Blount International, Inc. (BLT)
Q4 2008 Earnings Call Transcript
March 3, 2009 1:00 pm ET
Cal Jenness – SVP and CFO
Jim Osterman – Chairman and CEO
Ryan McGaver – Capstone Investments
Dax Vlassis – Gates Capital Management
Bob Franklin – Prudential Financial
Alan Robinson – Royal Bank of Canada
Previous Statements by BLT
» Blount International, Inc. Q3 2008 Earnings Call Transcript
» Blount International, Inc. Q2 2008 Earnings Call Transcript
» Blount International Inc. Q1 2008 Earnings Call Transcript
The conference will begin with a brief overview of the fourth quarter 2008 results and then some comments about 2009, followed by a question and answer session. (Operator instructions) This conference is being recorded.
At this time, I would like to turn the conference over Mr. Jenness. Sir, you may begin.
Thank you. Good morning, everyone. This call is being broadcast live on the Internet and recorded for future transmission and use by Blount and third parties. Participants in the call, including the Q&A session, agree that their likeness and remarks may be stored and used as part of the earnings call.
Before Jim and I summarize the company's performance, I would like to remind everyone that the statements made in the course of this conference call, regarding the company's or management's intentions, hopes, beliefs or expectations for the future are forward-looking statements as defined in the Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially.
Now I'd like to turn the call over to Jim Osterman, our Chairman and CEO.
Thanks, Cal. Good morning or afternoon everyone and thank you for joining us to review the company's 2008 results.
Our fiscal year 2008 was a good year for the company. We achieved a record sales level for continuing operations and posted a solid increase in profits, despite some challenging cost pressures. Additionally, we invested significantly for future profit and growth with the acquisition of Carlton and R&D efforts on new products. Although we are pleased with our full-year results, our fourth quarter performance reflected the first time in 2008 that Blount was significantly impacted by the global economic downturn.
In the fourth quarter, we experienced a slowdown in sales from our international customer base for the first time in nearly three years and began to see customers delay orders. Comparable year-over-year unit volume decreases were more significant as the fourth quarter progressed, and have continued into 2009. Domestic sales growth in the first quarter of 2008, aided by storm activities and our heavy replacement mix helped to dampen the affect of the international slowdown. However, international and OEM customers continue to be impacted by the stronger US dollar and the economy.
Overall, Carlton added approximately 11% to sales compared to the fourth quarter of 2007. Our comparable sales order backlog was 4% above the level at the end of 2007. However, many customers have requested shipping dates that are farther out than normal, as both OEM and international customers remain cautious about inventory levels as they enter 2009.
We expect 2009 to be a challenging year for the company. Comparable sales volumes in the first half of the year are expected to trail 2008, requiring us to reduce headcount and production levels. We believe that our replacements business, which represents approximately 76% of our sales, should improve as the year progresses and field inventories need to be replenished. Although we should see some healthy operating margin relief from foreign currency exchange rates and commodity cost, we expect the decline in the first half of 2009 volumes will result in full-year revenue and profit decreases from 2008.
Accordingly, we have implemented several cost control actions to minimize the impact of the unit volume decline. To date, we have initiated the permanent closure of a manufacturing facility, reduced worldwide headcount by approximately 8%, and have frozen certain salaries and wages. As experienced in prior downturns, we expect to continue to generate healthy cash flow that will be available for debt reduction. Cal will cover some of the details of our 2009 outlook later in this call.
Let me now cover a few of the fourth quarter operating highlights of our core business, the Outdoor Products segment. The Outdoor Products segment accounted for 95% of the company's sales in the fourth quarter. Sales were nearly $127 million and were $1 million above last year's fourth quarter. Sales from the Carlton business slightly more than offset comparable quarterly sales declines in the other outdoor products segment’s component businesses.
Comparable year-over-year sales were down 11% in the fourth quarter of 2007. The majority of the sales decrease was volume-related with foreign currency fluctuations adding to the decline. Higher selling prices helped offset the volume and currency impact on sales. Base unit volume declines were experienced in the international markets for our wood cutting products, slightly offset by domestic growth. So segment domestic sales were up 3.5 from 2007’s fourth quarter, excluding the effects of Carlton sales. However, this was a slower growth rate than we experienced over the first nine months of 2008.
The storm activity in the US Gulf Coast continued to help sales as customers reloaded inventories in the early part of the fourth quarter. International sales declined by 17.6% in the fourth quarter, excluding Carlton and reflect volume declines and the impact of a stronger US dollar. Pricing actions we took earlier in the year partially offset the volume and currency impacts. Currency translation reduced sales in the fourth quarter by approximately $2 million in comparison to last year's fourth quarter.