Baldor 2Q earnings up 192%; company expects strong 3Q

On a day that saw all major U.S. markets fall because of a weak economic outlook, Fort Smith-based Baldor Electric Co. reported second quarter earnings that blew past analyst estimates. The company also reported continued strength into the third quarter.

The global maker of electric motors, drives and controls said second quarter net earnings were $22.767 million, up 192% compared to the 2009 period. The earnings came from total revenue of $439.491 million, up more than $54.81 million, or 14.2% compared to the second quarter of 2009.

Net earnings of 48 cents per share outpaced the consensus analyst estimates of 44 cents.

"Compared to the same quarter last year, incoming orders increased by a double-digit amount each month of the quarter, with May having the strongest increase. July’s incoming orders have continued to grow at a double-digit rate,” John McFarland, Baldor chairman and CEO, said in the earnings statement.

For the first half of 2010, the company’s total revenue is $836.952 million, up 6% compared to the 2009 period. Net income for the first half of 2010 is $37.835 million, down 14% compared to the 2009 period — thanks to a lackluster first quarter report that saw net income down more than 58% compared to the 2009 first quarter.

BACKLOG, DEBT REDUCTION
McFarland also noted the company has a backlog of $200 million in orders, up from $135 million as of Dec. 31. The backlog, along with an anticipated growth in energy efficient motor sales, has the company predicting third-quarter sales growth of 16-18% ($440 million to $450 million) compared to third quarter 2009.

Business gains and a tough 2009 help Baldor post the impressive year-over-year gains. The company’s 2009 total sales and net income were down 22% and 40%, respectively, compared to 2008.

Improved 2010 conditions are also helping the company meet a goal of reducing long-term debt by $75 million in 2010. For the first half of the 2010, the company has reduced the debt by more than $42 million. Baldor accumulated significant debt in the $1.8 billion acquisition of Rockwell Automation subsidiaries (Dodge, Reliance) in November 2006. Outstanding debt at the end of the second quarter was $1.163 billion, down from the $1.205 billion at the end of 2009.

The company reported that sales of its super-efficient motors were up 25% in the quarter compared to a 12% increase for all electric motors.

“Some of this growth is due to early adoption of high efficiency motor standards included in the upcoming Energy Independence and Security Act (EISA),” the company noted in the statement.

Sales to original equipment manufacturers were up 16% in the quarter, sales of electronic drives were up 32% and sales to domestic distributors were up 30%. And while international sales were down 6%, the Baldor report said incoming international orders were up 14%.

SUPPLY, COST ISSUES
Baldor execs continue to face increasing raw materials costs and have “experienced some difficulty” obtaining “key components” for motors and mechanical power transmissions.

“Along with these shortages have come price increases for many materials. This will result in our costs being higher during the second half of the year than they were during the first half of the year. As a result, we implemented a price increase in early June. This increase will cover the cost increases we are experiencing,” noted the Baldor earnings statement.

A recent survey from MFGWatch reported that 51% of North American survey respondents experienced a “significant disruption” in their supply chain during the second quarter of 2010.

Baldor, a maker, designer and marketer of industrial electric motors, motor drives, power transmissions and generators, employs between 7,000 and 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.

Baldor shares (NYSE: BEZ) closed Thursday at $39.35, up 69 cents. The earnings report was released after the markets closed. During the past 52 weeks, the share price has ranged from a $41.51 high to a $24.67 low.