Baldor Electric Company Announces Second Quarter 2009 Results

FORT SMITH, Ark., July 30 /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 second quarter 2009.

John McFarland, Chairman and CEO, commented on the Company's results. "For
the second quarter of 2009, we had sales of $384.7 million, net earnings of
$7.8 million, and diluted earnings per share of $0.17. This compares to
second quarter 2008 sales of $504.0 million, net earnings of $29.4 million,
and diluted earnings per share of $0.63. During the second quarter of 2009,
we improved our operating margin to 11.5% from 11.2% in first quarter 2009
when sales were $17.8 million higher. We also reduced our debt by $44.6
million during the quarter. In June, we increased our 2009 cost reduction
goal to $92 million, and we are on track to achieve this goal."

2nd Quarter Year-To-Date
2009 2008 2009 2008
--------------------- ---------------------
(in thousands
except per Jul 4, Jun 28, % Jul 4, Jun 28, %
share data) 2009 2008 Chg 2009 2008 Chg
--------------------------- --------------------------
Net sales $384,678 $503,973 (24%) $787,211 $974,499 (19%)
Cost of sales 275,456 351,127 561,886 677,929
--------------------- ---------------------
Gross profit 109,222 152,846 (29%) 225,325 296,570 (24%)
SG&A 64,964 83,920 136,064 160,992
--------------------- ---------------------
Operating
profit 44,258 68,926 (36%) 89,261 135,578 (34%)
Other income
(expense), net (1,114) 1,603 (333) 1,604
Gain on debt
modification - - 35,740 -
Debt discount
amortization (2,484) - (2,484) -
Interest
expense (28,376) (24,630) (50,859) (51,222)
--------------------- ---------------------
Income
before income
taxes 12,284 45,899 (73%) 71,325 85,960 (17%)
Income taxes 4,489 16,527 27,109 30,949
--------------------- ---------------------
Net income $ 7,795 $29,372 (73%) $44,216 $55,011 (20%)
===================== =====================

Net earnings
per share
- diluted $0.17 $0.63 (73%) $0.95 $1.19 (20%)
Less net gain
on debt
modification - - 0.47 -
--------------------- ---------------------
Net earnings
per share
- diluted
excluding gain
on debt
modification(1) $0.17 $0.63 (73%) $0.48 $1.19 (60%)
===================== =====================

Dividends per
share $0.17 $0.17 0% $0.34 $0.34 0%

Avg shares
outstanding
- diluted 46,821 46,453 46,619 46,241

McFarland added, "While we were disappointed by a 24% sales decline this
quarter, sales trends during May and June lead us to believe second quarter
will be our most challenging quarter of the year. We believe third quarter
sales will be down approximately 20% from record levels in third quarter 2008.
Our sales initiatives, including Bounty Hunt and the introduction of new
products, are beginning to have a slightly positive impact on our incoming
orders. We are also encouraged by our productivity improvements and cost
reduction efforts this year. As a result, we believe our operating margin
will continue to improve throughout the balance of the year."

Selected Financial Data (unaudited)
---------------------------------------------------------
(in thousands) Q2 2009 Q1 2009
------- -------
Cash $13,724 $6,876
Net receivables 260,908 259,537
Inventories 311,249 344,945
Total outstanding debt 1,274,557 1,319,205
Shareholders' equity 903,139 884,123

Q2 2009 Q2 2008
------- -------
YTD Cash flows from operations $104,523 $71,652

(Photo: http://www.newscom.com/cgi-bin/prnh/20090730/DA54534)

Q. . . How was business during the quarter?
For the quarter, sales of industrial motors were $248 million, down 24%, and
sales of mechanical power transmission products were $115 million, down 20%.
Sales to domestic distributors were down 29%, while sales to domestic OEMs
were down 26%. April was the weakest month of the quarter and the year.
Incoming orders began to improve slightly during May, and June's order rates
improved slightly over May. International sales of $70 million comprised 18%
of sales for the quarter and were down 12% from last year. Sales in the Asia
Pacific region increased 28% for the quarter, and shipments and earnings from
our plants in China were an all-time record.

Q. . . How were sales of your Super-E(R) premium efficient motors?
Sales of our Super-E motors increased 12% for the quarter and 20% for the
year. Our Super-E motors consume less electricity than standard motors,
thereby reducing their users' electricity bills. Legislation introduced
during the past few years has increased industry's awareness of the cost of
operating electric motors. This legislation will require a broader use of
premium efficient motors like our Super-E motors. Therefore, we expect sales
of these motors to continue growing as we move closer to the implementation of
the 2007 Energy Bill on December 19, 2010.

Q. . . How important is the development of new products to Baldor?
New product development is a significant part of our long-term growth
strategy. During the first half of 2009, over 25% of the products we sold
were products introduced within the past five years. We have developed many
products for our Dodge customers in the past year, including MagnaGear(TM)
reducers for large material handling needs and E-Z Kleen(R) wash down bearings
for food and pharmaceutical applications. Our cooling tower motor and drive
system, currently being introduced, provides 10-15% energy savings and lower
maintenance costs over traditional cooling tower technologies. In the United
States alone, there are tens of thousands of cooling towers that could be
retrofitted to operate more efficiently with this new technology.

Q. . . How effective has your Bounty Hunt program been this year?
Bounty Hunt is a program which gives special incentives to our sales force for
earning new business from targeted accounts during 2009. This program has
begun to generate sales, and we believe the success of this program will be
more evident later this year and in 2010.

Q. . . Do you believe distributors are finished reducing their inventories?
With sales to distributors down 29% during the quarter, we think significant
amounts of destocking occurred. We expect this destocking to diminish over
the balance of the year.

Q. . . Did you reduce Baldor's inventories during the quarter?
During the second quarter, our inventories declined by $34 million primarily
due to a reduction in raw material and work-in-process inventories. Having
the appropriate mix and quantity of finished goods inventory is a competitive
advantage for us, particularly as our customers reduce their inventory. While
we expect to further reduce inventories in the third quarter, we will manage
the reduction in a way that will not negatively affect our customers.
Effective management of our inventories allows us to take advantage of sales
opportunities and cash flow generation for debt reduction.

Q. . . In June, you increased your 2009 cost savings target to $92 million
from $80 million. Is this still an achievable goal?
Yes, it is. Since we have eliminated almost all overtime, we are on target to
reach our $35 million overtime savings goal. We continue to have a hiring
freeze in place, and as a result of our productivity improvements, we do not
expect to add any new employees during the next 6-12 months. This will allow
us to meet our payroll savings goal of $33.5 million. In addition, we are
slightly ahead of our goal to achieve $23.5 million of savings in
discretionary spending.

As previously announced, we expected to incur $4.5 million of expense related
to manufacturing consolidations. The second quarter was impacted by
approximately $3.0 million of this expense. Third quarter 2009 will be
impacted by the remaining $1.5 million of consolidation expense. Beginning in
the second half of 2009, these consolidations will provide an annual cost
savings of approximately $9.0 million.

Q. . . How much debt reduction did you make during the quarter?
During the quarter, we reduced debt by $44.6 million. This brings our total
net debt repayment for the first half of the year to more than $52 million.
Since we took on the debt 29 months ago, we have repaid $275 million. Debt
reduction remains the priority for free cash flow. We expect to reduce our
debt by at least $100 million this year.

Q. . . What is your outlook for the balance of 2009?
We expect the second half of 2009 to continue to be challenging, with sales
declining from one year ago. Even with these sales declines, we believe our
operating margin will continue to improve during the next two quarters.

Q. . . When is your next public update?
A conference call will be held Friday, July 31, 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 877-440-5791. A replay will be available through
August 7, 2009 and can be accessed by calling 888-203-1112 (passcode 5293645).

On August 11, 2009, the Company will meet with institutional investors at the
Jefferies CEO Summit in Chicago. On August 12, 2009, management will make a
presentation at the Canaccord Adams Global Growth Conference in Boston. The
Company will also attend the Sidoti Institutional Investor Forum on September
11, 2009, in San Francisco and the Sterne Agee Best Ideas Conference on
September 16, 2009, in Milwaukee.

(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