Sauer-Danfoss Inc. announces its financial results for the third quarter ended September 30, 2012.
Third Quarter Review
Net sales for the quarter declined 15% to $410.3 million, compared to net sales of $483.3 million for the third quarter of 2011. Excluding the impact of changes in currency translation rates, sales in the third quarter declined 10% over the same quarter last year. Sales for the third quarter declined 2% in the Americas, 18% in Europe and 14% in the Asia-Pacific region, excluding the impact of changes in currency translation rates. Sales declined 17% in the Work Function segment, 10% in both the Controls and Propel segments, and 5% in the Stand-Alone Businesses segment, excluding the impact of changes in currency translation rates.
The company reported net income of $40.6 million, or $0.84 per share, for the third quarter of 2012, compared to net income of $57.0 million, or $1.18 per share, for the third quarter of 2011.
Eric Alstrom, President and Chief Executive Officer, comments, "Our third quarter results reflect the declining global markets. Sales in all three major regions are now down compared to a year ago, with the Americas now recording a slight decline. Given the drop in sales, I am very impressed that the team has been able to maintain the high level of operating margin, even improving the gross margin slightly over last year. This demonstrates the organization's ability to react quickly to market changes."
Orders and Backlog Decline
The company received new orders of $379.7 million for the third quarter of 2012, a 31% decline compared to third quarter 2011 new orders of $551.9 million. Excluding the impact of changes in currency translation rates, new orders declined 27%.
Total backlog at September 30, 2012, was $867.5 million, an 8% decline compared to the same period last year of $942.3 million. Excluding the impact of changes in currency translation rates, backlog declined 7%.
Nine Month Review
The company reported net sales for the nine months ended September 30, 2012, of $1,503.1 million, a decline of 7% compared to net sales of $1,611.4 million for the first nine months of 2011. Net sales for the first nine months of 2012 were down 3% compared to the prior year period, excluding the impact of currency translation rate changes.
Net income for the first nine months of 2012 was $161.8 million, or $3.34 per share, compared to net income of $202.4 million, or $4.18 per share, for the same period last year. 2011 results were favorably impacted by $13.7 million, or $0.28 per share, relating to the reversal of deferred tax asset valuation allowances.
Continued Strong Cash Flow; $20 Million Prepayment on Danfoss Loan
Cash flow from operations for the first nine months of 2012 was $264.6 million, compared to $283.2 million for 2011. Capital expenditures for the first nine months of 2012 were $23.2 million compared to $22.8 million for the same period last year.
"We generated $227 million of free cash flow for the first nine months, compared to the $250 million of record free cash flow of last year. Given our strong cash flow and balance sheet, we prepaid approximately $20 million on our long-term loan agreement with Danfoss as allowed under the agreement," states Alstrom.
Outlook Range Narrowed for 2012
Alstrom concluded, "We continue to manage our costs aggressively in response to the further weakening in the global markets. While we believe our sales will still come in within our previous range of guidance, it is now more likely to be at the lower end of the range. This will put additional pressure on our earnings, and we are therefore narrowing our earnings guidance by reducing the upper end of our guidance range."
The outlook for 2012 has been revised as follows:
- Annual sales decline of 5 to 10% from 2011 levels (unchanged)
- Expected earnings in the range of $3.50 to $4.00 per share (previously $3.50 to $4.25 per share)
- Capital expenditures of approximately $50.0 to $60.0 million (previously $60.0 to $70.0 million)
