Baldor Electric sees quarterly income fall 51%, misses earnings estimates

The earnings report issued Thursday by Fort Smith-based Baldor Electric Co. provides little evidence of a recovering national economy.

Baldor reported after the markets closed that its third-quarter net income was $12.592 million, down 51% from the same quarter of 2008. Total sales in the quarter hit $380.448 million, down 25% from the $506.154 million in the same quarter of 2008. The company’s per share earnings of 27 cents missed the consensus analysts estimate of 28 cents per share.

“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 (original equipment manufacturing) customers,” Baldor Chairman and CEO John McFarland noted in a statement.

Continuing, McFarland noted: “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.”

For the first nine months of the year, net income at Baldor is $56.808 million, down 30% from the same period in 2008. Year-to-date total sales in $1.167 billion, down 21% from the same nine-month period in 2008.

Company officials are not expecting improvements in the fourth quarter.

“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,” the company noted.

Despite the continued tough economic conditions, the company is on track to reduce the significant long-term debt incurred with the $1.8 billion acquisition of competitor Reliance/Dodge in November 2006. Debt was reduced by $35.4 million during the quarter, and is on track to “slightly exceed” the 2009 debt reduction goal of $100 million, the company said in the earnings statement.

Also, the company said it is on track to save $115 million through cost cutting initiatives, somewhat ahead of the original cost reduction targets of $92 million.

Other notables from the earnings statement include:
• Compared to third quarter 2008, motor sales of $241 million were down 27%.

• 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 — up primarily due to new customers.

• 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.”

Baldor, a maker, designer and marketer of electric motors, motor drives, power transmissions and generators, posted record sales in 2008 of $1.95 billion. The company employs between 7,500 and 8,000 in 28 plants in five countries and sales offices serving more than 80 countries. About 2,000 are employed in the Fort Smith area.

Shares of Baldor (NYSE: BEZ) closed Thursday (Oct. 29) at $27.05, down 7 cents. The company issued its quarterly report after the markets closed. During the past 52 weeks, the share price has ranged from a $30.82 high to a $10.21 low.