Baldor Electric Company 3rd Qtr and YTD 2003 Results and Discussion
FORT SMITH, Ark., Oct. 9, 2003 -- 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 third quarter and first nine months of 2003.
3rd Quarter Year
2003 2002 2003 2002
(in thousands except 13 weeks ended 39 weeks ended
per share data) Sep 27 Sep 28 % Sep 27 Sep 28 %
2003 2002 Change 2003 2002 Change
Net Sales $138,980 $134,890 +3% $414,893 $413,575 0%
Cost of Sales 102,154 98,758 302,927 298,917
Gross Profit 36,826 36,132 +2% 111,966 114,658 -2%
SG&A 25,769 26,309 78,328 80,657
Operating Profit 11,057 9,823 +13% 33,638 34,001 -1%
Other (Income) Expense 95 452 711 1,765
Profit Sharing 1,335 1,161 3,992 3,991
Earnings Before Income
Taxes 9,627 8,210 +17% 28,935 28,245 +2%
Income Taxes 3,562 3,038 10,706 10,451
Net Earnings $6,065 $5,172 +17% $18,229 $17,794 +2%
Earnings Per
Share - Diluted $0.182 $0.149 +22% $0.54 $0.51 +6%
Dividends Per Share $0.13 $0.13 0% $0.39 $0.39 0%
Average Shares
Outstanding 33,251 34,652 -4% 33,451 34,657 -3%
John McFarland, President and CEO, remarked on the Company's results. "Third quarter sales increased 3% and net earnings increased 17% over 2002 levels while earnings per share increased 22% to $0.182 from $0.149, due in part to share repurchases. For the year, sales are up slightly, with earnings increasing 2% and earnings per share increasing 6% to $0.54 from $0.51. Our cash flow from operations was a record $50 million for the first nine months."
R. S. Boreham, Jr., Chairman, added, "For many years we have focused on doing the right things for our customers, employees, and shareholders, regardless of the pace of the economy. We believe that our continued strategy of introducing new products, increasing our customer base, maintaining our workforce, and strengthening our balance sheet positions us well for future growth."
Balance Sheet Summary
(in thousands) 2003 2002
Sep 27 2003 Sep 28 2002
Cash & Marketable Securities $ 44,801 $ 45,172
Receivables 89,901 92,953
Inventories 111,973 114,303
Working Capital 180,540 198,073
Long-Term Debt 104,468 105,287
Shareholders' Equity 256,702 270,479
Cash Flow from Operations (YTD) $ 49,961 $ 38,010
Operating Margins
http://www.baldor.com/images/03Q3_OperatingMargin.jpg
YTD Cash Flow from Operations
http://www.baldor.com/images/03Q3_YTD_Cash_Flow_Chart.jpg
We have prepared answers to a list of questions often asked by shareholders.
Q ... What industries showed growth this quarter?
The strongest sales increases occurred in the equipment rental business, oilfield machinery, farm machinery, and material handling. We also believe that some distributors have begun to rebuild inventory.
Q ... What are some of the improvements you are seeing in your balance sheet?
We continued to strengthen our balance sheet during the third quarter. We have rebuilt our cash balance to $45 million after investing over $34 million in the first quarter to repurchase shares and acquire Energy Dynamics, Inc. Improvement in accounts receivable days outstanding and increased inventory turns contributed to record cash flow for the first nine months.
Q ... Your cash balance is increasing. Do you plan to pay down debt?
At the end of the third quarter, our debt was financed at an average of less than 2.5% while our cash was earning a higher interest rate. As a result, we are not paying down debt at this time; however, our strong cash position would allow us to if this situation changes.
Q ... Are you having success with new products?
We are seeing good results with new products, especially large motors, drives and generators. During the fourth quarter, we will complete an order for two 1600 horsepower motors and drives, the largest we have ever produced, as well as a single order for six 2000 kilowatt generators.
Q ... What effect did the Northeast power outage have on your generator business?
Since August 14, we have seen an increase in quotation requests for standby generators. The Northeast power outage and Hurricane Isabel highlight the importance of standby power. During the quarter, generator sales, currently 5% of total sales, were up 33%, and we expect them to increase by more than 50% during the fourth quarter. The renewed focus on aging power grids and increasing electricity costs has also raised awareness of high- efficiency motors. Many customers understand that by using high-efficiency motors, they can consume less electricity and better control their costs.
Q ... How are International Sales?
For the third quarter, international sales were up 8.2%, and for the year they are up 5.6% with improved operating results.
Q ... Do you see any signs that business is improving?
Incoming orders for September showed slight improvement over last year and the previous month.
This document contains statements that are forward-looking, i.e. not historical facts. The forward-looking statements (generally identified by words or phrases indicating a projection or future expectation such as "outlook", "optimistic", "trends", "expect(s)", "assuming", "expectations", "forecasted", "estimates", "expected") 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.