Exhibit 99.1
| Blount International, Inc. |
| 4909 SE International Way (97222 4679) |
| PO Box 22127 |
| Portland, OR 97269 2127 USA |
| (503) 653-8881 |
| FAX: (503) 653-4555 |
| |
NEWS RELEASE | |
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| Contact: | Calvin E. Jenness |
| | Senior Vice President |
| | and Chief Financial |
| | Officer |
| | 503-653-4573 |
| Release: | Immediately |
Blount Announces 2010 Third Quarter Results
· Third quarter results reflect execution of debt refinancing, purchase of SpeeCo, and sale of Gear Products
· Third quarter sales 28% higher than the third quarter of 2009, 17% higher excluding SpeeCo
· Operating Income of $20.7 million, with operating margins pressured by currency, commodity prices, and strategic initiatives
· Full year sales and operating income outlook updated
PORTLAND, OR, November 3, 2010: Blount International, Inc. [NYSE: BLT] (“Blount” or the “Company”) today announced results for the third quarter ended September 30, 2010, and updated its full year financial outlook for 2010.
Results for the Quarter Ended September 30, 2010
The Company’s sales in the third quarter of 2010 were $162.6 million, a 28.1% increase from the third quarter of 2009. Operating income for the third quarter of 2010 was $20.7 million compared to $20.2 million in the third quarter of 2009. Third quarter income from continuing operations was $10.6 million ($0.22 per diluted share) compared to $11.0 million ($0.23 per diluted share) in the third quarter of 2009.
2010 results include the operations of SP Companies, Inc. (“SpeeCo”) from the acquisition date of August 10, 2010 and exclude the results of Gear Products, Inc. (“Gear Products”) divested on September 30, 2010. Gear Products is reported as discontinued operations for all periods presented. With the divestiture of Gear Products, the Outdoor Products segment now represents 100% of the Company’s revenue and the Company’s only reportable segment.
Josh Collins, Chairman and Chief Executive Officer, commented on the results for the third quarter of 2010: “The third quarter was an active period for the Company. We acquired SpeeCo, refinanced our balance sheet and divested our remaining non-core asset, Gear Products. These actions are consistent with our strategic direction and will further strengthen the Company’s future financial performance. Additionally, we made further investments in the strategic programs initiated earlier in the year. These investments are targeted to increase future manufacturing efficiency and to improve our customer service levels. Our third quarter operating
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margins declined from the second quarter of this year as a result of these program costs, and from the negative impact of foreign exchange rates and steel pricing.”
Sales
In the third quarter of 2010, sales were 17.2% higher than the third quarter of 2009 (all sales increases are quoted excluding sales related to SpeeCo). International sales grew 19.8% and domestic sales grew 10.7% on a year-over-year basis. Sales to original equipment manufacturers were up 30.7% and replacement sales increased 13.6%. Foreign exchange rate changes had an unfavorable year-over-year impact on sales, primarily driven by a stronger U.S. dollar compared to most of the European currencies. The change to Outdoor Products sales in the comparable periods is illustrated below, with the addition of SpeeCo sales represented entirely as unit volume increase:
% Change in Sales from Prior Year: | | | |
Unit Volume | | +29.2 | % |
Selling Price/Mix | | 0.0 | % |
Foreign Exchange | | (1.1 | )% |
Total | | 28.1 | % |
Sales order backlog increased to $130.4 million at September 30, 2010, compared to $80.3 million at September 30, 2009, and $78.1 million as of December 31, 2009. SpeeCo backlog represents $10.3 million of the total backlog at September 30, 2010.
Gross Profit
Gross profit was $50.4 million compared to $43.8 million in the third quarter of 2009. The increase in gross profit was driven primarily by the increase in sales volume, including the benefits of acquiring SpeeCo mid-quarter. The favorable impact of higher sales volumes was partially offset by unfavorable movement in foreign exchange rates, increased steel costs, non-cash expenses related to SpeeCo acquisition accounting, and charges taken in connection with pursuit of the Company’s strategic programs. A reconciliation of the third quarter 2010 gross profit and gross profit margin to both the third quarter of 2009 and the second quarter of 2010 is presented below:
% Change in Gross Profit and Related Margin | | Compared To | | Compared To | |
(dollars in millions) | | Third | | Second | |
(amounts may not sum due to rounding) | | Quarter 2009 | | Quarter 2010 | |
Base Period Gross Profit and Gross Profit Margin | | $ | 43.8 | | 34.5 | % | $ | 51.1 | | 35.3 | % |
Increase/ (Decrease) | | | | | | | | | |
Unit Volume, including SpeeCo | | 13.8 | | +0.6 | % | 4.7 | | (0.9 | )% |
Selling Price /Mix | | — | | 0.0 | % | 0.4 | | 0.2 | % |
Costs/Mix | | (1.6 | ) | (1.0 | )% | (1.5 | ) | (0.9 | )% |
Steel costs | | (1.0 | ) | (0.6 | )% | (1.4 | ) | (0.9 | )% |
Purchase accounting charges related to SpeeCo | | (1.6 | ) | (0.9 | )% | (1.6 | ) | (1.0 | )% |
Foreign Exchange | | (3.1 | ) | (1.6 | )% | (1.4 | ) | (0.8 | )% |
Total Change | | 6.6 | | (3.5 | )% | (0.7 | ) | (4.3 | )% |
2010 Gross Profit and Gross Profit Margin | | $ | 50.4 | | 31.0 | % | $ | 50.4 | | 31.0 | % |
Rising steel prices experienced in the second quarter of 2010 increased cost of sales in the third quarter as the finished goods incorporating the more expensive steel were sold. Execution of the Company’s strategy to streamline product offerings and the resulting manufacturing footprint resulted in charges totaling $1.3 million to cost of sales for inventory, which are included in the costs/mix line in the table above.
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Operating Income
Operating income increased $0.5 million to $20.7 million in the third quarter compared to the third quarter of 2009. The drivers of the change in operating income compared to both the third quarter of 2009 as well as the second quarter of 2010 are presented below:
| | Compared To | |
| | Third | | Second | |
% Change in Operating Income | | Quarter | | Quarter | |
(dollars in millions) | | 2009 | | 2010 | |
Base Period Operating Income: | | $ | 20.2 | | $ | 22.0 | |
Increase/ (Decrease) | | | | | |
Gross Profit | | 6.6 | | (0.7 | ) |
Outdoor Products SG&A | | (4.4 | ) | 0.4 | |
SpeeCo SG&A | | (1.0 | ) | (1.0 | ) |
Corporate SG&A and Other | | (1.0 | ) | (0.1 | ) |
Foreign Exchange | | 0.3 | | 0.1 | |
Total Change | | 0.5 | | (1.3 | ) |
2010 Operating Income | | $ | 20.7 | | $ | 20.7 | |
Outdoor Products-related SG&A increased compared to the third quarter of 2009 in a variety of areas. The Company experienced increased spending in advertising expense of $1.3 million and incremental compensation expense of $1.1 million, primarily driven by better operating results. Additionally, the Company made upfront investments in our efficiency efforts, along with more complete integration of the manufacturing of Carlton branded products, which resulted in incremental expenses of $0.8 million in the third quarter of 2010 compared to the third quarter of 2009. Costs related to recruitment, relocation, travel, and training were also up $0.5 million on a year-over-year basis as the Company returned to more normal spending levels in those areas.
The increase in corporate SG&A levels compared to the third quarter of 2009 was driven primarily by increased equity compensation and incentive compensation related to improved operating results.
Income from Continuing Operations
Third quarter 2010 income from continuing operations was affected by a non-recurring expense for the refinancing of debt in August and an income tax benefit reflecting the release of previously reserved income taxes for uncertain tax positions. Overall, the change to income from continuing operations for this year’s third quarter compared to the third quarter of 2009 is illustrated in the table below:
Change in income from continuing operations:
| | | | | | Income | | | |
| | | | Income | | From | | Diluted | |
(amounts in millions except per share data) | | Pre-tax | | Tax | | Continuing | | earnings | |
(amounts may not sum due to rounding) | | Income | | Effect | | Operations | | per share | |
2009 Third Quarter Results | | $ | 14.5 | | $ | 3.5 | | $ | 11.0 | | $ | 0.23 | |
Change due to | | | | | | | | | |
Increased operating income | | 0.5 | | 0.1 | | 0.3 | | 0.01 | |
Increased net interest expense | | (1.6 | ) | (0.4 | ) | (1.2 | ) | (0.02 | ) |
Refinancing related expenses | | (7.1 | ) | (1.7 | ) | (5.4 | ) | (0.11 | ) |
Other income (expense), net | | (0.5 | ) | (0.1 | ) | (0.3 | ) | (0.01 | ) |
Change in income tax reserve and rate | | — | | (6.2 | ) | 6.2 | | 0.13 | |
2010 Third Quarter Results | | $ | 5.8 | | $ | (4.8 | ) | $ | 10.6 | | $ | 0.22 | |
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As of September 30, 2010 the Company had net debt of $283.7 million, up $31.6 million from September 30, 2009 and up $52.9 million from December 31, 2009. Net debt has increased primarily as a result of the acquisition of SpeeCo.
Discontinued Operations
Discontinued operations reflect the operating results and the gain on the September 30, 2010 sale of the Company’s former Gear Products subsidiary. Income from discontinued operations in the third quarter of 2010 was $5.1 million ($0.10 per diluted share) primarily from the gain on sale. The Company received approximately $25 million in cash on the closing date of the transaction and expects net cash proceeds to be approximately $18 million after final settlement of the purchase price and payment of transaction related costs and income taxes on the gain.
2010 Financial Outlook
The Company’s fiscal year 2010 outlook for continuing operations is for sales to range between $600 million and $610 million, including the addition of SpeeCo for the period from August 10, 2010 to the end of the year and excluding Gear Products for the entire year. This sales range is consistent with previous guidance as it relates to continuing operations. The outlook for 2010 full year sales from continuing operations assumes full year growth between 17% and 19% compared to 2009, excluding the added sales from SpeeCo. Operating income for 2010 is expected to range from $83 million to $86 million. The outlook assumes a $6 million to $7 million reduction in full-year operating income related to changes in foreign currency compared to 2009 and full-year steel costs that are slightly favorable compared to full-year 2009 levels. Before payment of income taxes on the sale of Gear Products, free cash flow (cash from operating activities less net capital spending) is expected to be between $37 million and $43 million in 2010. Income taxes related to the gain on Gear Products are estimated to be $6.5 million. Net interest expense is expected to be between $25 million and $26 million. The effective income tax rate for continuing operations for the fourth quarter of 2010 is expected to be between 33% and 36%.
A reconciliation of the current 2010 full-year outlook for sales and operating income compared to the outlook given at the conclusion of the second quarter of 2010 is provided in the table below. Additionally, estimated 2010 full-year pro forma amounts are provided as if the acquisition of SpeeCo and disposition of Gear Products had both occurred on January 1, 2010.
| | | | Operating | |
(amounts in millions) | | Sales | | Income | |
Previous 2010 Outlook Mid-Point Estimates | | $ | 590.0 | | $ | 88.5 | |
Change in outlook due to | | | | | |
Addition of SpeeCo | | 31.1 | | 1.4 | |
Elimination of Gear Products | | (16.8 | ) | (2.7 | ) |
Change in base business outlook | | 0.7 | | (2.7 | ) |
Current 2010 Outlook Mid-Point Estimates | | $ | 605.0 | | $ | 84.5 | |
| | | | | |
Current 2010 Outlook Mid-Point Estimate | | $ | 605.0 | | $ | 84.5 | |
Pro forma adjustment | | | | | |
SpeeCo Results Prior to August 10, 2010 Acquisition | | 45.2 | | 3.6 | |
Pro forma 2010 Full Year Mid-Point Outlook | | $ | 650.2 | | $ | 88.1 | |
| | | | | |
Pro forma 2010 Full Year Adjusted EBITDA | | | | $ | 125.0 | |
The above amounts include $3.4 million and $6.5 million of purchase accounting amortization and acquisition related charges for SpeeCo for the current 2010 outlook mid-point estimate and pro forma 2010 full year outlook, respectively. Pro forma 2010 Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is a non-GAAP measure and is reconciled to Operating Income in the attached financial data table.
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Blount is a global manufacturer and marketer of replacement parts, equipment, and accessories for the forestry, lawn and garden, farm and ranch, and construction industries, and is the market leader in manufacturing saw chain and guide bars for chain saws. Blount sells its products in more than 100 countries around the world. For more information about Blount, please visit our website at http://www.blount.com.
“Forward looking statements” in this release, including without limitation the Company’s “outlook,” “expectations,” “beliefs,” “plans,” “indications,” “estimates,” “anticipations,” “guidance” and their variants, as defined by the Private Securities Litigation Reform Act of 1995, are based upon available information and upon assumptions that the Company believes are reasonable; however, these forward looking statements involve certain risks and should not be considered indicative of actual results that the Company may achieve in the future. In particular, among other things, guidance given in this release is expressly based upon certain assumptions concerning market conditions, foreign currency exchange rates, and raw material costs, especially with respect to the price of steel, the presumed relationship between backlog and future sales trends and certain income tax matters, as well as the uncertainty of the current global economic situation. To the extent that these assumptions are not realized going forward, or other unforeseen factors arise, actual results for the periods subsequent to the date of this announcement may differ materially.
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Blount International, Inc. Financial Data (Unaudited)
Condensed Consolidated Statements of Income | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(In thousands, except per share data) | | 2010 | | 2009 | | 2010 | | 2009 | |
Sales | | $ | 162,581 | | $ | 126,923 | | $ | 440,498 | | $ | 348,473 | |
Cost of sales | | 112,174 | | 83,081 | | 289,900 | | 234,490 | |
Gross profit | | 50,407 | | 43,842 | | 150,598 | | 113,983 | |
Selling, general, and administrative expenses | | 29,702 | | 23,113 | | 86,560 | | 70,850 | |
Gain on sale of land and building | | — | | — | | — | | (2,701 | ) |
Plant closure and severance costs | | — | | 482 | | — | | 6,886 | |
Operating income | | 20,705 | | 20,247 | | 64,038 | | 38,948 | |
Interest expense, net of interest income | | (7,713 | ) | (6,124 | ) | (20,565 | ) | (18,326 | ) |
Other income (expense), net | | (7,189 | ) | 368 | | (7,221 | ) | 406 | |
Income from continuing operations before income taxes | | 5,803 | | 14,491 | | 36,252 | | 21,028 | |
Provision (benefit) for income taxes | | (4,757 | ) | 3,491 | | 7,207 | | 5,378 | |
Income from continuing operations | | $ | 10,560 | | $ | 11,000 | | $ | 29,045 | | $ | 15,650 | |
Income from discontinued operations, net | | 5,053 | | 342 | | 5,793 | | 881 | |
Net income | | $ | 15,613 | | $ | 11,342 | | $ | 34,838 | | $ | 16,531 | |
| | | | | | | | | |
Basic income per share: | | | | | | | | | |
Continuing operations | | $ | 0.22 | | $ | 0.23 | | $ | 0.61 | | $ | 0.33 | |
Discontinued operations | | 0.11 | | 0.01 | | 0.12 | | 0.02 | |
Basic income per share: | | $ | 0.33 | | $ | 0.24 | | $ | 0.73 | | $ | 0.35 | |
Diluted income per share: | | | | | | | | | |
Continuing operations | | $ | 0.22 | | $ | 0.23 | | $ | 0.60 | | $ | 0.32 | |
Discontinued operations | | 0.10 | | — | | 0.12 | | 0.02 | |
Diluted income per share: | | $ | 0.32 | | $ | 0.23 | | $ | 0.72 | | $ | 0.34 | |
Shares used for per share computations (in 000’s): | | | | | | | | | |
Basic | | 47,902 | | 47,766 | | 47,844 | | 47,751 | |
Diluted | | 48,424 | | 48,271 | | 48,364 | | 48,210 | |
Condensed Consolidated Balance Sheets | | September 30, | | December 31, | |
(In thousands) | | 2010 | | 2009 | |
Assets: | | | | | |
Cash and cash equivalents | | $ | 91,000 | | $ | 55,070 | |
Accounts receivable | | 85,651 | | 74,475 | |
Inventory | | 103,730 | | 78,179 | |
Other current assets | | 28,494 | | 29,490 | |
Property, plant and equipment, net | | 108,051 | | 114,470 | |
Other non-current assets | | 191,388 | | 131,882 | |
Total assets | | $ | 608,314 | | $ | 483,566 | |
Liabilities: | | | | | |
Current maturities of long-term debt | | $ | 7,687 | | $ | 5,013 | |
Other current liabilities | | 104,645 | | 82,654 | |
Long-term debt, net of current maturities | | 367,013 | | 280,852 | |
Other long-term liabilities | | 97,939 | | 121,787 | |
Total liabilities | | 577,284 | | 490,306 | |
Stockholders’ equity (deficit) | | 31,030 | | (6,740 | ) |
Total liabilities and stockholders’ equity (deficit) | | $ | 608,314 | | $ | 483,566 | |
| | | | | |
Net debt (in thousands) (Current maturities plus Long-term debt less Cash and cash equivalents) | | $ | 283,700 | | $ | 230,795 | |
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Blount International, Inc. Financial Data (Unaudited)
Free Cash Flow | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(In thousands) | | 2010 | | 2009 | | 2010 | | 2009 | |
Net cash provided by operating activities | | $ | 1,307 | | $ | 10,782 | | $ | 32,698 | | $ | 28,855 | |
Net purchases of property, plant and equipment | | (5,306 | ) | (4,510 | ) | (13,890 | ) | (9,455 | ) |
Free cash flow | | $ | (3,999 | ) | $ | 6,272 | | $ | 18,808 | | $ | 19,400 | |
Segment Information | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(In thousands) | | 2010 | | 2009 | | 2010 | | 2009 | |
Total sales | | $ | 162,581 | | $ | 126,923 | | $ | 440,498 | | $ | 348,473 | |
Operating income: | | | | | | | | | |
Outdoor products | | $ | 26,985 | | $ | 25,506 | | $ | 82,952 | | $ | 56,020 | |
Other and corporate expense | | (6,280 | ) | (5,259 | ) | (18,914 | ) | (17,072 | ) |
Operating income | | $ | 20,705 | | $ | 20,247 | | $ | 64,038 | | $ | 38,948 | |
Pro forma Adjusted EBITDA Outlook | | Full Year | |
(In thousands) | | 2010 | |
2010 Operating Income Outlook Mid-Point Estimate | | $ | 84,500 | |
Operating income of SpeeCo prior to August 10, 2010 acquisition | | 3,700 | |
Depreciation | | 22,000 | |
Amortization | | 7,500 | |
SpeeCo acquisition related charges | | 500 | |
Stock compensation | | 3,200 | |
Inventory charges and asset impairment related to production efficiency programs | | 3,100 | |
Transaction costs | | 500 | |
Earnings before Interest, Taxes, Depreciation, Amortization and certain charges (“EBITDA”) | | $ | 125,000 | |
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