Baldor Electric Company 3rd Quarter and YTD 2004 Results and Discussion
FORT SMITH, Ark., Oct. 14, 2004 -- Baldor Electric Company markets, designs, and manufactures industrial 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 2004.
3rd Quarter Year
2004 2003 2004 2003
13 weeks 13 weeks 39 weeks 39 weeks
ended ended % ended ended %
(in thousands except per Oct 2 Sep 27 Change Oct 2 Sep 27 Change
share data) 2004 2003 2004 2003
Net Sales $168,832 $138,980 +21% $485,350 $414,893 +17%
Cost of Sales 124,093 102,154 353,807 302,927
Gross Profit 44,739 36,826 +21% 131,543 111,966 +17%
SG&A 28,744 25,769 86,441 78,328
Operating Profit 15,995 11,057 +45% 45,102 33,638 +34%
Other (Income) Expense 291 95 826 711
Profit Sharing 1,844 1,335 5,160 3,992
Earnings Before Income
Taxes 13,860 9,627 +44% 39,116 28,935 +35%
Income Taxes 5,128 3,562 14,473 10,706
Net Earnings $ 8,732 $ 6,065 +44% $ 24,643 $ 18,229 +35%
Earnings Per Share -
Diluted $0.26 $0.18 +43% $0.74 $0.54 +35%
Dividends Per Share $0.14 $0.13 + 8% $0.42 $0.39 + 8%
Average Shares
Outstanding 33,419 33,251 + 1% 33,422 33,451 - 0%
John McFarland, President and CEO, commented on the Company's results. "We are pleased to announce record sales during the third quarter of $168.8 million, the highest quarterly sales in the Company's history. Sales were up 21%, earnings were up 44%, and diluted earnings per share increased 43% to $0.26. Our operating margins improved to 9.5% from 8.0% last year."
McFarland also said, "Despite unprecedented increases in the costs of steel and copper, our two largest purchased components, we have been able to improve our profitability this year. This improvement is due to higher sales, productivity increases in our manufacturing plants, and better management of our administrative and selling expenses."
R. S. Boreham, Jr., Chairman, said, "The consistency of our strategy, in both good times and bad, has put our Company in the best position in its history. As a result, we are gaining market share in all three of our product lines."
Balance Sheet Summary
(in thousands) 2004 2003
Oct 2 Sep 27
2004 2003
Cash & Marketable Securities $ 51,735 $ 42,152
Trade Receivables - net 107,408 89,901
Inventories 120,631 111,973
Working Capital 198,513 177,891
Total Debt 104,027 105,287
Shareholders' Equity 273,196 256,702
Cash Flow from Operations (YTD) $ 25,704 $ 47,312
Operating Margins
http://www.baldor.com/images/04Q3_OperatingMargin.jpg
We have prepared answers to a list of questions often asked by shareholders.
Q ... How was your business during the quarter?
Sales of motors were up 15% during the quarter. Orders were
strong across most of the industries we serve.
Drives sales were up 27%, the strongest increase we have seen in
several years. We believe the introduction of a new inverter and
vector drive product line in January will further strengthen our
drives business.
Our generator sales grew by 100% during the quarter, to 8% of
total sales. Approximately $3 million of the sales increase was
due to hurricane sales in the Southeast.
International sales continued to perform well, growing 26% during
the quarter and making up 15% of our business.
Q ... What will it take for you to return to the operating margins
achieved in 2000?
Our goal is to exceed the 13.8 percent operating margin we
achieved in 2000. During that year, manufacturing expenses as a
percentage of sales were dropping because of increasing sales.
SG&A expenses were also improving as a result of the increasing
sales. Additionally, we had the benefit of decreasing material
costs.
Today, we have accomplished two of the three steps necessary to
achieve our goal. SG&A expenses are at their lowest level in
20 years, and manufacturing costs are their lowest level since
2000. Unfortunately, material costs such as copper and steel are
rising, not falling, and they are offsetting the gains we have
achieved in the other two areas. For example, our steel prices
increased over 30% during the third quarter compared to the second
quarter. Even with these increases, we have been able to improve
operating margins compared to last year.
Q ... How are you dealing with the higher material costs?
We had two price increases earlier this year, and we will announce
another price increase by November 1st. We also continue to
improve the designs of our products so that we use less material
while still providing the high performance our customers expect.
Q ... Did your balance sheet improve this quarter?
Yes. The items we want to increase, cash and inventory turns,
increased, while the items we want to decrease, debt and the days
it takes to collect receivables, decreased.
Q ... What is your outlook for the future?
We will end the year with record sales and believe our long-term
strategy will allow us to continue to gain market share.
Q ... When will you update us again?
The Company will make presentations at the Southwestern Showcase
on November 18 in Dallas, Texas, and at the Sidoti Emerging Growth
Conference on January 18, 2005, in Palm Beach, Florida.
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.