Blount International, Inc. (BLT)

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Blount International Inc. (BLT)

Q4 2012 Earnings Conference Call

March 07, 2013 1:00 pm ET

Executives

Joshua L. Collins - Chairman and Chief Executive Officer

Calvin E. Jenness - SVP and Chief Financial Officer

David Dugan - Director, Corporate Communications and Investor Relations

Analysts

Robert Kosowsky - Sidoti & Company

Lawrence De Maria - William Blair

Steve Barger - KeyBanc Capital Markets

Presentation

Operator

Good morning, or afternoon, as the case may be for each of you, and welcome to the Blount International, Inc. call conference with Mr. Josh Collins, Chairman and Chief Executive Officer; Mr. David Willmott, President and Chief Operating Officer; Mr. Calvin Jenness, Senior Vice President and Chief Financial Officer; and Mr. David Dugan, Director of Corporate Communications and Investor Relations.

My name is Rocco and I will be your facilitator today. The conference will begin with a brief overview of the fourth quarter 2012 results and the Company's outlook for 2013, followed by a question-and-answer session. All lines have been placed on mute to prevent any background noise. (Operator Instructions)

At this time, I would like to turn the call over to Mr. Dugan. Mr. Dugan, you may begin.

David Dugan

Thank you, Rocco, and good day, everyone. Before we summarize the Company's performance, I'd 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, guidance ranges or other expectations for the future are forward looking statements. Those statements involve risk and uncertainties that could cause actual results to differ materially.

Please refer to the cautionary statements detailed in this morning's press release and our Form 8-K and SEC filings. Additionally, we have supplemented our fourth quarter results news release with a presentation that can be found along with the news release on our website at www.blount.com.

At this time, Josh Collins will give us an overview of the fourth quarter of 2012 and our outlook for 2013.

Joshua L. Collins

Thanks, David, and thanks to you all for joining us on today's call. 2012 proved to be a challenging year due to deteriorating European economic conditions throughout North America and the resolution of operational issues at our SpeeCo unit. However, we made important progress on many key initiatives and remain confident in our strategy and the long-term prospects.

While our sales for the fourth quarter were down 3% compared to the fourth quarter of 2011, our FLAG segment sales increased nearly 2% when excluding the impacts of foreign currency. Unit volume was up 2.6% with average selling prices declining by about 0.9% in the product mix.

For the overall Company, Asia was our strongest region for the quarter versus the same quarter a year ago, with a 4.5% increase and demand in Europe and Russia stabilized somewhat during the quarter with a nearly flat year-over-year result for that region, that's been down 15% year-over-year in the first three quarters.

Our on-order position continues to reflect moderate to stable demand. Our FLAG order board of about $168 million represents approximately 84% of the total. The total on-order position of nearly $200 million compares to $214 million in December 31, 2011. The on-order position for the FLAG business was down about 8% in 2012 compared to the year ago period and remains close to that trend line in early 2013.

EBITDA and operating income results were near the expectations we (indiscernible) on our last call. Our operating income for the quarter declined by $1.9 million compared to the fourth quarter of 2011. The profit decline was driven primarily by a charge associated with discontinuing a last quarter product line along with lower average pricing in both FLAG and FRAG businesses. Lower SG&A spend partially offset these factors and sales volume impact on profit was neutral overall.

I'll now turn the call over to Cal to cover some specifics related to the financial performance of the Company, including more detail on our overall cost structure and its impact on our fourth quarter profitability. After that, I will wrap up with our 2013 outlook.

Calvin E. Jenness

Thanks, Josh. As a reminder, we posted a presentation to our website this morning in addition to our press release that aligns profit and cash flow drivers compared to the fourth quarter of 2011 along with other operating metrics.

FLAG sales were essentially flat versus a year ago as well as our overall profitability. Sales were up driven by 2.6% volume gain, but this growth was nearly all offset by foreign currency and lower average pricing due to product and customer mix.

Asia sales were up 4.2% and South America was up 1.3% while Europe and North America were essentially flat versus Q4 2011. These results are an improvement versus the third quarter in kind of both Europe and Asia.

From a profit perspective, contribution to income was $26.2 million in Q4 2012 compared to $26.3 million in 2011. The factors affecting the FLAG contribution to profit were; volumes increased $1.4 million on a year-over-year basis and steel costs were about $1.8 million lower; volumes improved primarily in the Lawn and Garden product line which is up about 8%; average selling price declined by $1.4 million due to product and customer mix; Flag manufacturing and logistics cost were up $2.5 million, partially offset by a reduced SG&A spending which was down about $600,000; FX reduced profit by another $500,000; and finally, non-cash amortization expense was down about $500,000.

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