Sauer-Danfoss Inc. Reports Fourth Quarter 2012 Results

            Sauer-Danfoss Inc. Reports Fourth Quarter 2012 Results

- Revenues Down, Reflecting Continued Weak Markets

- Operating Income Increases, Reflecting Strong Control of Costs

- Strong Cash Flow

- Initial Outlook for 2013

PR Newswire

AMES, Iowa, Feb. 20, 2013

AMES, Iowa, Feb. 20, 2013 /PRNewswire/ -- Sauer-Danfoss Inc. (NYSE: SHS) today
announced its financial results for the fourth quarter ended December 31,
2012.

Fourth Quarter Review
Net sales for the quarter declined 7 percent to $413.0 million, compared to
net sales of $446.1 million for the fourth quarter of 2011. Excluding the
impact of changes in currency translation rates, sales in the fourth quarter
declined 6 percent over the same quarter last year. Sales for the fourth
quarter increased 1 percent in the Americas and 2 percent in the Asia-Pacific
region, but declined 18 percent in Europe, excluding the impact of changes in
currency translation rates. Sales declined 15 percent in the Work Function
segment and 10 percent in both the Controls and Hydrostatics (formerly Propel)
segments, but increased 16 percent in the Stand-Alone Businesses segment,
excluding the impact of changes in currency translation rates.

The Company reported net income of $19.9 million, or $0.41 per share, for the
fourth quarter of 2012, compared to net income of $27.4 million, or $0.57 per
share, for the fourth quarter of 2011. Fourth quarter 2012 results were
negatively impacted by $1.8 million, or $0.04 per share, related to deferred
tax asset valuation allowances. Fourth quarter 2011 results were favorably
impacted by $9.2 million, or $0.19 per share, related to the reversal of
deferred tax asset valuation allowances but were negatively impacted by
certain product field recall costs of $6.9 million, or $0.10 per share.

Eric Alstrom, President and Chief Executive Officer, commented, "Our fourth
quarter sales continue to reflect the weak global markets we serve, as well as
the inventory reduction actions being taken by several of our customers.
While our sales declined due to our weak markets, I am very pleased with our
increase in operating income. We have been able to increase our operating
margin by two full percentage points in the face of declining markets and
sales. This reflects strong cost control throughout our organization, as well
as our ability to flex our production to changing demands."

Orders and Backlog Decline
The Company received new orders of $378.1 million for the fourth quarter of
2012, a 17 percent decline compared to fourth quarter 2011 new orders of
$456.5 million. Excluding the impact of changes in currency translation
rates, new orders declined 16 percent.

Total backlog at December 31, 2012, was $837.0 million, an 11 percent decline
compared to the same period last year of $939.8 million.

Twelve Month Review
The Company reported net sales for the twelve months ended December 31, 2012,
of $1,916.1 million, a decline of 7 percent compared to net sales of $2,057.5
million for the twelve months of 2011. Net sales for the twelve months of
2012 were down 4 percent compared to the prior year period, excluding the
impact of currency translation rate changes.

Net income for full year 2012 was $181.8 million, or $3.75 per share, compared
to net income of $229.9 million, or $4.74 per share, for the same period last
year. 2011 results were favorably impacted by $22.9 million, or $0.47 per
share, relating to the reversal of deferred tax asset valuation allowances.

Strong Cash Flow
Cash flow from operations for full year 2012 was $335.3 million, compared to
$374.2 million for 2011. Capital expenditures for full year 2012 were $48.6
million compared to $51.8 million for the same period last year.

"We generated $262 million of free cash flow for full year 2012, compared to
the $299 million of record free cash flow of last year. Our strong cash flow
and earnings over the past couple of years has provided us a very solid
balance sheet, or base, from which to drive our future growth plans," stated
Alstrom.

Initial Outlook for 2013
Alstrom concluded, "Many of our customers are forecasting modest sales growth
for the coming year. However, there is considerable uncertainly in the global
economy. In addition, many of our customers are continuing to work down
excessive inventory levels, especially in North America and China. This could
be a drag on our sales for at least the first half of the coming year. We
therefore expect 2013 sales and earnings to be level with 2012."

The outlook for 2013 is as follows:

  oAnnual sales down 3 percent to up 7 percent from 2012 levels
  oExpected earnings in the range of $3.25 to $4.25 per share
  oCapital expenditures of approximately $65.0 to $75.0 million

Status of Proposed Tender Offer
As previously disclosed, on November 28, 2012, Danfoss A/S, the Company's
parent company, informed the Company's Board of Directors and publicly
announced that Danfoss proposed to acquire all the shares of the Company's
common stock that it does not already own for a price of $49 per share in
cash, and on the following day the Company announced that its Board of
Directors had established a special committee of independent directors to
consider Danfoss' proposal. From late December 2012 through late January
2013, the Special Committee and its advisors undertook efforts to enable the
Special Committee to respond to Danfoss' proposal, and since late January 2013
the Special Committee, through its advisors, has been in discussions with
Danfoss' advisors regarding the proposal. These discussions are continuing.
There is no assurance that the Special Committee and Danfoss will reach any
agreement or, if an agreement is reached, as to the terms and conditions of
that agreement or whether it will be successfully completed.

Webcast Information
Members of Sauer-Danfoss' management team will host a webcast on February 21
at 10 AM Eastern Time to discuss 2012 fourth 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 March 7, 2013.

About Sauer-Danfoss
Sauer-Danfoss Inc. is a worldwide leader in the design, manufacture, and sale
of engineered hydraulic and electronic systems and components for use
primarily in applications of mobile equipment. Sauer-Danfoss, with 2012
revenues of approximately $1.9 billion, has sales, manufacturing, and
engineering capabilities in Europe, the Americas, and the Asia-Pacific
region.

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. Readers should bear in
mind that past experience is never a perfect guide to anticipating actual
future results. Risk factors affecting the Company's forward-looking
statements include, but are not limited to, the following: general, worldwide
economic conditions, the level of interest rates, crude oil prices, commercial
and consumer confidence, and currency exchange rates; 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; the effectiveness of the Company's
cost-management and productivity improvement efforts; the Company's ability to
manage its business effectively in a period of slowing growth in sales and its
capacity to make necessary adjustments to changes in demand for its products;
competing technologies and difficulties entering and growing in new and
expanding markets, both domestic and foreign; changes in the Company's product
mix; future levels of indebtedness and capital spending; the availability of
sufficient levels of cash flow from operations and credit on favorable terms,
whether from Danfoss A/S, the Company's majority stockholder, or from the
capital markets or traditional credit sources to enable the Company to meet
its capital needs; claims, including, without limitation, warranty claims,
field recall claims, product liability claims, charges or dispute resolutions;
the 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, especially
in light of the persistence of tight credit markets; any inadequacy of the
Company's intellectual property protection or the potential for third-party
claims of infringement; credit market disruptions and significant changes in
capital market liquidity and funding costs affecting the Company and its
customers and suppliers; sovereign debt crises, in Europe and elsewhere, and
the reaction of other nations to such crises; energy prices; the impact of new
or changed tax and other legislation and regulations in jurisdictions in which
the Company and its affiliates operate, including regulations affecting
retirement and health care benefits provided to Company employees; actions by
the U.S. Federal Reserve Board and the central banks of other nations,
including heightened capital requirements imposed on Chinese banks; actions by
other regulatory agencies, including those taken in response to the global
credit crisis; actions by credit rating agencies; changes in accounting
standards; worldwide political stability, including developments in the Middle
East; the effects of terrorist activities and resulting political or economic
instability; natural catastrophes; U.S. and NATO military action overseas; and
the effect of acquisitions, divestitures, restructurings, product withdrawals,
and other unusual events.

The Company cautions the reader that this list of cautionary statements and
risk factors is not exhaustive. The Company's outlook is based upon
assumptions and projections arising in connection with the foregoing factors,
the evaluation of which is often based on estimates and data prepared by
government and other third-party sources. Those estimates and data are
frequently revised. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or changes to these
forward-looking statements to reflect 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.



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                     Three Months Ended  Year Ended
(Dollars and shares in thousands     December  December  December   December
                                     31,       31,       31,        30,
except per share data)               2012      2011      2012       2011
Net sales                            413,007   446,131   1,916,094  2,057,487
Cost of sales                        291,084   323,631   1,299,207  1,400,330
Gross profit                         121,923   122,500   616,887    657,157
Selling, general and administrative  59,292    61,259    235,069    227,968
Research and development             16,229    18,170    64,072     63,996
Other                                (191)     939       (70)       590
Total operating expenses             75,330    80,368    299,071    292,554
Income from operations               46,593    42,132    317,816    364,603
Nonoperating income (expense):
 Interest expense, net             (3,025)   (3,796)   (15,035)   (21,150)
 Loss on early retirement of debt  --        --        (1,254)    (1,176)
 Other, net                        (72)      (227)     2,825      (3,094)
Income before income taxes           43,496    38,109    304,352    339,183
Income tax expense                   (19,011)  (8,301)   (92,274)   (79,380)
Net income                           24,485    29,808    212,078    259,803
Net income attributable to                                       
noncontrollinginterest, net of tax
                                     (4,561)   (2,364)   (30,319)   (29,933)
Net income attributable to           19,924    27,444    181,759    229,870
Sauer-Danfoss Inc.
Net income per share:
 Basic net income per common share 0.41      0.57      3.75       4.75
 Diluted net income per common     0.41      0.57      3.75       4.74
share
Weighted average shares outstanding:
 Basic                             48,417    48,406    48,413     48,402
 Diluted                           48,486    48,478    48,482     48,479



BUSINESS SEGMENT INFORMATION


                        Three Months Ended          Year Ended
                        December 31,  December 31,  December 31,  December 31,
(Dollars in thousands)  2012          2011          2012          2011
Net sales
 Hydrostatics         189,225       212,839       883,683       948,153
 Work Function        68,919        82,709        311,588       377,519
 Controls             64,477        71,784        303,612       322,489
 Stand-Alone          90,386        78,799        417,211       409,326
Businesses
Total                   413,007       446,131       1,916,094     2,057,487
Segment Income (Loss)
 Hydrostatics         25,926        32,368        173,549       210,532
 Work Function        8,270         9,117         48,288        59,235
 Controls             11,093        6,830         74,224        78,459
 Stand-Alone          11,981        6,889         68,361        58,624
Businesses
 Global Services and  (10,749)      (13,299)      (43,781)      (45,341)
Other Expenses, net
Total                   46,521        41,905        320,641       361,509
 Interest expense,    (3,025)       (3,796)       (15,035)      (21,150)
net
 Loss on early        --            --            (1,254)       (1,176)
retirement of debt
 Income before        43,496        38,109        304,352       339,183
income taxes



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        Year Ended
                                        December 31,            December 31,
(Dollars in thousands)                  2012                    2011
Cash Flows from Operating Activities:
Net income                              212,078                 259,803
Depreciation and amortization           80,503                  88,094
Net change in receivables, inventories, 27,533                  (19,432)
and payables
Other, net                              15,181                  45,697
Net cash provided by operating          335,295                 374,162
activities
Cash Flows from Investing
Activities:
Purchases of property, plant and        (48,632)                (51,765)
equipment
Proceeds from sale of property,         507                     6,317
plant and equipment
Advances to related persons             (180,579)               (182,538)
Net cash used in investing              (228,704)               (227,986)
activities
Cash Flows from Financing
Activities:
Net repayments on notes payable         (21,921)                (82,580)
and debt facilities
Payment of prepayment penalty           (803)                   --
Cash dividends                          (50,871)                --
Dividend resulting from tax             --                      (12,928)
sharing agreement
Distributions to noncontrolling         (24,409)                (17,076)
interest partners
Net cash used in financing              (98,004)                (112,584)
activities
Effect of exchange rate changes         1,105                   (5,071)
Cash and Cash Equivalents:
Net increase in cash and cash           9,692                   28,521
equivalents
Cash and cash equivalents at            72,560                  44,039
beginning of year
Cash and cash equivalents at end        82,252                  72,560
of year
Non-cash Investing and Financing
Activities:
Purchases of property, plant and
equipment financed by capital           (382)                   --
leases
Free cash flow (1)                      261,958                 298,710
(1) Free cash flow is calculated by summing net cash provided by operating
activities, net cash used in investing activities, excluding advances to
related persons, and net cash used in financing activities, excluding net
repayments on notes payable and debt facilities and cash dividends.



CONDENSED CONSOLIDATED BALANCE SHEETS


                                                 December         December
                                                31,                31,
(Dollars in                                     2012               2011
thousands)
ASSETS
Current Assets:
Cash and cash equivalents (1)                   441,242            251,287
Accounts receivable, net                        217,611            215,978
Inventories                                     178,226            217,710
Other current assets                            73,224             75,868
Total current assets                            910,303            760,843
Property, plant and equipment, net              342,246            367,844
Other assets                                    146,410            149,569
Total Assets                                    1,398,959          1,278,256
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Long-term debt due within one year              479                955
Accounts payable                                168,486            177,996
Other accrued liabilities                       171,360            149,240
Total current liabilities                       340,325            328,191
Long-term debt                                  178,378            199,502
Long-term pension liability                     88,779             79,717
Deferred income taxes                           33,536             35,184
Other liabilities                               61,023             57,836
Noncontrolling interest                         94,275             90,408
Stockholders' equity of Sauer-Danfoss Inc.      602,643            487,418
Total Liabilities and Stockholders' Equity      1,398,959          1,278,256
Debt to Total Capital Ratio (2)                 20%                26%
(1) Includes cash deposited with related persons of $358,990 at December 31,
2012 and $178,727 at December 31, 2011.

(2) 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
long-term debt due within one year and long-term debt. Total capital is the
sum of total interest bearing debt, noncontrolling interest, and stockholders'
equity.

SOURCE Sauer-Danfoss Inc.

Website: http://www.sauer-danfoss.com
Contact: Sauer-Danfoss Inc. - Investor Relations, Kenneth D. McCuskey, Vice
President and Chief Accounting Officer, +1-515-239-6364, Fax, +1-515-505-1154,
kmccuskey@sauer-danfoss.com
 
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