Baldor Electric Company 2nd Qtr and YTD 2003 Results and Discussion

FORT SMITH, Ark., July 10 -- Baldor Electric Company markets, designs, and manufactures electric motors, drives, and generators and is based in Fort Smith, Arkansas. Today Baldor announced the results of the second quarter and first six months of 2003.

  (in thousands
   except per          2nd Quarter                      Year
   share data)       2003       2002               2003       2002
                     13 weeks ended                 26 weeks ended
                    Jun 28     Jun 29      %      Jun 28     Jun 29      %
                     2003       2002    Change     2003       2002    Change
  Net Sales        $138,523   $145,176   - 5%    $275,912   $278,686   - 1%
  Cost of Sales     100,763    103,805            200,773    200,160
  Gross Profit       37,760     41,371   - 9%      75,139     78,526   - 4%
  SG&A               26,706     27,768             52,558     54,348
  Operating Profit   11,054     13,603   -19%      22,581     24,178   - 7%
  Other (Income)
   Expense              245        599                616      1,313
  Profit Sharing      1,305      1,585              2,657      2,830
  Earnings Before
   Income Taxes       9,504     11,419   -17%      19,308     20,035   - 4%
  Income Taxes        3,505      4,224              7,144      7,413
  Net Earnings       $5,999     $7,195   -17%     $12,164    $12,622   - 4%

  Earnings Per
   Share - Diluted   $0.180     $0.207   -13%       $0.36      $0.36     0%
  Dividends Per
   Share              $0.13      $0.13     0%       $0.26      $0.26     0%

  Average Shares
   Outstanding       33,253     34,784   - 5%      33,556     34,663   - 3%

In commenting on the results, John McFarland, President and CEO, stated, "Second quarter 2003 sales decreased 5%, net earnings decreased 17%, and earnings per share decreased 13% to $0.180 from $0.207. On a year-to-date basis, sales decreased 1%, net earnings decreased 4%, and earnings per share remained flat at $0.36. Cash flow from operations during the first six months of the year more than doubled from the year before to $26.7 million."

R. S. Boreham, Jr., Chairman, commented, "These financial results don't show that the sales and profits are a combination of good news and bad news. The good news is that our drive for new customers, started last year, is progressing well. The bad news is that some old customers and traditional markets are not doing well now but are starting to show signs of recovery."

                            Balance Sheet Summary
  (in thousands)                          2003            2002
                                      Jun 28 2003     Jun 29 2002
  Cash & Marketable Securities         $ 31,053        $ 26,644
  Receivables                            89,388          94,646
  Inventories                           114,342         118,579
  Working Capital                       175,705         194,982
  Long-Term Debt                        104,520         106,455
  Shareholders' Equity                  254,244         270,994

  Cash Flow from Operations (YTD)        26,698          12,945

   Cash Flow from Operations:
   http://www.baldor.com/images/YTD_CashFlowOps_Chart.jpg

   Operating Margin:
   http://www.baldor.com/images/Q2_2003_OperatingMargins.jpg

We have prepared a list of questions and answers often asked by shareholders.

Q ... How were sales by product line in the second quarter?

We continued to see growth in our generator business, which increased over 50% from 2nd quarter 2002. Motor sales were down slightly and drives sales were flat with the same quarter last year.

Q ... Was your sales growth in generators due to your acquisition of Energy Dynamics?

Half of the increase in our generator business this quarter was due to the February acquisition of EDI, while the remaining half came from our existing products. Since the acquisition, our complete product line in generators has given us opportunities with new and existing customers. We expect generator sales to continue to grow at a double-digit rate.

Q ... Has the change in your vacation policy been a success?

Yes. We reduced our two-week July plant vacation to one week in order to take care of customers who rely on our 10-day lead times. The change gives our employees more flexibility with their vacation days. This had a negative impact on earnings during the second quarter, but we expect it to have a positive impact in the third quarter due to better plant efficiencies and inventory utilization.

Q ... Electricity prices are increasing again. How does this impact Baldor?

Baldor Super-E(R) high-efficiency motors and drives help companies reduce their electric bills. During the second quarter we announced a rebate program for these products effective through the end of the year. This provides an additional incentive to switch to higher-efficiency products from Baldor. In addition, we now offer a complete line of generators for use in reducing electricity costs through peak-shaving.

Q ... How do you feel about the remainder of 2003?

While we see some encouraging signs, we don't know what the second half of the year will bring. We feel the best thing we can do is focus on the basics: improving manufacturing efficiencies, continuing to earn new customers, introducing new and improved products, and strengthening our balance sheet.

Q ... When will you make your next update?

We will make a presentation at the Sidoti Emerging Growth Conference in San Francisco on September 22, 2003.