Second Quarter Review

Net sales for the quarter declined 55 percent to $277.4 million, compared to net sales of $611.5 million for the second quarter of 2008. Excluding the impact of changes in currency translation rates, sales in the second quarter declined 51 percent over the same quarter last year. Sales for the second quarter dropped 56 percent in Europe, 48 percent in the Americas, and 39 percent in the Asia-Pacific region, excluding the impact of currency. Sales decreased 57 percent in both the Work Function and Controls segments, and 45 percent in the Propel segment, excluding currency.

The Company reported a net loss of $121.8 million, or $2.52 per share, for the second quarter of 2009, compared to net income of $22.7 million, or $0.47 per share, for the second quarter of 2008. Second quarter 2009 results include restructuring and severance costs of $13.2 million, or $0.26 per share. In addition, second quarter 2009 results were negatively impacted by a charge of $78.5 million, or $1.62 per share, to establish non-cash deferred tax asset valuation allowances relating to operating losses which cannot be tax benefited.

Sven Ruder, President and Chief Executive Officer, commented, "The second quarter results show a further drop in sales compared to what we reported for the first quarter of 2009. This drop in sales was more pronounced than what we anticipated. Every market and region we serve was impacted by the full force of the global recession. Our sales were also affected negatively by our customers reducing their inventories. The further drop in sales, the tax asset valuation allowances, and the one-off costs associated with our aggressive cost reduction actions all had a negative influence on the Company's earnings. The cost reduction actions have enabled the Company to lower its operating expenses by approximately $25.0 million, or 27 percent, compared to the same quarter last year. The significantly lower run rate of expenses we expect to hit by the end of the year will put us in a good position as we go into 2010 and the global economy stabilizes and recovers."

New Orders and Backlog Decline

The Company received new orders of $173.4 million for the second quarter of 2009, a decrease of 73 percent from the second quarter of 2008. Excluding currency translation rate changes, orders were down 70 percent.

Total backlog at June 30, 2009, was $407.8 million, a 61 percent decline from the same period last year. Excluding currency translation rate changes, backlog decreased 59 percent.

Ruder added, "The dramatic decrease in new orders and backlog reflect the significant declines our customers are reporting in virtually every market and region we serve."

Six Month Review

The Company reported net sales for the six months ended June 30, 2009, of $627.1 million, compared to net sales of $1,228.9 million for the first six months of 2008. Net sales for the first six months of 2009 decreased 45 percent over the prior year period, excluding the impact of currency translation rate changes.

Net loss for the first six months of 2009 was $200.2 million, or $4.14 per share, compared to net income of $50.6 million, or $1.04 per share, for the same period last year. Results for the first six months of 2009 include restructuring costs of $28.0 million, or $0.55 per share, valuation allowances on deferred tax assets of $78.5 million, or $1.62 per share, and a non-cash charge related to goodwill impairment of $50.8 million, or $1.05 per share.

Cash Flow

Cash flow from operations for the first six months of 2009 was $52.5 million, compared to $114.5 million for 2008. Capital expenditures for the first six months of 2009 were $29.8 million compared to $84.0 million for the same period last year. The Company's debt to total capital ratio, or leverage ratio, was 64 percent at June 30, 2009, compared to 51 percent at year-end.

"I am pleased with the results of our focus on cash by reducing capital expenditures and net working capital which has allowed us to generate $34.0 million of free cash flow in the second quarter," stated Ruder.

2009 Outlook

Ruder concluded, "The severity of the global recession reflected in the 55 percent drop in second quarter sales means we are beyond what we believed was a realistic outlook just three months ago. As a result, we are taking further actions to reduce costs in response to the declining sales, resulting in increased workforce reduction and restructuring costs. We still cannot predict whether we are at the bottom of the downturn with any certainty. Both the severity of the downturn and future uncertainty require us to revise our outlook. Therefore, we are revising our outlook accordingly."

   Revised 2009 Outlook   --  Annual sales declining 45 to 50 percent from 2008 levels   --  Expected loss in the range of $6.70 to $7.30 per share, which includes       the following:       --  Impairment charge of  $1.05 per share       --  Valuation allowances on deferred tax assets of $2.35 to $2.55 per           share       --  Workforce reduction and restructuring costs of $1.00 to $1.20 per           share    --  Capital expenditures of approximately $60.0 million (unchanged)     Webcast Information  

Members of Sauer-Danfoss' management team will host a webcast on July 30 at 10 AM Eastern Time to discuss 2009 second 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 August 13, 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. 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.