Baldor Electric Company Announces Third Quarter 2009 Results

FORT SMITH, Ark., Oct. 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 third quarter 2009.

John McFarland, Chairman and CEO, commented on the Company's results. "In the
third quarter of 2009, we had sales of $380.4 million, net earnings of $12.6
million, and diluted earnings per share of $0.27. This compares to third
quarter 2008 sales of $506.2 million, net earnings of $25.8 million, and
diluted earnings per share of $0.55. While we were disappointed that sales
declined 25% in the quarter, we were pleased with the following:

-- Operating margin before gain on property sale(1) improved to 12.8%
from
one year ago on $126 million less sales
-- Debt reduction of $35.4 million
-- Record YTD cash flows from operations of $151.7 million
-- 10% year-over-year growth in generator sales
-- New customers gained from the Bounty Hunt program

-- On track to slightly exceed our cost reduction goal of $92 million for
2009

(Photo: http://www.newscom.com/cgi-bin/prnh/20091029/DA01866)

McFarland added, "During the quarter, we saw slight improvement in our sales
to distributors compared to second quarter 2009. While our distributor
customers are not restocking yet, it does seem that destocking has nearly come
to an end. This improvement in sales was offset, however, by further weakness
in sales to OEM customers. Recent orders lead us to believe this trend will
continue in the fourth quarter with sales expected to be down approximately
20-25% from one year ago. We had good productivity improvement in the
quarter, and we expect more in the fourth quarter resulting in year-over-year
improvement in our fourth quarter operating margin."

3rd Quarter Year-To-Date
2009 2008 2009 2008
------------------ ------------------
(in thousands except Oct 3, Sep 27, % Oct 3, Sep 27, %
per share data) 2009 2008 Chg 2009 2008 Chg
----------------------- -----------------------

Net sales $380,448 $506,154 (25%) $1,167,660 $1,480,653 (21%)
Cost of sales 265,479 359,400 827,365 1,037,328
----------------- ------------------
Gross profit 114,969 146,754 (22%) 340,295 443,325 (23%)
SG&A 66,096 84,997 202,161 245,989
---------------- ------------------
Operating profit
before gain on
property sale(1) 48,873 61,757 (21%) 138,134 197,336 (30%)
Gain on property
sale 3,721 - 3,721 -
--------------- ----------------
Operating profit 52,594 61,757 141,855 197,336
Other income
(expense), net (44) 1,192 (377) 2,797
Gain on debt
modification - - 35,740 -
Debt discount
amortization (2,484) - (4,968) -
Interest expense (29,796) (24,456) (80,655) (75,680)
------------------ -------------------
Income before
income taxes 20,270 38,493 (47%) 91,595 124,453 (26%)
Income taxes 7,678 12,683 34,787 43,631
--------------- -----------------
Net income $12,592 $25,810 (51%) $56,808 $80,822 (30%)
================= ==================

Net earnings per
share - diluted $0.27 $0.55 (51%) $1.22 $1.74 (30%)
Less net gain on
debt modification - - 0.47 -
--------------- ----------------
Net earnings per
share - diluted
excluding gain on
debt modification(1) $0.27 $0.55 (51%) $0.75 $1.74 (57%)
=============== ================

Dividends per share $0.17 $0.17 $0.51 $0.51 0%
Avg shares
outstanding
- diluted 46,992 46,601 46,743 46,361

Q ... How was business during the quarter?

Compared to third quarter 2008, motor sales of $241 million were down 27% and
mechanical power transmission sales of $111 million were down 21%. Sales to
OEMs declined 29% while sales to distributors declined 21%. Sales improved
sequentially throughout the quarter with July, August and September sales down
30%, 24%, and 23%, respectively.

Generator sales increased 10% compared to third quarter 2008. This increase
was primarily due to new customers earned this year. We expect generator
sales to increase during fourth quarter 2009 as well.

International sales of $63 million declined 27% compared to third quarter
2008, with the smallest decline occurring in Asia-Pacific and the largest in
Europe.

While sales of Super-E motors declined 4% during the quarter, they increased
to 15% of total motor sales. When the 2007 Energy Independence and Security
Act (EISA) takes effect in December 2010, we expect sales of these products to
be approximately 50% of our total motor sales.

Q ... Are you still on track to meet your cost reduction targets?

We are on track to slightly exceed our cost reduction targets of $92 million
for 2009 ($115 million on an annual run rate). In addition during the
quarter, we realized some benefit from lower material costs compared to the
record high costs of third quarter 2008. We do, however, expect to pay more
for electrical steel and copper in fourth quarter 2009 than we did this
quarter.

Q ... How are your inventory and accounts receivable balances?

During the quarter, our accounts receivable balance declined $11.7 million,
and our days sales outstanding (DSO) improved two days from second quarter
2009. The aging of our receivables also improved.

We reduced inventories nearly $23 million during the quarter, bringing our
year-to-date reduction to $56 million. We believe we have adequate
inventories to serve our customers.

Selected Financial Data (unaudited)
------------------------------------------------------
(in thousands) Q3 2009 Q2 2009
----------------------
Cash $14,122 $13,724
Net receivables 249,258 260,908
Inventories 288,470 311,249
Total outstanding debt 1,239,182 1,274,557
Shareholders' equity 920,759 903,139

Q3 2009 Q3 2008
----------------------
YTD cash flows from
operations $151,749 $62,349

Q ... Are you on track to meet your debt reduction target?

During the quarter, we reduced debt $35.4 million, bringing our year-to-date
reduction to approximately $88 million. Since taking on the additional debt
32 months ago, we have repaid approximately $313 million.

We anticipate reducing debt further in the fourth quarter, allowing us to
slightly exceed our 2009 debt reduction goal of $100 million.

Q ... What unusual benefits or expenses did you have during the quarter?

As expected, we had approximately $1.5 million of plant consolidation expense
during the quarter. In the fourth quarter, we expect an additional $500,000
of consolidation expense.

In addition, we completed a real estate transaction originally initiated in
the fall of 2008. Completion of this transaction resulted in a gain of
approximately $3.7 million.

As a result of modifying our debt agreement on March 31, 2009, interest
expense is based upon the rate we pay, interest rate hedge amortization, and
market value fluctuations of our interest rate swap agreements. Compared to
second quarter 2009, interest expense increased due to a $1.9 million non-cash
decline in the market value of our swap agreements, and interest expense
decreased $500,000 as a result of our debt repayments. The net effect was a
$1.4 million increase in interest expense over second quarter 2009.

Q ... What is your outlook for sales during fourth quarter 2009?

Even though daily order trends are improving slightly, we expect fourth
quarter 2009 sales to be down approximately 20-25% from one year ago partly
because fourth quarter 2008 contained 14 weeks and fourth quarter 2009
contains 13 weeks.

Q ... How are you positioning yourself for 2010?

It continues to be difficult to forecast sales for 2010. However, we believe
we are positioned to perform better during 2010 because of the improvements we
made this year, including:

-- Cost reductions of $115 million (on an annual run rate)
-- At least $100 million less debt
-- New customers gained from the Bounty Hunt program

-- New products introduced this year

Beginning in December 2010, the implementation of EISA will have a positive
impact on our total motor business.

Q ... When is your next public update?

A conference call will be held Friday, October 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 1-800-926-4458. A replay will be available
through November 6, 2009, and can be accessed by calling 800-633-8284
(reservation 21439329).

Members of management will meet with investors and make presentations at the
Baird 2009 Industrial Conference in Chicago on November 11, 2009 (webcast
live) and the Stephens Fall Investment Conference in New York on November 17,
2009.

(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 forward-looking statements; in other words, they are
not historical facts. The forward-looking statements in this document (which
might include but are not limited to "estimate", "think", "intend", "may",
"could", "would", "anticipate", "depend", "predict", "can", "assume",
"optimistic", "will", "continue", "expect", "believe", "should", "forecast")
are based on Baldor's current expectations, and they are subject to risks and
uncertainties. Therefore, please remember that forward-looking statements are
not guarantees of future performance and they do involve risks and
uncertainties. As a result of many factors, Baldor's actual results could
differ materially from those projected in the forward-looking statements.
Some of the factors that might cause such differences include (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) success in increasing sales and maintaining or improving
the operating margins of Baldor, and (v) other factors, including those
identified in Baldor's filings made with the Securities and Exchange
Commission. Please read these statements in conjunction with Baldor's most
recent Form 10-K and other reports we have filed with the Securities and
Exchange Commission. These reports contain discussions of Baldor's business
and of various factors that could 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, Investorinfo@baldor.com, all of
Baldor Electric Company, +1-479-648-5769