EX-99.1 2 a08-6711_1ex99d1.htm EX-99.1

Exhibit 99.1

 

PRESS RELEASE

 

 

FEBRUARY 27, 2008

 

SAUER-DANFOSS INC. REPORTS 2007 FOURTH QUARTER AND FULL-YEAR RESULTS

 

·                  23% Increase in Fourth Quarter Sales Leads to Strong Improvement in Earnings

 

·                  13% Net Sales Growth for the Year 2007

 

·                  Continued Reinvestment into Operating Improvements and Capacity Expansions

 

·                  New Orders and Backlog Remain Strong Reflecting Continued High Demand in Europe and Asia

 

·                  Restatement Reducing 2005 Earnings per Share by $0.08 to Correct Deferred Taxes Recorded

 

CHICAGO, Illinois, USA, February 27, 2008—Sauer-Danfoss Inc. (NYSE: SHS) today announced net sales rose 23 percent to $494.2 million for the fourth quarter ended December 31, 2007 compared to net sales of $403.4 million for the fourth quarter 2006. Net income for the quarter improved to $8.7 million, or $0.18 per share, compared to a net loss of $4.9 million, or a loss of $0.10 per share for the fourth quarter 2006.

 

David Anderson, President and Chief Executive Officer, stated, “Our operating results and bottom line earnings were a significant improvement over the previous year’s quarter.  We were able to achieve this improvement even though the strong European currencies and our capacity constraints in that region continue to pressure margins.  We remain intensely focused on increasing capacity and improving margins in the Controls and Work Function divisions.  During 2007, we made further progress on our lean initiatives tied into supply chain improvements supported by our common company-wide business system.  We are in the final phase of installing this system globally and we also brought to completion our multi-year restructuring program, an integral part of our reinvestment in the Company for future profitable growth.”

 

Fourth quarter 2007 earnings were impacted by plant restructuring costs of $1.6 million pre-tax, or approximately $0.02 per share, and implementation costs of the common company-wide business system of $2.4 million pre-tax, or approximately $0.03 per share, reflecting a quarter-over-quarter decline in each

 

Executive Offices: 250 Parkway Drive, Suite 270, Lincolnshire, IL 60069

Krokamp 35, 24539 Neumünster, Germany

 

1



 

of these costs as well as a significant decline compared to fourth quarter 2006.  Additionally, Sauer-Danfoss recorded a one-time charge of $2.3 million pre-tax, or $0.03 per share, related to obligations pertaining to the sale of our DC motor business earlier in 2007.  Management does not expect additional related charges.

 

Net sales for the fourth quarter increased 23 percent to $494.2 million, compared to sales of $403.4 million for the same period last year.  Excluding the impact of currency rate changes and divestitures, sales increased 18 percent over the prior year period.  Regionally, sales increased 17 percent in the Americas, while European and Asia-Pacific sales rose 19 percent and 20 percent during the quarter, respectively, excluding the impact of currency rate changes and divestitures.

 

Sauer-Danfoss reported strong sales growth in all segments.  The Propel segment led with a 21 percent sales increase over the fourth quarter in 2006, the Controls segment followed with an 18 percent increase and the Work Function segment increased 15 percent.  All numbers exclude the impact of currency rate changes and divestitures.

 

TWELVE MONTH REVIEW

 

Net sales for the twelve months ended December 31, 2007 were $1,972.5 million, an increase of 13 percent over sales of $1,739.1 million for 2006.  Sales for 2007 increased 10 percent over the previous year, excluding the impact of currency rate changes and divestitures.  Regionally, sales increased 5 percent in the Americas, while European and Asia-Pacific sales rose 14 percent and 13 percent, respectively, excluding the impact of currency rate changes and divestitures.  For the operating segments, excluding the impact of currency rate changes and divestitures, sales increased 17 percent in the Controls segment, and 8 percent in both the Propel and Work Function segments.

 

Income from operations was nearly level with last year at $114 million, yet net income for the full year 2007 was $47.2 million, or $0.98 per share, compared to net income of $54.0 million, or $1.12 per share for 2006.  Factors influencing the decline in earnings for 2007 included the plant restructuring costs of $19.4 million pre-tax, or $0.32 per share, compared to 2006 costs of $15.5 million pre-tax, or $0.21 per share.  Costs relating to the

 

2



 

implementation of a common company-wide business system platform were $11.2 million pre-tax, or $0.15 per share for 2007, compared to $13.7 million pre-tax, or $0.19 per share for 2006.    Change in the tax rate from 24.0% in 2006 to 28.5% in 2007 accounted for a difference of $0.06 per share.

 

Cash flow from operations for the full year of 2007 remained strong at $98.1 million.  Capital expenditures for the full year were $135.6 million, up from $116.2 million for the comparable period in 2006.  The increase primarily relates to new capacity brought on to meet the heavy demand situation in Europe.  Debt to total capital ratio, or leverage ratio, was 43 percent at the end of 2007.

 

ORDERS AND BACKLOG
 

Orders received for the 2007 fourth quarter were $648.1 million, up 32 percent from the same period last year, and up 23 percent excluding currency translation rate changes.

 

Total backlog at the end of the fourth quarter of 2007 was $921.4 million, an increase of 46 percent from the fourth quarter of 2006. Excluding currency translation rate changes, backlog rose 38 percent compared with the fourth quarter of 2006.

 

“Our significant increase in backlog is noteworthy because it continues to be a clear indicator of future sales growth and strength in our markets,” added Anderson.  “However, a portion of this increase is due to customers in Europe ordering ahead of their needs to ensure their minimum requirements are met for the year as a result of their strong demand for our products.”

 

OUTLOOK

 

“Current sales trends are similar to this time last year, with continued strength going into 2008 and sales at record levels,” said Anderson.   “Modest growth in the U.S. is again being offset by strength in both the European and Asian regions validating our strategy of global diversity specifically among the American and European markets, including our increasing market share in the Asia-Pacific region.

 

3



 

“We are proud of the progress we made in 2007 towards our goals of providing innovative technology for our markets and in achieving one of the strongest growth rates in the industry,” said Anderson.  “Our existing advanced technology and new product introductions across key applications continue to attract new business.  We are focused on pursuing our growth strategy with additional capacity to be installed over the course of 2008 while increasing profitability as we benefit from the integration of the common company-wide business system and realize the benefits of the recently completed restructuring program.”

 

2008 EXPECTATIONS

 

“Based on our strong sales trends, orders and backlog, and lean and cost improvement initiatives, we expect earnings per share for the full year 2008 to be $1.40 to $1.55 based on a sales increase expectation of 7 to 9 percent and capital expenditures of 7 to 8 percent of sales,” Anderson concluded.

 

2005 RESTATEMENT

 

Sauer-Danfoss announced today that it will restate its 2005 financial results to record an additional $3.9 million of deferred tax liabilities and a corresponding increase in income tax expense for the correct application of branch accounting under Statement of Financial Accounting Standards No. 109 in connection with deferred tax assets relating to its German branch operations.  The restatement did not impact operating income or cash flows for any period.  The restatement, which will be included in Sauer-Danfoss’ 2007 Form 10-K to be filed with the SEC in March 2008, reduces 2005 earnings per share from the reported level of $0.81 to a corrected $0.73.

 

Webcast Information

 

Members of Sauer-Danfoss’ management team will host a conference call on February 28th at 10 AM Eastern Time to discuss 2007 fourth quarter and year end 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 March 28, 2008.

 

4



 

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 Neumünster, Germany.  More details online at 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.

 

Actual future results may differ materially from those described in the forward-looking statements due to a variety of factors.  It is difficult to determine if past experience is a good guide to the future.  While the economy in the U.S. weakened throughout 2007, the economic situation in Europe remained strong.  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,

 

5



 

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; governmental laws and regulations affecting  operations, including tax obligations; 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.

 


 

For further information please contact:

Sauer-Danfoss Inc. — Investor Relations

 

Kenneth D. McCuskey

 

Sauer-Danfoss Inc.

 

Phone:

 

(515) 239-6364

Vice President and

 

2800 East 13th Street

 

Fax:

 

(515) 956-5364

Chief Accounting Officer

 

Ames, Iowa, USA, 50010

 

kmccuskey@sauer-danfoss.com

 

 

 

 

 

 

 

John N. Langrick

 

Sauer-Danfoss Inc.

 

Phone:

 

+49-4321-871-19

Director of Finance Europe

 

Krokamp 35

 

Fax:

 

+49-4321-871-121

 

 

24539 Neumünster, Germany

 

jlangrick@sauer-danfoss.com

 

Internet: http://www.sauer-danfoss.com

 

6



 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

 

 

Three Months Ended

 

Year Ended

 

(Dollars in thousands

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

except per share data)

 

2007

 

2006

 

2007

 

2006

 

Net sales

 

494,173

 

403,378

 

1,972,548

 

1,739,088

 

Cost of sales

 

397,572

 

323,561

 

1,544,846

 

1,342,324

 

Gross profit

 

96,601

 

79,817

 

427,702

 

396,764

 

Research and development

 

20,014

 

16,221

 

70,552

 

61,880

 

Selling, general and administrative

 

57,088

 

55,805

 

234,211

 

218,811

 

Loss on sale of business

 

307

 

 

9,010

 

 

Total operating expenses

 

77,409

 

72,026

 

313,773

 

280,691

 

Income from operations

 

19,192

 

7,791

 

113,929

 

116,073

 

Nonoperating income (expenses):

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(6,022

)

(4,438

)

(22,741

)

(17,761

)

Minority interest in income of consolidated companies

 

(6,051

)

(3,523

)

(21,562

)

(21,617

)

Other, net

 

(140

)

(2,104

)

(3,589

)

(5,675

)

Income (loss) before income taxes

 

6,979

 

(2,274

)

66,037

 

71,020

 

Income taxes

 

1,718

 

(2,636

)

(18,839

)

(17,021

)

Net income (loss)

 

8,697

 

(4,910

)

47,198

 

53,999

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

Basic net income (loss) per common share

 

0.18

 

(0.10

)

0.98

 

1.13

 

Diluted net income (loss) per common share

 

0.18

 

(0.10

)

0.98

 

1.12

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

48,099

 

47,706

 

48,094

 

47,700

 

Diluted

 

48,493

 

48,508

 

48,327

 

48,238

 

Cash dividends declared per common share

 

0.18

 

0.16

 

0.72

 

0.60

 

 

7



 

BUSINESS SEGMENT INFORMATION

 

 

 

Three Months Ended

 

Year Ended

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

(Dollars in thousands)

 

2007

 

2006

 

2007

 

2006

 

Net sales

 

 

 

 

 

 

 

 

 

Propel

 

233,327

 

183,871

 

940,692

 

839,306

 

Work Function

 

134,697

 

112,087

 

534,040

 

471,379

 

Controls

 

126,149

 

107,420

 

497,816

 

428,403

 

Total

 

494,173

 

403,378

 

1,972,548

 

1,739,088

 

Segment Income (Loss)

 

 

 

 

 

 

 

 

 

Propel

 

35,371

 

17,179

 

146,617

 

111,762

 

Work Function

 

(5,164

)

(1,724

)

(2,886

)

16,509

 

Controls

 

985

 

4,829

 

17,740

 

42,680

 

Global Services and Other Expenses, net

 

(12,140

)

(14,597

)

(51,131

)

(60,553

)

Total

 

19,052

 

5,687

 

110,340

 

110,398

 

 

8



 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Year Ended

 

 

 

December 31,

 

December 31,

 

(Dollars in thousands)

 

2007

 

2006

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

47,198

 

53,999

 

Depreciation and amortization

 

102,303

 

95,665

 

Minority interest in income of consolidated companies

 

21,562

 

21,617

 

Net change in receivables, inventories, and payables

 

(64,033

)

(11,510

)

Other, net

 

(8,890

)

8,141

 

Net cash provided by operating activities

 

98,140

 

167,912

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property, plant and equipment

 

(135,633

)

(116,244

)

Proceeds from sale of property, plant and equipment

 

6,496

 

6,959

 

Proceeds from sale of businesses

 

6,932

 

 

Net cash used in investing activities

 

(122,205

)

(109,285

)

Cash flows from financing activities:

 

 

 

 

 

Net borrowings on notes payable and debt instruments

 

71,436

 

1,813

 

Payments for debt financing costs

 

 

(285

)

Performance unit compensation excess tax deduction

 

145

 

137

 

Cash dividends

 

(33,636

)

(26,706

)

Distribution to minority interest partners

 

(15,889

)

(19,908

)

Net cash provided by (used in) financing activities

 

22,056

 

(44,949

)

Effect of exchange rate changes

 

(314

)

1,240

 

Net increase (decrease) in cash and cash equivalents

 

(2,323

)

14,918

 

Cash and cash equivalents at beginning of year

 

29,112

 

14,194

 

Cash and cash equivalents at end of year

 

26,789

 

29,112

 

 

9



 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,

 

December 31,

 

(Dollars in thousands, except employee data)

 

2007

 

2006

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

26,789

 

29,112

 

Accounts receivable, net

 

318,152

 

259,976

 

Inventories

 

319,524

 

272,286

 

Other current assets

 

55,677

 

44,162

 

Total current assets

 

720,142

 

605,536

 

Property, plant and equipment, net

 

562,818

 

503,977

 

Other assets

 

211,867

 

197,555

 

Total assets

 

1,494,827

 

1,307,068

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Notes payable and bank overdrafts

 

59,415

 

46,952

 

Long-term debt due within one year

 

201,085

 

120,243

 

Accounts payable

 

168,015

 

142,234

 

Other accrued liabilities

 

128,358

 

128,533

 

Total current liabilities

 

556,873

 

437,962

 

Long-term debt

 

183,545

 

182,388

 

Long-term pension liability

 

70,777

 

80,607

 

Deferred income taxes

 

35,335

 

32,207

 

Other liabilities

 

62,253

 

58,397

 

Minority interest in net assets of consolidated companies

 

60,544

 

53,448

 

Stockholders’ equity

 

525,500

 

462,059

 

Total liabilities and stockholders’ equity

 

1,494,827

 

1,307,068

 

 

 

 

 

 

 

Number of employees at end of year

 

9,756

 

9,178

 

Debt to total capital ratio (1)

 

43

%

40

%


(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.

 

10