Sauer-Danfoss Inc. Reports First Quarter 2008 Results
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CHICAGO, April 28 /PRNewswire-FirstCall/ — Sauer-Danfoss Inc. today announced financial results for its first quarter ended March 31, 2008. Net sales for the quarter increased 18 percent to $617.4 million, compared to net sales of $523.1 million for the first quarter 2007. Net income for the quarter rose 81 percent to $27.9 million, or $0.57 per share, compared to $15.4 million, or $0.32 per share for the first quarter 2007. First quarter 2008 net income included a one-time gain on the sale of a building of approximately $1.5 million, or $0.02 per share, related to the previously completed restructuring program. First quarter 2007 results included restructuring costs of $11.9 million, or $0.21 per share.
David Anderson, President and Chief Executive Officer, stated, “This was an outstanding quarter for Sauer-Danfoss, reporting the highest quarterly sales and earnings in the history of the Company. The growth in revenue was across all regions and business segments. Importantly, our operating margin improved significantly, led by the impressive performance in our Propel segment. We continue to address capacity constraints and operational issues in our Work Function and Controls divisions, which should result in margin improvement later this year and into 2009.”
Excluding the impact of currency translation rate changes and divestitures, sales for the first quarter 2008 increased 13 percent over the prior year period with growth of 8 percent in the Americas, 14 percent in Europe and 34 percent in the Asia-Pacific region.
For the first quarter 2008, excluding the impact of currency translation rate changes and divestitures, sales in the Propel segment increased 15 percent, sales in the Work Function segment increased 9 percent, and sales in the Controls segment increased 13 percent compared with the prior year.
Anderson commented, “Our sales growth is quite impressive considering the economic concerns in some of the U.S. and world markets. Our growth was led by strong sales into Ag equipment markets in both the Americas and European regions, highlighting the benefit of our geographic diversification.”
Orders and Backlog Support Continued Growth
Orders received for the first quarter 2008 were $677.9 million, up 22 percent from the same period last year. Excluding currency translation rate changes and divestitures, orders were up 13 percent.
Total backlog at the end of first quarter 2008 was $1,035.8 million, a 56 percent increase from the end of first quarter 2007. Excluding currency translation rate changes and divestitures, backlog was up 41 percent.
Anderson stated, “Even though economic uncertainty continues to exist in some of our markets, our order level and backlog reflect our ability to consistently outgrow our served markets. This capability is a result of the combined strength of our product portfolio and applications know-how. The bottom line is, we’ve been able to continually increase our dollar content on customer vehicles and win market share, offsetting overall market declines.”
First Quarter Cash Flow
Cash flow from operations for the first quarter 2008 was $14.3 million, compared to last year’s $2.1 million. Capital expenditures for the first quarter 2008 were $35.1 million, a planned capacity-focused increase from last year’s $24.9 million. The debt to total capital ratio, or leverage ratio, was 43 percent at the end of the first quarter 2008, level with year-end.
Outlook
“Our record first quarter sales and results, along with a strong backlog, give us reason to raise our outlook for the full year,” Anderson said. “We now expect full year 2008 earnings to be $1.50 to $1.65 per share based on a sales growth of 9 to 11 percent and capital expenditures to be 7 to 8 percent of sales.”
Webcast Information
Members of Sauer-Danfoss’ management team will host a Webcast on April 29 at 10 AM Eastern Time to discuss 2008 first quarter results. The call is open to all interested parties on listen-only mode via an audio webcast and can be accessed through the Investor Relations page of the Company’s website at . A replay of the call will be available at that site through May 29, 2008.
About Sauer-Danfoss
Sauer-Danfoss Inc. is a worldwide leader in the design, manufacture, and sale of engineered hydraulic, electric and electronic systems and components, for use primarily in applications of mobile equipment. Sauer-Danfoss, with 9,800 employees worldwide and revenue of approximately $2.0 billion, has sales, manufacturing, and engineering capabilities in Europe, the Americas, and the Asia-Pacific region. The Company’s executive offices are located near Chicago in Lincolnshire, Illinois and in Neumunster, Germany. More details online at .
This press release contains certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. All statements regarding future performance, growth, sales and earnings projections, conditions or developments are forward-looking statements. Words such as “anticipates,”"in the opinion,”"believes,”"intends,”"expects,”"may,”"will,”"should,”"could,”"plans,”"forecasts,”"estimates,”"predicts,”"projects,”"potential,”"continue,” and similar expressions may be intended to identify forward-looking statements.
Actual future results may differ materially from those described in the forward-looking statements due to a variety of factors. Readers should bear in mind that past experience may not be a good guide to anticipating actual future results. The economy in the U.S. remains unstable due to the repercussions of the deterioration in the credit markets, the weak housing and residential construction markets, and uncertainty surrounding job creation, interest rates and crude oil prices. The European economy has been strong for some time but may be reaching its peak, with inevitable declines to follow. Any downturn in the Company’s business segments could adversely affect the Company’s revenues and results of operations. Other factors affecting forward-looking statements include, but are not limited to, the following: specific economic conditions in the agriculture, construction, road building, turf care, material handling and specialty vehicle markets and the impact of such conditions on the Company’s customers in such markets; the cyclical nature of some of the Company’s businesses; the ability of the Company to win new programs and maintain existing programs with its original equipment manufacturer (OEM) customers; the highly competitive nature of the markets for the Company’s products as well as pricing pressures that may result from such competitive conditions; the continued operation and viability of the Company’s significant customers; the Company’s execution of internal performance plans; difficulties or delays in manufacturing; cost-reduction and productivity efforts; competing technologies and difficulties entering new markets, both domestic and foreign; changes in the Company’s product mix; future levels of indebtedness and capital spending; claims, including, without limitation, warranty claims, field retrofit claims, product liability claims, charges or dispute resolutions; ability of suppliers to provide materials as needed and the Company’s ability to recover any price increases for materials in product pricing; the Company’s ability to attract and retain key technical and other personnel; labor relations; the failure of customers to make timely payment; any inadequacy of the Company’s intellectual property protection or the potential for third-party claims of infringement; global economic factors, including currency exchange rates; general economic conditions, including interest rates, the rate of inflation, and commercial and consumer confidence; energy prices; the impact of new or changed tax and other legislation and regulations in jurisdictions in which the Company and its affiliates operate; changes in accounting standards; worldwide political stability; the effects of terrorist activities and resulting political or economic instability; natural catastrophes; U.S. military action overseas; and the effect of acquisitions, divestitures, restructurings, product withdrawals, and other unusual events.
The Company cautions the reader that these lists of cautionary statements and risk factors may not be exhaustive. The Company expressly disclaims any obligation or undertaking to release publicly any updates or changes to these forward-looking statements that may be made to reflect any future events or circumstances. The foregoing risks and uncertainties are further described in Item 1A (Risk Factors) in the Company’s latest annual report on Form 10-K filed with the SEC, which should be reviewed in considering the forward- looking statements contained in this press release.
Internet:
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(Dollars in thousands March 31, March 31,
except share and per share data) 2008 2007
Net sales 617,399 523,132
Cost of sales 469,674 398,547
Gross profit 147,725 124,585
Research and development 19,286 16,850
Selling, general and administrative 67,982 61,852
Net (gain)/loss on disposal of fixed assets (1,212) 252
Loss on sale of business — 6,230
Total operating expenses 86,056 85,184
Income from operations 61,669 39,401
Nonoperating expenses:
Interest expense, net (6,487) (5,356)
Minority interest (8,939) (8,384)
Other, net (3,836) (1,112)
Income before income taxes 42,407 24,549
Income taxes (14,544) (9,180)
Net income 27,863 15,369
Net income per share:
Basic net income per common share 0.58 0.32
Diluted net income per common share 0.57 0.32
Weighted average shares outstanding
Basic 48,210 48,085
Diluted 48,514 48,269
Cash dividends declared per common share 0.18 0.18
business SEGMENT INFORMATION
Three Months Ended
March 31, March 31,
(Dollars in thousands) 2008 2007
Net sales
Propel 311,658 256,970
Work Function 160,486 138,373
Controls 145,255 127,789
Total 617,399 523,132
Segment Income (Loss)
Propel 65,437 45,673
Work Function 4,388 2,479
Controls 4,875 5,002
Global Services and Other
Expenses, net (16,867) (14,865)
Total 57,833 38,289
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31, March 31,
(Dollars in thousands) 2008 2007
Cash flows from operating activities:
Net income 27,863 15,369
Depreciation and amortization 28,041 24,530
Minority interest 8,939 8,384
Net change in receivables, inventories, and payables (48,144) (59,123)
Other, net (2,365) 12,957
Net cash provided by operating activities 14,334 2,117
Cash flows from investing activities:
Purchases of property, plant and equipment (35,146) (24,876)
Proceeds from sale of property, plant and equipment 3,472 542
Net cash used in investing activities (31,674) (24,334)
Cash flows from financing activities:
Net borrowings on notes payable and debt instruments 36,886 36,336
Cash dividends (8,667) (7,639)
Distribution to minority interest partners (2,415) (2,613)
Net cash provided by financing activities 25,804 26,084
Effect of exchange rate changes (4) 1,617
Net increase in cash and cash equivalents 8,460 5,484
Cash and cash equivalents at beginning of year 26,789 29,112
Cash and cash equivalents at end of period 35,249 34,596
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, Dec. 31,
(Dollars in thousands) 2008 2007
ASSETS
Current assets:
Cash and cash equivalents 35,249 26,789
Accounts receivable, net 399,577 318,152
Inventories 327,939 319,524
Other current assets 64,199 55,677
Total current assets 826,964 720,142
Property, plant and equipment, net 608,331 562,818
Other assets 223,457 217,462
Total assets 1,658,752 1,500,422
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and bank overdrafts 65,389 59,415
Long-term debt due within one year 240,421 208,819
Accounts payable 175,949 168,015
Other accrued liabilities 162,138 128,358
Total current liabilities 643,897 564,607
Long-term debt 189,875 175,811
Long-term pension liability 61,117 70,777
Deferred income taxes 38,048 40,930
Other liabilities 65,110 62,253
Minority interest in net assets of
consolidated companies 69,464 60,544
Stockholders’ equity 591,241 525,500
Total liabilities and stockholders’ equity 1,658,752 1,500,422
Number of employees at end of period 9,853 9,756
Debt to total capital ratio (1) 43% 43%
(1) The debt to total capital ratio is calculated by dividing total
interest bearing debt by total capital. Total interest bearing debt is
the sum of notes payable and bank overdrafts, long-term debt due within
one year, and long-term debt. Total capital is the sum of total interest
bearing debt, minority interest in net assets of consolidated companies,
and stockholders’ equity.
Sauer-Danfoss Inc.
