third quarter 2015 financial results...
TRANSCRIPT
Certain statements contained in this presentation are forward looking based on
assumptions of future events which may not prove to be accurate. They involve risk
and uncertainty. Actual results may differ materially from those expected or implied.
We direct you to the cautionary statements detailed in our related press release and
recent SEC filings.
Cautionary Statements
2
Business Segments
3
Concrete Cutting and Finishing (“CCF”)
Farm, Ranch, and Agriculture (“FRAG”)
Forestry, Lawn, and Garden (“FLAG”)
• LTM 09/30/15 sales of $33.4 million (4% of total) • Cost effective way to cut concrete and ductile iron • Presented in Corporate and Other • Chain saws and diamond-coated saw chain for cutting concrete
and ductile iron pipe • Pentruder® high-performance concrete cutting systems
distribution acquired in the first quarter of 2014
• LTM 09/30/15 sales of $578.8 million (67% of total) • Market leader in saw chain and guide bars • Revenues are approximately 75% – 80% replacement • Wide-ranging geographic sales mix with approximately 70% of
sales outside of North America
• LTM 09/30/15 sales of $247.8 million (29% of total) • Woods and TISCO sell direct to approximately 11,000 dealers in
North America, giving the FRAG segment meaningful presence • Adjacent distribution to FLAG segment provides cross-selling
opportunities • Nearly all sales are in North America, representing opportunities
for international expansion
$944.8$860.1
$138.0 $110.0
LTM 12/31/2014 LTM 09/30/2015
Net Sales Adjusted EBITDA
$245.2
$209.2
$38.2 $29.8
Q3 14 Q3 15Net Sales Adjusted EBITDA
Third Quarter 2015 Results
4
• Third quarter sales down $36.1 million, or 14.7%, compared to Q3 2014 − Unfavorable foreign currency translation of $10.9
million − Lower sales volumes of $26.1 million
• Adjusted EBITDA decreased by $8.4 million compared to Q3 2014 − Manufacturing costs unfavorable $5.6 million on
lower volumes • Restructuring costs of $2.1 million not included in
Adjusted EBITDA expected to generate $8 million to $10 million in annual savings
• LTM 09/30/2015 sales decreased $84.7 million, or 9.0%, from LTM 12/31/2014 − Decline driven by unfavorable foreign currency
translation and impact on volumes from U.S. Dollar strength
• Adjusted EBITDA decreased $28.0 million, or 20.3%, compared to LTM 12/31/2014 − Volume unfavorable $14.6 million − Selling price unfavorable $1.0 million − Manufacturing costs unfavorable $16.4 million on
lower volume and plant sourcing adjustments
Third Quarter 2015
Last Twelve Months
($ millions)
($ millions)
2015 Sales by Region
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Year-over-year third quarter sales change
North America Q3 2015 Sales $ 118.0 vs. 2014 -6.6% Europe/Russia Q3 2015
Sales $48.2 vs. 2014 -20.7%
Rest of World Q3 2015 Sales $16.9 vs. 2014 -29.0%
Asia Pacific Q3 2015 Sales $26.0 vs. 2014 -24.1%
($ millions)
LTM LTM Sales by Category 12/31/14 09/30/15 Forestry $529 $470 Lawn and Garden 116 109 Farm, Ranch, and Agriculture 269 248 Concrete Cutting and Finishing 31 33 Total Sales $945 $860
Third Quarter 2015 Results by Segment
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FLAG
FRAG
___________________ 1) Reflects segment contribution to operating income including $1.3 million of non-cash impairment charges in
the FRAG segment related to purchased intangible assets 2) Amounts may not sum due to rounding 3) LTM 09/30/2015 contribution to profit includes $83.0 million of non-cash impairment of purchased intangible
assets in the FRAG segment
• Year-over-year FLAG sales decreased 18.5% • Foreign exchange translation unfavorable
$10.5 million • Volume down $19.5 million
• Adjusted EBITDA lower compared to prior year − Costs higher due to lower plant utilization − Lower sales volume − Partially offset by lower incentive compensation
expense and higher average selling prices
• Year-over-year FRAG sales decreased 9.6% − Lower volumes of agriculture attachments and log
splitters − Partially offset by higher average selling prices of
$0.5 million
• Adjusted EBITDA lower compared to prior year − Sales volume lower by $1.7 million
$ millions 2
LTM3
Q3 14 Q3 15 $ % 09/30/2015Sales $78.6 $71.1 ($7.5) -9.6% $247.9Contribution to Profit1 $2.2 $2.1 ($0.1) -4.1% ($83.1)% of Sales 2.8% 3.0% -33.5%
Adjusted EBITDA $7.8 $7.2 ($0.6) -7.9% $15.2% of Sales 9.9% 10.1% 6.1%
Year-over-Year Change
$ millions 2
LTM
Q3 14 Q3 15 $ % 09/30/2015Sales $159.1 $129.7 ($29.4) -18.5% $578.8Contribution to Profit $26.5 $17.8 ($8.7) -32.9% $78.8% of Sales 16.7% 13.7% 13.6%
Adjusted EBITDA $33.8 $24.3 ($9.4) -27.9% $105.8% of Sales 21.2% 18.8% 18.3%
Year-over-Year Change
($ millions)
• Positive Q3 2015 free cash flow of $26.0 million versus $37.9 million in Q3 2014 − Free cash flow up sequentially in Q3 2015 to $26.0 million from $11.7 million in Q2 2015 − Operating cash flow in Q3 2015 was $12.5 million lower primarily on lower profit compared to
Q3 2014 − Capital spending in Q3 2015 increased by $1.6 million compared to Q2 2015 mostly on new
product introduction related projects
Free Cash Flow
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Third Quarter 2015
$37.9
$26.0
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Q3 14 Q3 15
$44.9
$10.8
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
LTM 12/31/2014 LTM 09/30/2015
($ millions) 1
Operating Cash Flow $3.4 ($11.4) $21.4 $37.3Capital Expenditures, Net (10.4) (8.9) (9.7) (11.3) Free Cash Flow ($7.0) ($20.3) $11.7 $26.0
Other / FX4 1.1 (20.6) (9.1) 2.2
Net Debt Increase/(Decrease) $5.9 $40.9 ($2.6) ($28.2)
$384.2$421.8 $436.0
$392.1
$356.9$397.8 $395.2
$367.0
2.8x 3.3x
3.7x 3.6x
2.6x 3.1x 3.3x 3.3x
Q4 14 Q1 15 Q2 15 Q3 15
Debt Net Debt Debt / LTM EBITDA Net Debt / LTM EBITDA
Debt & Leverage
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___________________ 1) Amounts may not sum due to rounding; certain amounts have been reclassified to conform with current year presentation. 2) Total debt less cash 3) LTM EBITDA represents earnings before interest, taxes, depreciation, amortization, and other adjustments for the last twelve months. 4) Q2 15 “other” primarily reflects $4.4 million in share repurchase, $5.2 million of debt issuance costs, and the impact of foreign currency translation
on cash.
• Net debt reduced by $28 million in the third quarter of 2015
$136.4 $123.5 $138.0 $102.5
$927.7 $900.6 $944.8$830.0
2012Actual
2013Actual
2014Actual
2015 Outlook
EBITDA Sales
2015 Outlook
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• 2015 full year sales outlook in the range of $820 million to $840 million − Includes a FLAG sales decrease of 13% – 14% versus 2014 full year, driven by foreign currency
exchange rate translation and demand impacts from U.S. Dollar strength − Includes a FRAG sales decrease of 9% – 13% versus 2014 full year on soft global agriculture
machinery market dynamics
• Full-year EBITDA outlook in the range of $100 million to $105 million • Full-year Free Cash Flow outlook in the range of $10 million to $20 million • Net leverage expected to be approximately 3.6x EBITDA as of 12/31/15
($ millions)
Adjusted EBITDA From Continuing Operations
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______________ 1) 2011 pro forma includes full twelve months of results for KOX, PBL, and Woods/TISCO 2) 2015 Outlook does not include potential share repurchases for the period October 1, 2015 through December 31, 2015 3) Amounts may not sum due to rounding
($ millions) 3
Actual2011
Pro Forma1
2011Actual2012
Actual2013
Actual2014
Outlook2
2015Net Sales $831.6 $975.5 $927.7 $900.6 $944.8 $830.0
Operating income $98.0 $110.0 $79.3 $37.5 $64.2 ($11.9)Depreciation 23.5 26.9 28.6 33.5 31.4 31.0Non-cash acquisition accounting 15.6 22.0 16.0 14.8 13.6 12.0Non-cash impairment of purchased intangible assets - - - 24.9 21.1 63.3 Non-cash stock compensation 4.4 4.4 5.6 5.6 4.9 6.0
Subtotal 141.5 163.3 129.5 116.2 135.2 100.4
Other AdjustmentsInventory / asset charge offs 0.5 0.5 - 1.2 - - M&A expense 4.4 4.4 - - - - Facility closure & restructuring - - 7.0 6.0 2.8 2.1 CEO transaction / transition costs 0.5 0.5 - - - -
Adjusted EBITDA $146.9 $168.7 $136.4 $123.5 $138.0 $102.5
CAPEX, net 38.0 41.6 52.9 29.4 37.1 36.5Adjusted EBITDA less CAPEX, net $108.9 $127.1 $83.5 $94.1 $100.9 $66.0
Net debt (total debt less cash) $468.2 $468.2 $466.5 $395.2 $356.9 $369.5Net debt/Adjusted EBITDA 3.2x 2.8x 3.4x 3.2x 2.6x 3.6x
Adjusted EBITDA From Continuing Operations
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______________
1) Amounts may not sum due to rounding 2) Free Cash Flow equals Operating Cash less Net Capital Expenditures (“CAPEX”)
($ millions) 1
Q3 14 Q3 15Net Sales $245.2 $209.2
Operating income $23.5 $14.1Depreciation 8.1 7.6Non-cash acquisition accounting 3.5 3.0Non-cash impairment of purchased intangible assets 1.4 1.3 Non-cash stock compensation 1.4 1.6
Subtotal 37.9 27.6Facility closure & restructuring 0.3 2.1
Adjusted EBITDA $38.2 $29.8
CAPEX, net 11.9 11.3Adjusted EBITDA less CAPEX $26.3 $18.4
Net debt (total debt less cash) $351.1 $367.0Net debt/LTM Adjusted EBITDA 2.7x 3.3x
Operating Cash $49.8 $37.3Less CAPEX, net 11.9 11.3
Free Cash Flow2 $37.9 $26.0
Adjusted EBITDA From Continuing Operations
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______________
1) Amounts may not sum due to rounding
($ millions) 1
Forestry, Lawn & Garden
Farm, Ranch &
AgricultureCorporate & Other
Total Blount
Forestry, Lawn & Garden
Farm, Ranch &
AgricultureCorporate & Other
Total Blount
Forestry, Lawn & Garden
Farm, Ranch &
AgricultureCorporate & Other
Total Blount
Net Sales $159.1 $78.6 $7.5 $245.2 $129.7 $71.1 $8.4 $209.2 $578.8 $247.9 $33.4 $860.1
Operating income/(loss) $26.5 $2.2 ($5.2) $23.5 $17.8 $2.1 ($5.8) $14.1 $78.8 ($83.1) ($20.5) ($24.8)Depreciation 6.8 1.2 0.1 8.1 6.3 1.1 0.2 7.6 25.8 4.9 0.6 31.3 Non-cash acquisition accounting 0.4 2.9 0.2 3.5 0.2 1.2 0.2 1.7 1.1 10.5 0.7 12.4 Non-cash impairment purch. intangibles - 1.4 - 1.4 - 1.3 - 1.3 - 83.0 - 83.0 Non-cash stock compensation - - 1.4 1.4 - - 1.6 1.6 - - 5.5 5.5
Subtotal 33.8 7.8 (3.6) 37.9 24.4 5.8 (3.8) 26.3 105.8 15.2 (13.7) 107.3
Other AdjustmentsFacility closure & restructuring - - 0.3 0.3 - - 2.1 2.1 - - 2.6 2.6
Adjusted EBITDA $33.8 $7.8 ($3.3) $38.2 $24.4 $5.8 ($1.7) $28.4 $105.8 $15.2 ($11.0) $110.0Adjusted EBITDA Margin 21.2% 9.9% n.m. 15.6% 18.8% 8.2% n.m. 13.6% 18.3% 6.1% n.m. 12.8%
Q3 14 Q3 15 LTM 09/30/2015
Sales and EBITDA Comparison
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______________
1) Amounts may not sum due to rounding
($ millions) 1
Q3 14 Q3 15 $ % LTM 12/31/2014 LTM 09/30/2015 $ %Sales
FLAG $159.1 $129.7 ($29.4) -18.5% $644.8 $578.8 ($66.0) -10.2%FRAG 78.6 71.1 (7.5) -9.6% 269.2 247.9 (21.3) -7.9%Other 7.5 8.4 0.9 11.9% 30.8 33.4 2.6 8.4%
Total sales $245.2 $209.2 ($36.1) -14.7% $944.8 $860.1 ($84.7) -9.0%
Adjusted EBITDAFLAG $33.8 $24.3 ($9.4) -27.9% $129.8 $105.8 ($24.1) -18.5%FRAG 7.8 7.2 (0.6) -7.9% 19.9 15.2 (4.7) -23.7%Other (3.3) (1.7) 1.6 n.m. (11.8) (11.0) 0.7 n.m.
Adjusted EBITDA $38.2 $29.8 ($8.4) -22.1% $138.0 $110.0 ($28.0) -20.3%Adjusted EBITDA Margin 15.6% 14.2% 14.6% 12.8%
Change Change