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William Blair & Company 33rd Annual Growth Stock Conference June 13, 2013
Certain statements contained in this presentation are forward looking based on
assumptions of future events which may not prove to be accurate. They involve
risk and uncertainty. Actual results may differ materially from those expected or
implied. We direct you to the cautionary statements detailed in recent news
releases and SEC filings.
Cautionary Statements
2
• Corporate Overview 4 − BLT Investor Overview − Business Segments − Core Competencies − Strategy to Drive Shareholder Value − World-wide Sales & Distribution Network − Manufacturing and Sourcing Capabilities − Product Development
• Business Segment Detail 12
− Forestry, Lawn, and Garden End Markets and Market Drivers − Farm, Ranch, and Agriculture End Markets and Market Drivers − Construction End Markets − Reasons to Invest in Blount
• Financial Overview 20
− Financial Performance − Segment Performance − Sales by Region − Debt and Leverage
• Appendix 25
Index
3
Page
Corporate Overview
4
$487
$657
$976 $928 $934 $955
$84 $127
$169 $136 $138 $145
17.3%19.4%
17.3%14.7% 14.7% 15.2%
$-
$200
$400
$600
$800
$1,000
$1,200
2009 Pro Forma2010
Pro Forma2011
2012 LTM March2013
Forecast2013
Net Sales Adjusted EBITDA Adjusted EBITDA Margin
Blount International, Inc. Headquartered in Portland, Oregon
Business: We design, manufacture, and market replacement parts and equipment for consumers and professionals in select global end markets, including forestry, lawn, and garden (“FLAG”); farm, ranch, and agriculture (“FRAG”); and concrete cutting and finishing (“CCF”).
BLT Investor Overview
5
Financial Performance (1)
3-Year Stock Price (2)
(1) Pro forma for certain adjustments; 2011 and 2012 pro forma (PF) include full twelve months of results for SpeeCo, KOX, PBL and Woods (2) Outdoor Power Equipment Index includes Husqvarna, Emak, Toro, Briggs & Stratton, and Alamo Group
$ millions
Blount Summary ValuationBLT Price as of 06/07/13 $13.05Primary Shares (millions) 49.2
Equity Value $642Enterprise Value $1,122
Multiples of Enterprise Value
LTM Adj. EBITDA (3/31/13): $138 8.2xLTM Adj. EBITA (3/31/13): $108 10.4x2013 Estimated EBITDA: $145 7.7x
$7.58
$10.10
$12.63
$15.15
$17.68
$20.20
(25.0%)
0.0%
25.0%
50.0%
75.0%
100.0%
Jan-
10
Apr-1
0
Jul-1
0
Oct
-10
Jan-
11
Apr-1
1
Jul-1
1
Oct
-11
Jan-
12
Apr-1
2
Jul-1
2
Oct
-12
Jan-
13
Apr-1
3
BLT S&P Outdoor Power Equipment Index
Business Segments
6
Concrete Cutting and Finishing (“CCF”)
Farm, Ranch, and Agriculture (“FRAG”)
Forestry, Lawn, and Garden (“FLAG”)
• LTM 3/31/13 sales of $26 million (3% of total) • Accounted for in Corporate and Other • Chain saws and diamond-coated saw chain for cutting
concrete and ductile iron pipe
• LTM 3/31/13 sales of $654 million (70% of total) • Market leader in saw chain and guide bars • Revenues are approximately 75% – 80% replacement • Wide-ranging geographic sales mix with approximately 70% of
sales outside of North America
• LTM 3/31/13 sales of $253 million (27% of total) • Woods and TISCO sell direct to approximately 11,000 dealers in
North America, giving the FRAG segment meaningful presence • Adjacent distribution to FLAG segment provides cross-selling
opportunities • Nearly all sales are in North America, representing longer-term
opportunities for international expansion
We have significant assets and competitive advantages in the following core competencies:
Core Competencies
7
Distribution
Manufacturing
Product Development
Global sales and distribution infrastructure reaching OEMs and aftermarket via multiple channels
High-volume, small metal parts, particularly with cutting edges
Design and engineering of cutting and cutting-related products
Strategy to Drive Shareholder Value
8
Acquisitions • In adjacent categories • Businesses with similar
characteristics to our own
New Products • Develop new products with
a demonstrable value proposition to end-users
Cost Reductions • Develop a culture of continuous
improvement • Reduce complexity and waste in our
processes to drive efficiency • Increase free cash flow and pay down
debt and/or distribute a modest dividend
• Acquisition integration
Base Business Growth • Maintain or develop leading
market share positions in our existing business lines
• Product design evolution • High service levels
Cost Reduction
New Product Development
Grow Existing Markets
Accretive Acquisitions
World-wide Sales & Distribution Network
9
• World-wide distribution reaches all end-use segments − Traditional two-step distribution through distributor/dealer network − Dealer direct in select regions − Mass merchants (~10% of sales) − End-user direct (~3% to 5% of sales) − More than 35 chain saw OEMs globally
• Diversified end-user base − Mechanized harvesters − Professional loggers − Semi-professional: Arborists, maintenance, construction crews, landscapers, etc. − Consumers (e.g., ruralists, homeowners)
Manufacturing capabilities • Nearly 250 million feet of saw chain • More than 15 million guide bars • More than 15 million lawn mower blades • More than 100 thousand log splitters Current saw chain capacity weighted toward North America; migrating toward regionally distributed plants • Expanding China facility • Planning East Europe facility
Sourcing offices • North America • China • Europe
Manufacturing & Sourcing Capabilities
10
• Research and Development group established in 2007 to ensure break-through products − Consists of more than 40 engineers, technicians, managers focused on developing revolutionary
products for our end markets
− Concept development based on market/customer research and solving unmet needs
− Recent products: OREGON® 40V MAX Cordless Chain Saw, String Trimmer/Edger, and Hedge Trimmer, as well as PowerSharp®, PowerGrit®, and others
• Marketing groups design and develop evolutionary products within existing product families
− More than 80 design engineers and marketing specialists across company
− Concept development based on customer research
Product Development
11
Representative New Products
PowerSharp® PowerGrit® OREGON® 40V Cordless Tools:
Chain Saw, String Trimmer Edger, Hedge Trimmer
Business Segments
12
• Forestry sales are approximately 80% of FLAG segment
• Blount manufactures and sells saw chain, guide bars, sprockets, and other accessories − Sales are approximately 75% replacement (primarily traditional dealer channel) and 25% OEM
− OREGON® is largest brand; also market under Carlton®, KOX and Tiger® brands
− Largest competitor is a chain saw OEM; many small competitors offer low-end products
− Estimated market share of approximately 60% in saw chain
• Global sales and distribution network is key success factor
− Long-term relationships with 35+ OEMs and 300+ distributors
− KOX acquisition (Q1 2011) expanded distribution channel to end-user direct
• Design and engineering capabilities ensure we are continually innovating
• Worldwide manufacturing − Capacity for nearly 250 million feet of chain / more than 15 million guide bars – largest producer in the world
− Five plants (Portland (2), Canada, Brazil, China)
Forestry End Market
13
Representative Products
Saw Chain PowerSharp® Chain Guide Bars Sprockets
-‐
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Electric Gas
Chain Saw Growth • Growing global market with an estimated 18
million power head units sold in 2011, representing a compound annual growth rate of 8.5% since 2000 − Gas saws growing at 9.5% − Electric saws growing at 6.0%
• Blount benefits from initial sale, plus recurring replacement stream − Saw chain sales grew at 5.8% CAGR 2001 to
2011
Forestry Market Drivers
14
Source: Management estimates
Total Saw Chain Market Share
Blount Brands Combined
Competitor A
All Others
Blount Brands Combined
Competitor A
All Others
Global Saw Chain Market: • 2010 – 333 million feet • 2011 – 375 million feet
Saw Chain Market Size • 2011 estimated market size of
approximately 375 million feet − 25-year CAGR of 4% – 5% − Growth driven by consumer penetration
and shift toward chain saw cutting (vs. hand cutting)
• Blount is the largest global producer of saw chain − Competitor A is a chain saw OEM − Low cost country manufacturers have
gained share over the past decade
Chain Saw Market – 2000 to 2011
• Lawn and Garden sales – Approximately 20% of FLAG segment • Outdoor power equipment replacement parts and lawnmower/edger blades
− Manufactures lawnmower/edger blades in Kansas City, Mexico, and France facilities;
− Other products and accessories sourced from third parties
− Sales roughly 35% lawnmower blades and 65% parts/accessories
− Approximately 10,000 SKUs; most non-blade SKUs are vended
• PBL acquisition (Q3 2011) expanded blade manufacturing through addition of Mexico and France blade plants
• Leverages Blount’s global procurement, sales and distribution network • Approximately 6% global market share; approximately 9% U.S. market share
− Market consolidation opportunities exist
Lawn and Garden End Market
15
Representative Products
Lawnmower Blades Edger Blades Trimmer Heads, Nylon Trimmer Line
Air Filters, Spindles, and Other
Replacement Parts
• FRAG division created with acquisition of SpeeCo (Q3 2010). Woods/TISCO and PBL acquisitions (Q3 2011) expanded product offering
− Products include tractor attachments and implements, tractor parts, log splitters, diggers, augers, three-point linkage equipment, accessories, OEM custom components, and agricultural blade manufacturing.
− Today more than 90% of sales are in the United States • FRAG business unit offers opportunities in cross-selling, sourcing, supply chain, and back-office
− ~70% of FRAG end market users own chain saws; large replacement parts / accessories component
− Distribution adjacencies and overlap with FLAG
− Further acquisition opportunities in North America, Europe, and Brazil
• Positive macro dynamics − Growing size and affluence of world population increasing global food demand − Ruralist trends increasing number of small farms in U.S. − Water scarcity driving new technology
Farm, Ranch, and Agriculture End Market
16
Representative Products
Log splitters 3-Point Digger Tractor Parts Tractor Attachments 3-Point Linkage Components
$0
$10
$20
$30
$40
$50
2006 2011 2016E 2021E
($ in
bill
ions
)
$15.2
$21.2
$27.8
$36.1
FRAG – Positive Macro Dynamics
17
Developing regions converting to more protein-based diets(1)… Global Agricultural Equipment Demand
…requiring 50% increase in food output by 2030 on less land per capita. Global Agricultural Aftermarket Parts & Attachments Demand
0.0
0.1
0.2
0.3
0.4
0.5
0
1
2
3
4
5
6
7
8
9
10
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
Arable Hectares Per PersonW
orld
Pop
ulat
ion
(Bill
ions
)
Total Population Arable Hectares Per Person
Sources: USDA, U.S. Census, Global Harvest Initiative, Alexandratos (2012)
World Population Growing in Size and Affluence…
Source: Freedonia
…Driving Demand for Agricultural Equipment & Parts
'06 - '21E CAGR
n Asia-Pacific 9.0%n C. & S. America 7.8%n Africa/Mideast 6.0%n E. Europe 5.8%n N. America 3.6%n W. Europe 3.1% Total 6.0%
$0
$100
$200
$300
2006 2011 2016E 2021E
($ in
bill
ions
)
$84.2
$125.6
$174.6
$236.6
'06 - '21E CAGR
n Asia-Pacific 10.1%n C. & S. America 8.9%n Africa/Mideast 6.6%n E. Europe 6.0%n N. America 4.5%n W. Europe 3.2% Total 7.1%
(1) Increasing demand for grains for livestock feed, as producing calorie energy & protein from livestock takes an estimated 2.5 – 10x more grain
1.5%
1.1%
0.8%
0.3%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
0.0%
0.5%
1.0%
1.5%
2.0%
South &SE Asia
Africa LatinAmerica
Developed
Meat Consumption (Kg/person/year) GDP per Capita
% C
AGR
200
5vs
. 203
0
% C
AGR
2005vs. 2030
• ICS business launched in 1991 to service the professional concrete-cutting market − Leveraged Blount’s knowledge of chain saws and saw chain design/manufacturing
• Specialized hydraulic and gas chain saws provide alternative to cut-off saw
− Diamond saw chain grinds through concrete and rebar with a plunge cut
− Advantages vs. cut-off saw are: square corners without overcutting, deeper cuts, saves time
− Replacement saw chain business provides recurring sales stream
• Growth opportunities
− Geographic expansion in Europe and China
− Product expansion into ductile iron pipe cutting (sewage, utility) with PowerGrit®
− Acquisition opportunities in concrete cutting and finishing products
Construction End Market
18
Representative Products
Whole Goods Diamond Saw Chain PowerGrit®
Reasons to Invest in Blount
19
Attractive Business Model
Leveragable Infrastructure
Well Positioned to Grow
• “Razor blade”-like FLAG and FRAG replacement parts business
• Stable non-cyclical FLAG parts business
• 5% saw chain CAGR last 10 years
• Complementary FRAG whole goods business
• Strong position in niche markets
• Strong operating margins • Strong cash flow profile
• Design and engineering of cutting systems
• Manufacturing of high-volume small metal parts, often with a cutting edge
• Low cost capability • Global sales and
distribution network • Segment cross-selling
opportunities
• Organic growth and margin enhancement
• Strong management team, back-office, and culture
• Significant continuous improvement focus
• Shared services infrastructure • Global Supply Chain • R&D • Finance and other
functional areas • New product
development focus • Expansion in
replacement parts • Leveraging existing
distribution • Margin expansion
• Acquisition opportunities in Lawn & Garden, FRAG, and Concrete Cutting and Finishing
Financial Overview
20
Financial Performance
21
______________ 1) 2010 pro forma includes a full twelve months of results for SpeeCo, excludes $1.9 million of M&A and certain other expenses 2) 2011 pro forma includes a full twelve months of results for KOX, PBL, and Woods, excludes $4.4 million of M&A and certain other expenses
1 2
• 2013 full year sales expected to range between $930 – $980 million − FLAG sales up 0% – 4% versus 2012 full year − FRAG sales up 1% – 6% versus 2012 full year
• Full-year EBITDA expected to increase to between $140 million and $150 million versus 2012 due to the benefit of volume and absence of non-recurring expense incurred in 2012
$84 $127 $169 $136 $138 $145
$487
$657
$975$928 $934 $955
2009 2010Pro Forma
2011Pro Forma
2012Actual
LTM Mar 2013Actual
2013Outlook
Mid-point
EBITDA Sales
($ millions)
$145 $135 $132
$678 $650 $654
2011PF 2012 LTM 3/31/13
Adjusted EBITDA Net Sales
$36$10 $12
$273
$251 $253
2011PF 2012 LTM 3/31/13
Adjusted EBITDA Net Sales
Segment Performance
22
First Quarter 2013
FRAG Segment ($ millions)
FLAG Segment ($ millions)
• FLAG Sales − Soft Europe and
South America • FLAG EBITDA
− Margin of 20%+ − Includes $25.0 million of
shared service charges in the LTM March 2013 period
• FRAG Sales − Drought driven decline in
2012 and LTM Mar 2013 periods
• FRAG EBITDA − Impacted by SpeeCo
consolidation in 2012 − Includes $7.3 million of
shared service charges in the LTM March 2013 period
______________ 1) 2011 pro forma includes a full twelve months of results for KOX, PBL, and Woods, excludes certain other expenses
1
1
Sales by Region
23
Year-over-year first quarter sales up 3% overall
North America Q1 2013 Sales $106.3 vs. 2012 6.3% Europe/Russia Q1 2013
Sales $74.1 vs. 2012 -3.8%
Rest of World Q1 2013 Sales $17.1 vs. 2012 -12.5%
Asia Pacific Q1 2013 Sales $35.1 vs. 2012 17.9%
LTM Sales by Category 3/31/2013 Forestry $535 Lawn and Garden 119 Farm, Ranch, and Agriculture 253 Construction 26 Total Sales $934
($ millions)
$286
$350
$530 $517$494
$231$269
$468 $466 $480
3.4x 2.8x
3.1x 3.8x 3.6x
2.7x 2.1x
2.8x 3.4x 3.5x
2009 Pro Forma 2010 Pro Forma 2011 2012 LTM Q1 2013
Debt Net Debt Debt / LTM EBITDA Net Debt / LTM EBITDA
• Net debt increased from 2009 levels primarily for acquisition of FRAG business segment • Leverage levels driven by acquisition debt and recent profit and cash flow softness
Debt & Leverage
24
___________________ 1) LTM EBITDA represents earnings before interest, taxes, depreciation, amortization, and other adjustments for the last twelve months. Acquisitions
are included within the measurement of LTM EBITDA for the twelve month period ending in the quarter of acquisition and thereafter.
($ millions)
(1) (1)
Appendix
25
Adjusted EBITDA From Continuing Operations
26
______________
1) 2010 pro forma includes a full twelve months of results for SpeeCo, excludes $1.9 million of M&A and certain other expenses 2) 2011 pro forma includes full twelve months of results for KOX, PBL and Woods 3) 2013 outlook based on sales range between $930 million and $980 million and operating income range between $88 million and $98 million 4) Amounts may not sum due to rounding
$ millions 4
Actual 2009
Actual 2010
Pro Forma1
2010Actual2011
Pro Forma2
2011Actual2012
LTM3/31/13
Outlook3
2013Net Sales $487.4 $611.5 $656.6 $831.6 $975.5 $927.7 $934.0 $955.0
Operating income $54.5 $85.6 $89.3 $98.0 $110.0 $79.3 $84.9 $93.0Depreciation 19.5 21.0 21.3 23.5 26.9 28.6 29.2 31.4Non-cash acquisition accounting 1.5 4.9 8.1 15.6 22.0 16.0 15.3 14.9Non-cash stock compensation 1.6 3.2 3.2 4.4 4.4 5.6 5.8 5.7
Subtotal 77.1 114.6 121.9 141.5 163.3 129.5 135.1 145.0
Other AdjustmentsInventory / asset impairment charges - 3.0 3.0 0.5 0.5 - - - M&A expense 1.6 0.6 1.9 4.4 4.4 - - - Facility closure & restructuring 5.7 - - - - 7.0 2.5 - CEO transaction / transition costs - - 0.6 0.5 0.5 - - -
Adjusted EBITDA $84.3 $118.2 $127.4 $146.9 $168.7 $136.4 $137.6 $145.0
CAPEX net 13.4 19.8 20.1 39.4 41.6 51.7 48.3 45.0Adjusted EBITDA less CAPEX $70.9 $98.4 $107.3 $107.5 $127.1 $84.7 $89.3 $100.0
Net debt $230.8 $269.3 $269.3 $468.2 $468.2 $466.5 $480.0 $421.5
Adjusted EBITDA by Segment
27
______________
1) Amounts may not sum due to rounding 2) 2011 pro forma includes a full twelve months of results for KOX, PBL, and Woods, excludes $4.4 million of M&A and certain other
expenses
$ millions 1
Forestry, Lawn & Garden
Farm, Ranch &
AgriculturalCorporate &
Other Total Blount
Forestry, Lawn & Garden
Farm, Ranch &
AgriculturalCorporate &
Other Total Blount
Forestry, Lawn & Garden
Farm, Ranch &
AgriculturalCorporate &
Other Total BlountNet Sales $678.2 $273.0 $24.3 $975.5 $650.5 $250.8 $26.3 $927.7 $654.0 $253.5 $26.5 $934.0
Operating income $116.9 $15.2 ($22.1) $110.0 $108.3 ($7.5) ($21.5) $79.3 $105.1 ($4.8) ($15.4) $84.9Depreciation 21.9 4.7 0.4 27.0 23.1 4.6 0.9 28.6 24.0 4.7 0.5 29.2 Non-cash acquisition accounting 5.5 16.5 - 22.0 3.5 12.5 - 16.0 3.1 12.2 - 15.3 Non-cash stock compensation - - 4.4 4.4 - - 5.6 5.6 - - 5.8 5.8
Subtotal 144.3 36.3 (17.3) 163.3 134.9 9.5 (15.0) 129.5 132.1 12.1 (9.1) 135.1
Other AdjustmentsInventory / asset impairment charges 0.5 - - 0.5 - - - - - - - - M&A expense - - 4.4 4.4 - - - - - - - - Facility closure & restructuring - - - - - - 7.0 7.0 - - 2.5 2.5 CEO transaction / transition costs - - 0.5 0.5 - - - - - - - -
Adjusted EBITDA $144.8 $36.3 ($12.4) $168.7 $134.9 $9.5 ($8.0) $136.4 $132.1 $12.1 ($6.6) $137.6
2012 LTM 3/31/132011 Pro Forma2
Sales and EBITDA Comparison
28
______________
1) Amounts may not sum due to rounding 2) 2011 pro forma includes a full twelve months of results for KOX, PBL, and Woods, excludes $4.4 million of M&A and certain other
expenses
$ millions 1
Actual 2011
Pro Forma2
2011 2012LTM
3/31/13Sales
FLAG $659.9 $678.2 $650.5 $654.0FRAG 147.5 273.0 250.8 253.5 Other 24.3 24.3 26.3 26.5
Total sales $831.6 $975.5 $927.7 $934.0
Adjusted EBITDAFLAG $141.4 $144.8 $134.9 $132.1FRAG 18.0 36.3 9.5 12.1 Other (12.5) (12.4) (8.0) (6.6)
Adjusted EBITDA $146.9 $168.7 $136.4 $137.6
• Blount International and Oregon Saw Chain were founded in 1946 and 1947, respectively, and eventually merged in 1985
1946 – Red Blount founded Blount as a construction contractor in Alabama, USA
1947 – Joe Cox founded Oregon Saw Chain Corporation
1952 – Acquired Planer Chain in Guelph, Ontario, Canada and became a multi-national corporation
1957 – Changed the name to Omark Industries to better reflect diversified offering
1963 – Pioneered the development of modern era of light-weight direct-drive chain saws
1985 – Blount acquired Omark Industries in Portland, Oregon, USA
1992 – Founded ICS Division to develop construction products
1997 – Acquired Frederick Manufacturing in Kansas City, Missouri, USA
1999 – Acquired by Lehman Brothers Merchant Banking (“LBMB”)
2000 – Acquired Windsor Forestry Tools from Snap-On Inc.
2001 – Sold commercial ammunition business to Alliant Techsystems
2002 – Moved Corporate Headquarters to Portland, Oregon, USA
2004 – Blount held an initial public offering, where LBMB exited a large portion of its holding
2006 – Sold Dixon Industries (riding lawnmowers) to Husqvarna
2007 – Sold Forestry Division (heavy equipment) to Caterpillar
2008 – Acquired Carlton Holdings in Milwaukie, Oregon, USA
2010 – Acquired SpeeCo in Golden, Colorado, USA; Sold Gear Products to Dover
2011 – Acquired KOX in Germany; PBL in France and Mexico; and Woods/TISCO in Oregon, Illinois, USA
2012 – Opened Sourcing Office in Suzhou, China
Company History
29
Senior Leadership Team
30
YearName Title Joined Blount Prior Experience
Josh Collins Chairman & CEO 2009 n Collins Willmott & Co. (Private Equity)n Lehman Brothers Private Equity
David Willmott President & COO 2009 n Collins Willmott & Co. (Private Equity)n Lehman Brothers Private Equity
Cal Jenness Chief Financial Officer 2000 n Blount Corporate Controller, Treasurern CFO of Bryan Foods, division of Sara Lee Corporation
Ken Saito Senior Vice President 1975 n Blount President, Outdoor Products GroupSupply Chain & Manufacturing Ops. n Blount Senior Vice President Finance and Administration
Andy York Senior Vice President 2012 n Leupold & Stevens, Inc. since 2002Global Sales & Marketing
Cyrille Michel Senior Vice President 1983 n Blount Senior Vice President - Sales & MarketingEuropean Operations n Blount Vice President - Marketing
Jerry Johnson President - FRAG Division 2011 n President, Woods Equipment Companyn General Electric Company
Chad Paulson Vice President 2006 n PacifiCorp since 2003General Counsel & Secretary