Baldor Electric Company Announces First Quarter 2009 Results

FORT SMITH, Ark., April 29 /PRNewswire-FirstCall/ -- Baldor Electric Company
(NYSE: BEZ) markets, designs and manufactures industrial electric motors,
mechanical power transmission products, drives and generators. Today, Baldor
announced unaudited results for first quarter 2009.

John McFarland, Chairman and CEO, commented on the Company's results. "For
the first quarter of 2009, we had sales of $402.5 million, a 14% decline from
one year ago. Net earnings for the quarter, excluding a one-time gain from
the modification of our debt agreement, were $14.8 million, a 42% decline, and
diluted earnings per share, excluding the one-time gain, were $0.32, a 43%
decline. In December, we announced a plan to reduce 2009 costs by $80
million, and through the first quarter, we are on track to exceed this goal.
We can see our progress in the improved operating margin of 11.2% in the
quarter compared to 10.8% in fourth quarter 2008 when sales were nearly $72
million higher. We expect the planned cost savings to build as the year
progresses."

Year Over Year Sequential
Comparison Comparison

(in thousands Q1 2009 Q1 2008 Q1 2009 Q4 2008
except per Apr 4, Mar 29, % Apr 4, Jan 3, %
share data) 2009 2008 Chg 2009 2009 Chg

Net sales $402,479 $470,526 (14%) $402,479 $474,022 (15%)
Cost of
sales 286,053 326,803 286,053 339,049
Gross
profit 116,426 143,723 (19%) 116,426 134,973 (14%)
SG&A 71,428 77,072 71,428 83,712
Operating
profit 44,998 66,651 (32%) 44,998 51,261 (12%)
Other
income
(expense),
net 785 2 785 3,316
Gain on
debt
modification 35,740 - 35,740 -
Interest
expense (22,483) (26,592) (22,483) (26,762)
Income
before
income
taxes 59,040 40,061 59,040 27,815
Income
taxes 22,622 14,422 22,622 9,214
Net
income $36,418 $25,639 42% $36,418 $18,601 96%

Net earnings
per share -
diluted $0.79 $0.56 41% $0.79 $0.40 98%
Less net
gain on
debt
modification 0.47 - 0.47 -
Net earnings
per share -
diluted
excluding gain
on debt
modification
(1) $0.32 $0.56 (43%) $0.32 $0.40 (20%)

Dividends
per share $0.17 $0.17 0% $0.17 $0.17 0%

Avg shares
outstanding -
diluted 46,359 46,030 46,359 46,266

McFarland added, "We believe second quarter 2009 could be the most challenging
quarter of the year with sales down approximately 15-20% from a record sales
quarter last year. We believe a slower rate of customer inventory destocking,
as well as our introduction of new products and other sales initiatives, will
benefit us in the second half of the year."

Selected Financial Data (unaudited)
(in thousands) Q1 2009 Q4 2008

Cash $6,876 $13,098
Net Receivables 259,537 275,789
Inventories 345,295 344,920
Total outstanding debt 1,319,205 1,326,922
Shareholders' equity 882,295 839,527

Q1 2009 Q1 2008
YTD Cash flows from
operations $12,551 $26,701

(Photo: http://www.newscom.com/cgi-bin/prnh/20090429/DA07733)

Following are answers to questions recently asked by shareholders.

Q... How was business during the quarter?

For the quarter, sales of industrial motors were $272 million, down 11%, and
sales of mechanical power transmission products were $108 million, down 21%.
We saw weakness throughout most of our end markets and customers. Sales to
domestic OEMS were down 15%, and sales to domestic distributors were down 19%
as they continue to reduce inventories. Our backlog at the end of the quarter
was approximately $200 million compared to approximately $225 million at the
end of fourth quarter 2008. International sales of $73 million comprised 18%
of sales for the quarter and were down 4% from last year.

Q... How were sales of your Super-E(R) premium efficient motors?

Sales of Super-E motors continued to outpace sales of other motors with an
increase of more than 25% from first quarter 2008. We believe this trend will
continue as customers begin to prepare for the December 2010 implementation of
the 2007 Energy Bill. This bill raises the minimum efficiency of many motors
to our Super-E premium efficient level.

Once these efficiency levels become the new standard, we know that customers
will want to buy something even more efficient. As a result, we have been
working to develop the next generation of high efficiency industrial motors
with the assistance of the U.S. Department of Energy. Design work on these
products is expected to be completed in the next several years. This project
will create a smaller, lighter and more efficient motor than is currently
available. The Department of Energy estimates that these motors could
ultimately yield annual energy savings in the United States of over $1.4
billion. For more information on this and other industrial energy-efficiency
programs, visit the Department of Energy at www.eere.energy.gov/industry/.

Q... Do you see any other positive signs in your business?

Yes, we see a few. The sales decline for distributors has lessened slightly.
Our Dodge products are sold primarily through distributors, so a slower
destocking rate should be a benefit for these products. Quote activity for
Dodge products has increased for projects related to road construction. The
Bounty Hunt program has earned us the business of more than 150 new customers
this year. As the year progresses, the impact of these new customers will
increase.

Q... How have raw material costs changed for you?

Overall, we paid more for materials during the first quarter than we did one
year ago. We expect material costs to improve during the balance of the year.

Q... Are you on track to achieve the $80 million in annual cost savings you
announced in December?

Yes. We are exceeding our goals on overtime, people and discretionary
spending. This is evidenced by our higher gross margin of 28.9% in the
quarter compared to 28.5% in fourth quarter 2008 and higher operating margin
of 11.2% in the quarter compared to 10.8% in fourth quarter 2008. We expect
these cost savings to build throughout the year. We will provide a more
detailed update on our cost reduction efforts at our June 9, 2009, investor
meeting.

In addition to these savings, we recently announced the consolidation of two
of our manufacturing facilities into other existing facilities in the United
States. We believe these consolidations will provide a cost savings of
approximately $9.0 million on an annual basis. These consolidations will
occur during second quarter 2009, and the associated costs during the quarter
are expected to be approximately $4.5 million. There are no further
consolidations planned.

Q... Why did you amend your credit agreement this quarter, and how did it
affect your interest rate?

During the quarter, we amended our credit agreement to reduce the possibility
of violating our financial covenants. With the credit amendment in place, we
don't believe we will violate our financial covenants in the near or
long-term. Accounting for the amendment resulted in a reduction of the
carrying value of our long-term debt and a one-time noncash gain recorded in
other income of $35.7 million.

The discount recorded against long-term debt will be amortized through
interest expense over the remaining term of the loan. As a result, interest
expense will increase by approximately $1.4 million per quarter through first
quarter 2014.

As a result of the amendment, the weighted average interest rate on our debt
increased from 6.4% to 8.0% on March 31, 2009.

Q... How much debt reduction did you make during the quarter?

During the first quarter, we made net debt payments of $7.7 million. The
first quarter included several large cash payments, including the annual
funding of profit sharing of $13.0 million, semi-annual bond interest of $23.7
million, and fees to amend the credit agreement of $8.3 million. We also paid
the first quarter 2009 dividend of $7.9 million in addition to the fourth
quarter 2008 dividend. We expect the pace of repayment to accelerate over the
balance of the year, funded in part by reductions in receivables and
inventories. Due to a greater than originally anticipated sales decline in
the first half of the year, we have revised our debt repayment goal to a
minimum of $100 million for 2009.

Q... What is your outlook for 2009?

We believe 2009 will continue to be a difficult year, and we anticipate second
quarter 2009 to be the most challenging quarter with sales down approximately
15-20%. In the second half of the year, we expect additional benefit from our
Bounty Hunt program, introduction of new products, a slower pace of
distributor destocking, aggressive cost reductions and plant consolidations.

Q... When is your next public update?

A conference call will be held Thursday, April 30, 2009, at 10:00 a.m. central
time. Participants may listen to the discussion through the Company's website
at www.baldor.com or by calling 877-879-6203. A replay will be available
through May 7, 2009 and can be accessed by calling 888-203-1112 (passcode
8480771).

The Company will hold its annual Shareholders' Meeting on Saturday, May 2,
2009, in Fort Smith. On May 12, 2009, the Company will meet with
institutional investors at the UBS Industrial Conference in Chicago. The
Company will host an Investor Meeting at 11:30 a.m. on June 9, 2009, in New
York City. For more information on any of these events, please contact
Investor Relations.

For more information contact:
John McFarland, Chairman and CEO Phone: 479-648-5769
Ron Tucker, President and COO Website: www.baldor.com
Tracy Long, Vice President
Investor Relations Email: Investorinfo@baldor.com

(1) Non-GAAP Financial Measures. Baldor reports its financial results in
accordance with generally accepted accounting principles ("GAAP"). However,
management believes that certain non-GAAP performance measures provide
financial statement users meaningful comparisons between current and prior
period results, as well as important information regarding performance trends.
Certain items discussed in this press release are considered non-GAAP
measures. Non-GAAP financial measure should be viewed in addition to, and not
as an alternative for, the Company's reported results.

Forward-Looking Statement
This document contains statements that are forward-looking, i.e. not
historical facts. The forward-looking statements contained in this document
(including "estimate", "believe", "think", "will", "intend", "expect", "may",
"could", "plan", "anticipate", "would", "depend", "predict", "can", "if",
"assume", "continue", "ongoing" or any grammatical forms of these words or
other similar words) 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
Baldor'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.

BEZ-G

SOURCE Baldor Electric Company

John McFarland, Chairman and CEO, or Ron Tucker, President and COO, or Tracy
Long, Vice President Investor Relations, all of Baldor Electric Company,
+1-479-648-5769, Investorinfo@baldor.com