Industrial and Power
Equipment
Lehman Brothers
High Yield & Syndicated
Loan Conference
March 22, 2004
Blount International, Inc.
Outdoor Products Lawnmower
This presentation and discussion today contains forward-looking
statements, including without limitation the Company’s “expectations”, “beliefs”, “plans”, “indications”, “estimates”, “anticipations” and their variants, as defined by the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially. Additional information concerning important factors that could cause Blount’s actual future results to differ materially from today’s discussion is included in the Company’s public filings available on the SEC’s EDGAR database.
2
Forward Looking Statements
Agenda
Company Overview
Financial Overview
Wrap-up
Company Overview
Overview
Blount operates three separate business segments:
OPG, Lawnmowers & IPEG
Dixon – ZTR ® ride-on lawnmowers
Lawnmowers
Blount
Outdoor Products
Group
Industrial Power &
Equipment Group
Lawnmowers
Forestry & Industrial Equipment – Timber harvesting equipment
Gear Products – Rotation bearings, gear components
Oregon Cutting Systems – Saw chain, bars & accessories
ICS – Diamond cutting chain for concrete industry
Industrial & Power Equipment Group (IPEG)
Outdoor Products Group (OPG)
Operating Segments
REVENUE
SEGMENT OPERATING INCOME
$559M
$97M
Historical Results
The Company remains highly leveraged.
However, the leverage ratio has improved for
two consecutive years.
Financial Leverage
6.2x
5.9x
8.0x
7.3x
* Leverage
Ratio
10
0
6.0x
*Excludes preferred equivalent security
Operating From Strong Positions
Market leader in principal businesses
Attractive growth prospects
Highly diversified customer/geographic
base
Focus on consumables with recurring
revenues
Excellent operating income margins in
Outdoor Products
Strong and experienced management
team
Situation Outlook
Challenges
Raw Materials Supply and Price
Weakness/Strength of U.S. Dollar
Customer Backlog/Service
Offshore Production/Competition
Rising Heathcare Costs
Leverage/Refinancing
Programs
Debt reduction
Refinancing
Cost control
Asset sales
Operating Efficiencies
ERP Implementation
China Manufacturing Facility
Lean Manufacturing
Operations
Overview
Outdoor Products
Frederick
ICS
ICS
Outdoor Products
The Outdoor Products segment (“OPG”) is the world’s
leading manufacturer of chainsaw chains and guide bars,
with 56% and 50% market shares, respectively
The Outdoor Products segment manufactures and
distributes under two organizations, Oregon Cutting
Systems Group (“Oregon”) and ICS
Oregon produces a wide variety of cutting chain,
chain saw guide bars and mechanical timber harvesting
equipment
ICS produces specialized concrete cutting equipment
For 2003 the Outdoor Products group posted sales of
$359 million (+17%) and operating income of $86 million
(+27%)
Factors affecting the business include currency,
competition, offshore production and weather.
Outdoor Products
Leading Worldwide Market Share
Renowned Product Reliability
Brand Name Recognition Worldwide
Factors Affecting the Business
Currency
Competition
Economies
Weather
Increased Capacity to Meet Demands
Outdoor Products
Business Dynamics - OCS
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
Oregon Cutting Systems
Operations
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 – Approximately $18M in 2003
Strong operating margins
Innovation is growth engine
Lawnmower
Lawnmower
The Lawnmower segment operates through its subsidiary, Dixon Industries (“Dixon”)
Dixon manufacturers zero turning radius (ZTR®) lawn mowers and related attachments
Sales for 2003 were $36 million (-14%)
and operating loss was $1.2 million
Factors affecting the business include weather, competition and a distribution channel shift
Lawnmower
Lawnmower
Business Dynamics - Dixon
Zero turn radius riding lawn mower
Founded 1974, acquired by
Blount in 1990
Net Sales are 6% of Blount
200 Employees
3 Main Product Lines:
Suburban, Estate and Pro ZTR
Recent new product developments,
including Ram ® and Zeeter®
Dixon Challenges
Opportunities
Dixon Challenges
Increasing competitive offerings
Under-utilized plant
Unfavorable healthcare trends
Weather
Dixon Opportunities
New product offerings
New distribution
Management changes
Raw material/component sourcing
Industrial and Power Equipment
The Industrial & Power Equipment segment (“IPEG”) operates
through two units, the Forestry & Industrial Equipment Division
(“FIED”) and Gear Products (“Gear”)
FIED manufacturers hydraulic timber harvesting equipment under
the Hydro-Ax, Prenctice, CTR, Timber King and Fabtek brand
names
Gear Products is a leading manufacturer of rotational system
components for mobile heavy equipment
In 2003 IPEG posted sales of $165 million (+25%) and operating
income of $12 million (two-fold increase)
Factors affecting the business include commodity prices, currency,
inventory levels and imports
Industrial & Power Equipment
Industrial and Power Equipment
Industrial and Power Equipment
Business Dynamics - FIED
Factors Affecting the Business
Commodity Prices
Currency
Inventory Levels
Imports
Consolidation
Competition
Distribution
New Products
Lowered Operating Costs
Forestry is our Business
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
Reduce cost / breakeven
Cash / working capital management
International opportunities
New product development
Marketing Alliance
Forestry & Industrial Equipment Division
Forestry and Industrial Equipment
Marketing alliance with Caterpillar
Strengthens Blount’s position
Sale of Blount/CAT Manufactured products
into Caterpillar dealer network with
Timberking brands
Maintains existing Blount dealer network
with Blount brands
Blount produces 17 of the 26 products
Long-term marketing and supply agreements
$14 million in sales during 2003 (partial
year)
Industrial and Power Equipment
Business Dynamics – Gear Products
Manufacturer of rotational systems components
for mobile heavy equipment. Products include
bearings and drives
Acquired in 1991
OEM Supplier
Only Complete Rotational System
Price Sensitive
Markets Served
Construction
Utility
Forestry
Telecommunication
Financial Overview
Financial Overview
$ In Millions ADJUSTED EBITDA
$ In Millions SALES
3% Compound Growth Since 2000
FINANCIAL OVERVIEW
2000 2001 2002 2003
Segment Operating Income
Outdoor Products $74.3 $69.4 $67.7 $86.2
Lawn Mower 6.7 0.9 2.7 (1.2)
Industrial & Power Equipment 1.1 (1.7) 5.2 11.7
Elimination 0.3
Total Segments $82.1 68.6 75.9 96.7
Corporate Expenses (10.3) (7.7) (6.2) (12.7)
Depreciation/Amortization/ 18.8 17.4 13.9 13.5
Other
______ ______ _____ ______
Adjusted EBITDA(1) $ 90.6 $78.3 $83.6 $97.5
===== ==== ===== ====
(1) Earnings Before Interest, Taxes, Depreciation, Amortization
and Non-Recurring
Financial Overview
Operating Cash Flow
$ Millions
&nb sp;
2002 2003
Adjusted EBITDA $ 83.6 $ 97.5
-Cash Interest �� (64.9) (63.9)
-CAPEX (17.1) (16.5)
-Asset Sales 8.0 (0.6)
-Sporting Equipment Sale (22.6) 25.0
-Other 8.9 (2.8)
Total Operating Cash Flow $ (4.1) $ 38.7
===== =====
Financial Overview
Outstanding Debt/ Leverage
2002 2003 Comments
Term Loan/Revolver $ 134.4 $ 115.5 - Refinanced May 2003
with GECC as agent
7% Senior Notes 149.4 149.7 - Due June 2005 must be refinanced by March 2005
13% Senior Subordinated Notes 325.0 323.2 - Due August 2009
Preferred Equivalent Security 18.7 22.1 - 12% non-cash PIKs
Total Balance Sheet Debt $ 627.5 $ 610.5
========= ========
Cash on Hand $ 26.4 $ 35.2
========= ========
Net debt excluding cash/
preferred equivalent security $ 582.4 $ 553.3
========= ========
Net leverage 7.0X 5.7X
Financial Overview
- Credit Statistics
Covenant Requirements:
Minimum EBITDA
Until 9/30/2005 $75 Million
9/30/2005 to 9/30/2006 $80 Million
Remainder of Term $85 Million
Fixed Coverage Ratio .85x
Maximum Capital Expenditures $20 Million +
carryover
4th Quarter
2003 - Financial
LTM EBITDA $ 97.5
Total Debt $ 610.5
Total Leverage Ratio 6.3
Net Leverage Ratio 5.7
Fixed Coverage Ratio 1.05
Wrap-Up
Continued Cash Flow Generation
Operating improvements
Non-core asset sales
Offshore Production Opportunities
Focus on Capital Structure Improvements and Debt Reduction
