Blount International, Inc. (BLT)
Q3 2010 Earnings Conference Call
November 3, 2010 1:00 PM ET
Josh Collins – Chairman, President and CEO
Calvin Jenness – SVP and CFO
Mark Rupe – Longbow Research
Alan Robinson – Royal Bank of Canada
Dax Vlassis – Gates Capital Management
Mike Henney (ph) – Benchmark Capital
Previous Statements by BLT
» Blount International, Inc. Q2 2010 Earnings Call Transcript
» Blount International Inc., Q1 2010 Earnings Call Transcript
» Blount International, Inc. Q4 2008 Earnings Call Transcript
» Blount International, Inc. Q3 2008 Earnings Call Transcript
My name is Keith and I will be your facilitator today. The conference will begin with a brief review of Q3 2010 results and the company’s outlook for the remainder of 2010 followed by a question and answer session.
At this time I would like to turn the call over to Mr. Jenness. Mr. Jenness you may begin.
Thank you. Good day 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 in the Q&A session agree that their likeness and remarks may be stored and used as part of the earnings call.
Before Josh and I 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 as defined by the Securities Litigation Reform Act from 1995. Those statements involve risk and uncertainties that could cause actual results to differ materially.
This quarter we have supplemented our press release with a presentation that can be found on our website at www.blount.com. This presentation highlights the operating trends of the quarter, provides details on our full year outlook and includes other data points that we have historically disclosed in our prepared remarks.
Our intent is to provide these disclosures on a supplemental basis, shorten the length of our prepared remarks and allow more time for your questions.
Now I’d like to turn the call over to Josh Collins, our CEO.
Thank you Cal and thank you all for joining us on today’s call. First I’ll take a few moments to discuss the highlights of Q3. After that, Cal will cover some of the financial details. I will then conclude our prepared remarks by outlining our revised forecast for 2010.
Overall Q3 was an extremely active quarter for the company. As we have communicated earlier, we refinanced our balance sheet on August 9th, 2010 we paid $425 million dollar amended and restated senior credit facility led by GECC. We closed on the acquisition of SpeeCo on August 10 for approximately $92 million dollars fully loaded. We sold Gear Products on September 30th to complete the divestiture of the last non-core asset of the company.
All of these actions were aimed at increasing shareholder value, which is consistent with our overall strategic plan. Let me comment briefly on each of these actions before I discuss in details on our Q3 results.
Restatement of our now $425 million dollar senior credit facility allowed us to entirely pay off the $175 million dollars of relatively expensive eight and seven eighths notes. We expect this to reduce our annual cash interest expense run rate by $6 million to $7 million dollars. Additionally, the facility provides the financing flexibility to pursue our strategic programs or pay down debt as cash flow allows.
The SpeeCo acquisition is a tight strategic fit and will leverage our worldwide distribution system. Requiring SpeeCo positions us in the adjacent farm and ranch sector with a primary product that is forest related in the SpeeCo log splitter line. We see opportunity in our combined operations to expand the global and channel reach of parts that we sell as well as to improve our sourcing of low cost parts.
SpeeCo is highly cash flow generative with limited capital requirements. We are well on the way to integrating the SpeeCo team into Blount and we expect to gain (synergies) beginning in 2011.
The Gear divestiture was something we considered for some time. Gear products represented a non-core asset that would require significant investment on Blount’s part to grow into a market leader. We received good value for Gear and the buyer received a solid and profitable business that it will be able to expand. Cash from that divestiture was used to repay our outstanding revolver balance on October 1st and provides us with additional liquidity to further pursue our strategy.
In addition to the three items I just discussed, we made progress in the quarter on other initiatives as well. The introduction of PowerSharp is on track. In the quarter we sold $2.5 million dollars in the PowerSharp product line, bringing sales since introduction earlier this year, to $2.8 million. We now have good distribution and are focusing our efforts on pull-through with store demonstrations and print advertising to key trade partners. Last week we demonstrated PowerSharp at the GIE tradeshow in Louisville, Kentucky. The reception and interest were excellent.
On the efficiency front we continue to make organizational structure changes as well as pursue our continuous improvement programs. To date we’ve held 12 (kyzan) events and anticipate holding approximately three more in the next six months with approximately 70 scheduled for 2011. Results have been good so far and we expect to see the efficiency improvements reflected during 2011.