Safe Harbor Statement
Forward-looking statements in this presentation, including without limitation the Company's "expectations," "beliefs," "indications," "estimates," "cautious optimism," and their variants, as defined by the Private Securities Litigation Reform Law of 1995, involve certain risks, uncertainties, assumptions and other factors that may cause the actual results subsequent to the date of this announcement to differ materially. Additional information containing factors that could cause actual results to differ from those in the forward-looking statements are contained in the Company's Form 10-K and other filings with the Securities and Exchange Commission.
 | Blount International, Inc. |
| |  |
Lehman Brothers
High Yield & Syndicated Loan
Conference
March 19, 2003
| |
|---|
| Outdoor Products | Industrial and Power
Equipment |
| | Background |
| | |
| • | Lehman Brothers Merchant Banking Group (“LBMBG”) and management financed a LBO of Blount in August 1999. |
| • | Capital structure included $875M of debt: $400 senior credit facility, $150M senior notes, and $325M senior sub notes. |
| • | Market issues at the Forestry Equipment business and competitive issues at the Sporting Equipment Group caused a material reduction in revenue and profitability during 2000 and 2001. |
| • | Renegotiated senior credit facility covenants in February 2001; LBMBG invested an additional $20M. |
| • | In December 2001, sold the Sporting Equipment Group to ATK and repaid $170.5M of senior debt. |
| • | 2002 results were solid, with $83.6M in EBITDA, but leverage is still high with $608.8M in total covenant debt. |
| | Overview |
| | |
Blount operates two separate groups: OPG & IPEG
Outdoor Products Group (OPG)
• Oregon Cutting Systems - Saw chain, bars & accessories
• ICS - Diamond cutting chain for concrete and abrasive materials
• Dixon - ZTR ride-on lawn mower
Industrial & Power Equipment Group (IPEG)
• Forestry & Industrial Equipment - Timber harvesting equipment
• Gear Products - Rotation bearings, Gear components
| | Segment Profitability |
| | |
| | Operating From Strong
Positions |
| | |
| • | Market leader in principal businesses |
| • | Excellent EBITDA margins in Outdoor Products |
| • | Attractive growth prospects |
| • | Focus on consumables with recurring revenues |
| • | Highly diversified customer/geographic base |
| • | Strong and experienced management team |
| | Situation Outlook |
| | |
| | - | General Economy / Forestry Industry |
| | - | Offshore Production / Competition |
| | - | Sales/Marketing Activities |
| | - | New Product Introductions |
| | • | Selected Capacity Improvements |
| | • | Corporate Office Closure |
| | Historical Results |
| | |
| | Financial Leverage |
| | |
Although improved in 2002, the company remains highly leveraged.
| | Outdoor Products |
| | |
| | Outdoor Products |
| | |
| Outdoor Products
Business Dynamics - OCS |
| | |
| • | Leading Worldwide Market Share |
| • | Renowned Product Reliability |
| • | Brand Name Recognition Worldwide |
| • | Factors Affecting the Business |
| • | Increased Capacity to Meet Demands |
| | Oregon Cutting Systems |
| | |
Industry experts in wood cutting technology
• Product and process design for quality, performance, manufacturing, assembly, reliability,
and maintainability
• Proprietary design of all precision tooling and specialty production equipment
• Over 15 years practicing TQC principles and methods
• Four plants ISO certified
• Non-union, experienced workforce
| Outdoor Products
Product Dynamics - ICS |
| | |
| • | Diamond chain technology for cutting concrete and abrasive materials |
| • | Product line includes chain, bars, power saws and accessories |
| • | Business started in 1992 |
| • | Net Sales - 29% CAGR since inception, approximately $15M in 2002 |
| • | Strong operating margins |
| • | Innovation is growth engine |
o Diamond Chain
— 6 Types; 300 Part Numbers
— Patented SealPro(R)Technology
— 55% of Sales
o Hydraulic Saws
- 2 Prime Models - 853Pro, 814Mini
— Geared for Professionals; Expensive
o Gas Saws
- 2 Prime Models - 633GC(100cc), 613GC(80cc) - Geared for GCS; $1500-2500 MSRP
o Equipment & Accessories
— Powerpacks, Tracks, Vacuums, Spare Parts
— 2000 Part Numbers
| Outdoor Products
Business Dynamics - Dixon |
| | |
| • | Zero turn radius ride-on lawn mower |
| • | Founded 1974, acquired by Blount in 1990 |
| • | Net Sales are 9% of Blount |
| • | 3 Main Product Lines:
Suburban, Estate & Pro ZTR |
| • | Recent new product developments, including Zeeter(R)and 3500 series |
| | Industrial and Power Equipment |
| | |
| | Industrial and Power Equipment |
| | |
| | Industrial and Power Equipment
Business Dynamics - FIED |
| | |
| • | Factors Affecting the Business |
| | Forestry and Industrial Equipment Division |
| | |
| • | A Leading North American Manufacturer of Purpose-Build Forestry Equipment. |
| • | Long-term Committed to the Worldwide Forest Products Industry with Leading and High Quality Product. |
Direction
| • | Continued Lean Manufacturing |
| • | Cash / working capital management |
| • | International opportunities |
| • | In position for market upturn |
| | Forestry and Industrial Equipment |
| | |
| • | Announced marketing alliance with Caterpillar on March 11, 2003 |
| | - | Strengthens Blount's position |
| | - | Sale of Blount Manufactured products into Caterpillar dealer network |
| | - | Maintains existing Blount dealer network with Blount brands |
| | - | Long-term marketing and supply agreements |
Forestry and Industrial Equipment
| | Product Line Sales and Estimated
Market Shares |
| | |
| | Market Shares |
|---|
| Sales | % | Rank |
|---|
Loaders | | | | 43 | % | | 48 | % | # 1 | | |
Rubber Tired Cutters | | | | 30 | % | | 35 | % | # 2 | | |
Industrial Tractors | | | | 4 | % | | -- | | -- | | |
Cut-to-Length Machinery | | | | 8 | % | | 22 | % | # 2 | | |
Delimbing Equipment | | | | 9 | % | | 60 | % | # 1 | | |
Skidders | | | | 6 | % | | 1 | % | # 5 | | |
| | | | 100 | % |
| | Industrial and Power Equipment
Business Dynamics - Gear Products |
| | |
| • | Manufacturer of rotational systems components for mobile heavy equipment. Products include bearings and drives |
| • | Only Complete Rotational System |
| | What's Next for Blount |
| | |
2002 Actions
| - | Corporate headquarters/assets of $8M |
| - | Relocated corporate headquarters to Portland, Oregon |
| - | Continue realignment of production and assets within Oregon Cutting Systems |
| - | Lean manufacturing efforts at FIED |
| - | Material sourcing opportunities |
2003 Actions
| • | Resolve capital structure / leverage problems |
| • | Cash flow generation and debt reduction |
| | Financial Leverage / Ratios |
| | |
| Financial Leverage |
|---|
| 2001 | 2002 |
|---|
EBITDA | $ 78 | $ 84 |
Cap Ex | $ 12 | $ 17 |
Cash Interest | $ 70 | $ 64 |
Covenant debt | $625 | $609 |
Total leverage ratio | 8.0x | 7.3x |
Interest coverage ratio | 1.1x | 1.3x |
