FORT SMITH, Ark., April 29 /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 first quarter 2009. John McFarland, Chairman and CEO, commented
on the Company's results. "For the first quarter of 2009, we had
sales of $402.5 million, a 14% decline from one year ago. Net
earnings for the quarter, excluding a one-time gain from the
modification of our debt agreement, were $14.8 million, a 42%
decline, and diluted earnings per share, excluding the one-time
gain, were $0.32, a 43% decline. In December, we announced a plan
to reduce 2009 costs by $80 million, and through the first quarter,
we are on track to exceed this goal. We can see our progress in the
improved operating margin of 11.2% in the quarter compared to 10.8%
in fourth quarter 2008 when sales were nearly $72 million higher.
We expect the planned cost savings to build as the year
progresses." Year Over Year Sequential Comparison Comparison (in
thousands Q1 2009 Q1 2008 Q1 2009 Q4 2008 except per Apr 4, Mar 29,
% Apr 4, Jan 3, % share data) 2009 2008 Chg 2009 2009 Chg Net sales
$402,479 $470,526 (14%) $402,479 $474,022 (15%) Cost of sales
286,053 326,803 286,053 339,049 Gross profit 116,426 143,723 (19%)
116,426 134,973 (14%) SG&A 71,428 77,072 71,428 83,712
Operating profit 44,998 66,651 (32%) 44,998 51,261 (12%) Other
income (expense), net 785 2 785 3,316 Gain on debt modification
35,740 - 35,740 - Interest expense (22,483) (26,592) (22,483)
(26,762) Income before income taxes 59,040 40,061 59,040 27,815
Income taxes 22,622 14,422 22,622 9,214 Net income $36,418 $25,639
42% $36,418 $18,601 96% Net earnings per share - diluted $0.79
$0.56 41% $0.79 $0.40 98% Less net gain on debt modification 0.47 -
0.47 - Net earnings per share - diluted excluding gain on debt
modification (1) $0.32 $0.56 (43%) $0.32 $0.40 (20%) Dividends per
share $0.17 $0.17 0% $0.17 $0.17 0% Avg shares outstanding -
diluted 46,359 46,030 46,359 46,266 McFarland added, "We believe
second quarter 2009 could be the most challenging quarter of the
year with sales down approximately 15-20% from a record sales
quarter last year. We believe a slower rate of customer inventory
destocking, as well as our introduction of new products and other
sales initiatives, will benefit us in the second half of the year."
Selected Financial Data (unaudited) (in thousands) Q1 2009 Q4 2008
Cash $6,876 $13,098 Net Receivables 259,537 275,789 Inventories
345,295 344,920 Total outstanding debt 1,319,205 1,326,922
Shareholders' equity 882,295 839,527 Q1 2009 Q1 2008 YTD Cash flows
from operations $12,551 $26,701 (Photo:
http://www.newscom.com/cgi-bin/prnh/20090429/DA07733) Following are
answers to questions recently asked by shareholders. Q... How was
business during the quarter? For the quarter, sales of industrial
motors were $272 million, down 11%, and sales of mechanical power
transmission products were $108 million, down 21%. We saw weakness
throughout most of our end markets and customers. Sales to domestic
OEMS were down 15%, and sales to domestic distributors were down
19% as they continue to reduce inventories. Our backlog at the end
of the quarter was approximately $200 million compared to
approximately $225 million at the end of fourth quarter 2008.
International sales of $73 million comprised 18% of sales for the
quarter and were down 4% from last year. Q... How were sales of
your Super-E(R) premium efficient motors? Sales of Super-E motors
continued to outpace sales of other motors with an increase of more
than 25% from first quarter 2008. We believe this trend will
continue as customers begin to prepare for the December 2010
implementation of the 2007 Energy Bill. This bill raises the
minimum efficiency of many motors to our Super-E premium efficient
level. Once these efficiency levels become the new standard, we
know that customers will want to buy something even more efficient.
As a result, we have been working to develop the next generation of
high efficiency industrial motors with the assistance of the U.S.
Department of Energy. Design work on these products is expected to
be completed in the next several years. This project will create a
smaller, lighter and more efficient motor than is currently
available. The Department of Energy estimates that these motors
could ultimately yield annual energy savings in the United States
of over $1.4 billion. For more information on this and other
industrial energy-efficiency programs, visit the Department of
Energy at http://www.eere.energy.gov/industry/. Q... Do you see any
other positive signs in your business? Yes, we see a few. The sales
decline for distributors has lessened slightly. Our Dodge products
are sold primarily through distributors, so a slower destocking
rate should be a benefit for these products. Quote activity for
Dodge products has increased for projects related to road
construction. The Bounty Hunt program has earned us the business of
more than 150 new customers this year. As the year progresses, the
impact of these new customers will increase. Q... How have raw
material costs changed for you? Overall, we paid more for materials
during the first quarter than we did one year ago. We expect
material costs to improve during the balance of the year. Q... Are
you on track to achieve the $80 million in annual cost savings you
announced in December? Yes. We are exceeding our goals on overtime,
people and discretionary spending. This is evidenced by our higher
gross margin of 28.9% in the quarter compared to 28.5% in fourth
quarter 2008 and higher operating margin of 11.2% in the quarter
compared to 10.8% in fourth quarter 2008. We expect these cost
savings to build throughout the year. We will provide a more
detailed update on our cost reduction efforts at our June 9, 2009,
investor meeting. In addition to these savings, we recently
announced the consolidation of two of our manufacturing facilities
into other existing facilities in the United States. We believe
these consolidations will provide a cost savings of approximately
$9.0 million on an annual basis. These consolidations will occur
during second quarter 2009, and the associated costs during the
quarter are expected to be approximately $4.5 million. There are no
further consolidations planned. Q... Why did you amend your credit
agreement this quarter, and how did it affect your interest rate?
During the quarter, we amended our credit agreement to reduce the
possibility of violating our financial covenants. With the credit
amendment in place, we don't believe we will violate our financial
covenants in the near or long-term. Accounting for the amendment
resulted in a reduction of the carrying value of our long-term debt
and a one-time noncash gain recorded in other income of $35.7
million. The discount recorded against long-term debt will be
amortized through interest expense over the remaining term of the
loan. As a result, interest expense will increase by approximately
$1.4 million per quarter through first quarter 2014. As a result of
the amendment, the weighted average interest rate on our debt
increased from 6.4% to 8.0% on March 31, 2009. Q... How much debt
reduction did you make during the quarter? During the first
quarter, we made net debt payments of $7.7 million. The first
quarter included several large cash payments, including the annual
funding of profit sharing of $13.0 million, semi-annual bond
interest of $23.7 million, and fees to amend the credit agreement
of $8.3 million. We also paid the first quarter 2009 dividend of
$7.9 million in addition to the fourth quarter 2008 dividend. We
expect the pace of repayment to accelerate over the balance of the
year, funded in part by reductions in receivables and inventories.
Due to a greater than originally anticipated sales decline in the
first half of the year, we have revised our debt repayment goal to
a minimum of $100 million for 2009. Q... What is your outlook for
2009? We believe 2009 will continue to be a difficult year, and we
anticipate second quarter 2009 to be the most challenging quarter
with sales down approximately 15-20%. In the second half of the
year, we expect additional benefit from our Bounty Hunt program,
introduction of new products, a slower pace of distributor
destocking, aggressive cost reductions and plant consolidations.
Q... When is your next public update? A conference call will be
held Thursday, April 30, 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 877-879-6203. A
replay will be available through May 7, 2009 and can be accessed by
calling 888-203-1112 (passcode 8480771). The Company will hold its
annual Shareholders' Meeting on Saturday, May 2, 2009, in Fort
Smith. On May 12, 2009, the Company will meet with institutional
investors at the UBS Industrial Conference in Chicago. The Company
will host an Investor Meeting at 11:30 a.m. on June 9, 2009, in New
York City. For more information on any of these events, please
contact Investor Relations. For more information contact: John
McFarland, Chairman and CEO Phone: 479-648-5769 Ron Tucker,
President and COO Website: http://www.baldor.com/ Tracy Long, Vice
President Investor Relations Email: (1) Non-GAAP Financial
Measures. Baldor reports its financial results in accordance with
generally accepted accounting principles ("GAAP"). However,
management believes that certain non-GAAP performance measures
provide financial statement users meaningful comparisons between
current and prior period results, as well as important information
regarding performance trends. Certain items discussed in this press
release are considered non-GAAP measures. Non-GAAP financial
measure should be viewed in addition to, and not as an alternative
for, the Company's reported results. 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. BEZ-G
http://www.newscom.com/cgi-bin/prnh/20090429/DA07733
http://photoarchive.ap.org/ 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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