Company Overview February 11, 2014

Transcription

1 Company Overview February 11, 2014

2 Cautionary Statements 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 recent news releases and SEC filings. 2

3 Index Corporate Overview 4 BLT Investor Overview Business Segments Core Competencies World-wide Sales & Distribution Network Manufacturing and Sourcing Capabilities Product Development Business Segments 11 Forestry End Market and Drivers Lawn and Garden End Market Farm, Ranch, and Agriculture End Market Construction End Market Financial Overview 18 Financial Performance Estimated Full Year 2013 Results Segment Performance Estimated Full Year 2013 Results by Segment Debt and Leverage 2014 Outlook Strategy and Corporate Goals 23 Mission, Vision, and Values Corporate Strategy A Look at Blount in 2018 Business Segment Strategies Key Investment Highlights Appendix 34 Page 3

4 Corporate Overview 4

5 BLT Investor Overview Blount International, Inc. Headquartered in Portland, Oregon $ millions Financial Performance (1) Business: We design, manufacture, and market replacement parts and equipment for consumers and professionals in select global end markets, including forestry, lawn, and garden ( FLAG ); farm, ranch, and agriculture ( FRAG ); and concrete cutting and finishing ( CCF ). 3-Year Stock Price (2) (1) Pro forma for certain adjustments; 2011 and 2012 pro forma (PF) include full twelve months of results for SpeeCo, KOX, PBL and Woods. (2) Outdoor Power Equipment Index includes Husqvarna, Emak, Toro, Briggs & Stratton, and Alamo Group 5

6 Business Segments Forestry, Lawn, and Garden LTM 12/31/13 estimated sales of $613 million (68% 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 Farm, Ranch, and Agriculture LTM 12/31/13 estimated sales of $260 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 longer-term opportunities for international expansion Concrete Cutting and Finishing LTM 12/31/13 estimated sales of $27 million (3% 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 *Information contained within this presentation are estimates and unaudited. Actual 2013 financial results are expected to be released in March

7 Core Competencies We have significant assets and competitive advantages in the following core competencies: Manufacturing High-volume, small metal parts, particularly with a cutting edge Manufacturing Distribution Global sales and distribution infrastructure reaching OEMs and aftermarket via multiple channels Distribution Product Development Product Development Design and engineering of cutting and cuttingrelated products 7

8 World-wide Sales & Distribution Network World-wide distribution reaches all end-use segments Traditional two-step distribution through distributor/dealer network Dealer direct in select regions Mass merchants End-user direct OEMs globally Diversified end-user base 8

9 Manufacturing & Sourcing Capabilities Manufacturing capabilities 1 Nearly 220 million feet of saw chain More than 15 million guide bars More than 15 million lawn mower blades More than 100 thousand log splitters Current saw chain capacity weighted toward North America; migrating toward regionally distributed plants Expanding China facility Planning East Europe facility Sourcing offices North America China Europe (1) With the consolidation of two Portland, Oregon manufacturing facilities (with one facility closing) by the end of 2013, Blount saw chain manufacturing capabilities is approximately 220 million feet. 9

10 Product Development Research and Development group established to develop break-through products Consists of more than 40 engineers, technicians, managers focused on developing revolutionary products for our end markets Concept development based on market/customer research and solving unmet needs Recent products: OREGON 40V MAX Cordless Chain Saw, String Trimmer/Edger, Hedge Trimmer, and Pole Saw, as well as PowerSharp, PowerGrit, and others Marketing groups design and develop evolutionary products within existing product families More than 80 design engineers and marketing specialists across company Concept development based on customer research Representative New Products OREGON 40V Cordless Tools: PowerSharp PowerGrit Chain Saw, Pole Saw, String Trimmer Edger, Hedge Trimmer 10

11 Business Segments 11

12 Forestry End Market Forestry sales are approximately 80% of FLAG segment Blount manufactures and sells saw chain, guide bars, sprockets, and other accessories Sales are approximately 75% replacement (primarily traditional dealer channel) and 25% OEM OREGON is largest brand; also market under Carlton, KOX and Tiger brands Largest competitor is a chain saw OEM; many small competitors offer low-end products Estimated market share of approximately 60% in saw chain Global sales and distribution network is key success factor Long-term relationships with 35+ OEMs and 300+ distributors KOX acquisition (2011) expanded distribution channel to end-user direct Design and engineering capabilities ensure we are continually innovating World-wide manufacturing 1 Capacity for nearly 220 million feet of chain / more than 15 million guide bars United States, Canada, Brazil, China Representative Products Saw Chain PowerSharp Chain Guide Bars Sprockets (1) With the consolidation of two Portland, Oregon manufacturing facilities (with one facility closing) by the end of 2013, Blount saw chain manufacturing capabilities is approximately 220 million feet. 12

13 Forestry Market Drivers Saw Chain Market Size 2012 estimated market size of approximately 390 million feet 1 25-year CAGR of 4% 5% Growth driven by consumer penetration and shift toward chain saw cutting (vs. hand cutting) Blount is the largest global producer of saw chain Competitor A is a chain saw OEM Low cost country manufacturers have gained share over the past decade Chain Saw Growth Growing global market with an estimated 17.3 million power head units sold in 2012, representing a compound annual growth rate of 7.4% since 2000 Gas saws growing at 8.2% Electric saws growing at 5.3% Blount benefits from initial sale, plus recurring replacement stream Total Saw Chain Market Share Source: Management estimates (1) As of 2012 full year data. Global Saw Chain Market: million feet million feet 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Chain Saw Market 2000 to Electric Gas 13

14 Lawn and Garden End Market Lawn and Garden sales Approximately 20% of FLAG segment Outdoor power equipment replacement parts and lawnmower/edger blades Manufactures lawnmower/edger blades in Kansas City, Missouri, USA, and Civray, France facilities Other products and accessories sourced from third parties Sales roughly 35% lawnmower blades and 65% parts/accessories Approximately 10,000 SKUs; most non-blade SKUs are vended PBL acquisition (Q3 2011) expanded blade manufacturing capacity Leverages Blount s global procurement, sales and distribution network Approximately 6% global market share; approximately 9% U.S. market share Market consolidation opportunities exist Representative Products Lawnmower Blades Edger Blades Trimmer Heads, Nylon Trimmer Line Air Filters, Spindles, and Other Replacement Parts 14

15 Farm, Ranch, and Agriculture End Market FRAG division created with acquisition of SpeeCo (2010). Woods/TISCO and PBL acquisitions (2011) expanded product offering Products include tractor attachments and implements, tractor parts, log splitters, diggers, augers, threepoint linkage equipment, accessories, OEM custom components, and agricultural blade manufacturing Today, more than 90% of sales are in the United States FRAG business unit offers opportunities in cross-selling, sourcing, supply chain, and back-office ~70% of FRAG end market users own chain saws; large replacement parts / accessories component Distribution adjacencies and overlap with FLAG Further acquisition opportunities in North America, Europe, and Brazil Positive macro dynamics Growing size and affluence of world population increasing global food demand Ruralist trends increasing number of small farms in U.S. Representative Products Tractor Attachments Log splitters 3-Point Digger Tractor Parts 3-Point Linkage Components 15

16 FRAG Positive Macro Dynamics World Population Growing in Size and Affluence Driving Demand for Agricultural Equipment & Parts Developing regions converting to more protein-based diets (1) 2.0% 10.0% $300 Global Agricultural Equipment Demand '06 - '21E CAGR % CAGR 2005 vs % 1.0% 0.5% 1.5% 1.1% 0.8% 0.3% 8.0% 6.0% 4.0% 2.0% % CAGR 2005 vs ($ in billions) $200 $100 n Asia-Pacific 10.1% n C. & S. America 8.9% n Africa/Mideast 6.6% n E. Europe 6.0% n N. America 4.5% n W. Europe 3.2% Total 7.1% $84.2 $125.6 $174.6 $ % South & SE Asia Africa Latin America Meat Consumption (Kg/person/year) Developed 0.0% GDP per Capita $ E 2021E requiring 50% increase in food output by 2030 on less land per capita. World Population (Billions) Total Population Arable Hectares Per Person Sources: USDA, U.S. Census, Global Harvest Initiative, Alexandratos (2012) Arable Hectares Per Person ($ in billions) $50 $40 $30 $20 $10 Global Agricultural Aftermarket Parts & Attachments Demand '06 - '21E CAGR n Asia-Pacific 9.0% n C. & S. America 7.8% n Africa/Mideast 6.0% n E. Europe 5.8% n N. America 3.6% n W. Europe 3.1% Total 6.0% $15.2 $21.2 $27.8 $36.1 $ E 2021E Source: Freedonia (1) Increasing demand for grains for livestock feed, as producing calorie energy & protein from livestock takes an estimated 2.5x 10x more grain 16

17 Construction End Market ICS business services the professional concrete-cutting and municipal water utilities and contractor markets Product expansion into ductile iron pipe cutting (sewage, utility) with PowerGrit Leveraged Blount s knowledge of chain saws and saw chain design/manufacturing Specialized hydraulic and gas chain saws provide alternative to cut-off saw Diamond saw chain grinds through concrete and rebar with a plunge cut Advantages vs. cut-off saw are: square corners without overcutting, deeper cuts, time efficient Replacement saw chain business provides recurring sales stream Growth opportunities Geographic expansion in Europe and China Exclusive distribution rights for Pentruder Concrete Cutting System in the Americas Acquisition opportunities in concrete cutting and finishing products Representative Products Whole Goods Diamond Saw Chain PowerGrit 17

18 Financial Overview 18

19 Estimated Full Year 2013 Results Fourth Quarter 2013 ($ millions) $928 $901 $136 $125 LTM 12/31/12 LTM 12/31/13 Adjusted EBITDA Net Sales LTM 12/31/13 sales down $27 million or 3% from LTM 12/31/12 Higher FRAG North America sales more than offset by lower sales in Europe, including Russia, and Asia LTM 12/31/13 adjusted EBITDA driven by reduced sales volumes and related production inefficiencies in the FLAG segment *Information contained within this presentation are estimates and unaudited. Actual 2013 financial results are expected to be released in March

20 Estimated Full Year 2013 Results by Segment Forestry, Lawn, and Garden $ millions 2 Year-over-Year Change $ % Sales $650 $613 ($37) -6% Contribution to Profit 1 $108 $87 ($22) -20% % of Sales 17% 14% Adjusted EBITDA $135 $114 ($21) -16% % of Sales 21% 19% Lower sales year-over-year Asia sales down 11% year-over-year Europe/Russia continued softness, down 6% year-over-year Unfavorable foreign exchange and average pricing Year-over-year EBITDA down on lower sales volumes and related production levels Higher production costs partially offset by year-over-year favorable steel costs Farm, Ranch, and Agriculture $ millions 2 Year-over-Year Change $ % Sales $251 $260 $9 4% Contribution to Profit 1 ($7) $3 $10 n.m. % of Sales -3% 1% Adjusted EBITDA $10 $21 $11 119% % of Sales 4% 8% Year-over-year sales up 4% Improved sales volumes of agricultural attachments and log splitters Higher EBITDA driven by: Lower costs, primarily due to lower logistics costs as 2012 supply chain inefficiencies brought under control 1) Represents segment contribution to operating income. Estimated for 2013, FLAG includes $27 million of allocated shared service expense and FRAG includes $13 million of non-cash acquisition accounting charges and $9.0 million of allocated shared service expense. 2) Amounts may not sum due to rounding *Information contained within this presentation are estimates and unaudited. Actual 2013 financial results are expected to be released in March

21 Debt & Leverage ($ millions) Debt Net Debt Debt / LTM EBITDA Net Debt / LTM EBITDA $517 $466 $494 $487 $480 $461 $462 $438 $405 $ x 3.6x 3.7x 3.5x 3.5x 3.4x 3.5x 3.5x 3.1x 3.2x Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 LTM 12/31/13 Operating Cash Flow $12 ($6) $24 $64 $14 $97 Capital Expenditures, Net ($13) ($7) ($8) ($8) ($7) ($30) Free Cash Flow ($1) ($12) $16 $56 $7 $67 Other / FX $2 ($1) $4 ($0) $2 $4 Net Debt Increase/(Decrease) ($1) $14 ($19) ($56) ($9) ($71) 1) Amounts may not sum due to rounding 2) LTM EBITDA represents earnings before interest, taxes, depreciation, amortization, and other adjustments for the last twelve months. *Information contained within this presentation are estimates and unaudited. Actual 2013 financial results are expected to be released in March

22 2014 Outlook 2014 full-year sales range $925 million $950 million FLAG sales projected to be up approximately 4% versus 2013 full year estimate FRAG sales projected to be up approximately 8% versus 2013 full year estimate Full-year 2014 EBITDA expected to range between $130 million $135 million 2014 Free Cash Flow expected to be approximately $35 million $975 $928 $901 $937.5 $657 $487 $84 $127 $169 $136 $125 $ Pro Forma 2011 Pro Forma Actual 2013 Estimate 2014 Outlook Mid-point EBITDA Sales 1) 2010 pro forma includes a full twelve months of results for SpeeCo, excludes $1.9 million of M&A and certain other expenses 2) 2011 pro forma includes a full twelve months of results for KOX, PBL, and Woods/TISCO, excludes $4.4 million of M&A and certain other expenses *Information contained within this presentation are estimates and unaudited. Actual 2013 financial results are expected to be released in March

23 Strategy and Corporate Goals 23

24 Mission, Vision, and Values Mission Create long-term value for our shareholders through profitable growth, by building an enduring organization driven by a performance-oriented culture of continuous improvement and a relentless focus on providing our customers with quality parts and equipment. Vision Be the supplier of choice for professional quality parts and equipment that help our customers get their job done right. Values P4 Business Beliefs Is all about our PEOPLE Creating innovative and quality PRODUCTS Providing excellence in PERFORMANCE Generating sustainable and growing PROFITS 24

25 Corporate Strategy Profitably grow our business by leveraging our channel and geographic resources to sell existing and new, innovative products Maintaining or growing our market leading positions and margins in our core businesses Selling existing products through new distribution channels, including cross-selling between divisions/distribution networks Adding new, innovative products in existing and adjacent categories sold through our existing distribution channels Expanding internationally in FRAG and CCF and growing FLAG share in high growth, emerging markets Build a high performance organization Recruit, develop, and retain high performing, engaged Team Members Establish global shared services functions to support our divisions Foster a performance-oriented culture of continuous improvement anchored by our P-4 Business Beliefs Prudently allocate capital Maintaining appropriate investment levels to support organic growth and improve productivity Pay down debt to maintain a strong balance sheet and tax-efficiently create value Distribute dividends and/or institute share repurchase when appropriate Opportunistically pursue acquisitions 25

26 Corporate Strategic Initiatives 26

27 Putting It All Together Our values, strategy, and strategic initiatives are aligned to support achievement of our vision and mission 27

28 A Look at Blount in 2018 ($ millions) Organic growth to $1.1 billion in revenue and $175 million EBITDA Generate substantial free cash flow to strengthen balance sheet Consider dividend or share repurchase program once below 2.0X net leverage Acquisitions potentially accelerate growth 28

29 A Look at Blount in 2018 Strong financial position 3+ global divisions linked by culture, vision, global platform Shared services efficiently support mission, vision Quality leads industry Effective use of our ERP to support our mission All Team Members embrace CI every day and are highly engaged Customer needs drive our actions throughout company, functions Brand strategy clear to all; brands recognized Service levels, ease of doing business drive customer satisfaction 29 VISION Help our customers get their job done right.

30 FLAG Strategy and Goals Strategy Strengthen the core and expand adjacencies Protect and enhance core forestry business Strengthen core business processes Grow our share in the Outdoor Equipment Parts ( OEP ) market Expand our global harvester business Develop and scale our Outdoor Power Equipment ( OPE ) business 30

31 FRAG Strategy and Goals Strategy Transition to one integrated, international business Grow market share and margins in our core businesses Develop new products and add product categories Market brands and sell products across other distribution channels Leverage Blount global footprint to expand international business 31

32 CCF Strategy and Goals Strategy Scale the business Extend market leading position in diamond chain & saw technology Drive growth of pipe cutting applications with water / sewer municipalities Develop a full line of tools and equipment for the concrete sawing, drilling, and finishing market Develop infrastructure business beyond existing applications new products and channels 32

33 Key Investment Highlights Attractive Business Model Leveragable Infrastructure Well Positioned to Grow Razor blade -like FLAG and FRAG replacement parts business Stable non-cyclical FLAG parts business 4-5% saw chain CAGR over last 25 years Complementary FRAG parts and whole goods businesses Strong position in niche markets Strong operating margins Strong cash flow profile Design and engineering of cutting systems Manufacturing of high-volume small metal parts, often with a cutting edge Low-cost capability Global sales and distribution network Segment cross-selling opportunities Organic growth and margin enhancement Strong management team, back-office, and culture Significant continuous improvement focus Shared services infrastructure New product development focus Expansion in replacement parts Leveraging existing distribution Margin expansion Acquisition opportunities in Lawn & Garden, FRAG, and Concrete Cutting and Finishing 33

34 Appendix 34

35 Adjusted EBITDA From Continuing Operations Actual Actual Pro Forma 4 Actual Pro Forma 5 Actual Estimate Outlook Net Sales $487 $611 $657 $832 $976 $928 $901 $937.5 Operating income $55 $86 $89 $98 $110 $79 $64 $81 Depreciation Non-cash acquisition accounting Non-cash stock compensation Subtotal Other Adjustments Inventory / asset charge offs M&A expense Facility closure & restructuring CEO transaction / transition costs Adjusted EBITDA $84 $120 $127 $147 $169 $136 $125 $132.5 CAPEX, net Adjusted EBITDA less CAPEX, net $71 $100 $107 $108 $127 $85 $95 $88 Net debt $231 $269 $269 $468 $468 $467 $395 $360 Net debt/adjusted EBITDA 2.7x 2.2x 2.1x 3.2x 2.8x 3.4x 3.2x 2.7x Operating Cash n.m. 78 n.m Less CAPEX, net n.m. 39 n.m Free Cash Flow 6 $44 $36 n.m. $38 n.m. ($0) 67 $35 1) Amounts may not sum due to rounding 2) 2013 includes nearly $4 million of cash transition costs and over $4 million of non-cash charges, $2 million of which is accelerated depreciation and is included in the depreciation line item. 3) 2010 operating cash excludes $6.6 million for taxes relating to GEAR products 4) 2010 pro forma includes full twelve months of results for SpeeCo 5) 2011 pro forma includes full twelve months of results for KOX, PBL, and Woods/TISCO 6) Free Cash Flow is defined as Operating Cash less net capital expenditure ( CAPEX ) *Information contained within this presentation are estimates and unaudited. Actual 2013 financial results are expected to be released in March

36 Adjusted EBITDA From Continuing Operations $ millions Forestry, Farm, Forestry, Farm, Lawn & Garden Ranch & Agricultural Corporate & Other Total Blount Lawn & Garden Ranch & Agricultural Corporate & Other Total Blount Net Sales $650 $251 $26 $928 $613 $260 $27 $901 Operating income $108 ($7) ($21) $79 $87 $3 ($26) $64 Depreciation Non-cash acquisition accounting charges Non-cash stock compensation Subtotal (15) (17) 117 Other Adjustments Inventory / asset charge offs Facility closure & restructuring Adjusted EBITDA $135 $10 ($8) $136 $114 $21 ($10) $125 Adjusted EBITDA Margin 21% 4% n.m. 15% 19% 8% n.m. 14% 1) Amounts may not sum due to rounding *Information contained within this presentation are estimates and unaudited. Actual 2013 financial results are expected to be released in March

37 Company History Blount International and Oregon Saw Chain were founded in 1946 and 1947, respectively, and eventually merged in Red Blount founded Blount as a construction contractor in Alabama, USA 1947 Joe Cox founded Oregon Saw Chain Corporation 1952 Acquired Planer Chain in Guelph, Ontario, Canada and became a multi-national corporation 1957 Changed the name to Omark Industries to better reflect diversified offering 1963 Pioneered the development of modern era of light-weight direct-drive chain saws 1985 Blount acquired Omark Industries in Portland, Oregon, USA 1992 Founded ICS Division to develop construction products 1997 Acquired Frederick Manufacturing in Kansas City, Missouri, USA 1999 Acquired by Lehman Brothers Merchant Banking ( LBMB ) 2000 Acquired Windsor Forestry Tools from Snap-On Inc Sold commercial ammunition business to Alliant Techsystems 2002 Moved Corporate Headquarters to Portland, Oregon, USA 2004 Blount held an initial public offering, where LBMB exited a large portion of its holding 2006 Sold Dixon Industries (riding lawnmowers) to Husqvarna 2007 Sold Forestry Division (heavy equipment) to Caterpillar 2008 Acquired Carlton Holdings in Milwaukie, Oregon, USA 2010 Acquired SpeeCo in Golden, Colorado, USA; Sold Gear Products to Dover 2011 Acquired KOX in Germany; PBL in France and Mexico; and Woods/TISCO in Oregon, Illinois, USA 2012 Opened Sourcing Office in Suzhou, China 2013 Consolidated Portland operations; closed Milwaukie, Oregon forestry products plant 2014 Consolidated North American lawnmower blade manufacturing; closed Querétaro, Mexico blade plant 37

38 Senior Leadership Team 38