Motoring through the storm: Profile of Baldor Electric Co.

That Fort Smith-based Baldor Electric Co. has more than 9,500 global customers is just one of the interesting details about Baldor found in an annual filing the company provides to the U.S. Securities & Exchange Commission.

Although the company recently received a positive analyst report from Avondale Partners, financial struggles are ahead for the company.

The company — Baldor designs, markets and manufacturers electric motors, motor drives and generators — recently reported that its net income for 2008 was $99.42 million, up 6% over the $94.1 million in 2007. Total sales in 2008 were $1.95 billion, up 7% over the $1.82 billion in 2007.

However, net income in the fourth quarter of 2008 was $18.6 million, down 20% from the $23.37 million posted in the same period of 2007. The per share earnings of 40 cents fell below the consensus estimate of 42 cents per share.

The following are just a few details from Baldor’s 10-K filing with the SEC:
• Baldor supplies more than 9,500 customers in more than 160 industries. The company’s products are sold in the U.S. and in more than 70 foreign countries.

• Costs associated with research, new product development, and product and cost improvements amounted to approximately $35.4 million in 2008, $34.3 million in 2007, and $25 million in 2006.

• On average, Baldor releases 250 new product line additions a year and approximately 25% of its annual sales in each of the past five years were from newly developed products.

• Management analysis: “The current economic recession impacted our business levels in the second half of 2008. While order rates remained steady in the third quarter we began to see some slowing. That trend continued in the fourth quarter and order rates decreased sharply in December 2008 … We expect 2009 to be challenging and we have taken steps to prepare for reduced business levels in the coming year.”

• Management analysis: “(D)uring the fourth quarter of 2008, we implemented cost reduction initiatives across the Company, and we are accelerating integration projects related to our recent acquisitions. We expect to achieve approximately $80 million in cost savings in 2009 as a result of these initiatives. We have also implemented sales strategies targeted to obtain specifically identified new customers in 2009. … We successfully executed a similar strategy during the last recessionary period and many of the customers we obtained then are still customers today.”

• Baldor has senior secured debt ratings of Ba3 with a negative outlook by Moody’s Investors Services, and BB+ with a negative outlook by Standard & Poor’s Rating Service.

• The company has no downward rating triggers that would accelerate the maturity of amounts drawn or increase the interest rates paid under its senior secured credit facility and its senior unsecured notes.

BOTTOM LINE FIGURES
• Total sales 2008: $1.954 billion
Sales to domestic customers: $1.584 billion
Sales to export customers: $151.06 million

• Total sales 2007: $1.824 billion
Sales to domestic customers: $1.509 billion
Sales to export customers: $122.64 million

• Net income
2008: $99.42 million
2007: $94.10 million
2006: $48.11 million