- Fourth quarter 2014 sales increased seven percent compared to 2013
- Fourth quarter 2014 Adjusted EBITDA increased 24 percent compared to 2013
- Full year 2014 sales were $945 million and Adjusted EBITDA was $138 million
- Full year 2014 free cash flow was $46 million
PORTLAND, Ore., March 11 -- Blount International, Inc. today
announced results for the fourth quarter and full year ended December 31, 2014.
Results for the Quarter and Full Year Ended December 31, 2014
Sales in the fourth quarter were $232.2 million, an increase of
$15.3 million or seven percent compared to the fourth quarter of 2013.
Operating loss for the fourth quarter of 2014 was $2.5 million compared to an
operating loss of $16.5 million in the same quarter last year. Adjusted EBITDA
in the fourth quarter was $30.5 million, an increase of $6.0 million or 24
percent compared to the fourth quarter of 2013. Fourth quarter net loss was
$2.4 million, or $0.05 per diluted share, compared to net loss of $21.5
million, or $0.43 per diluted share, in the fourth quarter of 2013.
Sales for the full year were $944.8 million, an increase of
$44.2 million or five percent compared to full year 2013. Operating income for
2014 was $64.2 million compared to operating income of $37.5 million for full
year 2013. Adjusted EBITDA for full year 2014 was $138.0 million, an increase
of $14.5 million or 12 percent compared to full year 2013. The full year 2014
net income was $36.6 million, or $0.73 per diluted share, compared to net
income of $4.8 million, or $0.10 per diluted share, for full year 2013.
"We operated well in 2014, and our results reflect our
performance and stronger demand in our core business compared to the previous
year," stated Josh Collins, Blount's Chairman and CEO. "Our continued
focus on Operational Excellence and our targeted cost reductions positively
impacted our results for the quarter and the full year."
Collins continued, "Looking ahead to 2015, we remain
focused on operating well and executing on our strategic plan. While the
underlying fundamentals of our business are sound, we are experiencing
significant headwinds from foreign currency markets related to the strength of
the U.S. Dollar."
Blount operates primarily in two business segments – the
Forestry, Lawn, and Garden ("FLAG") segment and the Farm, Ranch, and
Agriculture ("FRAG") segment. The Company reports separate results
for the FLAG and FRAG segments. Blount's Concrete Cutting and Finishing
("CCF") business is included in "Corporate and Other."
Forestry, Lawn, and Garden
The FLAG segment had fourth quarter 2014 sales of $160.4
million, which was $12.7 million higher than the fourth quarter of 2013. Sales
volume increases were partially offset by foreign exchange rate impacts on
reported sales and a reduction in average prices. Fourth quarter 2014 sales
increased in all geographic regions compared to fourth quarter of 2013. North
America generated approximately 11 percent growth, Europe and Russia improved
about one percent, Asia sales increased 19 percent, and the rest of the world
generated nearly 10 percent growth.
Foreign exchange rates reduced segment
sales by more than three percent as the U.S. Dollar strengthened versus nearly
all currencies in the quarter. The largest impacts came from the Euro and
Russian currencies. Lower average prices resulted primarily from targeted price
reductions put in place earlier in 2014 in certain geographic markets.
Segment contribution to operating income and Earnings Before
Interest, Taxes, Depreciation, Amortization, and certain charges
("Adjusted EBITDA") was $23.9 million and $31.2 million,
respectively, for the fourth quarter of 2014, and includes $8.1 million of
allocated shared services expenses. Contribution to operating income improved
46.1 percent and Adjusted EBITDA improved 18.1 percent for the fourth quarter of
2014 versus the fourth quarter of 2013.
Segment contribution to operating income and Adjusted EBITDA
improved primarily due to higher sales volumes and favorable foreign exchange
rates. Increased steel costs, lower average pricing, and slightly higher costs
partially offset the improvements in those areas. The closure of a higher cost
FLAG manufacturing plant announced in 2013 and higher plant utilization rates
(89 percent in the fourth quarter of 2014 compared to 65 percent in the fourth
quarter of 2013) contributed to improved overall operating efficiency.
The
manufacturing cost improvement was more than offset by an increase in SG&A
spending, driven mostly by incentive compensation expense as 2014 results
compare more favorably to target than in 2013 and higher training, travel, and
relocation expenses.
Farm, Ranch, and Agriculture
The FRAG segment reported fourth quarter 2014 sales of $63.3
million, an increase of $0.2 million from the fourth quarter of 2013, mainly
due to stronger average pricing. Sales volumes declined approximately one
percent, but were more than offset by increased average pricing of nearly two
percent.
The FRAG segment had $2.3 million of Adjusted EBITDA in the
fourth quarter of 2014. FRAG segment contribution to operating loss was $21.4
million after $3.9 million of depreciation and amortization expense, $2.5
million of allocated shared services expenses, and $19.7 million in non-cash
charges related to impairment of certain acquired intangible assets. The change
in the fourth quarter 2014 contribution to operating loss compared to the
fourth quarter of 2013 is presented below.
The benefit of improved average pricing was more than offset by
slightly lower volumes and higher costs in the FRAG segment, mainly due to
additional spending in SG&A related to wages and benefits. Wages and
benefits increased primarily due to additional headcount, wage inflation, and
higher incentive compensation expenses. Product sales mix in the fourth quarter
of 2014 included relatively lower margin products compared to 2013. The FRAG
operating loss is also partially attributed to an impairment of purchased
intangible assets.
Corporate and Other
Corporate and Other generated net expense of $4.9 million in the
fourth quarter of 2014 compared to net expense of $8.9 million in the fourth
quarter of 2013. Fourth quarter 2014 net expense improved primarily as a result
of lower restructuring expenses and professional fees. Higher professional fees
in the prior year were driven mostly by financial statement audit costs.
Net Income
Fourth quarter 2014 net loss decreased primarily due to higher
overall operating income in the fourth quarter of 2014 compared to 2013 and
lower intangible asset impairment charges. Fourth quarter 2014 net interest
expense was flat. Other income improved $2.2 million primarily as a result of
foreign exchange impacts on non-operating assets.
Cash Flow and Debt
As of December 31, 2014, the Company had net debt of $356.9
million, a decrease of $38.2 million from December 31, 2013 and an increase of
$5.9 million compared to September 30, 2014. The decrease in net debt since
December 31, 2013 was primarily the result of generating free cash flow of
$45.6 million in 2014 partially offset by the CCF-related acquisition of
Pentruder and foreign exchange impacts on cash. Fourth quarter 2014 free cash
flow was a use of $6.3 million compared to generation of $7.8 million in the
fourth quarter of 2013.
The decrease in free cash flow in the fourth quarter of 2014 as
compared to 2013 was the result of a large conversion of working capital to
cash in the prior year and an increase of $1.8 million of capital spending in
the fourth quarter of 2014, mostly on continued capacity increases in China and
Canada. The Company defines free cash flow as cash flows from operating
activities less net capital spending. The ratio of net debt to
last-twelve-months ("LTM") Adjusted EBITDA was 2.6x as of December
31, 2014, which is an improvement compared to December 31, 2013 and reflects
lower net debt and increased Adjusted EBITDA.
2015 Financial Outlook
Prior to the recent significant movement in currency exchange
rates, our expectation was for FLAG sales to return to historic rates of growth
with a modest headwind related to ordering patterns from our largest OEM
customer. However, we now assume that the recent, significant change in foreign
currency markets related to the strength of the U.S. Dollar will override those
patterns. The Company has significant foreign sales denominated in U.S.
Dollars. As a result, many of the Company's products are effectively priced
higher for our customers.
While it is still early in the year and significant uncertainty
exists, we now estimate the Company's fiscal year 2015 sales to range between
$900 million and $950 million, operating income to range between $78 million
and $94 million, and Adjusted EBITDA to range between $130 million and $145
million. Our expectation for sales assumes FLAG segment sales decline one
percent to seven percent and FRAG segment sales remain flat to an increase of
three percent, both compared to 2014 levels.
In 2015, steel prices are expected to increase by $1 million to
$2 million compared to 2014. The 2015 operating income outlook includes
non-cash charges of approximately $12 million related to acquisition accounting
amortization. Free cash flow in 2015 is expected to range between $40 million
and $50 million, after approximately $40 million to $50 million of capital
expenditures. Net interest expense is expected to be between $17 million and
$18 million in 2015, and the effective income tax rate for continuing
operations is expected to be between 34 percent and 37 percent in 2015.
The Company's outlook range for Sales, Operating Income, and
Adjusted EBITDA in 2015 versus 2014 is presented in the table below. The table
illustrates the foreign currency translation impact at prior year business
volumes as well as the expected 2015 unit volume effect resulting from market
and currency driven demand pressure related to effectively higher U.S. Dollar
denominated prices.
Blount is a global manufacturer and marketer of replacement parts,
equipment, and accessories for consumers and professionals operating primarily
in two market segments: Forestry, Lawn, and Garden ("FLAG"); and
Farm, Ranch, and Agriculture ("FRAG"). Blount also sells products in
the construction markets and is the market leader in manufacturing saw chain
and guide bars for chain saws. Blount has a global manufacturing and
distribution footprint and sells its products in more than 115 countries around
the world. Blount markets its products primarily under the OREGON®, Carlton®,
Woods®, TISCO, SpeeCo®, ICS® and Pentruder® brands.
