Blount International Inc. (BLT)
Q1 2008 Earnings Call
April 30, 2008 13:00 pm ET
Calvin Jenness - SVP & CFO
James Osterman - Chairman & CEO
Curt Woodworth - J.P. Morgan
Bob Franklin - Prudential Equity Group
Dax Vlassis - Gates Capital Management
Alan Robinson - RBC Capital Markets
Previous Statements by BLT
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The conference will begin with a brief overview of the first quarter 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'd like to turn the call over to Mr. Jenness. Mr. Jenness, you may begin.
Thank you and 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 on 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. Those statements involve risks and uncertainties that could cause actual results to differ materially.
Now I'd like to turn the call back over to Jim Osterman, our Chairman and CEO.
Good morning, and thank you for joining us to review the results of the first quarter 2008. We got off to a good start for the year with solid results in the first quarter. Our sales increase from last year was north of 12% and we generated incremental profit despite continuation of the foreign currency pressures we've experienced in recent years.
The benefit from lower debt balance and lower interest rates also contributed to the 33% increase from last year's income from continuing operations. The Outdoor Products segment sales increased by nearly 14% from last year's first quarter. We experienced sales growth in all major markets with international sales up 17% and domestic sales up 7% from the first quarter of last year.
The increase in the domestic sales was somewhat surprising given the general weakness and demand we were expecting. Part of the increase can be attributed to a very weak performance in the first quarter of 2007 when domestic sales were down by 17% from the previous year.
International sales accounted for 70% of the segment's first quarter, compared to 68% last year. Sales in our largest market, Europe, were up 16% from last year as we continued to benefit from a stronger euro. Additionally, we gained some new distribution in Europe that resulted in pipeline fill.
Sales to OEMs were down in this year's first quarter by 5% from last year, as Asian and US chainsaw manufacturers experienced a decline in shipments. Sales for the replacement market were up 21% from the first quarter of 2007. Sales of concrete cutting equipment were flat year-over-year as the weaker demand in the United States resulted in a decline in domestic sales and offset strength in the international market.
Segment sales backlog was good at quarter end with 83.4 million in orders on hand. This represents the highest level of backlog since mid 2005. The contribution to operating income from the Outdoor Products segment was $21.7 million, up from last year's first quarter of 21.1. The improvement in segment contribution is the result of strong unit volume growth partially offset by approximately $2.7 million in negative foreign currency movement.
Additionally, in the first quarter, we also began to experience increased commodity pressure with steel cost increases of approximately $450,000 compared to the first quarter of last year. This increase was not unexpected and we have implemented additional selling price increases in certain channels effective May 1st.
Although we feel confident that the strong international demand for our products will continue in the near-term, improving segment operating margins will continue to be challenging, given the commodity and currency pressures we face, as well as high energy costs.
Now, I'd like to turn the call back to Cal, our CFO, for additional financial highlights. Cal?
Thanks, Jim. Let me cover a few profit and loss items outside of the Outdoor Products segment. In the first quarter, we had other sales of $7 million, compared to $7.4 million last year's first quarter. This sale decline reflects a unit volume decline in our gear components business.
The loss from other and corporate increased by about $200,000 from last year's first quarter. The increase in part was due to about $600,000 in non-recurring severance expense that related to the consolidation of certain functions in our Portland offices. Also included in the loss was $1.8 million in stock compensation expense, which was about equal to last year's first quarter.
The first quarter stock compensation expense represents approximately 50% of the estimated full year expense of $3.5 million. Loss from discontinued operations was $53,000 in this year's first quarter, compared to a $498,000 loss last year. Discontinued operation includes the Company's former Forestry equipment division that was sold in the fourth quarter of 2007.