(Source: PRNewswire-FirstCall)
BELOIT, Wis., May 6 /PRNewswire-FirstCall/ -- Regal Beloit Corporation today reported financial results for the first quarter ended March 28, 2009. Net sales of $443.3 million decreased 17.4% as compared to the $536.3 million reported for the first quarter of 2008. Diluted earnings per share were $0.39 as compared to $0.95 for the first quarter of 2008. (Note: prior year financial results have been restated to reflect the impact of the change in accounting for the Company's convertible senior subordinated notes as prescribed in FASB Staff Position APB 14-1: Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement.))
"While the first quarter proved to be as challenging as we anticipated, I am pleased with the response of our associates in delivering results consistent with our expectations. We have and will continue to take advantage of all available business opportunities and reduce costs throughout our Company while continuing to invest in high efficiency products and lean processes. We believe these actions and our focus on strong fundamentals will position us well to seize the opportunities that we expect will arise as the business environment begins to improve," commented Henry Knueppel, Chairman and Chief Executive Officer.
Sales for the first quarter of 2009 were $443.3 million, a 17.4% decrease over the $536.3 million reported for the first quarter of 2008. First quarter 2009 sales included $29.7 million of sales related to the Hwada and Dutchi businesses acquired in 2008 and the Customer Power Technology acquisition completed on January 2, 2009.
In the Electrical segment, sales decreased 17.4%, including the impact of the acquisitions noted above. Exclusive of the acquired businesses, Electrical segment sales decreased 23.7%, largely due to global generator sales decreasing 12%, commercial and industrial motors sales in North America decreasing 23% and residential HVAC motor sales decreasing 22%. Sales in the Mechanical segment decreased 17% from the prior year period.
From a geographic perspective, Asia-based sales decreased 24.2% as compared to the first quarter of 2008. In total, sales to regions outside of the United States were 26.7% of total sales for the first quarter of 2009 in comparison to 25.6% for the comparable period of 2008. The negative impact of foreign currency exchange rate changes decreased total sales by 2.4%. From an energy efficiency standpoint, sales of high efficiency products represented 12.9% of total sales for the quarter.
The gross profit margin for the first quarter was 20.4% as compared to the 22.8% reported for the comparable period of 2008. The decrease is driven by higher commodity costs and the fixed cost absorption impact of lower sales volumes. In addition, costs related to the ongoing plant rationalizations increased cost of sales by approximately $2.4 million.
Operating expenses were $62.4 million (14.1% of sales) in the three months ended March 28, 2009 versus $64.5 million (12.0% of sales) in 2008. Operating expenses included approximately $5.1 million for the Dutchi and Hwada businesses. Income from operations was $28.2 million versus $57.6 million in the comparable period of 2008. As a percent of sales, income from operations was 6.4% for the first quarter versus 10.7% in the comparable period of 2008.
Net interest expense was $7.0 million versus $8.0 million in the comparable period of 2008. The decrease was driven by lower interest rates in 2009 versus the comparable period of 2008. The impact of the change in accounting for the Company's convertible senior subordinated notes as prescribed in APB 14-1 was a pretax non-cash interest charge in the amount of $1.1 million. The comparable amount for 2008 is $1.2 million.
The effective tax rate for the three months ended March 28, 2009 was 34.1% versus 35.4% for the first quarter of 2008. The decrease in the effective tax rate results primarily from the global distribution of income.
Net income attributable to Regal Beloit Corporation for the three months ended March 28, 2009 was $12.8 million, a decrease of 59.3% versus the $31.4 million reported in the first quarter of 2008. Fully diluted earnings per share was $0.39 as compared to $0.95 per share reported in the first quarter of 2008.
The Company ended the first quarter with total debt of $587.3 million as compared to $575.4 million at the end of the fourth quarter of 2008. Cash and cash equivalents increased $16.8 million during the first quarter to $82.1 million.
"As we move into the second quarter, the difficult sales environment is expected to continue. We do not believe that the normal seasonal pick up in sales will materialize and we believe that inventory liquidation by our customers will continue well into the second quarter," continued Henry Knueppel, Chairman and Chief Executive Officer. "We also plan to continue to aggressively reduce our inventory levels to maximize our cash position which we expect will negatively impact our gross margin by approximately $7.5 million. Additionally, costs related to our plant rationalizations will add an estimated $3.0 million to cost of sales for the second quarter. Given these factors, we are estimating second quarter earnings per share to be in the range of $0.38 to $0.46," concluded Henry Knueppel, Chairman and Chief Executive Officer.
Regal Beloit will be holding a conference call pertaining to this news release at 10:30 AM CT (11:30 AM ET) on Thursday, May 7. Interested parties should call 866-394-7807, referencing Regal Beloit conference ID 96496426.
