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|Blount Announces 2011 Second Quarter Results, Updates Outlook for 2011|
PORTLAND, Ore., Aug. 9, 2011 /PRNewswire via COMTEX/ --
Sales increased 39% from the second quarter of 2010, 24% excluding acquisitions
Operating income increased 13% from the second quarter of 2010, 18% excluding acquisitions
Full year outlook for 2011 sales and profit increased
Acquired PBL, a manufacturer of lawnmower blades, on August 5, 2011
Blount International, Inc. [NYSE: BLT] ("Blount" or the "Company") today announced results for the second quarter ended June 30, 2011 and updated its financial outlook for 2011.
Results for the Quarter Ended June 30, 2011
The Company's sales in the second quarter were $201.3 million, a 39.1% increase from the second quarter of 2010, and a 24.5% increase when excluding sales from recent acquisitions. Operating income for the second quarter of 2011 was $24.8 million compared to $22.0 million in the prior year. Second quarter income from continuing operations was $13.8 million ($0.28 per diluted share) compared to $9.9 million ($0.21 per diluted share) in the second quarter of 2010.
Josh Collins, Chairman and Chief Executive Officer, commented on the second quarter results: "Our business continued to grow at a rapid clip in the second quarter as strength in international markets and the benefit of recent acquisitions contributed to a 39% year over year increase in revenues. Profit levels were also up, although tempered by increased steel and unfavorable foreign currency movements as well as investment in our growth initiatives. During the quarter we stepped up our advertising spend, incurred incremental M&A costs, and further rationalized our brand portfolio. These investments, along with the successful upsizing of our credit facility in June, are consistent with our long term growth plan. We have updated our full year outlook for sales and operating income to reflect our June on order position and current view of the expected impacts of steel costs, foreign currency, and the recent acquisition of PBL."
Sales were 24.5% higher in the second quarter of 2011 compared to the second 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 35.0%, and domestic sales were down 0.3% on a year-over-year basis. Sales to original equipment manufacturers increased 6.2%, and replacement sales increased 30.1%. Price increases implemented since last year's second quarter and improved foreign currency exchange rate changes had a favorable year-over-year impact on sales of $6.1 million. The change in sales for the comparable periods is illustrated below, with sales from acquired businesses of $21.1 million presented entirely as acquired volume increase:
Sales order backlog was $175.0 million at June 30, 2011 compared to $133.7 million at December 31, 2010 and $121.2 million at June 30, 2010. Excluding backlog related to businesses acquired within the last 12 months, backlog increased $42.0 million, or 35% from the year-ago period.
Second quarter 2011 gross profit was $64.2 million compared to $51.1 million in the second quarter of 2010. The increase in gross profit was driven primarily by the increase in sales volume, including 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. Selling price increases offset most of the increases in product costs. A reconciliation of the second quarter 2011 gross profit and gross profit margin compared to the second 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 $1.8 from the first quarter of 2011 and increased by $0.5 from the second quarter of 2010. All other product costs, including manufacturing conversion costs and charges related to rationalizing our brand portfolio, increased $2.5 million in the second quarter of 2011 compared to the second quarter of 2010 as high demand and capacity constraints led to some inefficiencies.
Operating income increased to $24.8 million in the second quarter of 2011 from $22.0 million in the second quarter of 2010. The drivers of the change in operating income compared to the second quarter of 2010 are presented below:
SG&A increased by $5.5 million compared to the second quarter of 2010, excluding the impact of acquisitions and foreign exchange. The increase was driven primarily by increased advertising expenditures of $2.0 million to support new products and increased professional services costs of $1.3 million related to the Company's acquisition and continuous improvement programs. Additionally, increased compensation and benefits of $1.3 million reflect annual pay increases and increased headcount in support of the Company's growth.
Income from Continuing Operations
Second 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 second quarter of 2010. Overall, the change in income from continuing operations for the second quarter of 2011 compared to the second quarter of 2010 is illustrated in the table below:
Cash Flow and Debt
As of June 30, 2011, the Company had net debt of $264.3 million, a decrease of $9.1 million from March 31, 2011. The decline in net debt in the second quarter of 2011 resulted from the generation of cash by the Company's ongoing operations partially offset by costs related to the amendment of the Company's Senior Credit Facility in June. In the second quarter, the Company generated $15.7 million in free cash flow. The Company defines free cash flow as cash flows from operating activities less net capital spending. The ratio of net debt to pro-forma LTM EBITDA was 1.9x as of June 30, 2011.
On June 13, 2011, the Company amended the terms of its Senior Credit Facility. The amendment included an increase in facility size, the elimination of the Term B tranche, a lowering of variable interest rates and an extension of maturity dates, among other items. The amended terms will become effective in August and the Company will record a related charge to pretax income of approximately $3.9 million. The company expects to save approximately $7 million in annual cash interest cost based on current LIBOR rates and borrowing levels as a result of the amendment.
Acquisition of PBL
On August 5, 2011, the Company acquired PBL, a manufacturer of lawnmower blades and agricultural cutting parts primarily serving OEM customers in Europe with a plant in Mexico and in France. The acquisition of PBL increases cost-efficient lawnmower blade manufacturing capacity and establishes a presence in the European agriculture market. PBL's sales for the twelve months ended July 31, 2011 were approximately $33.2 million.
2011 Financial Outlook
The Company's fiscal year 2011 outlook is for sales to range between $775 million and $795 million and operating income to range between $104 million and $109 million. Our expectation for 2011 sales levels assumes a full year of SpeeCo ownership and growth for the overall business of between 10% and 12%, plus the benefit of the KOX and PBL businesses acquired in March and August, respectively. The expectation for 2011 operating income assumes that unfavorable foreign currency exchange rates and rising steel prices will reduce year-over-year operating income between $9 million and $11 million and includes estimated incremental non-cash charges as a result of acquisition accounting of approximately $5.0 million. Free cash flow is expected to range between $50 million and $55 million in 2011, after spending approximately $34 million to $38 million on capital expenditures. Net interest expense is expected to be $17 million in 2011 and the effective income tax rate for continuing operations is expected to be between 32% and 35% in 2011.
A comparison of 2010 actual results, 2010 pro forma results, pro forma results for the 12 months ended June 30, 2011, and the 2011 outlook mid-point 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.