• Fourth quarter 2014 sales increased 7% compared to 2013
• Fourth quarter 2014 Adjusted EBITDA increased 24% compared to 2013
• Full year 2014 sales were $945 million and Adjusted EBITDA was $138 million
• Full year 2014 free cash flow was $46 million

PORTLAND, Ore. — Sales in the fourth quarter were $232.2 million, an increase of $15.3 million or 7% compared to the fourth quarter of 2013. Operating loss for the fourth quarter of 2014 was $2.5 million compared to an operating loss of $16.5 million in the same quarter last year. Adjusted EBITDA in the fourth quarter was $30.5 million, an increase of $6.0 million or 24% compared to the fourth quarter of 2013. Fourth quarter net loss was $2.4 million, or $0.05 per diluted share, compared to net loss of $21.5 million, or $0.43 per diluted share, in the fourth quarter of 2013.

Sales for the full year were $944.8 million, an increase of $44.2 million or 5% compared to full year 2013. Operating income for 2014 was $64.2 million compared to operating income of $37.5 million for full year 2013. Adjusted EBITDA for full year 2014 was $138.0 million, an increase of $14.5 million or 12 % compared to full year 2013. The full year 2014 net income was $36.6 million, or $0.73 per diluted share, compared to net income of $4.8 million, or $0.10 per diluted share, for full year 2013.

"We operated well in 2014, and our results reflect our performance and stronger demand in our core business compared to the previous year," stated Josh Collins, Blount's Chairman and CEO. "Our continued focus on operational excellence and our targeted cost reductions positively impacted our results for the quarter and the full year."

Collins continued, "Looking ahead to 2015, we remain focused on operating well and executing on our strategic plan. While the underlying fundamentals of our business are sound, we are experiencing significant headwinds from foreign currency markets related to the strength of the U.S. dollar."

Blount operates primarily in two business segments — the Forestry, Lawn, and Garden ("FLAG") segment and the Farm, Ranch, and Agriculture ("FRAG") segment. The company reports separate results for the FLAG and FRAG segments. Blount's Concrete Cutting and Finishing ("CCF") business is included in "Corporate and Other."

Forestry, Lawn, and Garden

The FLAG segment had fourth quarter 2014 sales of $160.4 million, which was $12.7 million higher than the fourth quarter of 2013. Sales volume increases were partially offset by foreign exchange rate impacts on reported sales and a reduction in average prices. Fourth quarter 2014 sales increased in all geographic regions compared to fourth quarter of 2013. North America generated approximately 11% growth, Europe and Russia improved about one percent, Asia sales increased 19%, and the rest of the world generated nearly 10% growth. Foreign exchange rates reduced segment sales by more than 3% as the U.S. dollar strengthened versus nearly all currencies in the quarter. The largest impacts came from the Euro and Russian currencies. Lower average prices resulted primarily from targeted price reductions put in place earlier in 2014 in certain geographic markets. The change in segment sales for the comparable fourth quarter periods is illustrated below. 

Segment backlog was $140.1 million at December 31, 2014, a decrease of 7% from $150.9 million on December 31, 2013.

Segment contribution to operating income and Earnings Before Interest, Taxes, Depreciation, Amortization, and certain charges ("Adjusted EBITDA") was $23.9 million and $31.2 million, respectively, for the fourth quarter of 2014, and includes $8.1 million of allocated shared services expenses. Contribution to operating income improved 46.1 percent and Adjusted EBITDA improved 18.1% for the fourth quarter of 2014 versus the fourth quarter of 2013. The change in FLAG contribution to operating income for the comparable fourth quarter periods is presented below. 

Segment contribution to operating income and Adjusted EBITDA improved primarily due to higher sales volumes and favorable foreign exchange rates. Increased steel costs, lower average pricing, and slightly higher costs partially offset the improvements in those areas. The closure of a higher cost FLAG manufacturing plant announced in 2013 and higher plant utilization rates (89% in the fourth quarter of 2014 compared to 65% in the fourth quarter of 2013) contributed to improved overall operating efficiency. The manufacturing cost improvement was more than offset by an increase in SG&A spending, driven mostly by incentive compensation expense as 2014 results compare more favorably to target than in 2013 and higher training, travel, and relocation expenses.

Farm, Ranch, and Agriculture

The FRAG segment reported fourth quarter 2014 sales of $63.3 million, an increase of $0.2 million from the fourth quarter of 2013, mainly due to stronger average pricing. Sales volumes declined approximately 1%, but were more than offset by increased average pricing of nearly 2%. The overall change in segment sales for the comparable fourth quarter periods is illustrated below. 

Segment backlog was $28.8 million at December 31, 2014 compared to $31.4 million at December 31, 2013.

The FRAG segment had $2.3 million of Adjusted EBITDA in the fourth quarter of 2014. FRAG segment contribution to operating loss was $21.4 million after $3.9 million of depreciation and amortization expense, $2.5 million of allocated shared services expenses, and $19.7 million in non-cash charges related to impairment of certain acquired intangible assets. The change in the fourth quarter 2014 contribution to operating loss compared to the fourth quarter of 2013 is presented below. 

The benefit of improved average pricing was more than offset by slightly lower volumes and higher costs in the FRAG segment, mainly due to additional spending in SG&A related to wages and benefits. Wages and benefits increased primarily due to additional headcount, wage inflation, and higher incentive compensation expenses. Product sales mix in the fourth quarter of 2014 included relatively lower margin products compared to 2013. The FRAG operating loss is also partially attributed to an impairment of purchased intangible assets.

Corporate and Other

Corporate and Other generated net expense of $4.9 million in the fourth quarter of 2014 compared to net expense of $8.9 million in the fourth quarter of 2013. Fourth quarter 2014 net expense improved primarily as a result of lower restructuring expenses and professional fees. Higher professional fees in the prior year were driven mostly by financial statement audit costs.

Net Income

Fourth quarter 2014 net loss decreased primarily due to higher overall operating income in the fourth quarter of 2014 compared to 2013 and lower intangible asset impairment charges. Fourth quarter 2014 net interest expense was flat. Other income improved $2.2 million primarily as a result of foreign exchange impacts on non-operating assets. The change in net loss for the fourth quarter of 2014 compared to the fourth quarter of 2013 is summarized in the table below. 

Cash Flow and Debt

As of December 31, 2014, the company had net debt of $356.9 million, a decrease of $38.2 million from December 31, 2013 and an increase of $5.9 million compared to September 30, 2014. The decrease in net debt since December 31, 2013 was primarily the result of generating free cash flow of $45.6 millionin 2014 partially offset by the CCF-related acquisition of Pentruder and foreign exchange impacts on cash. Fourth quarter 2014 free cash flow was a use of $6.3 million compared to generation of $7.8 million in the fourth quarter of 2013. The decrease in free cash flow in the fourth quarter of 2014 as compared to 2013 was the result of a large conversion of working capital to cash in the prior year and an increase of $1.8 million of capital spending in the fourth quarter of 2014, mostly on continued capacity increases in China and Canada. The Company defines free cash flow as cash flows from operating activities less net capital spending. The ratio of net debt to last-twelve-months ("LTM") Adjusted EBITDA was 2.6x as of December 31, 2014, which is an improvement compared to December 31, 2013 and reflects lower net debt and increased Adjusted EBITDA.

2015 Financial Outlook

Prior to the recent significant movement in currency exchange rates, our expectation was for FLAG sales to return to historic rates of growth with a modest headwind related to ordering patterns from our largest OEM customer. However, we now assume that the recent, significant change in foreign currency markets related to the strength of the U.S. Dollar will override those patterns. The company has significant foreign sales denominated in U.S. dollars. As a result, many of the company's products are effectively priced higher for our customers. While it is still early in the year and significant uncertainty exists, we now estimate the company's fiscal year 2015 sales to range between $900 million and $950 million, operating income to range between $78 million and $94 million, and Adjusted EBITDA to range between $130 million and $145 million. Our expectation for sales assumes FLAG segment sales decline 1-7% and FRAG segment sales remain flat to an increase of 3%, both compared to 2014 levels. In 2015, steel prices are expected to increase by $1 million to $2 million compared to 2014. The 2015 operating income outlook includes non-cash charges of approximately $12 million related to acquisition accounting amortization. Free cash flow in 2015 is expected to range between $40 million and $50 million, after approximately $40 million to $50 million of capital expenditures. Net interest expense is expected to be between $17 million and $18 million in 2015, and the effective income tax rate for continuing operations is expected to be between 34% and 37% in 2015.

The company's outlook range for sales, operating income, and adjusted EBITDA in 2015 versus 2014 is presented in the table below. The table illustrates the foreign currency translation impact at prior year business volumes as well as the expected 2015 unit volume effect resulting from market and currency driven demand pressure related to effectively higher U.S. Dollar denominated prices. 

The company's outlook range for sales, operating oncome, and adjusted EBITDA in 2015 versus 2014 is presented in the table below. The table illustrates the foreign currency translation impact at prior year business volumes as well as the expected 2015 unit volume effect resulting from market and currency driven demand pressure related to effectively higher U.S. Dollar denominated prices. 

A comparison of key operating indicators for 2014 actual results and the 2015 outlook mid-point is provided in the table below.    

Adjusted EBITDA and Free Cash Flow are non-GAAP measures and are reconciled to Operating Income and Cash Flow from Operations in the attached financial data table.

Blount is a global manufacturer and marketer of replacement parts, equipment, and accessories for consumers and professionals operating primarily in two market segments: Forestry, Lawn, and Garden ("FLAG"); and Farm, Ranch, and Agriculture ("FRAG"). Blount also sells products in the construction markets and is the market leader in manufacturing saw chain and guide bars for chain saws. Blount has a global manufacturing and distribution footprint and sells its products in more than 115 countries around the world. Blount markets its products primarily under the OREGON, Carlton, Woods, TISCO, SpeeCo, ICS and Pentruder brands. For more information about Blount, please visit our website at http://www.blount.com.

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