Published:
Baldor Electric Company Announces 2nd Quarter and YTD 2008 Results and Discussion
FORT SMITH, Arkansas, July 24 /PRNewswire-FirstCall/ -- Baldor Electric
Company (NYSE: BEZ) markets, designs, and manufactures industrial electric
motors, mechanical power transmission products, drives, and generators and is
based inFort Smith, Arkansas. Today, Baldor announced unaudited results for
the second quarter and year-to-date 2008.
2nd Quarter Year-To-Date
(in thousands except 2008 2007 2008 2007
per share data) Jun 28, Jun 30, % Chg Jun 28, Jun 30, % Chg
2008 2007 2008 2007
Net sales $ 503,973 $ 491,615 3% $ 974,499 $ 887,309 10%
Cost of sales 351,127 341,531 677,929 623,663
Gross profit 152,846 150,084 2% 296,570 263,646 12%
SG&A 83,920 81,081 160,992 142,403
Operating profit 68,926 69,003 0% 135,578 121,243 12%
Other income (expense),
net 1,603 773 1,604 1,670
Interest expense (24,630) (30,385) ( 51,222) (50,913)
Income before
income taxes 45,899 39,391 17% 85,960 72,000 19%
Income taxes 16,527 14,179 30,949 25,920
Net income $ 29,372 $ 25,212 17% $ 55,011 $ 46,080 19%
Net earnings per
share - diluted $0.63 $0.54 17% $1.19 $1.04 14%
Dividends per share $0.17 $0.17 0% $0.34 $0.34 0%
Avg shares outstanding
- diluted 46,453 46,566 46,241 44,110
John McFarland, Chairman and CEO, commented on the Company's results, "We
are pleased to announce record sales, net income and diluted earnings per
share for the 2nd quarter. Sales increased to $504.0 million, net income to
$29.4 million and diluted earnings per share to $0.63. Even though US
economic conditions seem uncertain, our incoming orders remain solid."
"One disappointment during the quarter was the rate of inflation in the
cost of materials we buy. Costs accelerated for many purchases, particularly
steel, copper, cast iron and transportation, at a much faster rate than we
expected. To offset these higher costs, we raised prices 5-8% across our
entire product line on July 13."
"We continue to aggressively reduce our debt balance. During the 2nd
quarter, we reduced bank debt by $40 million. Since the acquisition of
Reliance Electric Company 15 months ago, we have reduced our bank debt by a
total of $236 million."
SELECTED FINANCIAL DATA (preliminary, unaudited)
2nd Qtr 1st Qtr
2008 2008
(in thousands) Jun 28, 2008 Mar 29, 2008
Cash $ 26,622 $ 33,103
Trade receivables - net 325,340 314,449
Inventories 324,886 316,605
Total Assets 2,483,515 2,848,448
Total Debt 1,316,656 1,356,586
Shareholders' Equity 865,994 835,162
Year-To-Date
2008 2007
(in thousands) Jun 28, 2008 Jun 30, 2007
Cash flows from operations $ 71,559 $ 112,024
Depr and amortization 38,963 34,695
Capital expenditures 14,645 18,628
Dividends 15,668 15,574
Depr and amortization from 12,404 9,599
purchase accounting
Following are answers to questions recently asked by shareholders.
Q ... How was business during the quarter?
Net Sales
Net Sales in As a % of Chg %
Millions $ Total Sales Q208 v Q207
Motors $ 327,593 65% 5%
Power Transmission 140,641 28% 6%
Drives * 22,375 4% -2%
Generators 13,364 3% 6%
International Sales 85,012 17% 10%
2nd quarter 2007 sales included $12.4 million of motor repair business
which was sold during that quarter. Excluding that business, comparable sales
for the quarter were up 5%.
Domestic sales to new equipment manufacturers increased 6% and sales to
distributors increased 2% compared to 2nd quarter 2007. We saw sales growth
in basic industrial applications such as pumps, compressors, fans and blowers
as well as mining, material handling and agricultural end markets. Sales of
Super-E(R) premium efficient motors grew at more than 25% during the quarter.
Incoming orders have been consistent throughout the second quarter and
into the third. Our backlog of unshipped orders is solid at more than $235
million.
* To be consistent with industry standards, we now include only electronic
controls, linear motors and servo motors in our definition of drives.
Q ... Are you seeing strength in your international business?
Yes, our international sales grew by over 10% this quarter compared to
last year. The regions with strongest sales growth wereAsia Pacific and
Latin America. During the quarter we completed the expansion of ourShanghai
manufacturing facility. Products from this facility are sold to customers in
theAsia Pacific region. Sales of these products have a compounded annual
growth rate of 20% for the past four years.
Q ... How are you being affected by the rapid increase in material costs?
Material costs increased this quarter at a pace we haven't seen in
decades. While we made good progress in productivity and efficiency
improvements in our plants, that progress was more than offset by increases in
materials such as steel, copper and cast iron. Our gross margin was slightly
less than the same quarter one year ago because of the rapid increase in
material costs.
Additionally, we saw a large increase in the cost of outgoing
transportation during the quarter. This increase had a negative effect on
selling expenses.
As a result, we raised prices on July 13, 2008, 5-8% across our entire
product line. We believe this price increase will cover our increased costs
for the near future. However, if material and transportation costs continue
to rise, we will take further action.
Q ... How were cash flows from operations?
Cash flows from operations were $71.6 million for the first half of the
year compared to $112.0 million one year ago. This decrease was due primarily
to increased receivables and the timing of tax payments. Cash flows during
the quarter allowed us to reduce bank debt by $40 million.
Q ... How are your inventory levels now?
The availability of our finished goods inventory has improved,
particularly for motors rated less than 15 horsepower. We have also been able
to reduce our lead times in two of our largest motor plants. We continue to
focus on reducing lead times and increasing inventory availability for our
customers.
Q ... Are you still on target to meet your debt reduction goal of $125
million for 2008?
Yes, we continue to believe we will reach our goal. During the first half
of the year, we reduced our bank debt by $60 million. Less debt and lower
interest rates resulted in interest expense that was nearly $6 million less
this quarter than the same quarter one year ago.
Q ... How do you feel about sales during the second half of the year?
We expect sales to increase at a mid-single digit rate during the balance
of the year compared to the same period for 2007.
Q ... When will you provide your next update?
We will hold a conference call on Friday, July 25, 2008, at 10:00 a.m.
central time. Participants may listen to the discussion through the Company's
website at http://www.baldor.com/investors or by calling 877-440-5785. A
replay will be available through August 1, 2008 and can be accessed by calling
888-203-1112 (passcode 9949539).
During the third quarter, Baldor will participate in numerous conferences,
including:
-- The Hodges Capital Management Investment Forum inDallas, TX, on
September 4, 2008
-- The Sidoti Institutional Investor Forum inSan Francisco, CA on
September 8, 2008
-- The UBS Best of Americas Conference inLondon, England, on September
11, 2008
-- The Sterne Agee Best Ideas Conference inMilwaukee, WI on September 17,
2008
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", "will", "intend", "expect", "may", "could",
"future", "susceptible", "unforeseen", "anticipate", "would", "subject to",
"depend", "uncertainties", "predict", "can", "expectations", "if",
"unpredictable", "unknown", "pending", "assumes", "continued", "ongoing",
"assumption" 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 the Company'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.
SOURCE Baldor Electric Company
Copyright © 2009, PRNewswire
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