ---------------------------- ------------------- --------------------- ~~TREASURY~~TOTAL ~~STOCK:~~ASSETS ~~Purchased (3~~$178,~~950)~~279 ($3195,~~950)~~357 ~~Stock~~---------------------------------------------------------------------------- ~~Options~~------------------- ~~Exercised~~--------------------- ~~(79)~~LIABILITIES 89AND 10SHAREHOLDERS' ~~COMPREHENSIVE~~EQUITY ~~INCOME~~CURRENT LIABILITIES: ~~NET~~Accounts ~~INCOME~~payable $109,~~216~~966 $10,~~216~~596 ~~10,216~~Current ~~FOREIGN~~portion ~~CURRENCY~~of ~~TRANSLATION~~long-term ~~ADJUSTMENT~~debt (2670 669 Accrued liabilities 15,~~347)~~985 (19,753 Deferred revenue 2,~~347)~~948 (2,~~347)~~489 ---------- ~~COMPREHENSIVE INCOME $7,869 ========== BALANCE, December 31, 1999 $129 $~~-- ~~$76,818 ($9,251) ($26,964) ($1,791) $41,813 $80,754~~ -------- -------- --------- ---------- ------------- ---------------- ------------------- --------------------- ~~TREASURY~~Total ~~STOCK:~~current ~~Purchased~~liabilities (529,~~455)~~569 (533,~~455)~~507 ~~Stock~~LONG-TERM ~~Options~~DEBT ~~Exercised~~37,159 ~~(256)~~62,505 ~~286~~DEFERRED ~~30 COMPREHENSIVE~~ INCOME: ~~NET~~TAXES ~~INCOME $12~~8,~~990~~782 128,~~990~~982 ~~12,990~~ACCRUED ~~FOREIGN~~POSTRETIREMENT ~~CURRENCY~~BENEFIT ~~TRANSLATION~~COSTS ~~ADJUSTMENT~~AND (1OTHER 3,~~306)~~281 (13,~~306)~~350 COMMITMENTS AND CONTINGENCIES (~~1,306~~See Note 8) -- --~~------~~ ~~COMPREHENSIVE~~SHAREHOLDERS' ~~INCOME~~EQUITY: ~~$11~~Common stock,~~684~~ ~~==========~~$0.01 ~~BALANCE~~par value; 40,000,000 ~~DECEMBER~~shares 31authorized; 12,924,990 ~~2000~~shares $issued 129 $129 Preferred stock -- 6.0% cumulative, $0.01 par value; 4,000,000 shares authorized; 0 shares issued and outstanding Additional paid-in capital 76,111 76,562 Treasury stock, at cost; 2001 - 2,056,869 shares; 2000 - 2,031,530 shares; ($14,706) (14,420) Reduction for carryover of predecessor cost basis ($26,964) ($26,964) Accumulated other comprehensive loss: Foreign currency translation adjustment (3,926) (3,097) $Derivative and hedging activities (130) - Retained earnings 68,974 54,803 $---------------------------------------------------------------------------- ------------------- --------------------- Total shareholders' equity 99,488 87,013 ~~========~~---------------------------------------------------------------------------- ~~========~~------------------- ~~=========~~--------------------- ~~==========~~TOTAL ~~=============~~LIABILITIES ~~=============~~AND ~~==========~~SHAREHOLDERS' ~~=========~~EQUITY $178,279 $195,357 ---------------------------------------------------------------------------- ------------------- ---------------------

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY --------------------------------------------------------- --------- --------- ----------- ---------- --------- ---------~~----~~ YEARS ENDED DECEMBER 31, ~~2000~~1999, ~~1999~~2000 and ~~1998~~2001 (in thousands) ~~2000~~------------------- ~~1999~~----------- ~~1998~~-------- --------- ---------- --------- ----------- ---------------------- --------- --------- Accumulated Other Comprehensive Income (Loss) ------------------- ----------- -------- --------- ---------- ~~CASH~~--------- ~~FLOWS~~----------- ~~FROM~~----------- ~~OPERATING~~---------- ~~ACTIVITIES:~~--------- ~~Net~~--------- ~~income~~Reduction $For ~~12,990~~Carryover ~~$10,216~~Foreign $Derivative ~~9,196~~Additional ~~Adjustments~~of toCurrency ~~reconcile~~And ~~net~~Comprehen- ~~income~~Common toPreferred ~~net~~Paid-In ~~cash~~Treasury ~~flows~~Predecessor ~~from~~Translation ~~operating~~Hedging ~~activities:~~Retained ~~Depreciation~~sive 7Income Stock Stock Capital Stock Cost Basis Adjustment Activities Earnings Total ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- BALANCE,~~865~~ 7$129 $-- $76,~~481~~897 ($5,~~739~~390) ~~Amortization~~($26,964) 2$556 $31,~~846~~597 2$76,~~961~~825 2January 1,~~443~~ ~~Foreign~~1999 ~~exchange~~------------------- ~~loss~~----------- 22-------- ~~1,858~~--------- ~~330~~---------- ~~Equity~~--------- in----------- ~~loss~~----------- ~~from~~---------- ~~joint~~--------- ~~venture~~--------- 17TREASURY ~~126~~STOCK: ~~3,673~~------------------- ~~(Gain)~~----------- ~~loss~~-------- on--------- ~~sale~~---------- of--------- ~~assets~~----------- ~~(241)~~----------- 10---------- ~~(232)~~--------- ~~Deferred~~--------- ~~income~~Purchased; ~~taxes~~579,750 Shares (~~854~~3,950) ~~763~~ (13,~~794~~950) ~~Changes~~------------------- in----------- ~~operating~~-------- ~~assets~~--------- ~~and~~---------- ~~liabilities~~--------- ~~(net~~----------- of----------- ~~effects~~---------- ~~from~~--------- ~~acquisitions~~--------- Stock Options (79): ~~Accounts~~89 ~~receivable~~10 ~~1,373~~Exercised; 11,~~732~~256 ~~(13,199)~~Shares ~~Construction~~------------------- ~~costs~~----------- in-------- ~~excess~~--------- of---------- ~~billings~~--------- ----------- ~~5,120~~----------- ~~(5,120)~~---------- ~~Inventories~~--------- 2--------- COMPREHENSIVE INCOME: ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- NET INCOME $10,~~527~~216 210,~~635~~216 (110,~~318)~~216 ~~Prepaid~~------------------- ~~expenses~~----------- ~~and~~-------- ~~other~~--------- ~~assets~~---------- ~~(1,350)~~--------- ~~305~~----------- ~~1,741~~----------- ~~Accounts~~---------- ~~payable,~~--------- ~~accruals~~--------- ~~and~~FOREIGN ~~other~~CURRENCY ~~liabilities~~TRANSLATION (2,~~175~~347) (62,~~101~~347) 1(2,~~346~~347) ADJUSTMENT ------------------- ----------- -------- --------- ---------- --------- ---- ------- -------- --- ---------- -- ------- --------- ~~Net~~COMPREHENSIVE ~~cash~~$7,869 ~~flows~~INCOME ~~from~~------------------- ~~operating~~----------- ~~activities~~-------- ~~23,020~~--------- ~~37,106~~---------- ~~2,805~~--------- ----------- ----------- ---------- --------- --------- ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ~~CASH~~---------- ~~FLOWS~~--------- ~~FROM~~--------- ~~INVESTING~~BALANCE, ~~ACTIVITIES:~~$129 ~~Acquisition~~$-- ~~of property~~$76,818 ~~plant and equipment~~ (4$9,~~252~~251) (6$26,~~759~~964) (7$1,~~004~~791) ~~Acquisitions~~$41,813 ~~net~~$80,754 ofDecember ~~cash acquired (1~~31,~~100)~~ ~~(33,884)~~1999 ~~(1,452)~~------------------- ~~Investment~~----------- in-------- ~~joint~~--------- ~~venture~~---------- --------- ----------- ~~(3,613)~~----------- ~~Proceeds~~---------- ~~from~~--------- ~~sale~~--------- of------------------- ~~assets~~----------- ~~478~~-------- ~~246~~--------- ~~504~~---------- --------- ----------- ----------- ---------- --------- --------- TREASURY STOCK: ------------------- ----------- -------- --------- ---------- --------- ----------- ~~Net~~----------- ~~cash~~---------- ~~flows~~--------- ~~from~~--------- ~~investing~~Purchased; ~~activities~~810,697 Shares (45,~~874~~455) (405,~~397~~455) ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- Stock Options (~~11,565~~256) 286 30 Exercised; 36,280 Shares ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- COMPREHENSIVE INCOME: ------------------- ~~CASH~~----------- ~~FLOWS~~-------- ~~FROM~~--------- ~~FINANCING~~---------- ~~ACTIVITIES:~~--------- ~~Purchase~~----------- of----------- ~~treasury~~---------- ~~stock~~--------- --------- NET INCOME $12,990 12,990 12,990 ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- FOREIGN CURRENCY TRANSLATION (51,~~455~~306) (31,~~950~~306) (81,~~484~~306) ~~Exercise~~ADJUSTMENT of------------------- ~~stock~~----------- ~~options~~-------- 30--------- 10---------- ~~140~~--------- ~~Proceeds~~----------- ~~from~~----------- ~~long~~-~~term~~--------- ~~debt~~--------- ~~283,692~~--------- ~~388,108~~COMPREHENSIVE 90$11,~~878~~684 ~~Payments~~INCOME on------------------- ~~long~~-~~term~~---------- ~~debt~~-------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- BALANCE, $129 $-- $76,562 (~~296~~$14,~~169~~420) (~~377~~$26,~~437~~964) (74$3,~~250~~097) $54,803 $87,013 December 31, 2000 ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- ------------------- ~~Net~~----------- ~~cash~~-------- ~~flows~~--------- ~~from~~---------- ~~financing~~--------- ~~activities~~----------- ~~(17,902)~~----------- ~~6,731~~---------- ~~8,284~~ --------- --------- TREASURY STOCK: ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- ~~NET~~Purchased; ~~INCREASE~~87,899 Shares (~~DECREASE~~791) IN(791) ~~CASH~~------------------- ~~AND~~----------- ~~CASH~~-------- ~~EQUIVALENTS~~--------- ~~244~~---------- ~~3,440~~--------- ~~(476)~~----------- ~~NET~~----------- ~~EFFECT~~---------- OF--------- ~~TRANSLATION~~--------- ~~ADJUSTMENT~~Stock ~~(674)~~Options (~~1,609~~451) ~~(77)~~505 ~~CASH~~54 ~~AND~~Exercised; ~~CASH EQUIVALENTS~~62,560 ~~BEGINNING~~Shares OF------------------- ~~PERIOD~~----------- ~~2,439~~-------- ~~608~~--------- ~~1,161~~---------- --------- ----------- ----------- ---------- --------- --------- COMPREHENSIVE INCOME: ------------------- ----------- -------- --------- ---------- --------- ----------- ~~CASH~~----------- ~~AND~~---------- ~~CASH~~--------- ~~EQUIVALENTS,~~--------- ~~END~~NET OFINCOME ~~PERIOD~~ $14,171 214,~~009~~171 ~~$ 2~~14,~~439~~171 $------------------- ~~608~~----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- CUMULATIVE 663 663 663 EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE ------------------- ----------- -------- --------- ---------- ~~Supplemental~~--------- ~~Disclosures~~----------- of----------- ~~Cash~~---------- ~~Flow~~--------- ~~information~~--------- ~~Non~~DERIVATIVE AND (793) (793) (793) HEDGING ACTIVITIES -~~cash~~------------------ ~~investing~~----------- ~~and~~-------- ~~financing~~--------- ~~activities:~~---------- In--------- ~~1999~~----------- ~~and~~----------- ~~1998~~---------- ~~the~~--------- ~~Company~~--------- ~~recorded~~FOREIGN ~~liabilities~~(829) ~~pursuant~~(829) to(829) ~~acquisition~~CURRENCY ~~agreements~~TRANSLATION ofADJUSTMENT ~~$49,000~~------------------- ~~and~~----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- --------- COMPREHENSIVE $~~564~~13,~~000,~~212 ~~respectively.~~INCOME ~~The~~------------------- ~~Company~~----------- ~~also~~-------- ~~issued~~--------- ~~common~~---------- ~~stock~~--------- ~~with~~----------- a----------- ~~fair~~---------- ~~value~~--------- of--------- BALANCE, $1129 $-- $76,~~411~~111 ($14,~~000~~706) ~~and~~($26,964) a($3,926) ~~note~~($130) ~~payable~~$68,974 of $199,~~012~~488 DECEMBER 31,~~000~~ in2001 ~~1998~~------------------- in----------- ~~connection~~-------- ~~with~~--------- ~~certain~~---------- ~~acquisitions.~~--------- ----------- ----------- ---------- --------- --------- ------------------- ----------- -------- --------- ---------- --------- ----------- ----------- ---------- --------- ---------

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------------------------- ---------------- --------------- --------------- YEARS ENDED DECEMBER 31, 2001, 2000 and 1999 (in thousands) 2001 2000 1999 ----------------------------------------------------------------- ---------------- --------------- ~~2000~~--------------- ~~1999~~CASH ~~1998~~FLOWS FROM OPERATING ACTIVITIES: Net income $ 14,171 $ 12,990 $10,216 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation 7,919 7,865 7,481 Amortization 2,748 2,846 2,961 Foreign exchange loss 188 22 1,858 Equity in loss from joint venture 61 17 126 (Gain) loss on sale of assets (106) (241) 10 Deferred income taxes 57 (854) 763 Changes in operating assets and liabilities (net of effects from acquisitions): Accounts receivable 4,796 1,373 11,732 Construction costs in excess of billings -- -- 5,120 Inventories 2,466 2,527 2,635 Prepaid expenses and other assets 1,387 (1,350) 305 Accounts payable, accruals and other liabilities (3,279) (2,175) (6,101) ----------------------------------------------------------------- ---------------- --------------- --------------- ~~Basic~~Net ~~weighted~~cash ~~average~~flows ~~shares~~from 11operating activities 30,~~015~~408 1223,~~037~~020 1237,~~655~~106 ~~Dilutive~~----------------------------------------------------------------- ~~effect~~---------------- --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property, plant and equipment (5,039) (4,252) (6,759) Acquisitions, net of cash acquired -- (1,100) (33,884) Proceeds from sale of assets 204 478 246 ----------------------------------------------------------------- ---------------- --------------- --------------- Net cash flows from investing activities (4,835) (4,874) (40,397) ----------------------------------------------------------------- ---------------- --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock (791) (5,455) (3,950) Exercise of stock options ~~212~~54 ~~236~~30 ~~344~~10 ~~Diluted~~Proceeds ~~weighted~~from ~~average~~long-term ~~shares~~debt 11191,~~227~~288 12283,~~273~~692 12388,~~999~~108 Payments on long-term debt (215,005) (296,169) (377,437) ----------------------------------------------------------------- ---------------- --------------- --------------- Net cash flows from financing activities (24,454) (17,902) 6,731 ----------------------------------------------------------------- ---------------- --------------- --------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 1,119 244 3,440 NET EFFECT OF FOREIGN EXCHANGE FLUCTUATIONS ON CASH 114 (674) (1,609) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,009 2,439 608 ----------------------------------------------------------------- ---------------- --------------- --------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,242 $ 2,009 $ 2,439 ----------------------------------------------------------------- ---------------- --------------- ---------------

Supplemental Disclosures of Cash Flow information Non-cash investing and financing activities: In 1999 the Company recorded liabilities pursuant to acquisition agreements of $49,000. See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Nature of Business - The Company is a designer, manufacturer and marketer of agricultural equipment for the poultry, hog and egg production markets and for the grain storage, handling and conditioning market. The Company markets its products on a worldwide basis primarily under the BROCK(R), CHORE-TIME(R), ENERGY MISER(R), FANCOM(R), SIBLEY(R), STACO(R), and ROXELL(R) names. Principles of Consolidation - The consolidated financial statements include the accounts of CTB International Corp. and its wholly-owned and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents - The Company considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. Inventories - Inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) method for domestic subsidiaries and the first-in, first-out (FIFO) and weighted average method for foreign subsidiaries. Property, Plant and Equipment - Property, plant and equipment is stated at cost. Depreciation is provided using accelerated and straight-line methods over the estimated useful lives of individual assets. The estimated useful lives for buildings and improvements range from 10 to 40 years, or the life of the lease if shorter, and from 3 to 10 years for machinery and equipment. Goodwill - Goodwill represents costs in excess of the fair value of net assets acquired and is amortized using the straight-line method over 40 years, except for Fancom Holding B.V. and its consolidated subsidiaries which is amortized over 25 years. The Company periodically assesses the recoverability of goodwill based on its expectations of future profitability and undiscounted cash flow of the related operations. These factors, along with management's plans with respect to the operations, are considered in assessing the recoverability of goodwill. If the Company determines, based on such measures, that the carrying amount is impaired, the goodwill will be written down to its recoverable value with a corresponding charge to earnings. During the periods presented no such impairment was incurred. Also see "New Accounting Pronouncements." Impairment of Long-Lived Assets - Management reviews long-lived assets and related intangible assets for impairment of value whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. If the Company determines it is unable to recover the carrying value of the assets, the assets will be written down using an appropriate method. Management does not believe current events or circumstances provide evidence that suggests asset values have been impaired during the periods presented. Deferred Finance Costs - Costs associated with the issuance of debt are being amortized over the life of the related debt. Amortization costs are included in interest expense. Income Taxes - The Company provides for income taxes under the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recorded based on the expected tax effects of future taxable income or deductions resulting from differences in the financial statement and tax bases of assets and liabilities. An allowance is provided whenever management believes it is more likely than not that tax benefits will not be utilized. Revenue Recognition of Deferred Revenue and Product Warranties - Sales of products and services are recorded based upon shipment of product and performance of services. Egg production system projects, which generally do not exceed one year, require predetermined payment intervals and, in some instances, customer prepayments. Such revenue is deferred and recognized at the date that the product is shipped or the service is performed. The Company recognizes revenue on construction contracts using the percentage-of-completion accounting method determined in each case by the ratio of cost incurred to date on the contract to management's estimate of the contract's total cost. Contract cost includes all direct material, subcontract and labor costs and those indirect costs related to contract performance. Provisions for estimated losses on incomplete contracts are recorded in the period in which such losses are determined. Changes in estimated revenues and costs are recognized in the periods in which such estimates are revised. The Company completed all such construction contracts in 1999. Depending on the product, the Company provides its customers with a one- to five-year warranty, from the date of purchase, or longer for certain components. Estimated warranty costs are accrued at the time of sale. Warranty expense for the years ended December 31, 2001, 2000 and 1999 was approximately $1,894,000; $3,531,000 and $1,627,000; respectively. Concentration of Credit Risk - Financial instruments which potentially subject the Company to concentration of credit risk consist principally of trade receivables. The Company's customers are not concentrated in any specific geographic region, but are concentrated in the agriculture industry. No single customer accounted for a significant amount of the Company's sales in 2001, 2000 or 1999, and there were no significant accounts receivable from a single customer at December 31, 2001, 2000 or 1999. The Company reviews a customer's credit history before extending credit. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. To reduce credit risk, the Company generally receives down payments on large orders. In order to minimize the risk of loss on export sales, the Company insures certain foreign trade receivables. Accounts Receivable Sales - In May 2001, the Company entered into certain transactions, with respect to a portion of its accounts receivable from international customers, with financing organizations in order to reduce the amount of working capital required to fund such receivables. These transactions have been treated as sales pursuant to the provisions of Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." At December 31, 2001, the balance of accounts receivable funded with financing organizations was $2.1 million. Total accounts receivable sold since inception of the program have been $9.5 million. The maximum availability under this accounts receivable sales facility is $6.0 million. Costs incurred in connection with these sales totaled $106,000 and were recorded as losses on the sale of assets that are included as a component of selling, general, and administrative expenses in the Consolidated Statement of Income. The Company is the collection agent on behalf of the financing organization for many of these arrangements and has no significant retained interests or servicing liabilities related to accounts receivable that it has sold. Research and Development - Research and development expenditures are charged to operations as incurred. Total research and development expenses for 2001, 2000 and 1999 were approximately $5,010,000; $4,681,000 and $5,579,000; respectively. Foreign Currency Translation - The Company has determined the local currency to be the functional currency of all foreign subsidiaries. Assets and liabilities of non-U.S. subsidiaries are translated at period end exchange rates, and related revenues and expenses are translated at average exchange rates in effect during the period. Resulting translation adjustments are recorded without tax effects as a component of shareholders' equity. Transaction gains and losses on intercompany receivables and payables that are due currently are recorded in earnings. Derivative and Hedging Activities - The Company adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" effective January 1, 2001. This statement established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The adoption of SFAS No. 133 did not have a material impact on results of operations but resulted in a pre-tax cumulative effect of an accounting change of $1,106,000 ($663,000 net of tax) being recognized as income in other comprehensive income representing the fair value of interest rate swaps. At December 31, 2001, the pre-tax impact on other comprehensive income was $217,000; resulting in other comprehensive loss, net of tax, of $130,000. Forward Exchange Contracts - The Company enters into foreign currency forward exchange contracts on a limited basis. Contracts entered into are for significant outstanding interest payment obligations and limited purchases of foreign inventory components in currencies other than U.S. dollars for which timing of the payment can be reasonably ascertained. The purpose of the Company's hedging activities is to both protect the Company from the risk that the periodic foreign currency flows (primarily dividends and debt service) from foreign subsidiaries will not match future foreign currency interest payments, and to limit the effect of foreign currency fluctuations on purchases of foreign components for eventual sale in the U.S. Forward contracts that are designated as hedges are marked to market with realized and unrealized gains and losses deferred and recognized in earnings and as an adjustment to the assets and liabilities being hedged. The Company's foreign exchange contracts do not subject the Company's results of operations to risk due to exchange rate movements because gains and losses on the contracts generally offset gains and losses on the assets and liabilities being hedged. No contracts were entered into during 2001. Approximately $0.9 million in contracts were entered into in 2000 while there were approximately $2.0 million in contracts entered into in 1999. There were no open contracts outstanding at December 31, 2001. The notional and fair values of contracts at December 31, 2000 and 1999, were $801,000 and $762,000; respectively. Interest Rate Swap Agreements - The Company enters into interest rate swaps in managing its interest rate risk and holds such instruments for purposes other than trading. In these swaps, the Company agrees with other parties to exchange, at specific intervals, the difference between fixed and floating interest amounts calculated on an agreed-upon notional principal amount. Because some of the Company's interest-bearing liabilities are floating rate obligations, interest rate swaps in which the Company pays the fixed rate and receives the floating rate are used to reduce the impact of market interest rate fluctuation on the Company's net income. The differential to be paid or received on interest rate swap agreements entered into to reduce the impact of changes in interest rates is recognized as an adjustment to interest expense related to the hedged liability over the life of the agreement. In the event of early extinguishment of a designated debt obligation, any realized or unrealized gain or loss from the swap would be recognized in interest income, coincident with the extinguishment. Earnings Per Common Share - Earnings per common share ("EPS") are computed by dividing net income by the weighted average number of shares of common stock (basic) plus common stock equivalents (diluted) outstanding during the year. Common stock equivalents consist of stock options and have been included in the calculation of weighted average shares outstanding using the treasury stock method. The basic weighted average common shares outstanding reconciles to diluted weighted average common shares outstanding as follows: (in thousands) ----------------------------------- --------------- -------------- ------------- 2001 2000 1999 ----------------------------------- --------------- -------------- ------------- Basic weighted average shares 10,886 11,015 12,037 Dilutive effect of stock options 196 212 236 ----------------------------------- --------------- -------------- ------------- ----------------------------------- --------------- -------------- ------------- Diluted weighted average shares 11,082 11,227 12,273 ----------------------------------- --------------- -------------- ------------- New Accounting Pronouncements - The Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." These statements establish new accounting and reporting standards for business combinations and associated goodwill and intangible assets. They require, among other things, elimination of the pooling of interests method of accounting, no amortization of acquired goodwill, and a periodic assessment for impairment of all goodwill and intangible assets acquired in a business combination. SFAS No. 141 is effective for all business combinations accounted for by the purchase method that are completed after June 30, 2001. SFAS No. 142 will be effective for the Company's fiscal year beginning January 1, 2002. At December 31, 2001, the Company had recorded approximately $76.7 million of goodwill, net of accumulated amortization, on its consolidated balance sheet and the related goodwill amortization expense was approximately $2.3 million for the years ended December 31, 2001 and 2000 and $2.5 million for the year ended December 31, 1999. Although the effects of implementing the new accounting standard have not yet been finalized, the Company expects to record a one-time, non-cash, goodwill impairment charge currently estimated to be in the range of $6.0 to $8.0 million during the first quarter of 2002. This anticipated charge would reflect the cumulative effect of adopting the accounting change in the income statement, but does not affect the Company's operations and has no impact on cash flows. Under the new standard, goodwill will be subject to an annual assessment for impairment using a prescribed fair-value-based test. Additionally, since the Company will no longer amortize goodwill, the Company's pre-tax income, excluding any impairment charges, is expected to increase by approximately $2.3 million on an annual basis. On August 16, 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." The pronouncement addresses the recognition and remeasurement of obligations associated with the retirement of tangible long-lived assets. On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144, which supercedes SFAS No. 121 "Accounting for Long-lived Assets and for Long-Lived Assets to be Disposed Of" and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual, and Infrequently Occurring Events and Transactions," applies to long-lived assets (including discontinued operations) and it develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS No. 143 will be effective for the Company's fiscal year beginning January 1, 2003. SFAS No. 144 will be effective for the Company's fiscal year beginning January 1, 2002. The Company has evaluated SFAS No. 143 and SFAS No. 144 and determined that there will be no impact on the consolidated financial statements. Reclassifications - Certain reclassifications have been made to conform prior years' financial statements with the current year presentation. 2. Business Combinations On January 12, 1999, the Company acquired substantially all of the assets of Roxell N.V. (Roxell). Based in Maldegem, Belgium, Roxell is a leading global manufacturer and marketer of automated feeding and watering systems as well as feed storage bins for the poultry and hog production markets. The purchase price of $33.9 million, net of cash acquired and including expenses, was financed through German mark-denominated borrowings under the Company's credit facility. The acquisition was accounted for under the purchase method of accounting. Accordingly, the purchase price has been allocated to the acquired assets and liabilities based on their fair market values as of the date of acquisition with the remainder charged to goodwill which is being amortized on a straight-line basis over 40 years. The purchase price has been allocated as follows: (in thousands) ------------------------------------------- ----------------- Current assets $ 10,508 Property, plant and equipment 7,175 Intangibles and other assets 27,849 Long-term debt assumed (740) Liabilities assumed (10,908) ------------------------------------------- ----------------- Total purchase price $ 33,884 ------------------------------------------- ----------------- The acquisition was accounted for as if Roxell was purchased as of January 1, 1999. The 1999 Consolidated Statement of Income would not have been materially different if the acquisition had been accounted for as of the January 12, 1999, date of purchase. On November 16, 2000, the Company purchased certain assets of ABC Industries. The assets purchased included inventory, certain manufacturing equipment and patents, and trademarks and trade names of ABC's product lines. The purchase price of $1.1 million was financed under the Company's credit facility and was allocated to inventory ($100,000); property, plant and equipment ($200,000) and intangibles ($800,000). 3. Inventories Inventories consist of the following: (in thousands) 2001 2000 --------------------------------------------- ---------------- --------------- Raw material $ 5,836 $ 6,808 Work in process 1,347 1,834 Finished goods 16,592 18,118 --------------------------------------------- ---------------- --------------- 23,775 26,760 LIFO valuation allowance (32) (54) --------------------------------------------- ---------------- --------------- Total $23,743 $26,706 --------------------------------------------- ---------------- --------------- Approximately 79% of the Company's inventories are stated on the LIFO basis at December 31, 2001, and 80% at December 31, 2000. 4. Property, Plant And Equipment Property, plant and equipment consist of the following: (in thousands) 2001 2000 --------------------------------------------- ---------------- --------------- Land and improvements $ 3,630 $ 3,556 Buildings and improvements 22,631 22,813 Machinery and equipment 55,833 51,510 Construction in progress 490 709 --------------------------------------------- ---------------- --------------- 82,584 78,588 Less accumulated depreciation (36,172) (28,189) --------------------------------------------- ---------------- --------------- Total $ 46,412 $ 50,399 --------------------------------------------- ---------------- --------------- 5. Intangibles Intangibles consist of the following: (in thousands) 2001 2000 --------------------------------------------- ---------------- --------------- Goodwill $ 87,572 $ 89,274 Accumulated amortization (10,918) (8,749) --------------------------------------------- ---------------- --------------- Goodwill - net 76,654 80,525 --------------------------------------------- ---------------- --------------- Deferred finance costs and other 3,621 3,621 Accumulated amortization (2,748) (2,298) --------------------------------------------- ---------------- --------------- Deferred finance costs and other - net 873 1,323 --------------------------------------------- ---------------- --------------- Total $ 77,527 $ 81,848 --------------------------------------------- ---------------- --------------- 6. Accrued Liabilities Accrued liabilities consist of the following: (in thousands) 2001 2000 --------------------------------------------- ---------------- --------------- Salaries, wages and benefits $ 6,849 $ 10,308 Warranty 2,980 3,434 Income taxes 760 303 Other 5,396 5,708 --------------------------------------------- ---------------- --------------- Total $ 15,985 $ 19,753 --------------------------------------------- ---------------- --------------- 7. Long-Term Debt Long-term debt consists of the following: (in thousands) 2001 2000 --------------------------------------------- ---------------- --------------- Revolving line of credit U.S. dollar $12,695 $31,750 Foreign currency (euro) 22,643 27,241 Term loans payable to bank 2,491 4,183 and other --------------------------------------------- ---------------- --------------- Total debt 37,829 63,174 Less current portion 670 669 --------------------------------------------- ---------------- --------------- Total $37,159 $62,505 --------------------------------------------- ---------------- --------------- In conjunction with the 1999 closing of the Roxell acquisition, the Company entered into an amendment to its existing credit agreement. The revolving credit facility, as amended, provides the Company $135,000,000 in borrowing capability. There is no mandatory principal amortization prior to maturity in 2004; however, the Company remains subject to certain financial and business covenants customary for credit facilities of this type. The revolving credit facility allows for borrowings in certain foreign currencies up to the U.S. dollar equivalent of $50,000,000. Borrowings in U.S. dollars or other currencies under the amended agreement bear interest at rates ranging from 0.55% to 1.225% over the applicable currency rate (LIBOR, EURIBOR, etc.) depending upon certain financial ratios. At December 31, 2001, the rates on the revolving credit facility ranged from 2.375% to 5.09%. At December 31, 2001, the Company had approximately $80,446,000 of availability under the revolving credit facility. Under the credit agreement, CTB, Inc., a wholly-owned subsidiary of the Company, is required to maintain a minimum net worth, which increases quarterly by an amount equal to 50.0% of the quarterly earnings of CTB, Inc. This covenant limits the dividends CTB, Inc. can pay to the Company and, therefore, the dividends the Company can pay to its shareholders. The Company was in compliance with all debt covenants at December 31, 2001. Term loans bear interest at rates ranging from 4.40% to 6.70% and certain amounts are collateralized by named assets of Fancom B.V. and Agile Manufacturing. Interest paid was approximately $2,629,000; $4,407,000 and $5,735,000 in 2001, 2000 and 1999, respectively. In conjunction with the debt agreements, the Company maintains various interest rate swap agreements which effectively converted the equivalent of $32,643,000 and $42,241,000 of the revolver debt at December 31, 2001, and 2000 into approximately 4.56% and 4.79% fixed rate debt on a weighted average basis. The swaps have variable maturity dates, the latest expiring January 12, 2004. The weighted average interest on credit facility debt outstanding at December 31, 2001, and 2000, after considering the effect of interest rate swaps, was 4.39% and 5.51%, respectively. The carrying value of debt approximates fair value because the floating interest rates reflect market rates. The fair value of interest rate swaps was ($217,000); $1,106,000 and $1,192,000 at December 31, 2001, 2000 and 1999, respectively. Foreign currency debt has been incurred to finance a foreign acquisition and provides a natural hedge of debt service with the commensurate cash flows of the acquired entity. The use of foreign currency debt to finance a foreign acquisition may result in certain foreign exchange fluctuations that are accounted for as foreign currency translation adjustments in shareholders' equity. The aggregate maturities of long-term debt at December 31, 2001, are as follows: (in thousands) ----------------- ---------------- --------------- ---------------- Term Loans Revolver Total 2002 $ 670 $ -- $ 670 2003 256 -- 256 2004 127 35,339 35,466 2005 116 -- 116 2006 121 -- 121 Thereafter 1,200 -- 1,200 ----------------- ---------------- --------------- ---------------- Total $ 2,490 $35,339 $37,829 ----------------- ---------------- --------------- ---------------- 8. Commitments And Contingencies There are various claims and pending legal proceedings against the Company involving matters arising out of the ordinary conduct of business. While the Company is unable to predict with certainty the outcome of any of the current proceedings, based upon the facts currently known to it, the Company does not believe that resolution of any such proceeding will have a material adverse effect on its financial position or results of operations. In the fourth quarter of 2001, the Company settled various legal proceedings and claims in Alabama, which resulted in an approximately $1.1 million charge to earnings, or six cents per diluted share. There were approximately 54 separate actions and claims, in various venues in Alabama that were settled. While the Company believes that it had meritorious defenses to these actions and claims, and did not admit liability or wrongdoing in any of the settlements, the Company decided to settle these matters in order to limit the ongoing litigation expenses and investment of time and effort, as well as any potential liability in each such matter. The Company has a Management Incentive Compensation Plan whereby certain employees are eligible for annual bonuses based upon achievement of certain financial goals, including diluted earnings per share and business unit operating targets. The Company has contracts that commit it to purchase fixed quantities of certain raw materials and semi-finished products. The contracts, which are generally of one year or less in duration, require the Company to purchase approximately $3.2 million at December 31, 2001. The Company leases certain property and equipment including some plant facilities, property, warehouses, vehicles and manufacturing equipment, under operating leases which generally expire over the next five years. Some of these operating leases provide the Company with the option to purchase the property or renew the lease, generally at current market rates. Management expects that leases will be renewed or replaced by other leases in the normal course of business. Minimum payments for operating leases having non-cancelable terms in excess of one year are as follows: (in thousands) --------------------------------------- ---------------- 2002 $ 653 2003 487 2004 360 2005 217 2006 70 Thereafter -- --------------------------------------- ---------------- Total minimum lease payments $1,787 --------------------------------------- ---------------- Rent expense under operating leases amounted to $745,000; $1,005,000 and $643,000 in 2001, 2000 and 1999, respectively. 9. Profit Sharing The Company has a qualified defined contribution profit sharing retirement plan that covers substantially all employees who are not participants in certain defined benefit plans. The plan provides that Company contributions be made in amounts as determined by the Company's Board of Directors. Contributions are allocated to participants on the basis of proportionate compensation at the close of each fiscal year. Benefits to participants are limited to funds in their individual accounts, which may also be held in Company stock. The Company recorded expenses related to the plan and predecessor plans of approximately $1,178,000; $1,992,000 and $988,000 in 2001, 2000 and 1999, respectively. The profit sharing plan and predecessor plans, plus an additional plan at one U.S. subsidiary, have 401(k) provisions which allow participants to contribute a percentage of their pre-tax compensation to the plans within Internal Revenue Code limits. Upon authorization of the Board of Directors, the Company may make matching contributions to these plans. Matching contributions made by the Company to these plans approximated $593,000; $434,000 and $472,000 in 2001, 2000 and 1999, respectively. 10. Pension Plans The Company has a defined benefit pension plan covering certain employees at a specified domestic business unit. The benefits for this plan are based on years of service and stated amounts for each year of service. Additionally, the Company has foreign pension obligations related to mandatory pension plans, which are multi-employer plans as defined in SFAS No. 87, "Employers' Accounting for Pensions." The benefits for foreign pension plans are based on years of service and compensation levels for the covered employees. Net pension expense for these domestic and foreign plans includes the following components: (in thousands) 2001 2000 ------------------------------------------- ------------------- ---------------- Service cost $ 183 $ 211 Interest cost 169 167 Expected return on assets (41) (51) Net amortization and deferral 48 76 ------------------------------------------- ------------------- ---------------- Net periodic pension cost $ 359 $ 403 ------------------------------------------- ------------------- ---------------- Summary information of the Company's plans is as follows: (in thousands) 2001 2000 -------------------------------------------- ----------------- ----------------- Change in benefit obligation: Benefit obligation at beginning of year $2,753 $ 2,986 Service cost 183 211 Interest cost 169 167 Benefits paid (82) (398) Actuarial loss (gain) 257 (84) Exchange rate changes (93) (129) -------------------------------------------- ----------------- ----------------- Benefit obligation at end of year 3,187 2,753 -------------------------------------------- ----------------- ----------------- Change in plan assets: Fair value of plan assets at beginning of year 903 1,046 Contributions 308 276 Benefits paid (82) (398) Actual return on plan assets 99 42 Exchange rate changes (38) (63) -------------------------------------------- ----------------- ----------------- Fair value of plan assets at end of year 1,190 903 -------------------------------------------- ----------------- ----------------- Funded status (1,997) (1,850) Unrecognized net actuarial loss 278 8 Unrecognized prior service cost 759 817 -------------------------------------------- ----------------- ----------------- Accrued benefit cost $ (960) $(1,025) -------------------------------------------- ----------------- ----------------- The projected benefit obligation for the domestic plan was determined using a weighted average discount rate of 7.0% in 2001 and 7.5% in 2000 and 1999. The benefit multiplier was increased $1.00 per year until the participant's normal retirement date. The expected rate of return on plan assets was 9.0%. The projected benefit obligation for the foreign plans was determined using weighted average discount rates of 4.75% and 5.5% and an expected rate of return on plan assets of 5.5%. The Company's policy for funded plans is to make contributions equal to or greater than the requirements prescribed by the Employee Retirement Income Security Act (ERISA) or the respective foreign government law. 11. Postretirement Health Care Benefit Plans The Company provides medical and dental benefit programs for retired employees and certain employees near retirement. In December 2000, the Company approved amendments to medical and dental benefits programs for retired employees. The amendments limit eligibility to retirees currently eligible for the benefits and current employees that meet certain eligibility requirements. Amendments to the plan limiting eligibility have been reflected as a curtailment and the Company recorded a curtailment gain of $909,000 as a reduction of selling, general and administrative expenses in 2000. Additionally, changes to a union retiree medical plan, including changes in retiree contribution rates and the provider of plan benefits, resulted in a plan amendment of $1.1 million in 2001, that will be amortized as a charge to cost of sales over the expected service of current employees. The Company's postretirement plans are unfunded and use the minimum amortization method for recognizing gains and losses for postretirement benefits as prescribed by SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Summary information of the Company's plan is as follows: (in thousands) 2001 2000 ------------------------------------------ ------------------ ------------------ Change in benefit obligation: Benefit obligation at beginning of year $ 1,798 $ 2,679 Service cost 21 241 Interest cost 125 195 Plan participants' contributions 160 140 Actuarial gain (55) (163) Plan amendment 1,145 -- Curtailment gain -- (909) Benefits paid (247) (385) ------------------------------------------ ------------------ ------------------ Benefit obligation at end of year 2,947 1,798 ------------------------------------------ ------------------ ------------------ Fair value of plan assets at end of year -- -- ------------------------------------------ ------------------ ------------------ Funded status (2,947) (1,798) Unrecognized net actuarial gain (180) (186) Unrecognized prior service cost 1,283 151 Unrecognized gain (55) -- ------------------------------------------ ------------------ ------------------ Accrued benefit cost $ (1,899) $ (1,833) ------------------------------------------ ------------------ ------------------ The accumulated postretirement benefit obligation was determined using relevant actuarial assumptions and the timing of the Company's medical and dental plans. The effect of a 1.0% annual increase in the assumed medical inflation rate on the accumulated postretirement benefit obligation and the related expense would be insignificant. Measurement of the accumulated postretirement obligation was based on a 7.25% discount rate at December 31, 2001 and 2000, and 7.5% at December 31, 1999. In In 2001 medical trend rates were assumed at 10.5% declining evenly to 6.0%, while in 2000, medical trend rates were assumed at 11.0% trending down to 6.0% and in 1999, medical trend rates were assumed at 12.0% (under age 65) and 8.0% (over age 65) trending down to 6.0%. The Company funds medical and dental costs as incurred. The components of net periodic postretirement benefit expense are as follows: (in thousands) 2001 2000 1999 ---------------------------------- -------------- --------------- -------------- Service cost $ 21 $ 241 $ 221 Interest cost 125 195 167 Net amortization and deferral 12 20 7 Curtailment gain -- (909) -- ---------------------------------- -------------- --------------- -------------- Total $ 158 $ (453) $ 395 ---------------------------------- -------------- --------------- -------------- 12. Shareholders' Equity The Company was purchased in a leveraged buyout transaction in 1996. The buyout was accounted for using the purchase method of accounting to the extent of the 67.9% change in ownership with the remaining 32.1% valued at historical book value. To the extent of the change in ownership, the purchase price was allocated to assets and liabilities based on their fair values. The Company has recorded an adjustment ("reduction for carryover of predecessor cost basis") to reduce the former shareholders' investment in the Company to the historical cost basis of their investment. 13. Stock Option Plans Executives and other key employees have been granted options to purchase common shares of the Company. In each case, the option price equals or exceeds the fair market value of the common shares on the day of the grant. An option's maximum term is ten years. Options granted vest (i) in seven years or over an accelerated period of five to six years should certain annual or cumulative earnings targets be met, or (ii) over an elapsed time of three to six years from the grant date. In accordance with the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company has elected to apply the accounting prescribed by Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock option plan. If the Company had elected to recognize compensation cost based on the fair value of the options granted at grant date as prescribed by SFAS No. 123, net income and earnings per share for the years ended December 31, 2001, 2000 and 1999 would have been reduced to the pro forma amounts indicated in the table below: (in thousands, except per share amounts) 2001 2000 1999 ------------------------------- -------------- --------------- ----------------- Net income: As reported $ 14,171 $ 12,990 $ 10,216 Pro forma 13,742 12,508 9,738 Net income per share - basic: As reported $ 1.30 $ 1.18 $ 0.85 Pro forma 1.26 1.14 0.81 Net income per share - diluted: As reported $ 1.28 $ 1.16 $ 0.83 Pro forma 1.24 1.11 0.79 ------------------------------- -------------- --------------- ----------------- The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2001 2000 1999 ----------------------------- ---------------- ----------------- --------------- Volatility 40% 40% 35% Expected dividend yield 0% 0% 0% Risk-free interest rate 4.22-4.74% 4.98-6.22% 4.95-4.98% Expected life of options 6 years 6 years 5 years ----------------------------- ---------------- ----------------- --------------- The weighted average fair value of options granted during 2001, 2000 and 1999 was $5.16, $3.66 and $2.12, per share, respectively. Changes in shares under option are summarized below:

~~(in~~2001 ~~thousands)~~ 2000 1999 ------------------------------ --------------~~----------------~~ -------------~~-----~~ -------------~~------~~ ~~Service cost $ 211 $ 203 Interest cost 167 162 Expected return on assets (51) (53) Net amortization and deferral 76 77~~ -------------~~-----------------------------------------------~~ --------------~~----~~ ------------~~-------~~ ~~Net~~Weighted ~~periodic~~Weighted ~~pension~~Weighted ~~cost~~Average $Average ~~403~~Average $Number ~~389~~of ~~---------------------------------------------------------------------------------------------------~~Exercise ~~Summary~~Number ~~information~~ of ~~the~~Exercise ~~Company's~~Number ~~plans~~of ~~are~~Exercise asShares ~~follows:~~Price ~~(in~~Shares ~~thousands)~~Price ~~2000~~Shares ~~1999~~Price ------------------------------ -------------- ------------- --- ---------- ------------- -------------- ------------ ~~Change~~Outstanding ~~in benefit obligation: Benefit obligation at~~ beginning of1,081,824 ~~year~~ $ 28.19 1,~~986~~153,640 $ 17.77 928,~~548~~758 ~~Acquisition~~$ 6.90 of ~~Roxell~~year --Granted 140,~~221~~000 ~~Service~~9.66 ~~cost~~57,000 ~~211~~7.51 ~~203~~300,000 ~~Interest~~9.17 ~~cost~~Exercised ~~167~~(62,560) ~~162~~0.83 ~~Benefits~~(36,280) ~~paid~~0.83 (~~398~~11,256) --0.83 ~~Actuarial~~Forfeited ~~loss~~ (8454,093) 13.51 (7792,536) ~~Exchange~~5.33 ~~rate changes~~ (~~129~~63,862) ~~(71)~~2.89 ------------------------------ --------------~~----------------~~ -------------~~-----~~ -------------~~------~~ ~~Benefit obligation at end of year 2,753 2,986~~ -------------~~-----------------------------------------------~~ --------------~~----~~ ------------~~-------~~ ~~Change~~Outstanding inend ~~plan assets: Fair value~~ of ~~plan~~1,005,171 ~~assets~~$ at8.42 ~~beginning~~1,081,824 of$ ~~year~~8.19 1,~~046~~153,640 83$ ~~Acquisition~~7.77 ofyear ~~Roxell~~ -- ~~790 Contributions 276 122 Benefits paid (398)~~ -- ~~Actual return on plan assets 42 51 Exchange rate changes (63)~~ -- ------------------------ --------------~~----------------------~~ -------------~~-----~~ -------------~~------~~ ~~Fair value of plan assets at end of year 903 1,046~~ -------------~~-----------------------------------------------~~ --------------~~----~~ ------------~~-------~~ ~~Funded~~Exercisable ~~status~~end ~~(1,850)~~of (1Year 407,~~940)~~100 ~~Unrecognized~~$ ~~net~~7.02 ~~actuarial~~328,195 ~~(gain)~~$ ~~loss~~2.93 8269,356 ~~(26)~~$ ~~Unrecognized~~2.52 ~~prior service cost 817 1,047~~ ------------------------------ -------------- -------------~~---~~ -------------~~-----~~ -------------~~------~~ ~~Accrued benefit cost $(1,025) $ (919)~~ -------------- ------------~~-------------------------------------------------------------------------~~

Options outstanding and exercisable at December 31, 2001, are summarized below:

~~(in~~--------------------- ~~thousands) 2000 1999~~ --------------------------------------------------------- ------------------ -------------------- ~~Change~~Options inOutstanding ~~benefit~~Options ~~obligation:~~Exercisable ~~Benefit~~Remaining ~~obligation~~Number atContractual ~~beginning~~Life ofWeighted ~~year~~Avg. $Number ~~2,679~~Exercisable $Weighted ~~2,561~~Avg. ~~Service~~Exercise ~~cost~~Prices ~~241~~Outstanding ~~221~~in ~~Interest~~years ~~cost~~Exercise ~~195~~Price ~~167~~Exercise ~~Plan~~Price ~~participants'~~$0.83 ~~contributions~~264,472 ~~140~~4.0 ~~108~~$0.83 ~~Actuarial~~199,168 ~~(gain)~~$0.83 ~~loss~~$6.38-$7.97 ~~(163)~~242,000 697.4 ~~Curtailment~~$6.83 ~~gain~~5,000 ~~(909)~~$6.38 $9.05--$10.00 ~~Benefits~~40,000 ~~paid~~9.8 ~~(385)~~$9.66 ~~(447)~~ --~~----------------------------------------------~~ --~~----------------~~ $10.92-~~-----------------~~$14.25 ~~Benefit~~458,699 ~~obligation~~6.2 at$13.54 ~~end of year 1~~202,~~798~~932 ~~2,679~~$13.21 ---------------------~~---------------------------~~ ------------------ ------------------ ~~Fair value of plan assets at end of year~~ -- -- ---------------- -------------------~~-------------~~ ------------------ ~~------------------~~Total ~~Funded status (~~1,~~798)~~005,171 (2407,~~679)~~100 ~~Unrecognized net actuarial gain (186) (177) Unrecognized prior service cost 151 331~~ --------------------- ------------------~~---------~~ ------------------- ------------------ ~~Accrued benefit cost $ (1,833) $ (2,525)~~ ------------------- ------------------~~-------------------------------------------------~~

14. Income Taxes The elements of the provision for income taxes are as follows:

(in thousands) 2001 2000 1999 ~~1998~~ --------------------------------------------------------- ----------------- ------------------ ------------------ ~~Service~~Current: ~~cost~~U.S. federal $ ~~241~~4,873 $ ~~221~~7,627 $ ~~154~~3,078 ~~Interest~~State ~~cost~~613 ~~195~~1,224 ~~167~~680 ~~118~~Foreign ~~Net~~3,510 ~~amortization~~663 ~~and~~2,299 ~~deferral~~--------------------------------------------------------- 20----------------- 7------------------ ------------------ Total current 8,996 9,514 6,057 --------------------------------------------------------- ----------------- ------------------ ------------------ Deferred: U.S. federal 123 (22395) ~~Curtailment~~1,266 ~~gain~~State 17 (~~909~~56) 181 Foreign (83) (403) (684) -- -- ----------------------------------------------------- ----------------- ------------------- ------------------ Total $deferred 57 (~~453~~854) 763 --------------------------------------------------------- ----------------- ------------------ ------------------ Provision for income taxes $ ~~395~~9,053 $ ~~250~~8,660 $ 6,820 --------------------------------------------------------- ----------------- ------------------ ------------------

Income taxes paid were approximately $8,422,000; $11,339,000; and $8,829,000 in 2001, 2000 and 1999, respectively. At December 31, 2000, the Company had recorded in accounts receivable both income tax overpayments and refund claims of $2,324,000. A reconciliation of the net effective tax for consolidated operations to the U.S. statutory federal income tax rate, at 35%, is as follows:

(in thousands~~, except per share amounts~~) 2001 2000 1999 ~~1998~~ --------------------------------------------------------- ----------------- ------------------ ------------------ ~~Net~~U.S. ~~income:~~tax Asat ~~reported~~federal statutory rate $ 128,~~990~~128 $ 107,~~216~~578 $ 95,~~196~~963 ~~Pro~~Increase ~~forma~~(decrease) ~~12,508~~in ~~9,738~~tax ~~8,964~~resulting ~~Net~~from: State income ~~per~~taxes, ~~share~~net -of ~~basic:~~U.S. Astax ~~reported~~benefit $410 ~~1.18~~759 $559 ~~0.85~~FSC $benefit ~~0.73~~(200) ~~Pro~~(228) ~~forma~~(240) ~~1.14~~Non-deductible ~~0.81~~goodwill ~~0.71~~384 ~~Net~~384 ~~income~~389 ~~per~~Other, ~~share~~net 331 167 149 --------------------------------------------------------- ~~diluted:~~----------------- As------------------ ~~reported~~------------------ $Provision ~~1.16~~for $income ~~0.83~~taxes $ ~~0.71~~9,053 ~~Pro~~$ ~~forma~~8,660 ~~1.11~~$ ~~0.79~~6,820 ~~0.69~~ --------------------------------------------------------- ----------------- ------------------ ------------------

Deferred tax assets and liabilities are as follows:

(in thousands) 2001 2000 ~~1999~~---------------------------------------------------------------- ~~1998~~---------------------- ---------------------- Deferred tax assets (liabilities) - current: Accrued liabilities $ 1,642 $ 1,926 Inventories (1,296) (1,225) Allowance for doubtful accounts receivable 830 671 ---------------------------------------------------------------- ---------------------- ---------------------- Total current 1,176 1,372 ---------------------------------------------------------------- ~~Volatility~~---------------------- ~~40%~~---------------------- ~~35%~~Deferred 30tax assets (liabilities) -~~35%~~ ~~Expected~~non-current: ~~dividend~~Property, ~~yield~~plant 0%and 0%equipment 0%(9,204) ~~Risk~~(9,530) Goodwill (1,267) (985) Accrued postretirement benefit costs 1,469 1,406 Foreign tax credit carryforward 1,167 1,187 Other (22) (135) Valuation allowance -~~free~~ ~~interest~~foreign ~~rate~~tax ~~4.98~~credit (925) (925) -~~6.22%~~--------------------------------------------------------------- ~~4.95~~-~~4.98%~~--------------------- ~~4.31~~-~~5.73%~~--------------------- ~~Expected~~Total ~~life~~non-current of(8,782) ~~options~~(8,982) 6---------------------------------------------------------------- ~~years~~---------------------- 5---------------------- ~~years~~Total 6deferred ~~years~~income tax $(7,606) $(7,610) ---------------------------------------------------------------- ---------------------- ----------------------

The foreign tax credit carryforward expires at December 31, 2004. 15. Segments Effective January 1, 2000, the Company's organizational structure and internal financial reporting were reorganized primarily on the basis of business units generally determined by geographic location and type of agricultural market served. The Company believes certain operating segments have similar economic characteristics that meet the aggregation criteria of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." Accordingly, beginning in 2000 the Company is reporting three operating segments. Based on the organizational and reporting structure that existed in 1999 and following the aggregation criteria of SFAS 131, the Company operated in only one segment in that year. It is impracticable to obtain segment data for 1999 that is comparable to the 2001 and 2000 data. The Company's products for the Protein Group Segment consist of systems which deliver feed and water, and provide a comfortable climate for poultry and hogs, thereby creating an optimum growing environment for efficient production of meat and eggs. Protein Group Segment sales are primarily in the U.S. and Canada. The Grain Segment manufactures a wide variety of models of grain storage bins and handling and conditioning systems for on-farm and commercial grain facilities. The Grain Segment also manufactures and markets a line of industrial bulk storage bins and conveying equipment and markets various related accessory items. Grain Segment sales are primarily to customers in the U.S. and Canada. The International Segment manufactures and markets products similar to those of the Protein Group and Grain Segments. Sales in the International Segment, however, are generally to customers outside the U.S. and Canada. Inter-segment sales are generally recorded at standard cost plus five percent. Management evaluates performance based upon operating earnings before interest and income taxes. The Company does not maintain for each of its operating segments separate stand-alone financial statements prepared in accordance with generally accepted accounting principles. Following is segment information for the year ended December 31, 2001.

~~2000~~(in ~~1999~~thousands) ~~1998~~Protein ~~------------------------------~~Group ~~----------------------------~~Grain ~~--------------------------~~International Other Consolidated ---------------------------~~----~~ ~~Weighted Weighted Weighted Average Average Average Number of Exercise Number of Exercise Number of Exercise Shares Price Shares Price Shares Price~~ -------------------~~-----------~~ -------------- -~~------------~~ ------------- ---~~---------~~ ------------- ------------------ ~~Outstanding~~Sales ~~beginning~~to ofthird ~~year~~parties ~~1,153,640~~ $ ~~7.77 928~~84,~~758~~038 $ ~~6.90 836~~61,~~716~~551 $ ~~3.46 Granted 57~~87,~~000 7.51 300,000 9.17 350,000 13.81 Exercised (36,~~280) ~~0.83~~$ ~~(11,256)~~-- ~~0.83~~$ ~~(169~~232,~~632)~~869 ~~0.83~~Inter-segment ~~Forfeited~~sales ~~(92~~15,~~536)~~319 5~~.33 (63~~,~~862)~~382 2~~.89~~,170 (8822,~~326~~871) ~~13.46~~ --~~----------------------------~~ ~~--------------~~Operating ~~-------------~~profit ~~-------------~~15,520 ~~------------~~11,356 ~~-------------~~13,987 ~~-----------------~~(15,091) ~~Outstanding~~25,772 ~~end~~Capital ofexpenditures ~~year~~1,239 1,~~081,824~~333 ~~$ 8.19~~ 1,~~153,640~~753 $714 ~~7.77 928~~5,~~758~~039 $Total ~~6.90~~assets ~~------------------------------~~23,736 ~~--------------~~54,551 ~~-------------~~56,833 ~~-------------~~43,159 ~~------------~~178,279 ~~-------------~~Depreciation ~~-----------------~~and ~~Exercisable~~amortization ~~end~~ of ~~year~~goodwill ~~328~~2,~~195~~922 $ 2~~.93 269~~,~~356~~755 $ 2~~.52 285~~,~~868~~487 $ 2~~.28~~,074 10,238 ------------------------------- --------------- --------------- ---------------- ------------ ------------------~~-----------~~

Following is segment information for the year ended December 31, 2000.

(in thousands) Protein Group Grain International Other Consolidated --------------------------- ------------------- --------------- ---------------- ------------ -----------------~~------------~~ ~~Options~~Sales ~~Outstanding~~to ~~Options~~third ~~Exercisable~~parties ~~Number~~$ ~~Remaining~~92,610 ~~Weighted~~$ ~~Avg.~~86,294 ~~Number~~$ ~~Weighted~~80,211 ~~Avg.~~$ ~~Exercise~~-- ~~Prices~~$ ~~Outstanding~~259,115 ~~Contractual~~Inter-segment ~~Life~~sales ~~Exercise~~12,787 ~~Price~~11,859 ~~Exercisable~~2,510 ~~Exercise~~(27,156) ~~Price $0.83~~-~~$4.96~~- ~~327~~Operating profit 17,~~032~~820 ~~5.0~~19,325 ~~$0.83~~7,805 ~~261~~(18,~~728~~912) ~~$0.83~~26,038 ~~$6.38-$7.97~~Capital ~~242~~expenditures 1,~~000~~604 ~~8.4~~837 ~~$6.84~~1,110 --701 --4,252 ~~$10.92-$14.25~~Total ~~512~~assets 32,~~792~~329 ~~7.1~~51,526 ~~$13.53~~60,351 6651,~~467~~151 ~~$11.22~~195,357 ~~---------------------~~Depreciation ~~------------------~~and ~~-------------------~~amortization ~~Total~~of 1goodwill 2,~~081~~799 2,~~824~~696 ~~328~~2,203 2,497 10,195 ------------------------------- --------------- --------------- ---------------- ------------ -----------------~~------------~~

"Other" consists primarily of eliminations for inter-segment sales and corporate-related assets. Additionally, "Other" includes the costs for shared services functions such as Finance, Information Systems and Administration and for shared manufacturing cost centers for the Milford, Indiana, operations as well as profit sharing and bonus plans. United States and foreign operations, which include subsidiaries in Belgium, the Netherlands and Brazil, are shown below. Net sales amounts are based on the location of the selling entity.

(in thousands) 2001 2000 1999 ~~1998~~ --------------------------------------- ------------------ ---- ------------- --------- -------- --------------~~---~~ ~~Current~~Net sales: ~~U.S.~~United ~~federal~~States $176,730 7$211,~~627~~432 $ 3217,~~078~~504 $Belgium 536,~~965~~341 ~~State~~26,675 130,~~224~~210 ~~680~~The 1Netherlands 18,~~019~~715 ~~Foreign~~17,921 ~~663~~20,724 2Brazil 1,~~299~~083 ~~990~~3,087 4,165 --------------------------------------- ------------------ ---- ------------- --------- -------- --------------~~---~~ Total ~~current 9~~$232,~~514~~869 6$259,~~057~~115 7$272,~~974~~603 --------------------------------------- ------------------ ---- ------------- --------- -------- -------------- Long---lived ~~Deferred~~assets: ~~U.S.~~United ~~federal~~States ~~(395)~~$ 192,~~266~~070 (1$ 97,~~613)~~121 ~~State~~$102,433 ~~(56)~~Belgium ~~181~~23,461 ~~(230)~~25,183 ~~Foreign~~27,895 ~~(403)~~The ~~(684)~~Netherlands 498,804 ~~---------------------------------------------------------~~10,074 ~~-----------------~~10,959 ~~------------------~~Brazil ~~------------------~~466 ~~Total~~611 ~~deferred~~643 ~~(854) 763 (1,794)~~ --------------------------------------- ------------------ ---- ------------- --------- --------- -------------~~-----~~ ~~Provision~~Total ~~for income taxes~~ $ 8124,~~660~~801 $ 6132,~~820~~989 $ 6141,~~180~~930 --------------------------------------- ---------------------- ---------------------- ----------------------~~--------~~

Net sales (based on destination) were as follows:

(in thousands) 2001 2000 1999 ~~1998~~ --------------------------------------- ------------------ ---- ------------- --------- -------- --------------~~---~~ ~~U.S.~~United ~~tax~~States ~~at federal statutory rate~~ $ 7131,~~578~~807 $ 5164,~~963~~086 $ 5176,~~376~~157 ~~Increase~~Latin ~~(decrease)~~America in22,893 ~~tax~~23,275 ~~resulting~~20,813 ~~from:~~Europe/Middle ~~State~~East ~~income~~55,713 ~~taxes~~46,974 ~~net~~54,600 ofAsia ~~U.S.~~11,322 ~~tax~~12,553 ~~benefit~~10,461 ~~759~~Canada ~~559~~11,134 ~~512~~12,227 ~~FSC benefit (228) (240) (228) Goodwill 384 389 361 Other~~10,572 ~~net 167 149 159~~ --------------------------------------- ------------------ ---- ------------- --------- -------- --------------~~---~~ ~~Provision~~Total ~~for income taxes~~ $ 8232,~~660~~869 $ 6259,~~820~~115 $ 6272,~~180~~603 --------------------------------------- ---------------------- ---------------------- ----------------------~~------~~

16. Quarterly Financial Data (Unaudited)

(in thousands), ~~2000~~except ~~1999~~per share amounts) ----------------------------------------- ---------------- ---------------------- ------------------------- ~~Deferred tax assets (liabilities)~~ ----------- ~~current:~~Three ~~Accrued~~months ~~liabilities~~ended $2001 ~~1,926~~March $31 ~~2,058~~June ~~Inventories~~30 ~~(1,225)~~September ~~(1,439)~~30 ~~Allowance~~December ~~for~~31 ~~doubtful accounts receivable 671 281~~ -----------------------------------------~~----------------~~ ------------------~~----~~ ------------------~~-------~~ ~~Total current 1,372 900~~ -----------------~~----------------------------------------~~ ------------------~~----~~ ~~-------------------------~~Sales ~~Deferred~~$ ~~tax~~53,185 ~~assets~~$ ~~(liabilities)~~67,141 -$ ~~non-current:~~66,576 ~~Property~~$ 45,967 ~~plant~~Gross ~~and~~profit ~~equipment~~$ (914,~~530)~~560 (9$ 20,~~888)~~540 ~~Goodwill~~$ ~~(985)~~20,209 ~~(704)~~$ ~~Foreign~~11,340 ~~losses~~Gross 57margin --27.4% ~~Accrued~~30.6% ~~postretirement~~30.4% ~~benefit~~24.7% ~~cost~~Operating 1income $ 4,~~406~~549 $ 9,812 $ 10,030 $ 1,~~631~~381 Operating income margin 8.6% 14.6% 15.1% 3.0% Net ~~foreign~~income ~~tax~~$ ~~credit~~2,279 ~~carryforward~~$ ~~262~~5,346 --$ ~~Other~~5,716 ~~(192)~~$ ~~(488)~~830 ~~---------------------------------------------------------~~Basic ~~----------------------~~earnings ~~-------------------------~~per ~~Total~~share ~~non-current~~$ (80.21 $ 0.49 $ 0.52 $ 0.08 Basic weighted average shares 10,~~982)~~887 (910,~~449)~~870 ~~---------------------------------------------------------~~10,918 ~~----------------------~~10,868 ~~-------------------------~~Diluted ~~Total~~earnings ~~deferred~~per ~~income~~share ~~tax~~$ 0.21 $ ~~(7,610)~~0.48 $ (80.52 $ 0.08 Diluted weighted average shares 11,~~549)~~087 11,078 11,098 11,064 ----------------------------------------- ------------------ ------------------ ----------------- ------------------

(in thousands), ~~Protein~~except ~~Group~~per ~~Grain~~share ~~International~~amounts) ~~Other~~----------------------------------------- ~~Consolidated~~ -------------------------------------------------------------------------- Three months ended 2000 March 31 June 30 September 30 December 31 ----------------------------------------- ------------------ ------------------ ----------------- ------------------ Sales ~~to third parties~~ $ 9257,~~610~~752 $ 8674,294 $ 8081,~~211~~551 $ --45,518 Gross profit $ ~~259~~16,~~115~~132 ~~Inter-segment~~$ ~~sales 12~~20,~~787~~113 11$ 23,~~859~~791 2$ 9,~~510~~185 (Gross margin 27~~,156)~~.9% --27.1% 29.2% 20.2% Operating ~~profit~~income ~~17,820~~$ 194,~~325~~835 ~~7,805~~$ ~~(18~~8,~~912)~~761 26$ 11,~~038~~747 ~~Capital~~$ ~~expenditures~~695 ~~1,604~~Operating ~~837~~income margin 8.4% 11.8% 14.4% 1.5% Net income $ 2,~~110~~248 ~~701~~$ 4,~~252~~407 ~~Total~~$ ~~assets 32~~6,~~329~~475 51$ (139) Basic earnings per share $ 0.20 $ 0.40 $ 0.59 $ (0.01) Basic weighted average shares 11,~~526~~263 6010,~~351~~970 5110,~~151~~930 ~~195~~11,~~357~~015 ~~Depreciation~~Diluted ~~and~~earnings ~~amortization~~per ofshare ~~goodwill~~$ ~~2,799~~0.20 2$ 0.39 $ 0.58 $ (0.01) Diluted weighted average shares 11,~~696~~479 211,~~203~~182 211,~~555~~139 1011,~~253~~112 ----------------------------------------- ------------------ ------------------ ----------------- ------------------

The total quarterly income per common share may not equal the annual amount because net income per common share is calculated independently for each quarter. 17. Related Party Transactions The Company is required to pay annual management fees of $300,000 plus expenses to American Securities Capital Partners, L.P. (ASCP), a related party through stock ownership. These expenses have been charged to operations, as part of selling, general and administrative expenses. The Earn-Out payments related to the 1996 acquisition of the Company in a leveraged buyout transaction totaled $1,760,000 in 2000. These amounts were paid to predecessor company shareholders, certain of whom are current directors and officers of the Company. 18. Restructuring A corporate restructuring program was announced in late September 1999. The Company eliminated approximately 12% of the positions in its Milford, Indiana, operations support, sales and administrative functions. The action resulted in a pre-tax charge of $0.9 million, of which $0.6 million was recorded in cost of sales and $0.3 million was charged against selling, general and administrative expenses. During the fourth quarter of 1999, an additional accrual of $0.2 million was recorded in selling, general and administrative expenses upon the elimination of positions in the Company's Milford, Indiana, and Brazilian sales and administrative functions. In December 2000, the Company implemented expense reduction actions including restructuring its Fancom Group operations in the Netherlands to reduce Fancom's workforce by nearly 20 percent and to consolidate two Netherlands-based Fancom facilities by moving the Wierden operations to Fancom's Panningen headquarters facility. Additionally, the Company made adjustments to the cost structure at its Milford, Indiana, headquarters location and at certain other operating units to further reduce expenses. These actions resulted in a pre-tax charge of $0.7 million, of which $0.2 million was recorded in cost of sales and $0.5 million was charged to selling, general and administrative expenses. The $0.3 million and $0.7 million balance recorded at December 31, 2001 and 2000, to be paid in future periods, is reported in accrued liabilities. Payments made related to restructuring expenses, were $0.4 million and $1.1 million in 2001 and 2000, respectively. 19. Subsequent Events In early 2002, the Company completed two acquisitions. On January 22, 2002, CTB announced the establishment of Chore-Time Europe B.V., a European logistics center, in Asten, the Netherlands. The new logistics center was established through the purchase of a controlling interest in Veldmaster B.V., a master distributor in the Netherlands for CTB's Milford-based international business unit. Chore-Time Europe B.V. will sell primarily Chore-Time's products for raising poultry throughout Europe, the Middle East and in northern Africa. CTB has closed its Chore-Time Brock B.V. sales and service facility in Deurne, the Netherlands, and transferred its operations to the new company. Chore-Time Europe B.V., also has a wholly-owned subsidiary in Poland, which has now been designated Chore-Time Europe Sp. z.o.o. On February 1, 2002, the Company acquired substantially all of the operating assets of Beard Industries, Inc., a leading grain dryer manufacturer producing more than 45 different models of dryers for both farm and commercial use under the brand name ENERGY MISER(R). The company, based in Frankfort, Indiana, is also an industry leader in innovative electronic grain drying controls. The total purchase price for these acquisitions was $5.3 million, and was financed through borrowings under the Company's credit facility. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE -------------------------------------------------------------------------------- The Company had no changes in or disagreements with accountants on accounting and financial disclosure. ================================================================================ PART III -------------------------------------------------------------------------------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------------------------------------- The information required by this Item concerning the Directors and nominees for Director of the Company and concerning disclosure of delinquent filers under Section 16(a) of the Exchange Act is incorporated herein by reference from the Company's definitive Proxy Statement for its 2002 Annual Meeting of Shareholders, which will be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company's last fiscal year. Information concerning the executive officers of the Company is included under the caption "Executive Officers of the Company" at the end of Part 1 of this Annual Report. Such information is incorporated herein by reference, in accordance with General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION -------------------------------------------------------------------------------- The information required by this Item concerning remuneration of the Company's officers and Directors and information concerning material transactions involving such officers and Directors is incorporated herein by reference from the Company's definitive Proxy Statement for its 2002 Annual Meeting of Shareholders which will be filed with the Commisssion pursuant to Regulation 14A within 120 days after the end of the Company's last fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------------------------- The information required by this Item concerning the stock ownership of management and five percent beneficial owners is incorporated herein by reference from the Company's definitive Proxy Statement for its 2002 Annual Meeting of Shareholders which will be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company's last fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -------------------------------------------------------------------------------- The information required by this Item concerning certain relationships and related transactions is incorporated herein by reference from the Company's definitive Proxy Statement for its 2002 Annual Meeting of Shareholders which will be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company's last fiscal year. ================================================================================ PART IV -------------------------------------------------------------------------------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K -------------------------------------------------------------------------------- (a.)1. Financial Statements and Independent Auditors' Report The following consolidated financial statements of CTB International Corp. and its subsidiaries are set forth in Part II, Item 8. o Independent Auditors' Report. o Consolidated Statements of Income for the years ended December 31, 2001, 2000 and 1999. o Consolidated Balance Sheets as of December 31, 2001, and 2000. o Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000, and 1999. o Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000, and 1999. o Notes to Consolidated Financial Statements. (a.)2. Financial Statement Schedule The following financial statement schedules are included in this Item 14. o Schedule I - Parent company Financial Statements. o Schedule II - Valuation and Qualifying Accounts for years ended December 31, 2001, 2000 and 1999. All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the Consolidated Financial Statements of CTB International Corp. or the Notes thereto. (a.)3. Exhibits A list of exhibits required to be filed as part of this report is set forth in the Exhibit Index, which immediately precedes such exhibits, and is incorporated herein by reference. (b.) Reports on Form 8-K None. SCHEDULE I PARENT COMPANY FINANCIAL STATEMENTS As discussed in Note 7, under the terms of the Credit Agreement, CTB, Inc., the Company's wholly-owned subsidiary, is limited in the dividends it may distribute to the Company, subject to meeting certain financial goals and requirements. Accordingly, the following parent-company-only financial statements are presented because the distribution of the net assets of CTB, Inc. is restricted. Condensed Balance Sheets December 31, 2001 and 2000 (in thousands) 2001 2000 Assets Equity investment in subsidiaries $99,488 $87,013 ------------ ------------ Total assets $99,488 $87,013 ============ ============ Liabilities and shareholders' equity Shareholders' equity $99,488 $87,013 ------------ ------------ Total liabilities and shareholders' equity $99,488 $87,013 ============ ============ Condensed Statements of Income Years Ended December 31, 2001, 2000 and 1999 (in thousands) 2001 2000 1999 Equity in undistributed net income of subsidiaries $14,171 $12,990 $10,216 ------------ ------------ ------------ Net income $14,171 $12,990 $10,216 ============ ============ ============ Condensed Statements of Cash Flows For the Years Ended December 31, 2001, 2000 and 1999 (in thousands) 2001 2000 1999 Cash flows from operating activities Net income $14,171 $12,990 $10,216 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed net income of (14,171) (12,990) (10,216) subsidiaries --------- --------- --------- Net cash provided by operating activities -- -- -- --------- --------- --------- Net increase in cash -- -- -- Cash at beginning of the period -- -- -- --------- --------- --------- Cash at end of the period $ -- $ -- $ -- ========= ========= ========= Note 1 - The Company uses the equity method of accounting for its investment in subsidiaries. Note 2 - See the Notes to the Company's 2001 Consolidated Financial Statements for a complete description of the Company's accounting policies. SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2001, 2000 and 1999 (in thousands) ~~2000~~Column ~~1999~~A ~~1998~~Column B Column C Column D Column E ---------------------------- ------------- --------------------------- ------------ ------------- Additions --------------------------- ~~Net~~Balance ~~sales:~~at ~~United~~Charged ~~States~~to $Charged ~~211,432~~to $Balance ~~217,504~~at $beginning ~~240,348~~costs ~~Belgium~~and ~~26,675~~other ~~30,210~~end --of ~~The~~of ~~Netherlands~~period ~~17,921~~expenses ~~20,724~~accounts ~~29,987~~Deductions ~~Brazil~~period ~~3,087 4,165 1,845~~ ------------- -------------~~-------------~~ -------------~~---------~~ -------------~~---------~~ -------------~~---------~~ ~~Total~~2001 Allowance for doubtful accounts . . . $1,907 ~~259~~$1,~~115~~239 $ ~~272,603~~(14) (2) $ ~~272~~897 (1) $ 2,~~180~~235 ~~---------------------------------------~~Inventory ~~----------------------~~obsolescence ~~----------------------~~reserve ~~----------------------~~. ~~Long-lived~~. ~~assets:~~. ~~United~~1,719 ~~States~~188 $(9) 97(2) 168 1,~~121~~730 2000 Allowance for doubtful accounts . . . $1,086 ~~102~~$1,~~433~~158 $ ~~104,340~~(16) ~~Belgium~~(2) ~~25,183~~$ 27321 (1) $ 1,~~895~~907 --Inventory ~~The~~obsolescence ~~Netherlands~~reserve ~~10,074~~. 10. . 1,~~959~~071 13718 (14) (2) 56 1,~~542~~719 ~~Brazil~~1999 ~~611~~Allowance ~~643~~for ~~239~~doubtful ~~---------------------------------------~~accounts ~~----------------------~~. ~~----------------------~~. ~~----------------------~~. ~~Total~~$1,122 $499 ~~132,989~~$ 240 (2) $775 ~~141,930~~(1) $ ~~118~~1,~~121~~086 ~~------------------------------------------------------------------------------------------------------------~~Inventory obsolescence reserve . . . 634 488 251 (2) 302 1,071

(1) Uncollectible accounts written off (2) Charges to other accounts include foreign currency translation and reserves acquired in business combinations SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CTB International Corp. By: /s/ Victor A. Mancinelli -------------------------------- Victor A. Mancinelli Director, President and Chief Executive Officer Dated: March 15, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of CTB International Corp. and in the capacities and on the dates indicated. Signature Title Date /s/ J. Christopher Chocola Director, Chairman of the Board 3/15/02 ---------------------------- J. Christopher Chocola /s/ Victor A. Mancinelli Director, President and Chief Executive 3/15/02 ---------------------------- Officer (Principal Executive Officer) Victor A. Mancinelli /s/ Don J. Steinhilber Vice President and Chief Financial Officer 3/15/02 ---------------------------- (Principal Financial and Accounting Officer) Don J. Steinhilber /s/ Caryl M. Chocola Director 3/15/02 ---------------------------- Caryl M. Chocola /s/ Michael G. Fisch Director 3/15/02 ---------------------------- Michael G. Fisch /s/ Larry D. Greene Director 3/15/02 ---------------------------- Larry D. Greene /s/ Frank S. Hermance Director 3/15/02 ---------------------------- Frank S. Hermance /s/ David L. Horing Director 3/15/02 ---------------------------- David L. Horing /s/ Charles D. Klein Director 3/15/02 ---------------------------- Charles D. Klein EXHIBIT INDEX Exhibit Number 3.1 Restated Articles of Incorporation of the Company, filed as Annex 1 to the Company's definitive Information Statement on Schedule 14C filed on November 19, 1999 and incorporated herein by reference. 3.2 Restated By-Laws of the Company dated as of March 1, 2001. 4.1 Specimen Certificate of Common Stock of the Company, filed as Exhibit 4.1 to Amendment No.3 to the Company's Registration Statement on Form S-1(Registration No. 333-29873) and incorporated herein by reference. 10.1 Commitment Letter, dated as of March 21, 1997, by and among CTB, Inc., and Key Bank National Association, filed as Exhibit 10.1 to Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.2 Asset Purchase Agreement, dated as of March 31, 1997, by and among Butler Manufacturing Company and CTB, Inc., filed as Exhibit 10.3 to the Company's Registration Statement on Form S-1 (Registration No.333-29873) and incorporated herein by reference. 10.3 Share Purchase Agreement, dated as of May 1, 1997, by and among Chore-Time Brock Holding B.V. and Halder Investments III B.V., V. Berger, A.Faber, J. Paquet, J.H.M. Cremers and H.W. Gootzen and Fancom Holding B.V., filed as Exhibit 10.4 to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.4 Asset Purchase Agreement, dated as of May 29, 1997, between CTB, Inc., and Royal Crown Limited, filed as Exhibit 10.5 to the Company's Registration Statement on From S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.5 Stock Purchase Agreement, dated as of November 29, 1995, by and among the Company, CTB Ventures, Inc., CTB, Inc., and the selling shareholders party thereto, filed as Exhibit 10.6 to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.6 Shareholders' Agreement, dated as of January 4, 1996, by and among the Company and the Individual Shareholders party thereto, filed as Exhibit 10.7 to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.7 Board Representation Agreement, dated as of January 4, 1996, by and among American Securities Capital Partners, L.P., J. Christopher Chocola, Caryl Chocola and the Company, filed as Exhibit 10.8 to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.8 Form of Non-Qualified Stock Option Agreement, filed as Exhibit 10.9 to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.9 Profit Sharing Plan, filed as Exhibit 10.10 Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.10 Management Incentive Compensation Plan, filed as Exhibit 10.11 Amendment No.2 to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.11 Escrow Agreement, dated as of November 29, 1995, by and among CTB Ventures, Inc., the shareholders party thereto and NBD Bank,N.A., filed as Exhibit 10.12 to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.12 Management Consulting Agreement, dated as of January 4,1996, by and among CTB, Inc. and American Securities Capital Partners, L.P., filed as Exhibit 10.13 to the Company's Registration Statement on Form S-1(Registration No. 333-29873) and incorporated herein by reference. 10.13 Agreement for Partial Release of Escrowed Funds, dated as of March 1, 1997, by and among CTB, Inc. and each of the shareholders party thereto, filed as Exhibit 10.14to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.14 Transaction Consulting Agreement, dated as of April 30, 1997, by and among the Company and American Securities Capital Partners, L.P., filed as Exhibit 10.15to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.15 Transaction Consulting Agreement, dated as of April 30, 1997, by and among CTB, Inc., and American Securities Capital Partners,L.P., filed as Exhibit 10.16to the Company's Registration Statement on Form S-1 (Registration No. 333-29873) and incorporated herein by reference. 10.16 Acquisition Agreement of all shares of Roxell N.V., dated November 30, 1998, filed as Exhibit 99.2 to the Company's Current Report on Form 8-K dated March 2, 1999 and incorporated herein by reference. 10.17 Representations and Warranties of Sellers, filed as Exhibit 99.3 to the Company's Current Report on Form 8-K dated March 2, 1999 and incorporated herein by reference. 10.18 (i) Credit Agreement, dated as of August 15, 1997, among CTB, Inc., Chore-Time Brock Holding B.V. the Lending Institutions named therein, and KeyBank National Association, filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference. (ii) Amendment No. 1, dated as of March 1, 1998, to Credit Agreement dated as of August 15, 1997 among CTB, Inc., Chore-Time Brock Holding B.V., the Lending Institutions named therein, and Key Bank National Association, filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference. (iii) Amendment No. 2, dated as of June 1, 1998, to Credit Agreement dated as of August 15, 1997 among CTB, Inc., Chore-Time Brock Holding B.V., the Lending Institutions named therein, and Key Bank National Association, filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference. (iv) Amendment No. 3, dated as of November 19, 1998, to Credit Agreement dated as of August 15, 1997 among CTB, Inc., Chore-Time Brock Holding B.V., the Lending Institutions named therein, and Key Bank National Association, filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference. (v) Amendment No. 4, dated as of October 5, 2001, to Credit Agreement dated as of August 15, 1997 among CTB, Inc., Chore-Time Brock Holding B.V., the Lending Institutions named therein, and Key Bank National Association, filed as Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 and incorporated herein by reference. 10.19 1999 CTB International Corp. Stock Incentive Plan, filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 and incorporated herein by reference. 21 Subsidiaries of CTB International Corp., filed as Exhibit 21.1 to the Company's Registration Statement on Form S-1 (Registration 333-29873) and incorporated herein by reference. 23.1 Consent of Deloitte & Touche LLP. EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statements (File Nos. 333-95843 and 333-66132) of CTB International Corp. on Form S-8 of our report dated February 5, 2002, appearing in this Annual Report on Form 10-K of CTB International Corp. for the year ended December 31, 2001. DELOITTE & TOUCHE LLP Chicago, Illinois March 15, 2002 SHAREHOLDER INFORMATION BOARD OF DIRECTORS J. Christopher Chocola Chairman of the Board Victor A. Mancinelli President and Chief Executive Officer Of the Company Caryl M. Chocola Private Investor Michael G. Fisch President, American Securities Capital Partners, L.P. Larry D. Greene Manufacturing and Financial Consultant Frank S. Hermance Chairman and Chief Executive Officer, AMETEK, Inc. David L. Horing Managing Director, American Securities Capital Partners, L.P. Charles D. Klein Managing Director, American Securities Capital Partners, L.P. SUBSIDIARIES & DIVISIONS CTB, Inc. operations located at corporate headquarters in Milford, Indiana, U.S.A.: Brock Manufacturing Chore-Time Egg Production Systems Chore-Time Poultry Production Systems Chore-Time/Brock International Operations outside Milford: Agile Manufacturing Anderson, Missouri, U.S.A. Brock Manufacturing Frankfort, Indiana, U.S.A. Indianapolis, Indiana, U.S.A. Kansas City, Missouri, U.S.A. Chore-Time Egg Production Systems Decatur, Alabama, U.S.A. Chore-Time Europe B.V. Asten, The Netherlands Strykowo, Poland Chore-Time Hog Production Systems Schaefferstown, Pennsylvania, U.S.A. Chore-Time Ltda. Londrina, Parana, Brazil Fancom B.V. Panningen, The Netherlands Vitre, France Roxell N.V. Maldegem, Belgium

(in thousands) 2000 1999 1998 --------------------------------------- ---------------------- ---------------------- ---------------------- United States $ 164,086 $ 176,157 $ 193,534 Latin America 23,275 20,813 21,497 Europe/Middle East 46,974 54,600 39,310 Asia 12,553 10,461 7,881 Canada 12,227 10,572 9,958 --------------------------------------- ---------------------- ---------------------- ---------------------- Total $ 259,115 $ 272,603 $ 272,180 ------------------------------------------------------------------------------------------------------------

(in thousands, except per share amounts) ----------------------------------------- -------------------------------------------------------------------------- Three months ended 2000 March 31 June 30 September 30 December 31 ----------------------------------------- ------------------ ------------------ ----------------- ------------------ Sales $ 57,752 $ 74,294 $ 81,551 $ 45,518 Gross profit $ 16,132 $ 20,113 $ 23,791 $ 9,185 Gross margin 27.9% 27.1% 29.2% 20.2% Operating income $ 4,835 $ 8,761 $ 11,747 $ 695 Operating income margin 8.4% 11.8% 14.4% 1.5% Net income $ 2,248 $ 4,407 $ 6,475 $ (139) Basic earnings per share $ 0.20 $ 0.40 $ 0.59 $ (0.01) Basic weighted average shares 11,263 10,970 10,930 11,015 Diluted earnings per share $ 0.20 $ 0.39 $ 0.58 $ (0.01) Diluted weighted average shares 11,479 11,182 11,139 11,112 --------------------------------------------------------------------------------------------------------------------

(in thousands, except per share amounts) ----------------------------------------- -------------------------------------------------------------------------- Three months ended 1999 March 31 June 30 September 30 December 31 ----------------------------------------- ------------------ ------------------ ----------------- ------------------ Sales $ 59,905 $ 76,260 $ 84,088 $ 52,350 Gross profit $ 13,918 $ 20,438 $ 22,502 $ 13,211 Gross margin 23.2% 26.8% 26.8% 25.2% Operating income $ 3,016 $ 8,110 $ 10,533 $ 3,566 Operating income margin 5.0% 10.6% 12.5% 6.8% Net income $ 329 $ 3,802 $ 4,883 $ 1,202 Basic earnings per share $ 0.03 $ 0.32 $ 0.41 $ 0.10 Basic weighted average shares 12,106 12,022 12,022 11,998 Diluted earnings per share $ 0.03 $ 0.31 $ 0.40 $ 0.10 Diluted weighted average shares 12,330 12,277 12,282 12,206 --------------------------------------------------------------------------------------------------------------------

Director/ Name Age Position with Company Officer Since J. Christopher Chocola 39 Chairman of the Board 1991 Victor A. Mancinelli 57 President and Chief Executive Officer, Director 1999 Caryl M. Chocola 62 Director 1976 Michael G. Fisch 38 Director 1995 Larry D. Greene 43 Director 1997 Frank S. Hermance 52 Director 1997 David L. Horing 38 Director 1995 Charles D. Klein 62 Director 1995 Danny DeRouck 37 Managing Director, Roxell N.V. 2000 Randy S. Eveler 36 Vice President & Corporate Controller, CTB, Inc. 1999 Michael J. Kissane 43 Vice President, General Counsel & Secretary 1993 Mark A. Lantz 40 Vice President & General Manager, CTB, Inc. 1996 George W. Murdoch 41 Executive Vice President & General Manager, CTB, Inc. 1998 Douglas J. Niemeyer 53 Vice President & General Manager, CTB, Inc. 2000 Don J. Steinhilber 43 Vice President & Chief Financial Officer 1994

Condensed Balance Sheets December 31, 2000 and 1999 (in thousands) 2000 1999 Assets Equity investment in subsidiaries $87,013 $80,754 ------------ ------------ Total Assets $87,013 $80,754 ============ ============ Liabilities and Shareholders' Equity Shareholders' Equity $87,013 $80,754 ------------ ------------ Total Liabilities and Shareholders' Equity $87,013 $80,754 ============ ============

Condensed Statements of Income Years Ended December 31, 2000, 1999 and 1998 (in thousands) 2000 1999 1998 Equity in undistributed net income of subsidiaries $12,990 $10,216 $9,196 ------------ ------------ ------------ Net Income $12,990 $10,216 $9,196 ============ ============ ============

Condensed Statements of Cash Flows For the Years Ended December 31, 2000, 1999 and 1998 (in thousands) 2000 1999 1998 Cash flows from operating activities Net income $12,990 $10,216 $9,196 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed net income of subsidiaries (12,990) (10,216) (9,196) ------------ ------------ ------------ Net cash provided by operating activities -- -- -- ------------ ------------ ------------ Net increase in cash -- -- -- Cash at beginning of period -- -- -- ------------ ------------ ------------ Cash at end of the period $ -- $ -- $ -- ============ ============ ============

VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2000, 1999 and 1998 (in thousands) Column A Column B Column C Column D Column E ---------------------------- ------------- --------------------------- ------------ ------------- Additions --------------------------- Balance at Charged to Charged to Balance at beginning costs & other end of of period expenses accounts Deductions period ------------- ------------- ------------- ------------- ------------- 2000 Allowance for doubtful accounts . . . $1,086 $1,158 $ (16)(2) $321(1) $1,907 Inventory obsolescence reserve . . . 1,071 718 (14)(2) 56 1,719 1999 Allowance for doubtful accounts . . . $1,122 $ 499 $ 240(2) $775(1) $1,086 Inventory obsolescence reserve . . . 634 488 251(2) 302 1,071 1998 Allowance for doubtful accounts . . . $657 $568 $ - $103(1) $1,122 Inventory obsolescence reserve. . . . 554 188 - 108 634

Signature Title Date ----------- ------ ------ /s/ J. Christopher Chocola Director, Chairman of the Board 3/19/01 --------------------------------------- J. Christopher Chocola /s/ Victor A. Mancinelli Director, President and Chief Executive 3/19/01 ------------------------------------------ Victor A. Mancinelli Officer (Principal Executive Officer) /s/ Don J. Steinhilber Vice President and Chief Financial Officer 3/19/01 ------------------------------------ Don J. Steinhilber (Principal Financial and Accounting Officer) /s/ Caryl M. Chocola Director 3/19/01 ------------------------------------ Caryl M. Chocola /s/ Michael G. Fisch Director 3/19/01 ------------------------------------- Michael G. Fisch /s/ Larry D. Greene Director 3/19/01 ------------------------------------- Larry D. Greene /s/ Frank S. Hermance Director 3/19/01 ------------------------------------ Frank S. Hermance /s/ David L. Horing Director 3/19/01 ------------------------------------ David L. Horing /s/ Charles D. Klein Director 3/19/01 ----------------------------------- Charles D. Klein

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