Regal Beloit Corporation (Regal Beloit) has reported total net sales of $2.25 billion for the year-end 2008, up 24.6%, compared with the total net sales of $1.8 billion in the previous year-end. It has also reported a net income of $128.6 million, or $3.87 per diluted share, for the year-end 2008, compared with the net income of $118.3 million, or $3.49 per diluted share, in the previous year-end.
The net sales of $483.0 million increased 1.7% as compared to the $474.7 million reported for the fourth quarter 2007. The diluted earnings per share were $0.67 as compared to $0.71 for the fourth quarter 2007.
We are very pleased to report another record year for the Company. This is clearly proof of our ability to adapt to a changing environment through improved operating efficiencies and the introduction of a record number of new products in 2008, commented Henry Knueppel, chairman and chief executive officer, Our results were achieved despite unprecedented raw material inflation, a depressed HVAC market throughout the year, and deteriorating industrial and commercial markets late in 2008.
The sales for the fourth quarter of $483.0 million were 1.7% above the $474.7 million reported for the fourth quarter 2007. The sales for the fourth quarter included $38.2 million of sales attributable to the Hwada acquisition completed in April of 2008, the Dutchi acquisition completed in October of 2008 and the Alstom acquisition completed in November 2007. The sales for Electrical segment increased 2.6% as compared to the comparable period of 2007, including the results from the acquisitions mentioned above. Sales for the HVACR products decreased 7.8% for the quarter. Sales of commercial and industrial motors decreased 5.6% and sales of electric generators increased 13.2%. Sales in the Mechanical segment decreased 4.1%.
From a geographic perspective, sales outside the US were 28.9% of total sales for the quarter as compared to 25.2% in the fourth quarter of 2007. The negative impact of foreign currency exchange rate changes decreased total sales by 2.2%. From an energy efficiency standpoint, sales of high efficiency products increased 12.8% from the fourth quarter of 2007 and represented 11.7% of total sales for the quarter. The gross profit margin for the fourth quarter of 2008 was 23.7%, which was 150 basis points above the gross profit margin in the fourth quarter of 2007, primarily driven by our focus on Lean Six Sigma, other productivity improvements and the margin gain from the higher mix of more energy efficient products. While material inflation exceeded the impact of price increases, strong productivity results more than offset the price inflation shortfall.
The income from operations was $39.6 million or 8.2% of sales as compared to the $45.3 million or 9.5% of sales reported for the fourth quarter of 2007. The operating margins were impacted by the businesses acquired in 2008, which operated at lower margins and an increase in operating expenses. Included in operating expense was about $5 million of additional expense related to reserves for certain discrete customer receivables and impairment of certain fixed assets. Operating expenses increased about $5.2 million as a result of the 2007 Alstom and 2008 acquisitions. Net income in the fourth quarter of 2008 was $21.4 million as compared to the $24.0 million reported in the fourth quarter of 2007. Diluted earnings per share were $0.67 versus the $ 0.71 reported in the fourth quarter of 2007.
The full year 2008 sales included $404.5 million of incremental sales from the businesses acquired in 2007 and 2008. The gross profit margin decreased 60 basis points to 22.3% for the full year. While margins were favorably impacted by the company’s Lean Six Sigma and productivity initiatives, the impact of raw material inflation net of product price actions decreased margins on an overall basis. Income from operations was $230.4 million or 10.3% of sales as compared to the $206.1 million or 11.4% of sales reported for fiscal year 2007, reflecting the impact of the price-inflation gap and the lower overall margin contribution from the acquired businesses.
The company ended the year with total debt of $576.5 million as compared to $ 564.3 million at the end of 2007. The primary debt covenant for the company is Debt-to-EBITDA which ended the year at about 2.0, which is well within the limit of 3.75.
While the fourth quarter started on a positive note with a relatively strong sales performance in October, the global economic issues became apparent as we moved into November and December. Although we will be facing significant business challenges in 2009, we are well positioned with our strong balance sheet and our adherence to maintaining operational efficiency to meet those challenges. These will continue to serve as powerful drivers in the Company’s long-term growth and profitability goals, added Knueppel.
Due to the impending headwinds in the sales environment, we are continuing to aggressively address our production rates, cost structure and inventory levels. We are adjusting our workforce and are accelerating productivity and plant restructuring projects. Raw material costs will provide some relief as the year progresses; however, this will be substantially muted in the first half as a result of commodity hedges. Given these situations and the normal seasonality of our business, we are estimating first quarter earnings per share to be in the range of $0.38 to $0.46 and sequential improvement as we move through the year, concluded Knueppel.