Baldor Electric Company 2nd Quarter 2001 Results
Baldor Electric Company 2nd Quarter 2001 Results
FORT SMITH, Ark., July 16 Baldor Electric Company
markets, designs, and manufactures electric motors and drives and
is based in Fort Smith, Arkansas. Today Baldor made the following
announcement regarding sales and earnings for the second quarter of 2001.
In commenting on the quarterly results, John McFarland, President and CEO
stated, "The broad based decline in orders we saw during the first quarter
accelerated in the second quarter resulting in a 10% drop in sales during the
quarter and 8% for the first half of the year. Earnings per share declined to
$0.19 from a second quarter record of $0.36 the previous year. For the first
6 months, earnings per share are $0.39, compared to a record $0.71 the
previous year. Operating margins were hurt by this drop in orders."
(all data in thousands except for per share data)
2nd Quarter Year (6 Months)
2001 2000 2001 2000
13 weeks ended % 26 weeks ended %
Jun 30 Jul 1 Change Jun 30 Jul 1 Change
2001 2000 2001 2000
Net Sales * $146,668 $163,190 - 10% $296,823 $321,209 - 8%
Cost of Sales 104,875 110,853 212,420 217,913
Gross Profit 41,793 52,337 - 20% 84,403 103,296 - 18%
SG&A 28,703 29,274 56,998 57,409
Operating
Profit 13,090 23,063 - 43% 27,405 45,887 - 40%
Other Income
(Expense) (1,345) (284) (2,729) (1,034)
Profit Sharing 1,508 2,722 3,063 5,246
Earnings Before
Income Taxes 10,237 20,057 - 49% 21,613 39,607 - 45%
Income Taxes 3,788 7,522 7,997 14,852
Net Earnings $6,449 $12,535 - 49% $13,616 $24,755 - 45%
Earnings Per
Share -
Diluted $0.19 $0.36 - 47% $0.39 $0.71 - 45%
Dividends Per
Share $0.13 $0.12 8% $0.26 $0.24 8%
Average Shares
Outstanding 34,539 34,508 0% 34,511 34,784 - 1%
* Prior year net sales has been restated to comply with revised accounting
standards to reflect the reclassification of gross freight costs. This
change has no effect on current or historical net earnings or earnings
per share.
McFarland also commented, "We have begun to see some small but gradual
improvement in our incoming order rates. We believe this will continue in the
3rd and 4th quarters of this year. We have also taken some additional actions
to improve profitability. We believe these actions, along with gradually
improving sales, should allow us to generate earnings per share of $0.20 to
$0.22 during the 3rd quarter.
"We continue to focus on improving margins by aggressively pursuing cost
reductions in materials, designs, productivity improvements in our plants, and
combining two of our smaller plants into larger, more cost effective
operations. As orders increase, we believe we're in a strong position to show
good productivity improvement in our operations.
"During the balance of the year we will continue to focus on introducing
new products, finding new customers, and entering new markets. Our sales
force is the strongest in our Company history and is in a position to gain
market share from our competitors."
R. S. Boreham, Jr., Chairman, commented, "Higher energy costs and our
initiatives to help electric motor users better understand their electricity
consumption are beginning to benefit our sales. With industrial electric
motors consuming 63% of all of the electricity consumed by industry, it's
important that electric motor and drive users address the conservation
opportunities available to them by using more efficient Baldor Super-E(R)
motors. These products are fully developed and available today in over 600
stock ratings and, according to the Department of Energy, could reduce
industry's electricity consumption by up to 18%."
We have prepared a list of questions and answers often asked by
shareholders. We believe these comments will help you better understand our
Company and our reasons for optimism about the future.
Q ... Have you seen any improvement in incoming orders during the quarter?
Yes. Our incoming orders were down the most in April, improved some in
May, and again in June. While they have been improving, they are still
running behind last year.
Q ... What are your expectations for sales during the balance of the year?
We expect a continued gradual improvement in our incoming orders. Our
aggressive introduction of new products this year will also help to improve
sales in the future.
Q ... What has been done to improve profits?
Many things have been done to improve profitability. During the quarter,
we announced the consolidation of our plant in Plymouth, Minnesota, into our
Fort Smith Drives Plant. This consolidation will be completed during July and
will help us do a better job for our customers and help achieve our goal of
doubling margins in the drives business.
We also announced and began to implement the consolidation of our
St. Louis motor plant into other Baldor motor plants. This consolidation will
be completed during the balance of the year. This will give us good
productivity improvement and the opportunity to expand our metal stamping
operation in St. Louis, which is a key competitive advantage.
There are also a number of other product and cost improvements in process
and productivity improvements being implemented that will allow us to reduce
our costs while continuing to improve value we provide our customers.
Q ... Do you have the right amount of inventory?
Yes, we do have the right amount of inventory. Our finished goods
inventory is a competitive advantage and benefits our customers by providing
them immediate delivery on a great variety of motors and drives.
Q ... Are you losing market share to any of your competitors?
No, we do not believe we're losing market share to any of our competitors.
New products, such as our fractional horsepower commercial motor and new large
motors designed for the oil and gas and power generation markets, will help us
gain market share in the future.
Q ... What new products are being developed that will provide benefit in
the long term?
During the quarter we purchased the assets of the Mavrik Motors Division
of Tridelta Industries, Inc. The Mavrik Motors Division is a developer of
switched reluctance motors and controls. The purchased assets include
patents, engineering expertise, potential customers, and some equipment and
tooling. We believe switched reluctance technology helps complete our line of
drive products and has substantial promise over the long term.
Q ... Have you begun to see improvement in sales of Super-E high
efficiency motors as a result of higher electricity costs?
Yes, we have begun to see improvement in our Super-E high efficiency motor
sales. During June, sales of these motors, the highest efficiency motors
available in the United States, were up about 10% over June 2000.
Q ... What are you doing to promote Super-E high efficiency motors and
drives to users faced with higher electricity bills?
We're doing many things to help industrial users better understand the
cost of operating industrial electric motors. Today we began labeling all of
our Super-E high efficiency motors with an energy guide label similar to those
found on appliances. These labels will help electric motor users understand
the cost of operating motors and the penalty they pay when buying less
efficient motors. A copy of this label is attached or available upon request.
Also, we are conducting seminars and working with our distributors to
conduct energy audits for large industrial motor users. With motors consuming
63% of all of the electricity purchased by industry, there are substantial
opportunities for reduced consumption by using Baldor motors and drives.
Q ... How is the Pow'R Gard acquisition going?
We are excited about the future we have with Pow'R Gard generator
products. Approximately 100 of our sales people have been trained on the
Pow'R Gard products and we have added sales representation in areas where
Pow'R Gard was previously not represented, such as California and Canada. Our
efforts are just starting to pay off in the form of new customers and
increased sales. During the quarter we introduced a new line of standby
generators for agricultural use. We will continue to focus on adding new
products, new customers, and new sales representation for this important new
product line.
Q ... When will you update us again?
We will make a presentation to the New York Society of Security Analysts
on August 23rd in New York City. A copy of our presentation and the questions
and answers that follow the presentation will be distributed to shareholders
on our website and by mail immediately following the presentation.
Balance Sheet Summary
2001 2000
Cash & Marketable Securities $9,723 $16,943
Receivables 100,437 111,138
Inventories 122,474 111,450
Working Capital 181,991 179,132
Long-Term Debt 99,058 65,665
Shareholders' Equity 266,071 250,885
Cash Flow from Operations 9,652 11,077