Blount Announces 2011 First Quarter Results, Updates Outlook for 2011

PORTLAND, Ore., May 5, 2011 /PRNewswire/ -- Blount International, Inc. (NYSE: BLT) ("Blount" or the "Company") today announced results for the first quarter ended March 31, 2011 and updated its financial outlook for 2011.  

Results for the Quarter Ended March 31, 2011

The Company's sales in the first quarter were $180.9 million, a 35.9% increase from the first quarter of 2010, and a19.1% increase when excluding sales from recent acquisitions. Operating income for the first quarter of 2011 was $27.8 million compared to $21.4 million in the first quarter of 2010.  First quarter income from continuing operations was $15.6 million ($0.31 per diluted share) compared to $8.5 million ($0.18 per diluted share) in the first quarter of 2010.  

Josh Collins, Chairman and Chief Executive Officer, commented on the first quarter results: "Our first quarter operating results were solid as we experienced continued strong demand and benefited from our completed acquisitions. The increase in sales resulted in a significant increase in earnings and a corresponding improvement in the Company's financial leverage profile to its lowest level in over a decade. We are increasing our full year financial outlook for sales and operating income to reflect our increasing comfort with the performance of our acquisitions, as well as the significant order backlog that exists in our saw chain and accessories business. Our 2011 profitability outlook is tempered somewhat by volatility in steel prices and currency markets."

Sales

Sales were 19.1% higher in the first quarter of 2011 compared to the first quarter of 2010, excluding acquisitions (for comparability, all sales growth statistics are quoted excluding sales related to the SpeeCo and KOX acquisitions made in the last 12 months). International sales grew 17.9% and domestic sales were up 20.7% on a year-over-year basis. Sales to original equipment manufacturers increased 10.1%, and replacement sales increased 21.9%.  Foreign exchange rate changes had a favorable year-over-year impact on sales, primarily driven by a weaker U.S. Dollar compared to most foreign currencies. The change in sales for the comparable periods is illustrated below, with sales from acquired businesses of $22.3 million presented entirely as acquired volume increase:

Sales order backlog increased to $181.9 million at March 31, 2011 compared to $133.7 million at December 31, 2010 and $103.3 million at March 31, 2010. Excluding backlog related to businesses acquired within the last 12 months, backlog increased $71.5 million, or 69% from the year-ago period.

Gross Profit

First quarter 2011 gross profit was $60.0 million compared to $49.1 million in the first quarter of 2010. The increase in gross profit was driven primarily by the increase in sales volume, including that resulting from the addition of SpeeCo and KOX. The favorable impact of higher sales volumes was partially offset by year-over-year unfavorable movement in currency exchange rates and non-cash expenses related to acquisition accounting. A reconciliation of the first quarter 2011 gross profit and gross profit margin compared to the first quarter of 2010 is presented below:

The foreign exchange impact reflects the strength of both the Canadian Dollar and Brazilian Real compared to the U.S. Dollar and the associated impact on manufacturing conversion costs. Steel purchase prices were up slightly from the fourth quarter of 2010 but were in line with the first quarter of 2010. Product cost, including manufacturing conversion costs, increased $2.5 million in the first quarter of 2011 compared to the first quarter of 2010. The increase in product cost was driven by annual pay rate increases, incremental headcount brought on after the first quarter of 2010 to service increasing product demand, and costs related to the Company's continuing effort to streamline product offerings and improve efficiency.  The comparable gross margin in the first quarter of 2010 benefited significantly from the relatively quick upturn in volumes and related manufacturing leverage.

Operating Income

Operating income increased to $27.8 million in the first quarter of 2011 from $21.4 million in the first quarter of 2010.  The drivers of this change in operating income compared to the first quarter of 2010 are presented below:

SG&A increased by $4.5 million in total compared to the first quarter of 2010. The increase was driven primarily by incremental SG&A at acquired businesses, acquisition activity, and increased compensation and benefits driven both by merit pay increases and increased headcount in support of the Company's strategic programs and improved business conditions.

Income from Continuing Operations

First quarter 2011 income from continuing operations improved primarily due to improved operating income, a reduction in net interest expense, and a reduction in income tax rates compared to the first quarter of 2010. Overall, the change to income from continuing operations for the first quarter of 2011 compared to the first quarter of 2010 is illustrated in the table below:

Cash Flow and Debt

As of March 31, 2011, the Company had net debt of $273.5 million, an increase of $4.2 million from December 31, 2010. Net debt increased in the first quarter of 2011 primarily as a result of using cash for the acquisition of KOX, partially offset by the generation of cash by the Company's ongoing operations. In the first quarter, the Company generated $11.5 million in free cash flow, excluding the impact of acquiring KOX. The Company defines free cash flow as cash flows from operating activities less net capital spending. The ratio of net debt to pro-forma EBITDA was 2.0x as of March 31, 2011.  

2011 Financial Outlook

The Company's fiscal year 2011 outlook is for sales to range between $735 million and $755 million and operating income to range between $105 million and $110 million. Our expectation for 2011 sales levels assumes a full year of SpeeCo ownership and growth for the overall business of between 9% and 12%, plus the benefit of the recently acquired KOX business, which is expected to contribute net sales of approximately $25 million from the March 1, 2011 acquisition date. The expectation for 2011 operating income assumes that unfavorable foreign currency exchange rates and rising steel prices will increase costs between $7 million and $10 million and includes estimated incremental non-cash charges as a result of acquisition accounting of approximately $2 million. Free cash flow is expected to range between $45 million and $50 million in 2011 after spending approximately $32 million to $38 million on capital expenditures. Net interest expense is expected to be $20 million in 2011, and the effective income tax rate for continuing operations is expected to be between 33% and 37% in 2011.

A comparison of 2010 actual results, 2010 pro forma results (incorporating SpeeCo's results for the full year), pro forma results for the 12 months ended March 31, 2011 (incorporating SpeeCo and KOX for the entire period), and the 2011 outlook mid-point estimates for key operating indicators is provided in the table below.

Adjusted Earnings before Interest, Taxes, Depreciation, Amortization, and certain adjustments ("Adjusted EBITDA") is a non-GAAP measure and is reconciled to Operating Income in the attached financial data table.

Blount is a global manufacturer and marketer of replacement parts, equipment, and accessories for the forestry, lawn and garden; farm, ranch and agriculture; and construction markets, and is the market leader in manufacturing saw chain and guide bars for chainsaws.  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 being subject to 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.

SOURCE Blount International, Inc.