2009 tougher than expected for Baldor; 2010 looking better

Baldor officials said Saturday (May 1) that 2009 was a tougher year than expected but say they are seeing signs that suggest recovery in 2010.

The Fort Smith-based global manufacturing and distribution company held its annual shareholders’ meeting Saturday morning at the Fort Smith Convention Center. Baldor, a maker, designer and marketer of industrial electric motors, motor drives, power transmissions and generators, employs 7,500 in 26 plants in five countries and sales offices serving more than 80 countries. About 2,000 are employed in the Fort Smith area.

How bad was 2009? The company’s overall sales in 2009 ($1.52 billion) fell 22% compared to 2008, the largest percentage drop in company history, said Baldor President and Chief Operations Officer Ron Tucker. Baldor manufacturing operations had 21 short-week schedules and an amended credit agreement pushed interest on debt from 2.25% to 5/25%, Tucker explained.

“It was much more challenging than anticipated,” Tucker said of 2009.

But it wasn’t all bad. Tucker said the company was able to maintain its “no layoff policy,” added 300 new customers, posted record cash flow of $206 million, reduced debt by $121 million and continued to focus on safety programs that help cut workers’ comp claims by 50%.

Despite a first quarter 2010 net income and revenue that was down 58.6% and 1%, respectively from the 2009 quarter, Tucker said 2010 will prove financially better than 2009. He said all plants are now working full weeks, distributors have ended inventory destocking, operating margins continue to improve and orders are up.

Baldor Chairman and CEO John McFarland said the company had several big-ticket orders last week, including a $7 million generator order and a $3 million motor order. The company needs more than $31 million a week in sales to reach the lower range of its second-quarter revenue guidance of $415 million to $430 million.

Tucker said the no-layoff policy is allowing the company to quickly gear up production to meet the increasing demand.

“We’re in a really good position right now to take advantage of these things as business improves,” Tucker told the shareholders and employees.

The company also is eager to take advantage of new federal energy efficiency rules that become effective Dec. 19, 2010. Tucker said sales of Baldor’s higher-priced super efficiency motors could boost 2011 sales by at least $150 million. Baldor officials also expect sales gains in 2010 from super efficiency motor sales as customers prepare for the new federal rules.

According to info provided during the shareholders’ meeting, the company had four primary product lines.
• Industrial motors
This product line accounts for 64% of the company sales in 2009, with product prices ranging from $60 to $1 million.

• Mechanical transmissions
This product line is 29% of company revenue, with product prices ranging from $10 to $400,000.

• Generators
This line is 4% of sales, with product prices ranging from $1,000 to $600,000.

• Motor drives
This line is 3% of sales, with product prices ranging from $200 to $200,000.

McFarland said the company will continue its policy of pursuing productivity rather than chasing cheap labor. He received a loud and spontaneous round of applause when saying the company’s focus is on exporting products, not exporting jobs.

During a brief interview after the meeting, McFarland said external factors that most concern him are the direction of the national and global economy and the potential for “more anti-business” laws and regulations.

It was announced during the meeting that Baldor’s Ozark motor manufacturing plant won the 2009 Chairman’s Award. The award is based on several key factors, including plant safety and efficiency.