Baldor Electric Co. Q4 2008 Earnings Call Transcript

Executives

Tracy L. Long - Vice President of Investor Relations

John McFarland - Chairman and Chief Executive Officer

Ronald Tucker - President and Chief Operating Officer

Analysts

Steven Sanders - Stephens, Inc.

Kristine Kubacki - Avondale Partners

Yilma Abebe - JPMorgan

John Franzreb - Sidoti & Company, LLC

Brian Meyer - Robert W. Baird

Manish Somaiya - Citigroup

Tom Lamb - Weybosset Research

Presentation

Operator

Good morning, everyone and welcome to Baldor Electric Company's Fourth Quarter 2008 Earnings Results Conference Call. This call is being recorded. With us today from the company is John McFarland, Chairman and Chief Executive Officer; Ron Tucker, President and Chief Operating Officer; and Tracy Long, Vice President of Investor Relations.

At this time I'd like to turn the conference over to Ms. Long. Please go ahead.

Tracy L. Long

Thank you, Dustin. And good morning, everybody. We appreciate your time. Thanks for being here today. Our press release was filed yesterday afternoon and you can find the copy on our website, if you don't have one already. I need to remind everybody that some of the comments we make today may be forward-looking statements. Such statements are not guarantees and therefore our actual results could be materially different.

With that I'll turn the call over to John.

John McFarland

Thank you, Tracy. And good morning, everyone. Thank you for joining us this morning for our year-end conference call.

I am pleased to again report record sales for both the fourth quarter and the year. Fourth quarter sales of $474 million were up 4% over 2007. Net earnings in the fourth quarter were not a record, net earnings in the fourth quarter were $18.6 million, down 22% from 2007 net earnings of $23.4 million. Earnings per share in the quarter were $0.40, down 20% from 2007.

For the full year sales were a record at $1.954 billion, up 7% and net earnings were a record $99.4 million, up from $94.1 million in the year before or up 6%. Earnings for the full year were $2.15 per share, up 3% from $2.08 in 2007.

During the year cash flow from operations allowed us to repay $49.4 million of our debt and also acquire Maska, a company up in Canada for a little over $40 million. Maska is a great addition to our company and is performing well. We are really proud that they are now part of Baldor.

While the quarter started on a very positive note, it did not end that way. On December 15th, total sales for the company were up approximately 10% for the quarter. Over the next three weeks we saw extended closings by many of our customers. We saw our distributor customers aggressively reduce inventories and by the end of December, sales were down 16% for the month.

Even though our sales in December were more than $35 million less than the month of October, we did have the best operating margin of the quarter in December. We believe this along with the results from January are clear evidence of the success of our cost reduction efforts.

As we previously announced, we expect to reduce costs in 2009 by approximately $80 million through the elimination of overtime, a hiring freeze, a reduction in discretionary spending and lower interest expense on our debt.

January results show we are achieving all of our targets in these areas. January sales were down nearly 9% disappointing, but somewhat of a rebound from the 16% decline in December. While earnings in January were down less than 17% contrasting with the fourth quarter when sales were up 4% and earnings down 20%. While we aren't happy sales and earnings were down in January, these results are evident that our cost savings are developing and we expect them to build throughout the balance of the year.

Later in the year we will update you on our targets and report in more detail on our progress. read more