FORT SMITH, Ark., Feb. 5 /PRNewswire-FirstCall/ -- Baldor Electric
Company (NYSE:BEZ) markets, designs and manufactures industrial
electric motors, mechanical power transmission products, drives and
generators. Today, Baldor announced unaudited results for the
fourth quarter and year-to-date 2008. (in thousands 4th Quarter
Year-To-Date except per 2008 2007 2008 2007 share data) Jan 3, Dec
29, %Chg Jan 3, Dec 29, %Chg 2009 2007 2009 2007 Net Sales $474,022
$456,995 4% $1,954,679 $1,824,899 7% Cost of sales 339,049 316,381
1,376,381 1,274,753 Gross profit 134,973 140,614 (4%) 578,298
550,146 5% SG&A 83,712 76,322 329,701 297,418 Operating profit
51,261 64,292 (20%) 248,597 252,728 (2%) Other income (expense),
net 3,316 831 6,113 2,611 Interest Expense (26,762) (28,443)
(102,441) (108,176) Income before income taxes 27,815 36,680 (24%)
152,269 147,163 3% Income taxes 9,214 13,303 52,846 53,061 Net
income $18,601 $23,377 (20%) $99,423 $94,102 6% Net earnings per
share - diluted $0.40 $0.51 (22%) $2.15 $2.08 3% Dividends per
share $0.17 $0.17 0% $0.68 $0.68 0% Avg shares outstanding -
diluted 46,266 46,264 46,339 45,242 John McFarland, Chairman and
CEO, commented on the Company's results, "We are pleased to
announce record sales for 2008 of $1.95 billion, net earnings of
$99.4 million, and diluted earnings per share of $2.15. Cash flows
from operations of $103.2 million allowed us to reduce our debt
balance by $49.4 million during the year. Sales for the fourth
quarter of $474.0 million resulted in net earnings of $18.6 million
and $0.40 diluted earnings per share. "On December 15, 2008, our
sales were up 10% for the quarter; however, they fell dramatically
during the final three weeks of the month. We believe this was due,
in part, to longer than normal plant shutdowns over the holidays
and customers reducing inventories. As a result, we did not achieve
our sales goal for the quarter. Earnings during the quarter
continued to be negatively impacted by increases in raw material
costs. For the entire year, we paid nearly $100 million more for
roughly the same amount of materials than we did during the prior
year. We believe these costs will improve in 2009." "We expect 2009
to be a challenging year. However, we have faced challenging years
before. We believe we came out of those years stronger and in a
better position to gain new customers and market share than anyone
in our industry. Today, we think we are taking the necessary steps
to keep Baldor healthy in the short term while strengthening our
growth opportunities for the long term." SELECTED FINANCIAL DATA
(unaudited) December 2008 2007 (in thousands) Jan 3, 2009 Dec 29,
2007 Cash $13,098 $37,757 Net receivables 275,789 281,729
Inventories 344,920 309,921 Total Assets 2,834,235 2,821,626 Total
Debt 1,326,922 1,376,346 Shareholders' Equity 849,906 810,769
Year-To-Date 2008 2007 (in thousands) Jan 3, 2009 Dec 29, 2007 Cash
flows from operations $103,204 $163,018 Total depr and amortization
81,532 71,779 Capital expenditures 45,634 39,490 Dividends 31,392
31,184 Depr and amortization from purchase accounting 24,808 21,447
Following are answers to questions recently asked by shareholders.
Q... How was business during the quarter? Net Sales Chg % Net Sales
% of Total Q408 v Q407 (thousands) Sales Motors $320,436 68% 8%
Power Transmission 124,315 26% (2%) International Sales 92,155 19%
18% During the quarter, many of our customers reduced their
inventories. This reduction took place with both our original
equipment and distributor customers. This destocking accelerated in
December 2008 when distributor sales declined by more than 20%. Our
backlog at the end of the quarter was approximately $225 million
compared to approximately $260 million at the end of third quarter
2008. Sales of Super-E(R) premium-efficient motors continued to
grow at more than 30% for the quarter and 25% for the year.
Premium-efficient motors make up approximately 10% of our motor
sales. Even during a challenging economic period, customers realize
premium-efficient motors reduce their electricity costs. Customers
also appreciate the fact that our wide variety of Super-E motors
already comply with the 2007 Energy Bill which becomes effective in
December 2010. Q... How were sales internationally? During the
quarter, international sales increased 18% and were a record 19% of
total sales. For the period, sales increased at a double-digit rate
in Latin America, Asia Pacific, and Canada and decreased slightly
in Europe. Q... What caused the decline in earnings during the
quarter? Raw material costs continued to increase in the fourth
quarter. We expect them to improve throughout 2009. Distributor
sales declined considerably more than the less profitable OEM
sales. Selling and administrative expenses increased during the
quarter due to increases in commissions and the inclusion of
Maska's expenses beginning September 2008. We also had nearly $2
million in year end adjustments. Q... Did your electrical steel and
copper costs decline during the quarter? Electrical steel is our
largest raw material purchase. During the quarter, the price we
paid for electrical steel was 65% higher than one year ago. We also
did not get the benefit of falling spot prices for copper because
of our hedging strategy. This strategy successfully kept us from
paying record high prices for copper one year ago but prevents us
from paying the spot price now. We expect the cost of electrical
steel to decline in first quarter 2009 compared to fourth quarter
2008. However, these prices will still be higher than we paid in
first quarter 2008. We anticipate lower copper costs in the second
half of 2009. Q... Have you improved your accounts receivable
collections? Yes. The number of days it takes us to collect our
accounts receivable declined by 8 days from the third quarter and 2
days from last year. We believe the quality of our accounts is
good, and we have had no unusual write-offs. Q... Are you on track
to achieve the $80 million in annual cost savings you announced in
December? Yes. In January 2009 we met our goals on overtime,
people, discretionary spending and interest expense. We do expect
to achieve all $80 million in cost savings in 2009. Q... Are your
inventories adequate for the current level of sales? Yes. During
the fourth quarter, our inventories declined by $5 million. Like
our customers, we are managing our balance and mix of inventories
very carefully. Our manufacturing systems allow us to adjust
inventories up or down quickly as incoming order rates change. Q...
What is your target for debt reduction during 2009? While we are
only required to make debt reduction of approximately $7 million
during 2009, we expect to repay a minimum of $125 million. Q...
What will capital expenditures be during 2009? We plan to invest
$37 million in capital expenditures in 2009 compared to $46 million
in 2008. This will allow us to continue investing in new products,
productivity improvements and quality improvements while covering
our maintenance needs of approximately $15 million. Q... Are there
additional benefits to be achieved from the acquisitions made
during the past two years? Yes. While we've made progress, there is
additional benefit to be achieved between now and the end of 2010,
particularly in our manufacturing facilities. As our business
slows, the pace of integration activities is starting to increase.
Q...... What do you expect the tax rate to be in 2009? We expect
the 2009 tax rate to be approximately 36%. 2008 earnings generated
outside the United States were greater than anticipated. This
resulted in a lower fourth quarter 2008 tax rate. Q... When is your
next public update? A conference call will be held Friday, February
6, 2009, at 10:00 a.m. central time. Participants may listen to the
discussion through the Company's website at http://www.baldor.com/
or by calling 877-718-5101. A replay will be available through
February 13, 2009, and can be accessed by calling 888-203-1112
(passcode 9749619). The Company will also make a presentation at
the Gabelli 19th Annual Pump, Valve and Motor Symposium at 10:30
a.m. central time on Wednesday, February 18, 2009, in New York
City. The webcast will be available on Baldor's website. Baldor's
Annual Shareholders' Meeting will be held at 10:30 a.m. central
time on Saturday, May 2, 2009, in Fort Smith, Arkansas. Forward
Looking Statement This document contains statements that are
forward-looking, i.e. not historical facts. The forward-looking
statements contained in this document (including "estimate",
"believe", "think", "will", "intend", "expect", "may", "could",
"plan", "anticipate", "would", "depend", "predict", "can", 'if",
"assume", "continue", "ongoing" or any grammatical forms of these
words or other similar words) are based on the Company's current
expectations and some of them are subject to risks and
uncertainties. Accordingly, you are cautioned that any such
forward-looking statements are not guarantees of future performance
and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking
statements as a result of various factors. The factors that might
cause such differences include, among others, the following: (i)
changes in economic conditions, (ii) developments or new
initiatives by our competitors in the markets in which we compete,
(iii) fluctuations in the costs of select raw materials, (iv) the
success in increasing sales and maintaining or improving the
operating margins of the Company, and (v) other factors including
those identified in the Company's filings made from time-to-time
with the Securities and Exchange Commission. These statements
should be read in conjunction with Baldor's most recent annual
report (as well as the Company's Form 10-K and other reports filed
with the Securities and Exchange Commission) containing a
discussion of the Company's business and of various factors that
may affect it. DATASOURCE: Baldor Electric Company CONTACT: John
McFarland, Chairman and CEO, or Ron Tucker, President and COO, or
Tracy Long, Vice President, Investor Relations, all of Baldor
Electric Company, +1-479-648-5769, Web Site: http://www.baldor.com/
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