First Quarter Review

Net sales for the quarter declined 43 percent to $349.7 million, compared with net sales of $617.4 million for the first quarter of 2008. Excluding the impact of changes in currency translation rates, sales in the first quarter declined 38 percent over the same quarter last year. Sales for the first quarter dropped 41 percent in Europe, 37 percent in the Americas, and 33 percent in the Asia-Pacific region, excluding the impact of currency. Sales decreased 42 percent in the Work Function segment, and 37 percent in the Propel and Controls segments, excluding currency.

The Company reported a net loss of $78.4 million, or $1.62 per share, for the first quarter 2009, compared to net income of $27.9 million, or $0.57 per share, for the first quarter of 2008. First quarter 2009 results include a goodwill impairment charge of $50.8 million, or $1.05 per share. In addition, results for 2009 were impacted by one-time restructuring and severance costs of $10.2 million, or $0.14 per share and $4.6 million, or $0.07 per share, of costs related to the previously announced exiting from the unprofitable electric drive business.

Sven Ruder, President and Chief Executive Officer, commented, "The first quarter results reflect the severe downturn in virtually every market and region we serve. The decline in sales was particularly steep as our customers have been working down their inventory levels. In addition, earnings were also impacted by the up-front costs of our aggressive cost reduction actions. I am very pleased with the response we have had from all employees in reducing costs. We are staying focused on conserving cash and sizing our business to the lower sales levels we expect for the remainder of this year and into 2010."

Non-Cash Goodwill Impairment Charges

As a result of continued goodwill impairment testing, the Company incurred a first quarter non-cash charge related to goodwill impairment of $50.8 million, or $1.05 per share, impacting the Controls segment. The goodwill relates to the acquisition of the Danfoss Fluid Power business in 2000 and subsequent acquisitions made over the past seven years.

Ruder explained, "As I noted last quarter, we were required by accounting rules to record an additional non-cash goodwill impairment charge in the first quarter as a result of the further decline in the Company's market capitalization. We believe these charges are now behind us and do not expect any further goodwill impairment."

New Orders and Backlog Decline

The Company received new orders of $124.6 million for the first quarter of 2009, a decrease of 82 percent from the first quarter of 2008. Excluding currency translation rate changes, orders were down 80 percent.

Total backlog at March 31, 2009 was $503.4 million, a 51 percent decline from the same period last year. Excluding currency translation rate changes, backlog decreased 48 percent.

Ruder added, "The significant decrease in new orders for the quarter and the resulting decline in our backlog is a continuation of what we experienced last quarter and is in line with our expectations for the remainder of the year."

Cash Flow from Operations

Cash flow from operations for first quarter 2009 was $5.6 million, compared to $14.3 million for first quarter 2008. Capital expenditures for first quarter 2009 were $16.8 million compared to $35.1 million for the same period last year. The Company's debt to total capital ratio, or leverage ratio, was 59 percent at March 31, 2009, compared to 51 percent at year-end.

"We are pleased to have the strong financial support of Danfoss A/S in the form of the previously announced credit agreement. This backing has provided us with the timeframe necessary to execute our plans to meet the challenging market conditions," stated Ruder.

Reaffirm 2009 Outlook

"Our cost and capital expenditure reduction actions are on schedule, while we now expect our full year sales decline to be closer to the high end of our range, or 40 percent. Excluding the impairment charge of $1.05 per share, we are reaffirming our outlook for full year 2009 of an expected loss in the range of $1.60 to $2.40 per share, including workforce reduction and restructuring costs of $0.40 to $0.60 per share, with annual sales declining 30 to 40 percent from 2008 levels. Capital expenditures will be approximately $60.0 million," concluded Ruder.

Webcast Information

Members of Sauer-Danfoss' management team will host a Webcast on May 6 at 11 AM Eastern Time to discuss 2009 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 http://ir.sauer-danfoss.com/. A replay of the call will be available at that site through May 20, 2009.

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 had revenues of $2.1 billion in 2008 and has sales, manufacturing, and engineering capabilities in Europe, the Americas, and the Asia-Pacific region.

More details online at http://www.sauer-danfoss.com/.

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.