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Blount International, Inc. (BLT)
Q2 2008 Earnings Call Transcript
August 5, 2008 1:00 pm ET
Calvin Jenness – SVP & CFO
Jim Osterman – Chairman & CEO
Alan Robinson – RBC Capital Markets
Jeff Gates – Gates Capital Management
Bob Franklin – Prudential Financial
Ryan McGaver – Capstone Investments
Previous Statements by BLT
» Blount International, Inc. Q4 2008 Earnings Call Transcript
» Blount International, Inc. Q3 2008 Earnings Call Transcript
» Blount International Inc. Q1 2008 Earnings Call Transcript
The conference will begin with a brief overview of the second quarter followed by a question-and-answer session. (Operator instructions)
At this time, I'd like to turn the call over to Mr. Jenness. Mr. Jenness, 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. Those 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.
Thank you, Cal. Good morning or afternoon everyone and thank you for joining us to review the results of the second quarter of 2008. In this year’s second quarter, the company posted solid revenue growth compared to last year. This growth reflects continued robust demand for our company’s products as well as the acquisition of Carlton which closed on May 2. Organic sales growth was nearly 7% and Carlton added another $10.3 million in revenues compared to last year’s second quarter. Our company’s strong international market presence where approximately 68% of revenue is generated was the major reason for the organic growth. Demand for our woodcutting products in these international markets remained strong due in part to a weaker dollar.
We also believe that share gains in certain international markets are driving increased sales volumes. Our order backlog at the end of the second quarter was an all-time high. So, we should see continued top line growth in the second half of this year. We are excited about our May acquisition of Carlton, which complements our operations nicely. The proximity of the Carlton Manufacturing Facility to our Portland facility provides synergistic opportunities in a more cost effective way to add additional manufacturing capacity in the near term.
Additionally, with the majority of Carlton’s sales outside the United States, the acquisition will enable to Blount expand further into the growing global markets. We have identified numerous operating synergies during the first two months of our ownership and will actively implement such actions over the balance of this year.
Let me now cover a few of the second quarter operating highlights for our core business, the outdoor product segment. The outdoor product segment sales increased by approximately 14% from last year’s second quarter. The Carlton acquisition accounted for eight points of this growth. Of the base segment growth of about six points, approximately one-third was the result of increased unit volume, one-third from selling price increases and one-third from changes in foreign currency exchange rate.
Base international sales were up 15% and domestic sales were down 10% from the second quarter of last year. Base unit volume sales growth was achieved primarily through the growth of woodcutting product sales and international markets. Sales of concrete cutting products declined by 13% from last year’s second quarter as we experienced weaker demand for construction related products. Contributing to our international sales growth were both volume gains driven by a weak US dollar and pricing actions we have taken this year.
Sales to OEMs were down in this year’s second quarter by 10% compared to last year. Weaker demand for chainsaws, particularly among North American consumer outdoor product users, served to reduce demand for our products on the part of our OEM customers. Sales to the replacement markets were up nearly 13% from the second quarter of 2007. As I mentioned earlier, Carlton contributed 10.3 million of sales in the second quarter for the approximately two months of Blount’s ownership.
For the first half of 2008, including the non-Blount ownership period, Carlton sales were up 15% from the comparable period of 2007. International sales in the second quarter accounted for 72% of the segment's second quarter sales inclusive of Carlton sales. Segment backorder log was about $122 million at quarter end and includes nearly $25 million from Carlton. The second quarter segment back log is the highest in history even when the incremental Carlton amount is excluded.
Contribution to operating income from the outdoor product segment was nearly $25 million, down from last year’s second quarter result of close to $27 million. This year’s second quarter was negatively impacted by approximately $2 million in one-time acquisition related expenses.
Cal will provide you with some further detail on these expenses shortly. Foreign currency rates also continued to negatively impact year-over-year segment contribution although at a lesser extent than in the first quarter. In the second quarter, we implemented price increases to offset rising commodity cost. The selling price increase was approximately 4% on slightly over one-half of segment sales.