Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Blount International, Inc. (NYSE:BLT)

Q3 2010 Earnings Conference Call

November 3, 2010 1:00 PM ET

Executives

Josh Collins – Chairman, President and CEO

Calvin Jenness – SVP and CFO

Analysts

Mark Rupe – Longbow Research

Alan Robinson – Royal Bank of Canada

Dax Vlassis – Gates Capital Management

Mike Henney (ph) – Benchmark Capital

Operator

Good morning or afternoon as the case may be for each of you, and welcome to the Blount International Inc. teleconference with Chairman and Chief Executive Officer, Mr. Josh Collins and Mr. Calvin Jenness, Senior Vice President and Chief Financial Officer.

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.

(Operator Instructions).

At this time I would like to turn the call over to Mr. Jenness. Mr. Jenness you may begin.

Calvin Jenness

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.

Josh Collins

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.

Now a few comments about Q3 results. The core operations continue to show good top line growth. Sales were up 17% in our core outdoor products business excluding the SpeeCo sales from the acquisition date, that’s year over year. SpeeCo added nearly $14 million dollars in sales in the quarter for an overall increase of 28% compared to Q3 of 2009.

Sales were strong both internationally and domestically with both the OEM and replacement markets showing strength. We believe customer inventories in the field are appropriate and that current order patterns generally reflect end user demand.

Our full year sales outlook for our base operations now approximates our record level with 2008. We continue to face challenges in meeting customer demand and we are working three shifts, seven days a week in general and are adding production capacity as well as working to improve our supply chain capability.

Backlog at over $130 million dollars is now the highest it has ever been for continuing operations. This bodes well for the business in the near term but also causes challenges for service levels and costs.

From a profit perspective, we experienced some pressure on margins as a result of increase in costs related to steel and foreign exchange rates, executing the various transactions in Q3 and spending on implementation of our strategic programs. We’ve illustrated the impact of these factors in our distributed materials.

In September we began implementing price increases in select markets to offset some of this cost pressure. Overall, we are pleased with our Q3 2010 operating performance despite the cause pressures. We kept overall leverage at a reasonable level. On pro forma basis, overall leverage is comparable 3.1 times after executing significant components of our M&A strategy.

Cal will now cover some specifics related to financial performance with the company.

Calvin Jenness

Thanks Josh. The Q3 financial results reflect activities that Josh discussed. As a clarification, all the historical results of Gear Products have been reclassified as discontinued operations. As a result, the outdoor product segment represents all the company’s revenues and now includes the results of SpeeCo from the date of acquisition, August 10, 2010.

Associated with SpeeCo are several purchase accounting adjustments that we have isolated in our prepared material that had a negative impact on operating results.

From a profit perspective, many factors influenced our results in Q3 of 2010 compared to Q3 of 2009. Although gross profit was up from Q3 of last year, we saw a 350 basis point decline in gross margins. Foreign exchanged accounted for 160 basis points of this change and steel costs accounted for 60 basis points.

Costs of sales were also influenced by write-downs in inventories as a result of our program to drastically reduce the number of SKUs we manufacture. These write-downs and other strategic programs accounted for approximately 100 basis points of the gross margin pressure. However, the reduction of SKUs is expected to improve our future order fulfillment capabilities as well as create future production efficiencies.

Sequentially from Q2 of 2010 we experienced a 430 basis point decline in gross margin due to the same factors as the year over year decline. Additionally Q3 of 2010 reflects higher costs associated with rapid increase and manufacturing head count and training that was required to meet the accelerating product demand.

SG&A spending increased in both the core outdoor products business as well as the corporate administration areas. As we outlined in our press release, we have (inaudible) in advertising our products and add return to a more normal spending levels in the areas of training, recruiting, relocation and travel.

The Q3 2010 spending levels were consistent with Q2 of 2010 although up from Q3 of 2009 as we had intentionally reduced discretionary spending in 2009. Additionally our SG&A spending reflects our commitment to our strategic programs as we position our internal human resources and structure to execute on those initiatives.

Finally we took charge in the SG&A related to further integration of the manufacturing capability for our Carlton brand of products for efficiency.

We have presented EBITDA details in the presentation materials on our website. In addition to the normal (inaudible) for depreciation and amortization, we have adjusted for the inventory and manufacturing integration changes noted earlier, as well as the transaction costs incurred in applicable quarters. Transaction costs have primarily to do with our refinancing and execution of our acquisition divestiture actions. We made these adjustments in order to normalize EBITDA so that it is representative of the ongoing profitability of our business.

Adjusted EBITDA for the quarter was nearly $31 million and almost $111 million dollars on a trailing twelve-month basis. Including SpeeCo for an entire trailing 12 months and not just since August 10th acquisition. Pro forma adjust EBITDA was approximately $119 million dollars. Overall pro forma leverage was 3.1 times and pro forma net leverage was 2.4 times; both up approximately a half a turn from a quarter ago since we borrowed to accomplish the SpeeCo purchase. Because of the timing of the Gear Products sale, we carried about $25 million dollars cash over to October 1st and then paid down the revolver at the start of Q4.

We recognized a tax benefit on income from continued operations in Q3 of 2010 as we reduced our reserves for uncertain tax positions. This resulted in a tax benefit of about 82% on pre-tax income from continuing operations versus a more normal effective cash rate expense of approximately 34%. In Q4 of 2010 we expect our effective income tax rate on continuing operations to return to a more normal level and range between 33% and 36%.

Net debt at the end of the quarter was approximately $24 million and increased compared to the end of Q2 of 2010 due to borrowing for the SpeeCo acquisition and payment of costs related to the refinancing of our debt.

We continue to use pre-cash flow to reduce debt as well as to fund our strategic programs. We used $4 million dollars of cash in Q3; this represents a $10.3 million dollar reduction in cash generation compared to Q3 of 2009. The decline was driven mostly by an increase in working capital to serve higher sales levels.

Additionally, our capital spending was up nearly $1 million dollars and our cash interest pay was up about $4 million dollars due in part to the extra holding period of our senior notes prior to redemption and timing differences between our old and new debt structures. We define pre-cash flow as cash flow from operating activities less net capital spending. We expect capital spending levels to increase over the remainder of 2010 and to range between $19 million and $22 million for the year.

As Josh mentioned earlier; we used a portion of our proceeds of our new $425 million credit facility to redeem the $175 million of senior subordinated eight and seven eighths percent notes at par value on September 16th 2010 in accordance with our terms.

The amended and restated senior credit facility reduces our cash interest run rate by approximately $6 million and also reduces interest by approximately $2 million- non-cash interest by approximately $2 million dollars annually.

More over the facility will allow some (inaudible) acquisitions in a manner consistent with the strategy we have previously outlined. Prior to this expense for Q3 was approximately $1.6 million higher than our run rate due to the interest carry charges from the August 9th 2010 refinance to the September 16th redemption of the notes.

I believe that covers the specifics related to Q3 2010. At this time I’d like to turn the call back over to Josh for some observations on our outlook and concluding remarks.

Josh Collins

Thanks Cal. With continued strong order intake, we expect to see year over year sales growth in Q4 in full year 2010 consistent with what we forecasted a quarter ago. After adjusting for the addition of SpeeCo and the sale of Gear Products, our midpoint estimate for 2010 sales is $605 million. As we illustrated in the press release, this is in line with the previous guidance. Orders and customer demand show overall strength globally, particularly in developing new economies.

Our outlook midpoint estimate for operating income is $85 million dollars after adjusting for SpeeCo and Gear Products. The core operating income outlook is down some from our guidance last quarter as we experienced higher costs related to reducing the breadth of our manufactured product portfolio.

Additionally as Cal mentioned sales volumes have driven new hiring to company inefficiencies due to the inexperience of recently added manufacturing staff.

We expect our full year net interest expense to be approximately $25 million dollars reflecting the recently completed refinancing and all associated costs. On a pro forma basis, cash interest expense would have been about $18 million dollars.

Additionally, full year 2010 free cash flow is consistent with previous guidance before a required payment of income tax on the Gear Products sale was estimated to be between $37 million to $43 million dollars.

In the presentation materials online, we outline several strategic initiatives that position us for growth. As we have discussed on past calls, these initiatives are designed to drive profitable growth over the next several years and can be broken down into several categories.

First, driving growth in existing business lines including initiatives around investment in our marketing organization, refinement of our brand strategy, which is underway and development of an opening price point chain offering.

Secondly, efforts to improve customer service which include our supply chain reorganization, our SKU rationalization and continuous improvement program.

Thirdly, efforts to lower cost and improve efficiency, which include also the continuous improvement program, the Carlton chain facility integration and optimizing our manufacturing footprint globally.

Fourthly, new product developments; PowerSharp as we talked about, the launch is underway and on plan. Commercialization of new products in the near to midterm and investment in the next round of products for long-term growth.

Finally, growth through acquisitions, we continue to review multiple acquisition opportunities and expect to acquire two to three businesses over the next 18 to 24 months with aggregate enterprise value in the $100 million to $200 million dollar range.

As we stated before, acquisitions will leverage our capabilities in global distribution, design and engineering cutting systems for manufacturing and high volume metal parts.

We continue to target an increase in EBITDA from the 2009 level of $90 million dollars to $180 million dollars by year 2014. We feel that we are on or ahead of schedule.

At this time I will open the line for any questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions.) Our first question comes from Mark Rupe of Longbow Research.

Mark Rupe – Longbow Research

Hey guys, congrats on all the transactions during the period. As it relates to kind of the gross margin going forward, obviously you’ve indicated some of the costs in ramping some of the new people but as far as some of the pricing that you’ve put, to just kind of get an idea of how much the pricing will offset some of that cost and maybe kind of just on a run rate versus kind of the Q3 level.

Josh Collins

Without getting into details, which we won’t do, we’ll tell you that we are optimistic that overall our price increases, and it won’t be immediate, will offset steel costs and FX. And there are a lot of variables in there, but that’s what we think we can cover.

Mark Rupe – Longbow Research

Okay, maybe not so much Q4, but maybe heading into the first part of next year, is that fair to say?

Josh Collins

Yeah, it takes time to roll this out and then select. And it’s product by product and we’ve already started, as we said, September 1st. So we got a little bit of benefit in Q3, we’ll get more certainly in Q4 and more going forward.

Mark Rupe – Longbow Research

Okay, would you say that the price increase represented more than half your sales base or is that too aggressive?

Josh Collins

That’s not too aggressive.

Mark Rupe – Longbow Research

Okay, and just kind of the, obviously with the backlog numbers in your commentary, I would assume the flow of kind of reorder demand, was it consistent and stable to the period?

Josh Collins

Overall, yes. And I say that because, you know, it’s lumpy and chunky by region, by customer, but if you look at it overall, it’s strong and stable.

Mark Rupe – Longbow Research

Okay, perfect. And then any color on each of the sub-segments; the chain versus outdoor products or lawn and garden versus ICS?

Josh Collins

Yeah, so what I’ll say is that 4 – 3 lawn and garden, ICS or concrete finishing and the farm and ranch all seem to be experiencing similar overall strength in order intake. Once again, by region, by customer, you get lumpiness obviously and whether we’ll impact it here positively and there negatively, but you know, good stable order intake.

You know, obviously on the construction, on the commercial construction side that index is still way off but you know, we’re still seeing good replacement and on the maintenance side there’s good strength there.

Mark Rupe – Longbow Research

Okay, and just last, on the SG&A line, Cal maybe you can help me here, just kind of on a go forward, not specifically but is there anything that would be any different than kind of the run rate we’re at? I mean obviously you’d increase your ads and stuff like that, but I mean anything materially different kind of on a moving part basis going forward?

Calvin Jenness

Yeah, Mark, on down the base, I don’t think there is. I mean there’s been, you know, as we’ve tried to call out in the previous quarters there have been some noise in the numbers recently. Like I think this past quarter we have $700,000 or so of one timers related to the Carlton integration that hopefully won’t reoccur and we have some transaction, but base thing, I think we said in our notes, Q3 to Q2 the trend wasn’t too much different.

Mark Rupe – Longbow Research

Okay, perfect. Thanks and good luck.

Calvin Jenness

Thank you.

Operator

The next question comes from Alan Robinson from Royal Bank of Canada.

Alan Robinson – Royal Bank of Canada

Good morning gentlemen. Thanks very much for the extra detail you provided online, that answered a lot of my questions. I had a question regarding the SpeeCo acquisition and I’m not sure if I’m reading this correctly. But if I back out the guidance you add in SpeeCo for the rest of the year together with the pro forma it looks like, for the year ending 2010, that SpeeCo’s going to have a decline in revenues compared to the year end in July 2010. Am I reading that right? And if so, what’s behind that?

Calvin Jenness

Yeah, I mean I think it’s pretty close I think. I think the numbers we disclose in the LTM for July was like 77 and I think this works out to 76 and change. So it’s pretty close.

Alan Robinson – Royal Bank of Canada

Right.

Josh Collins

Yeah, on SpeeCo just to hit this, the SpeeCo integration is probably combining these companies they’re going really well. We, obviously the log splitter business is seasonal and the fall selling season is important. We got off to a slow start due to weather, and I hate the weather excuse, but you know, just telling it like it is. And you know then it picked back up. So we feel, where as I thought we’d have a bit of a shortfall on EBITDA level compared to where we were expecting when we closed transaction, it feels to me like we’re going to be on it or very, very close to it. And that’s a really good business and I think we’ve been telling people all along that we want to make sure that we maintain that existing business.

There are some interesting things that the combination provides over time and both on the cost side but really much more importantly on the revenue side in leveraging our distribution globally, etcetera. The most important aspect of that is the integration of the team and really starting to develop what the program is going to be in 2011–2012. You know if we’re off a million bucks or something like that from where we stand on the top line and the matter of a couple hundred thousand, you know, it’s all within a degree of uncertainty. So I think to us it feels like we’re on there. But do the arithmetic around getting to it.

Alan Robinson – Royal Bank of Canada

Okay, fair enough. Was there anything unusual about the linearity of SpeeCo orders in the quarter? It seems that you got a good chunk of orders after you acquired the company. Is that just typical lumpiness of orders or was there anything else unusual going on there?

Calvin Jenness

Just absolutely regular. Pretty much with the exception of some regional weather, which the only thing I know about weather is it changes, is it’s right on for our expectations.

Alan Robinson – Royal Bank of Canada

Okay, thank you. And then just finally on your comments regarding acquisitions, another three potentially in the hundreds, two hundred EV range, what’s the composition going to be there roughly speaking? Are you still looking at one large one and a couple of smalls or is that to be determined?

Calvin Jenness

Unknown. It feels like, you know, that’s sort of the number, I mean two to three hundred to $200 million dollars and if we get any more clarity we’ll let you know, but I would expect on the small side (inaudible) consistent, on the small side, you know $20 million. On the high side $100 million.

Alan Robinson – Royal Bank of Canada

Okay. That’s all. Thank you.

Calvin Jenness

And I will tell you this, the opportunities appear to be out there.

Alan Robinson – Royal Bank of Canada

Thanks.

Josh Collins

Thank you.

Operator

And the next question comes from Dax Vlassis from Gates Capital Management.

Calvin Jenness

Hey Dax.

Dax Vlassis – Gates Capital Management

Hey, how you doing? A couple quick questions. The SpeeCo LTM pro forma EBITDA that you gave on 119, is that comparable to the 125? In other words, is that an apples to apples number for the estimated pro forma 2010 number?

Josh Collins

Yes, if I understand your question correctly. I mean it’s–

Dax Vlassis – Gates Capital Management

Well if LTM is 119 and you expect 125, I guess you expect to be up pro forma excluding all charges about $6 million on EBITDA basis year over year in Q4?

Josh Collins

Yeah, 119 was in the- 119 I gave in the script here for the 125 includes the add back for SpeeCo for the period we didn’t own it.

Calvin Jenness

Yeah, yeah, yeah, okay.

Dax Vlassis – Gates Capital Management

Is my math correct?

Josh Collins

(Inaudible)

Dax Vlassis – Gates Capital Management

Okay, and then on a free cash flow basis it looked like you did about 18 in the nine months and you’re expecting around 40 for the year which, I mean that’d be $20 millionish type of number for Q4. Is there something seasonal that’s happening in that quarter or is working capital a little high right now? How would you describe your working capital versus a normalized number with SpeeCo in it?

Josh Collins

Q4 is generally good for us in terms of cash flow. It was last year. Yes, I would say our working capital is slightly higher than we want. And then in Q3 we made a $10 million dollar contribution to our US pension plan, a voluntary contribution which was consistent with what we did last year in Q3, but we won’t do that in Q4. So we would have been positive in cash flow if we didn’t make that contribution.

Dax Vlassis – Gates Capital Management

And that was at your election, correct?

Josh Collins

Yes. I mean we’re under funded but we didn’t have to make a payment but we’re trying to get funded.

Dax Vlassis – Gates Capital Management

And how much are you underfunded now?

Josh Collins

Tough to say. I mean obviously there’s something to change. But we didn’t last year I think worldwide our pension funds were about $30 million under funded. We’re probably putting in 14 this year. The US plan as you call it doesn’t have any service accruing. So we’ve made progress on the US. I don’t know, it’s probably still close to 30. I mean discount rates are going to change at the end of the year and everything else so it’s probably in the same ballpark.

Dax Vlassis – Gates Capital Management

Okay, gotcha.

Josh Collins

We didn’t make a lot of progress.

Dax Vlassis – Gates Capital Management

And then on the cash on the balance sheet at the end of the quarter, I heard that you paid down the revolver; I guess that would leave you with around $60ish sort of millions of cash. How much of that is international, and Josh, does that play at all into your ideas about acquisitions or are we looking more in the international markets or the domestic markets? Can you give us a little color on that?

Josh Collins

Yeah, sure. We look at acquisitions independent of where we have the cash. You don’t want to be taking our logic around does this acquisition make sense? That being said, we also are working hard to make sure that we can efficiently move cash around the globe. But it does tend to be you know, you need it in the US or you need it outside the US. Definitely, however, two thirds of the business is outside of North American and we like that. And when we’re looking at acquisitions, even if it’s something in the US like SpeeCo was, we’re looking to see how we can take that product line global. But I would say that as I said in the past, if you look at all the acquisition opportunities that we’ve looked at, the majority of them are outside of North America.

Dax Vlassis – Gates Capital Management

Okay. Last question. You know the $3.1 million of business optimization charges for 2010, do you expect that to repeat in 2011 and can you describe if that’s just some- it sounded to me like you were just doing some things with the Carlton acquisition which I would guess would be wrapped up this year. So is that sort of the one off thing this year or do you expect additional charges going forward to improve the manufacturing footprint or efficiency?

Josh Collins

Yeah, so we laid this out for those of you listening. On slide 11 in that presentation that you can get at blount.com and we (inaudible) there’s a lot that happened in the quarter obviously but we were trying to get as much disclosure as possible. And when you peel the onion back there are a lot of layers and then you get to what you need to focus on which is gross margin. And the components of roughly 350 basis points, components that Cal laid out, I mean there’s FX, there’s steel costs, you know, steel and other material but largely steel cost, there’s some inefficiencies due to a volume ramp up and having to hire a bunch of people and train them. Which is the one that we’re- that I am most focused on. We’re focused on the others too.

And then there’s this reserve increase around inventory and there’s two pieces to that. One in around Carlton in really trying to finalize we were trying to get all done in Q2, but trying to finalize that integration, if you will. And we took an increase in reserve in a warehouse in Europe that was Carlton, okay and (inaudible) that is one time and we hope that’s not one of those recurring non-recurrings. We certainly don’t think it is. We don’t know of any other warehouses that we need to look at there.

The other piece of it on the inventory side is around the SKU reduction. And we have normal reserving policy but we, you know, we have blocked manufacturing of an enormous number of SKUs and are in the process and have been pointing our customers to other SKUs. And we had a reserve that we thought was pretty good and when we looked at that inventory, we needed to increase reserve, it needed to be higher. So we think that that is sufficiently conservative. We didn’t want to have to take another bite of the apple around those numerous items. But we will continue next year to look at other SKU reduction finishes and there could be another hit there, but it’s not our intention. And it’s- there may very well be but it won’t be related to these SKUs.

We don’t have any plans at this point but I just want to just throw that out there because as with an (inaudible) there could be another event.

Dax Vlassis – Gates Capital Management

Okay, thanks a lot.

Operator

Thank you and the next question comes from Mike Henney (ph) from Benchmark.

Mike Henney – Benchmark Capital

Great. Benchmark Capital. Hi Cal, Josh. Question on PowerSharp and if you can just clarify for me, I think I heard you say that you did $2.5 million in sales in Q3 for a total of $2.8 million so far?

Josh Collins

Yep.

Mike Henney – Benchmark Capital

Now last quarter you had mentioned you did $2.7 at the end of Q2, now that was combined sales and orders. Maybe I’m not understanding something, but so if you were at $2.7 in Q2 and your overall now you’re $2.8…

Josh Collins

Yeah, that’s (inaudible) so that was where there was probably 300,000 sales.

Mike Henney – Benchmark Capital

I assume that’s how the math works.

Josh Collins

Yeah, we have additional orders outstanding, you know, from Q3 that are outstanding orders. You probably have a number there. But obviously there’s, maybe not obviously but there’s a load when you, when we launch this product there’s a channel load and now we’re focused on sell through.

Mike Henney – Benchmark Capital

Right. So how much of that $2.8 million was- so just $2.5 million of that was inventory stocking then?

Josh Collins

Well it’s all inventory stocking initially.

Mike Henney – Benchmark Capital

Okay, but of the $2.8 million that you’ve sold so far, how much has been actual sales out the door?

Josh Collins

I have some information on that. You know by customer and I have no information on that for other customers. There are just too many customers and it’s been on the channel obviously. I will tell you this, the challenge for us is communicating with end user in creating demand pole.

We have a product here that is exceptional and we are certain of that; the data is showing it. But it’s effectively a new category and it’s not intuitive and it is on us to communicate it to the end user. So there are areas where it sells very well or channels where it appears to be selling pretty well and other which is largely where you have the demonstration and you have an active selling program. But if you put this on a peg it’s not going to move so that’s on us. And that’s why we say we shifted from the initial launch in getting it on the shelves to demonstrations and working with our distribution to ensure that a communication plan is going through.

Mike Henney – Benchmark Capital

Would it be fair to say that you guys have been kind of disappointed so far in the sales and if the increase in advertising that I see that you’re doing is maybe primarily related to this product?

Josh Collins

The first part of that is no; it’s on plan. It’s absolutely on plan. There is, I should think most of that advertising increase is not associated with this but Cal can correct me there.

Calvin Jenness

Yes, I’d say that’s fair.

Josh Collins

But I do think that we are expecting additional spend over the next two to three quarters around this product.

Mike Henney – Benchmark Capital

Any idea quantity- you know, on the amount of that that you might be looking at?

Josh Collins

No.

Mike Henney – Benchmark Capital

Okay, great. Thanks guys.

Josh Collins

Okay, thank you.

Operator

(Operator Instructions)

Josh Collins

Okay, well thank you all for joining and we will talk to you next quarter or sooner if need be. Thanks.

Calvin Jenness

Thank you.

Operator

Thank you and that does conclude today’s teleconference. You may now disconnect your phone lines.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Blount International CEO Discusses Q3 2010 Results – Earnings Call Transcript
This Transcript
All Transcripts