Baldor Electric Company 1st Quarter 2005 Results and Discussion
FORT SMITH, Ark., April 14 -- Baldor Electric Company markets, designs, and manufactures industrial electric motors, drives, and generators and is based in Fort Smith, Arkansas. Today Baldor announced the unaudited results of the first quarter of 2005.
1st Quarter
(in thousands except per share data) 2005 2004
13 weeks ended %
Apr 2 2005 Apr 3 2004 Change
Net Sales $170,596 $152,823 + 12 %
Cost of Sales 124,185 110,635
Gross Profit 46,411 42,188 + 10 %
SG&A 29,673 28,555
Operating Profit 16,738 13,633 + 23 %
Other (Income) Expense 506 268
Profit Sharing 1,912 1,560
Earnings Before Income Taxes 14,320 11,805 + 21 %
Income Taxes 5,298 4,365
Net Earnings $ 9,022 $ 7,440 + 21 %
Earnings Per Share - Diluted $0.27 $0.22 + 20 %
Dividends Per Share $0.15 $0.14 + 7 %
Average Shares Outstanding 33,781 33,439 + 1 %
John McFarland, Chairman and CEO, commented on the Company's results. "We are pleased to announce record sales for the first quarter of $170.6 million, an increase of 12%. Earnings were up 21%, and earnings per diluted share increased 20% to $0.27. Operating margins improved from 8.9% last year to 9.8%, the highest in over four years, in spite of continued rising material costs."
McFarland also said, "We are optimistic about 2005 because of the new products we are introducing and the new customers we have earned. Incoming orders remain good although not at the growth rate of the last half of 2004."
Balance Sheet Summary
(in thousands) 2005 2004
Apr 2 2005 Apr 3 2004
Cash & Marketable Securities $39,071 $49,780
Trade Receivables - net 105,166 96,929
Inventories 126,521 114,267
Working Capital 215,942 176,148
Total Debt 104,025 105,281
Shareholders' Equity 287,711 265,326
Cash Flow from Operations (YTD) $ 4,346 $ 8,046
Operating Margins
http://www.baldor.com/images/05Q1_OperatingMargins.jpg
Q ... How did your balance sheet change during the quarter?
Record sales during the quarter required additional investments in inventory and receivables. We also utilized cash to repurchase shares, pay dividends, and invest in capital equipment. We improved the time it takes to collect receivables when compared to last year and last quarter.
Q ... Where did you see strength in your business?
Our record sales during the quarter were primarily due to a 14% increase in motors and a 5% increase in drives. Our international sales were up 11% for the quarter, with the strongest increases coming from Asia and Canada. Sales to distributors grew slightly more than sales to original equipment manufacturers.
Generator sales increased 1% for the quarter. While military sales dropped during the quarter, our non-military generator sales were up over 30%.
Q ... Has there been any decrease in raw material costs?
No. Steel and aluminum prices have flattened out, but copper prices continued to increase during the quarter.
Q ... What progress are you making toward reaching your goal of a 13.8% operating margin?
Manufacturing productivity improved significantly during the quarter. Unfortunately, that benefit was offset by rising material costs. During the quarter, we also began the relocation of our linear motor plant from California to Fort Smith, Arkansas. This move, which will be complete by the end of the second quarter, will help us further reduce manufacturing expense.
Selling and administrative costs declined to 17.4% during the quarter from 18.7% one year ago.
Q ... Are you introducing any new products this quarter?
During the next month we will begin production on the new H2 family of drives. Introduced during National Manufacturing Week in Chicago, the H2 has many customer-requested features, including an ethernet server expansion board, allowing customers to monitor motors and drives over the internet.
At the Hannover Fair in Germany this week, we are introducing our DDL family of controls. This digital technology makes it easier for customers to link multiple drives together.
Q ... What are your capital expenditure plans for the year?
We expect to invest $19.5 million in our plants this year, up from $17.5 million last year. The majority of this investment will be to further improve productivity and quality.
Q ... When will you update us again?
The Company will hold its annual Shareholders' Meeting on Saturday, April 16 in Fort Smith, Arkansas at 10:30 a.m. (CDT). A copy of the presentation will be available through the Company's website http://www.baldor.com/ .
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.