SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended Commission File Number
January 1, 1994 1-7284
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B A L D O R E L E C T R I C C O M P A N Y
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(Exact name of registrant as specified in its charter)
Missouri 43-0168840
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5711 R. S. Boreham, Jr St, Fort Smith, Arkansas 72902 (501) 646-4711
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(Address of principal executive offices) (Zip Code) (Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Each Class which registered
- ----------------------------- ------------------------
Common Stock, $0.10 Par Value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the regis-
trant based on the closing price on February 25, 1994, was $477,203,000.
At February 25, 1994, there were 18,093,009 shares of the registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended
January 1, 1994, ("the Annual Report to Shareholders for 1993") are
incorporated by reference into Part II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held May 7, 1994, ("the 1994 Proxy Statement") are incorporated by
reference into Parts I and III.
<PAGE>
PART I
Item 1. Business
Baldor Electric Company ("the Company") was incorporated in Missouri in
1920. The Company operates primarily in one industry segment which
includes the design, manufacture, and sale of electric motors and drives. In
addition to electric motors and drives, products include industrial grinders,
buffers, polishing lathes, stampings, castings, and repair parts. Baldor has
made several small acquisitions; however, the majority of its growth has come
internally through broadening its markets and product lines.
Products
Sales of electric motors represented approximately 85% of the Company's
business in 1993, 85% in 1992, and 86% in 1991. The AC motor product
line presently ranges in size from 1/50 through 600 horsepower. The DC
motor product line presently ranges from 1/50 through 700 horsepower.
Industrial drive products, which include servo products, brushless DC and SCR
controls, and inverter and vector drives, accounted for approximately 11% of
the Company's business in 1993, 10% in 1992, and 9% in 1991. The
Company's line of adjustable speed controls ranges from 1/100 to 125
horsepower. With these products, the Company provides its customers the
ability to purchase industrial motors and electronic controls (which constitute
drives) from one manufacturer.
Baldor's motors and drives are designed, manufactured, and marketed for
general purpose uses ("stock products") and for individual customer
requirements and specifications ("custom products"). Stock product sales
represent approximately 64% of the Company's business, with most sales to
customers who place orders for immediate shipment. Custom products
generally are shipped within four weeks from the date of order. Because of
these and other factors, the Company does not believe that its backlog
represents an accurate indication of future shipments.
Sales and Marketing
The products of the Company are marketed throughout the United States and
in more than 55 foreign countries. The Company's field sales organization
consists of more than 50 independent manufacturer's representatives including
25 in the United States and the remainder in Canada, Europe, Latin America,
Australia, and the Far East.
Custom products and stock products are sold to original equipment manufac-
turers ("OEMs"). Stock products are sold to independent distributors for
resale, often as replacement components in industrial machinery which is being
modernized or upgraded for improved performance.
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<PAGE>
The Company conducts business with a large number of customers and it does
not believe that the loss of any single customer would have a material adverse
effect on its total business.
Competition
The Company faces substantial competition in the sales of its products in all
markets served. Some of the Company's competitors are larger in size or are
divisions of large diversified companies and have substantially greater
financial resources. The Company competes by providing its customers better
value through product quality and efficiency and better services including
availability, shorter lead-times, on-time delivery, product literature,
and training.
The Company is not aware of any industry-wide statistics from which it can
precisely determine its relative portion of the industrial electric motor
industry. In the United States, certain industry statistics are available from
the U.S. Department of Commerce and the National Electric Manufacturers
Association. However, these sources do not include all competitors or all sizes
of motors. The Company believes, however, that it is a significant factor in
the markets it serves.
Manufacturing
The Company manufactures many of the components used in its products in-
cluding laminations, motor hardware, and aluminum die castings.
Manufacturing many of its own components permits the Company to better
manage cost, quality, and availability. In addition to the manufacture of
components, the Company's motor manufacturing operations include
machining, stamping, welding, winding, assembling, and finishing operations.
The raw materials necessary for the Company's manufacturing operations are
available from several sources. These materials include steel, copper wire,
gray iron castings, aluminum, and insulating materials, most of which are
purchased from more than one supplier. Although some materials are
purchased from a single supplier, the Company believes that alternate sources
are available for such materials.
Research and Development
The Company's design and development of electric motors and drives includes
both the development of products which extend the product lines and the
modification of existing products to meet new application requirements.
Additional development work is done to improve production methods. Costs
associated with research, new product development, and product and cost
improvements are treated as expenses when incurred and amounted to
approximately $12,900,000 in 1993, $11,300,000 in 1992, and $9,900,000
in 1991.
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<PAGE>
Environment
Compliance with laws relating to the discharge of materials into the envi-
ronment or otherwise relating to the protection of the environment has not had
a material effect on capital expenditures, earnings, or the competitive position
of the Company and is not expected to have such an effect.
Employees
At January 1, 1994, the Company had 3,102 employees.
Executive Officers of the Registrant
Information regarding executive officers is contained in Part III, Item 10, and
incorporated herein by reference.
International Operations
For each of the three fiscal years in the period ended January 1, 1994, export
and international sales have increased, representing approximately 13.4% of
consolidated sales in 1993, 13.3% in 1992, and 12.8% in 1991. See also
Note G on page 26 of the Annual Report to Shareholders for 1993.
The Company's products are distributed in more than 55 foreign countries,
principally in Canada, Europe, Australia, the Far East, and Latin America. The
Company's international operations include the Baldor ASR group of companies
which was acquired in 1983. Baldor ASR has a sales office located in
Switzerland, a sales office located in Germany, and three sales offices located
in the United Kingdom. Baldor ASR also has research and manufacturing
operations in Germany. The Company has a majority interest in Baldor Electric
(Far East) Pte. Ltd., which has locations in Indonesia and Singapore, and a
majority interest in Australian Baldor Pty. Limited, with two locations in
Australia. Finally, the Company owns Baldor de Mexico, S.A. de C.V., located
in Mexico City, and the Company has a minority interest in Baldor Electric
(Thailand) Ltd., located in Bangkok, Thailand. All of the affiliate locations
except Baldor ASR Germany are sales operations.
The Company believes that it is in a position to act on global opportunities as
they become available. The Company also believes that there are additional
risks attendant to international operations including currency fluctuations and
possible restrictions on the movement of funds. However, these risks have
not had a material adverse effect on the Company's business.
Item 2. Properties
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The Company believes that its facilities, including equipment and machinery,
are in good condition, suitable to current operations, adequately maintained
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<PAGE>
and insured, and capable of sufficient additional production levels. The
following table sets forth certain information with respect to the Company's
properties.
AREA
LOCATION PRIMARY USE (SQ. FT.)
Fort Smith, AR AC motor production 293,350
Distribution and service center 159,500
Administration and engineering
offices 69,700
Aluminum die casting 56,400
St. Louis County, Metal stamping and engineering
MO toolroom 121,700
DC and miscellaneous motor
production 55,600
Columbus, MS AC motor production 140,300
Westville, OK AC and DC motor production 155,000
Fort Mill, SC DC motors, AC motors 110,000
and tachometer production
Clarksville, AR Subfractional motor and 86,750
gear motor production
Five other Motor, drives, and servomotor 128,900
domestic locations production, and metal stamping
Eight foreign Sales and distribution centers 37,900
locations and servodrive production ---------
1,415,100
Certain properties listed above (428,750 sq. ft. in the aggregate) are leased,
principally pursuant to Industrial Revenue Bond agreements, and where
material, are accounted for as capitalized lease obligations. Certain lease
agreements contain purchase options at varying prices and/or renewal options
at reduced rentals for extended additional periods.
Item 3. Legal Proceedings
- --------------------------
The Company is party to a number of legal proceedings incidental to its
business, none of which is deemed to be material to its operations or business.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
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Matters
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Information under the captions "Dividends Paid", "Common Stock: Price
Range", and "Shareholders" on the inside back cover of the Annual Report to
Shareholders for 1993 is incorporated herein by reference.
Item 6. Selected Financial Data
- --------------------------------
Information under the "Eleven-Year Summary of Financial Data" for years 1989
through 1993 for net sales, net earnings, net earnings per share, dividends per
share, long-term obligations, and total assets on page 14 of the Annual Report
to Shareholders for 1993 is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
- ---------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 18 and 19 of the Annual Report to Shareholders for 1993
is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The consolidated financial statements of the Company on pages 20 through
26, the report thereon of Ernst & Young, Independent Auditors, on page 27,
and the "Summary of Quarterly Results of Operations (Unaudited)" on page 21
of the Annual Report to Shareholders for 1993 are incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
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Not applicable.
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<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The current executive officers of the Company, each of whom is elected for
a term of one year or until his successor is elected and qualified, are:
Served as
Officer
Name Age Position Since
R. S. Boreham, Jr. 69 Chairman of the Board 1962
R. L. Qualls 60 President and Chief 1986
Executive Officer
George A. Schock 86 Assistant Secretary 1944
Theodore W. Atkins 55 Vice President - Industry 1986
Relations and
Governmental Affairs
Charles H. Cramer 49 Vice President - Personnel 1984
Lloyd G. Davis 46 Chief Financial Officer, 1992
Vice President - Finance,
Secretary, and Treasurer
James R. Kimzey 55 Vice President - Research 1984
and Engineering
Robert L. Null, Jr. 51 Vice President- 1990
Manufacturing
John A. McFarland 42 Vice President - Sales 1990
Jerry D. Peerbolte 37 Vice President - Marketing 1990
Each of the executive officers has served as an officer or in a management
capacity with Baldor Electric Company for the last five years. There are no
family relationships among the executive officers. The information under the
caption "Election of Directors" of the 1994 Proxy Statement is incorporated
herein by reference.
Item 11. Executive Compensation
- --------------------------------
Information contained in the 1994 Proxy Statement under the caption
"Executive Compensation", except for the information contained in the sub-
captions "Report of the Executive and Stock Option Committees" and
"Performance Graph", and information under the caption "Information About
the Board of Directors and Committees of the Board" is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The security ownership by officers and directors included under the caption
"Security Ownership of Certain Beneficial Owners and Management" of the
1994 Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information under the caption "Certain Transactions" of the 1994 Proxy
Statement is incorporated herein by reference.
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<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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(a) (1) and (2) - The response to this portion of Item 14 is submitted as a
separate section of this Report at page 13 hereof. For a listing of all
management contracts and compensatory plans or arrangements required
to be filed as exhibits to this Form 10-K, see the first four exhibits
listed below under Exhibit 10.
(3) Listing of Exhibits
Exhibit 3(i) - The Restated Articles of Incorporation of Baldor Electric
Company (as amended) filed as Exhibit 3.1 to Form 10-K for the year
ended December 30, 1989, and incorporated herein by reference.
Exhibit 3(ii) - Bylaws of Baldor Electric Company (as amended) dated
February 15, 1993, filed as Exhibit 3.2 to Form 10-K for the year ended
January 2, 1993, and incorporated herein by reference.
Exhibit 4(i) - Rights Agreement dated May 6, 1988, between Baldor
Electric Company and Wachovia Bank of North Carolina, N.A. (formerly
Wachovia Bank & Trust Company, N.A.), as Rights Agent filed as Exhibit
1 to Registrant's Form 8-K Current Report, dated May 13, 1988, and
incorporated herein by reference.
Exhibit 4(iii) - The Registrant agrees to furnish to the Securities and
Exchange Commission upon request pursuant to Item 601(b)(4)(iii) of
Regulation S-K copies of instruments defining the rights of the holders of
long-term debt of the Registrant and its consolidated subsidiaries.
Exhibit (10) - Exhibits 10(iii)(A)(1) through 10(iii)(A)(4) were previously
submitted as exhibits and are incorporated herein by reference:
- 10(iii)(A)(1) 1982 Incentive Stock Option Plan (originally filed
as Exhibit 10.8 to Form 10-K for year ended December
31, 1981, refiled as Exhibit 10.1 to Form 10-K for
the year ended December 28, 1991.)
- 10(iii)(A)(2) Officers Compensation Plan (filed as Exhibit 10.6 to
Form 10-K for year ended December 31, 1988).
- 10(iii)(A)(3) 1987 Incentive Stock Plan (filed as Appendix A to
Registrant's Proxy Statement dated April 3, 1987).
- 10(iii)(A)(4) 1989 Stock Option Plan for Non-Employee Directors
(filed as Exhibit 10 to Form 10-Q for quarter ended
September 29, 1990).
Exhibit (11) - Computation of earnings per common share.
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<PAGE>
Exhibit (13) - Portions of the Annual Report to Shareholders for 1993.
The Annual Report is being filed as an exhibit solely for the purpose of
incorporating certain provisions thereof by reference. Portions of the An-
nual Report not specifically incorporated are not deemed "filed" for the
purposes of the Securities Exchange Act of 1934, as amended.
Exhibit (21) - Subsidiaries of the Registrant.
Exhibit (23) - Consent of Independent Auditors.
Exhibit (24) - Powers of Attorney. Included on signature pages 10 and 11.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this Report.
(c) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this Report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate
section of this Report.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALDOR ELECTRIC COMPANY
(Registrant)
By /s/ R. L. Qualls
President and Chief Executive Officer
(Chief Executive Officer)
Date: March 18, 1994
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints R. S. Boreham, Jr., R. L. Qualls, and
George A. Schock and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign this Report and any
and all amendments to this Report, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents and
purposes as they might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
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<PAGE>
Signature Title Date
/s/ R. S. Boreham, Jr. Chairman of the Board of )
R. S. Boreham, Jr. Directors and Chairman of )
the Executive Committee )
)
)
/s/ R. L. Qualls President, Chief Executive )
R. L. Qualls Officer, and Director )
(Principal Executive Officer) )
)
)
/s/ Lloyd G. Davis Chief Financial Officer, )
Lloyd G. Davis Vice President - Finance, )
Secretary, and Treasurer )
(Principal Financial )
and Accounting Officer) )
)
/s/ George A. Schock Assistant Secretary and ) March 18, 1994
George A. Schock Director )
)
)
/s/ Jefferson W. Asher, Jr. Director )
Jefferson W. Asher, Jr. )
)
)
/s/ Fred C. Ballman Director )
Fred C. Ballman )
)
)
/s/ O. A. Baumann Director )
O. A. Baumann )
)
)
/s/ Robert J. Messey Director )
Robert J. Messey )
)
)
/s/ Robert L. Proost Director )
Robert L. Proost )
)
)
/s/ Willis J. Wheat Director )
Willis J. Wheat )
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<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED JANUARY 1, 1994
BALDOR ELECTRIC COMPANY
FORT SMITH, ARKANSAS
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<PAGE>
FORM 10-K, ITEM 14(a)(1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
The following consolidated financial statements of Baldor Electric Company
and Subsidiaries, included in the Annual Report to Shareholders for 1993, are
incorporated by reference in Item 8:
- Consolidated Balance Sheets
- January 1, 1994, and January 2, 1993
- Consolidated Statements of Earnings
- for the three years in the period ended January 1, 1994
- Consolidated Statements of Cash Flows
- for the three years in the period ended January 1, 1994
- Consolidated Statements of Shareholders' Equity
- for the three years in the period ended January 1, 1994
- Notes to Consolidated Financial Statements
The following consolidated financial statement schedules of Baldor Electric
Company and Subsidiaries are included in Item 14(d):
- Schedule V Property, Plant and Equipment
- Schedule VI Accumulated Depreciation, Depletion,
and Amortization of Property, Plant
and Equipment
- Schedule VIII Valuation and Qualifying Accounts
- Schedule IX Short-Term Borrowings
- Schedule X Supplementary Income Statement
Information
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
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<PAGE>
<TABLE>
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
(In thousands)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Other Changes Balance
Beginning Additions Add (Deduct) At End
Classification of Period at Cost Retirements Describe of Period
<S> <C> <C> <C> <C> <C>
Year Ended January 1, 1994
Land and improvements $ 3,280 $ 1 $ 164 $ $ 3,117
Buildings and improvements 24,014 2,604 1,714 (112)<FN1> 24,792
Machinery and equipment 111,455 12,377 4,433 (1,088)<FN2> 118,311
-------- ------- ------ -------- ---------
$138,749 $14,982 $6,311 $(1,200) $ 146,220
======== ======= ====== ======== =========
Year Ended January 2, 1993
Land and improvements $ 3,119 $ 161 $ $ $ 3,280
Buildings and improvements 21,899 2,693 189 (389)<FN1> 24,014
Machinery and equipment 105,637 8,778 2,564 (396)<FN2> 111,455
-------- ------- ------ -------- ---------
$130,655 $11,632 $2,753 $ (785) $ 138,749
======== ======= ====== ======== =========
Year Ended December 28, 1991
Land and improvements $ 3,047 $ 72 $ $ $ 3,119
Buildings and improvements 20,310 1,665 76 21,899
Machinery and equipment 100,989 8,095 3,092 (355)<FN1> 105,637
-------- ------- ------ -------- ---------
$124,346 $ 9,832 $3,168 $ (355) $ 130,655
======== ======= ====== ======== =========
<FN>
_______________
Note: Estimated useful lives of property, plant, and equipment used in
computing the provision for depreciation were:
Land improvements - 5 to 20 years
Building and improvements - 15 to 35 years
Machinery and equipment - 3 to 15 years
<FN1> Miscellaneous reclassifications.
<FN2> Reclassifications and amounts capitalized for Information Systems, net
of amortization of $1,108,000 in 1993, $1,037,000 in 1992, and
$1,007,000 in 1991. See Note A to Annual Report to Shareholders for
1993.
</TABLE>
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<PAGE>
<TABLE>
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(In thousands)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Additions
Balance at Charged to Other Changes Balance
Beginning Costs and Add (Deduct) At End
Classification of Period Expenses Retirements Describe of Period
<S> <C> <C> <C> <C> <C>
Year Ended January 1, 1994
Land and improvements $ 980 $ 111 $ $ 1,091
Buildings and improvements 7,641 736 573 7,804
Machinery and equipment 58,971 9,855 3,897 64,929
------- ------- ------ -------
$67,592 $10,702 $4,470 $73,824
======= ======= ====== =======
Year Ended January 2, 1993
Land and improvements $ 883 $ 97 $ $ 980
Buildings and improvements 6,876 781 16 7,641
Machinery and equipment 51,617 9,895 2,541 58,971
------- ------- ------ -------
$59,376 $10,773 $2,557 $67,592
======= ======= ====== =======
Year Ended December 28, 1991
Land and improvements $ 787 $ 96 $ $ 883
Buildings and improvements 6,212 664 6,876
Machinery and equipment 44,805 10,162 3,350 51,617
------- ------- ------ -------
$51,804 $10,922 $3,350 $59,376
======= ======= ====== =======
</TABLE>
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<PAGE>
<TABLE>
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
----------------------
Charged to Charged to
Balance at Costs Other Balance
Beginning and Accounts Deductions at End of
Description of Period Expenses Describe Describe Period
<S> <C> <C> <C> <C> <C>
Deducted from current assets:
Allowance for doubtful accounts
1993 $1,200 $1,197 $ 597<FN1> $1,800
1992 935 1,354 1,089<FN1> 1,200
1991 975 693 733<FN1> 935
Included in current liabilities:
Anticipated warranty costs
1993 $2,500 $ 250 <FN2> $2,750
1992 2,405 95 <FN2> 2,500
1991 2,450 (45)<FN2> 2,405
<FN>
- ---------------
<FN1> Net uncollectible accounts written off during year.
<FN2> Additions/(reductions) to reserve for anticipated warranty costs, net of
expenses incurred.
</TABLE>
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<PAGE>
<TABLE>
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
SCHEDULE IX
SHORT-TERM BORROWINGS
<CAPTION>
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Weighted Amount Amount Average
Balance Averaged Outstanding Outstanding Interest
Category of Aggregate at End of Interest During During Rate During
Short-Term Borrowings Period Rate the Period the Period the Period
<FN1> <FN2>
<S> <C> <C> <C> <C> <C>
Year ended January 1, 1994
Notes payable to bank NONE
Year ended January 2, 1993
Notes payable to bank <FN3> NONE $1,085,000 $ 217,000 9.7%
Year ended December 28, 1991
Notes payable to bank <FN3> $1,085,000 10.9% $2,760,000 $2,014,000 10.2%
<FN>
- -----------------
<FN1> The average amount outstanding during the period was computed by dividing
the total of month-end outstanding principal balances by the number of
months outstanding.
<FN2> The weighted average interest rate during the period was computed by
dividing the actual interest expense by the average short-term debt
outstanding.
<FN3> Notes payable to bank consists of international lines of credit borrowing
arrangements which have no termination date but are reviewed annually for
renewal.
</TABLE>
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<PAGE>
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
Column A Column B
Charged to
Costs and
Item Expenses
Year ended January 1, 1994
Maintenance and repairs $6,186
Year ended January 2, 1993
Maintenance and repairs $5,575
Year ended December 28, 1991
Maintenance and repairs $4,978
_______________
Note: Amounts for depreciation and amortization of intangible assets; taxes,
other than payroll and income taxes; royalties; and advertising costs for the
three years in the period ended January 1, 1994, are not presented as such
amounts are less than 1% of total sales and revenues.
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<PAGE>
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
11 Computation of Earnings Per Common Share
13 Annual Report to Shareholders for 1993
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
24 Powers of Attorney. Included on signature pages 10 and
11.
EXHIBIT 11
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
FISCAL YEAR
1993 1992 1991
(In thousands, except per share amounts)
Primary
Weighted average shares outstanding 17,865 17,668 17,486
Dilutive stock options based on the
treasury stock method using
the average market price 846 652 421
------ ------ ------
Total 18,711 18,320 17,907
====== ====== ======
Net Earnings $19,426 $15,264 $11,922
======= ======= =======
Per Share Earnings $1.04 $.83 $.67
===== ==== ====
Fully Diluted
Weighted average shares outstanding 17,865 17,668 17,486
Dilutive stock options based on the
treasury stock method using the
year-end market price, if higher
than average market price 993 862 421
------ ------ ------
Total 18,858 18,530 17,907
====== ====== ======
Net Earnings $19,426 $15,264 $11,922
======= ======= =======
Per Share Earnings $1.03 $.82 $.67
===== ==== ====
_______________
Note: Amounts for 1993-91 have been restated for a six-for-five stock split
effected in the form of a 20% stock dividend which was declared during
the fourth quarter 1993. See Note E to Annual Report to Shareholders
for 1993.
ELEVEN-YEAR SUMMARY of FINANCIAL DATA
(In thousands, except percentages and per-share data)
<TABLE>
<CAPTION>
PER SHARE DATA
-------------------- LONG-
NET NET NET TOTAL TERM
SALES EARNINGS EARNINGS DIVIDENDS ASSETS OBLIGATIONS
<S> <C> <C> <C> <C> <C> <C>
1993 $356,595 $19,426 $1.04 $.35 $237,950 $22,474
1992 318,930 15,264 .83 .29 211,941 23,209
1991 286,495 11,922 .67 .27 203,277 24,376
1990 294,030 14,137 .80 .27 200,694 25,299
1989 281,462 13,107 .75 .23 185,474 22,543
</TABLE>
1993 Annual Report Page 14
<PAGE>
Management's Discussion and Analysis
Results of Operations
Summary
Baldor continued its growth trend in 1993 with record sales and earnings
for the year. Baldor leveraged an 11.8% sales increase into a 27.3% earnings
increase for the year. We continue to focus on building our drives business,
new product introductions, productivity and cost improvements, marketing
innovations, education, and training.
Net Sales
Baldor sells to a broad base of distributors and OEMs domestically and
in more than 55 countries through a network of foreign affiliates and
distributors. No single customer accounts for more than 1.5% of sales. Sales
of $356.6 million in 1993 were up 11.8% over 1992 sales of $318.9 million
even though fiscal 1992 contained 53 weeks. Sales in 1991 were $286.5
million.
The 1993 sales increase was broad-based across many industries and
geographic regions. Sales of new products continue to provide good growth
opportunities for Baldor. For instance, our 1993 drives business grew 23.3%
over 1992 levels and, for the second year in a row, grew at twice the rate of
our motor business. Energy efficiency continues to gain importance in our
industry and Baldor's sales of Super-E premium efficient motors grew at over
three times the rate of overall sales. In 1993, distributor sales increased
10.0% over 1992 levels and OEM sales increased 12.6% over 1992 levels.
The 1992 sales increase of 11.3% over 1991 sales was due to good
improvement in almost every aspect of our business including product growth,
distributor and OEM mix, and growth across geographic regions. Drive sales
were up 23.2% in 1992 over 1991 drive sales.
Net Earnings
Net earnings of $19.4 million in 1993 exceeded 1992 net earnings of $15.3
million by 27.3%. Net earnings in 1991 were $11.9 million. Price
improvement averaged slightly over 2% in both 1993 and 1992.
The gross margin percentage increased to 28.3% in 1993 compared to
28.0% in 1992. Both of these were above the 1991 gross margin percentage
of 27.8%. The gross margin percentages in 1993 and 1992 improved due to
a small, but effective, price increase in both years and continued productivity
improvements in both years.
Selling and administrative costs as a percentage of sales have improved
to 18.2% in 1993, from 19.0% in 1992, and 19.8% in 1991. These
improvements have been about evenly split between selling and administrative
expenses. We have managed to support increases in sales without significant
increases in support costs from these areas.
Due to the increased volumes, improved pricing, and cost containment,
1993 pre-tax margins were 9.1%. This compares to 1992 pre-tax margins of
7.8% and 1991 pre-tax margins of 6.8%.
International Operations
Sales from international operations (foreign affiliates and exports) were
$47.6 million in 1993, up 12.4% from 1992 sales of $42.4 million. Sales in
1991 from international operations were $36.7 million. Sales were particularly
strong in our Pacific Rim countries and Mexico. Foreign pre-tax earnings for
1993 increased to $1.6 million, a 65.2% increase over the previous year and
a 150.6% increase over 1991 levels.
Environmental Remediation
Baldor believes, based on its review and other factors, that the future costs
relating to environmental remediation and compliance will not have a material
effect on its results of operations or financial condition.
1993 Annual Report Page 18
<PAGE>
Financial Position
Summary
The continued strength of our balance sheet provides a good foundation
for financing growth opportunities, better serving our customers, and
increasing value for our shareholders. During 1993, we continued to invest
in our future by expanding research and development of new products and
improvements of old ones, continuing capital investments for productivity and
cost improvements and making additional investments in our employees and
customers through education and training.
Investments
In 1993, we invested $15.0 million in property, plant and equipment,
which was up 29.3% compared to 1992. Approximately 50% of Baldor's
property, plant and equipment has been purchased in the last five years.
Capital investments have been made to improve product quality, increase
productivity, lower manufacturing costs, increase capacity and support new
products. During 1992, we completed the relocation of our large motor plant
from Charlotte, North Carolina, to nearby York County, South Carolina. Also
completed in 1992 was the construction of a new R&D center in Fort Smith,
Arkansas.
Investments in property, plant and equipment for 1994 are anticipated to
be $15.0 million to $20.0 million. This range includes a new plant to be
located in Ozark, Arkansas, near Fort Smith, to expand capacity for the 15hp
to 75hp steel band motors which are now being built in Columbus, Mississippi.
The Columbus plant will continue to build cast-iron motors in these sizes.
This move will allow for better utilization of the Columbus plant and improve
our cost competitiveness in the 15hp to 75hp motors. Baldor's cash flow and
financial strength are expected to be adequate to fund these investments.
In 1993, we also increased our investments in research and development
to $12.9 million from $11.3 million in 1992 and $9.9 million in 1991. During
the last three years we have introduced many new products and our
commitment to research and development continues to help Baldor maintain
a leadership position in the marketplace and to satisfy our customers' needs.
Education and training continues to be important at Baldor. During
1993, we made investments in the education and training of our people
through classes in value, quality, cost improvement, advanced technical skills,
safety, job development and basic literacy. Additionally, we have over 1,000
customer and employee graduates of our sales and product training classes to
date. These classes help to increase technical skills in sales and support
areas.
Current Liquidity
Baldor has a very strong current position. Cash flow from operations
continues to provide the principal source of liquidity. In 1993, cash flow from
operating activities increased to $27.7 million from $25.0 million in 1992.
Working capital was $108.6 million at the end of 1993 compared to $97.3
million at the end of 1992. The current ratio, while still very strong,
decreased to 3.5 compared to 4.0 at the end of 1992. This decrease was due
to the increased volume of business and the investments in receivables,
inventory, and property, plant and equipment needed to support the increase.
Baldor has available lines of credit of $31.4 million to support domestic and
foreign operations. There were no borrowings under these lines at the end
of 1993 or 1992.
Long-Term Debt and Shareholders' Equity
Long-term obligations were 12.3% of capitalization at the end of 1993
compared to 13.8% at the end of 1992. The weighted average interest rate
on our long-term debt is 6.4%. Shareholders' equity continues to increase and
is at a record level for Baldor. This strong base gives us an excellent
opportunity for assuming additional debt to finance expansion opportunities,
including acquisitions, which could further enhance the growth of the
Company. Return on shareholders' equity for 1993 increased to 12.7% from
10.9% in 1992. In the fourth quarter of 1993, there was a six-for-five stock
split and in the fourth quarter of 1992, there was a three-for-two stock split.
Both stock splits were effected in the form of stock dividends.
Dividend Policy
The cash dividend was increased 20.7% during 1993. This is in addition
to the 7.4% increase during 1992. Our dividend policy is to make increases
periodically, as earnings and financial strength warrant, but also to reinvest a
major portion of earnings and internal funds to finance growth opportunities.
Our goal is to enable shareholders to obtain increased dividends over time
while also participating in the growth of the Company.
1993 Annual Report Page 19
<PAGE>
CONSOLIDATED BALANCE SHEETS
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
JANUARY 1 JANUARY 2
1994 1993
ASSETS (in thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 7,310 $ 5,921
Marketable securities 22,914 16,812
Receivables, less allowances of
$1,800 and $1,200, respectively 59,566 51,401
Inventories:
Finished products 44,544 44,461
Work-in-process 9,351 9,908
Raw material 24,448 20,429
------- -------
78,343 74,798
LIFO valuation adjustment (deduction) (24,724) (25,123)
------- -------
53,619 49,675
Deferred Income Taxes 2,219
Other current assets 6,374 5,531
------- -------
TOTAL CURRENT ASSETS 152,002 129,340
OTHER ASSETS 13,552 11,444
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 3,117 3,280
Buildings and improvements 24,792 24,014
Machinery and equipment 118,311 111,455
Allowances for depreciation and
amortization (deduction) (73,824) (67,592)
------- -------
TOTAL PROPERTY, PLANT
AND EQUIPMENT 72,396 71,157
--------- ----------
$ 237,950 $ 211,941
========= ==========
See notes to consolidated financial statements.
JANUARY 1 JANUARY 2
1994 1993
LIABILITIES AND SHAREHOLDERS' EQUITY
(in thousands, except share data)
CURRENT LIABILITIES:
Accounts payable $ 12,690 $ 9,340
Employee compensation 4,740 3,761
Profit sharing 4,284 3,371
Anticipated warranty costs 2,750 2,500
Accrued insurance obligations 6,616 4,792
Other accrued expenses 9,710 7,014
Income taxes 2,121 533
Current maturities of long-term obligations 490 686
-------- --------
TOTAL CURRENT LIABILITIES 43,401 31,997
LONG-TERM OBLIGATIONS 22,474 23,209
DEFERRED INCOME TAXES 11,536 11,509
SHAREHOLDERS' EQUITY:
Preferred stock, $.10 par value
Authorized shares: 5,000,000
Issued and outstanding shares: None
Common stock, $.10 par value
Authorized shares: 25,000,000
Issued and outstanding shares:
1993--17,968,383; 1992--17,790,200
(excluding 120,387 shares held in
treasury in 1993 and 142,809 shares
held in treasury in 1992) 1,797 1,483
Additional capital 17,848 15,440
Retained earnings 141,729 128,792
Cumulative translation adjustments (835) (489)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 160,539 145,226
--------- ---------
$ 237,950 $ 211,941
========= =========
See notes to consolidated financial statements.
1993 Annual Report Page 20
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF EARNINGS
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
<CAPTION>
YEARS ENDED
JANUARY 1 JANUARY 2 DECEMBER 28
1994 1993 1991
(In thousands, except share data)
<S> <C> <C> <C>
Net sales $ 356,595 $ 318,930 $ 286,495
Other income, net 1,398 705 707
--------- --------- ---------
357,993 319,635 287,202
Costs and expenses
Cost of goods sold 255,557 229,686 206,953
Selling and administrative 64,807 60,697 56,867
Profit sharing 4,284 3,371 2,652
Interest 975 908 1,281
-------- --------- ---------
325,623 294,662 267,753
Earnings Before Income Taxes 32,370 24,973 19,449
Income taxes 12,944 9,709 7,527
--------- --------- ---------
NET EARNINGS $ 19,426 $ 15,264 $ 11,922
========= ========= =========
NET EARNINGS PER COMMON SHARE $ 1.04 $ .83 $ .67
====== ====== ======
Weighted average shares outstanding 18,710,860 18,319,835 17,907,572
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (Unaudited)
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
<CAPTION>
QUARTER (In thousands, except share data): FIRST SECOND THIRD FOURTH TOTAL
<S> <C> <C> <C> <C> <C>
1993
Net sales $86,547 $90,673 $90,703 $88,672 $356,595
Gross profit 24,602 25,874 25,591 24,971 101,038
Net earnings 4,593 5,145 4,853 4,835 19,426
Net earnings per common share 0.25 0.27 0.26 0.26 1.04
1992
Net sales $73,715 $80,028 $79,704 $85,483 $318,930
Gross profit 20,369 22,813 22,341 23,721 89,244
Net earnings 3,406 4,034 3,702 4,122 15,264
Net earnings per common share 0.19 0.22 0.20 0.22 0.83
</TABLE>
1993 Annual Report Page 21
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
<CAPTION>
YEARS ENDED
JANUARY 1 JANUARY 2 DECEMBER 28
1994 1993 1991
(In thousands)
<S> <C> <C> <C>
Operating activities:
Net earnings $ 19,426 $ 15,264 $ 11,922
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 12,220 12,148 12,099
Deferred income taxes (2,192) (1,846) (1,446)
Changes in operating assets
and liabilities:
Receivables (8,765) (2,274) 1,992
Inventories (3,944) (268) (805)
Other current assets (843) 794 (729)
Accounts payable 3,350 (330) (1,657)
Accrued expenses 6,662 1,957 (1,205)
Income taxes 1,588 (179) (754)
Other, net 258 (232) (113)
------ ------ ------
Net cash from operating activities 27,760 25,034 19,304
Investing activities:
Additions to property,
plant, and equipment (14,983) (11,632) (9,832)
Marketable securities purchased (22,914) (16,812) (5,271)
Marketable securities sold 16,812 5,271 3,332
Information systems development (252) (652)
------- ------- -------
Net cash used in investing activities (21,085) (23,425) (12,423)
Financing activities:
Short-term borrowings (repayments) (1,085) (1,191)
Reduction of long-term obligations (931) (1,416) (895)
Unexpended debt proceeds 472 3,661 629
Repurchase of company stock (103)
Dividends paid (6,190) (5,139) (4,668)
Stock option plans 1,363 1,516 1,717
------ ------ ------
Net cash used in financing activities (5,286) (2,463) 4,511)
------- ------ ------
Net increase (decrease) in
cash and cash equivalents 1,389 (854) 2,370
Beginning cash and cash equivalents 5,921 6,775 4,405
-------- -------- --------
Ending cash and cash equivalents $ 7,310 $ 5,921 $ 6,775
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
1993 Annual Report Page 22
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
<CAPTION> Cumulative
Common Stock Additional Retained Translation
(In thousands) Shares Amount Capital Earnings Adjustments Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 29, 1990 9,653 $965 $11,395 $111,906 $(334) $123,932
Stock option plans
(net of shares exchanged) 113 11 1,706 1,717
Translation adjustments 470 470
Net earnings 11,922 11,922
Repurchase of common stock (6) (103) (103)
Purchase of Sweo Controls, Inc. 20 2 391 393
Cash dividends at $.27
per common share (4,668) (4,668)
----- --- ------ ------- --- -------
BALANCE AT DECEMBER 28, 1991 9,780 978 13,389 119,160 136 133,663
Stock option plans
(net of shares exchanged) 99 10 1,506 1,516
Translation adjustments (625) (625)
Net earnings 15,264 15,264
Purchase of Sweo Controls, Inc. 22 2 545 547
Three-for-two common stock split
effected in the form of a 50%
stock dividend 4,924 493 (493)
Cash dividends at $.29
per common share (5,139) (5,139)
------ ----- ------ ------- ---- -------
BALANCE AT JANUARY 2, 1993 14,825 1,483 15,440 128,792 (489) 145,226
Stock option plans
(net of shares exchanged) 102 10 1,353 1,363
Translation adjustments (346) (346)
Net earnings 19,426 19,426
Purchase of Sweo Controls, Inc. 47 5 1,055 1,060
Six-for-five common stock split
effected in the form of a 20%
stock dividend 2,994 299 (299)
Cash dividends at $.35
per common share (6,190) (6,190)
------ ------ ------- -------- ----- --------
BALANCE AT JANUARY 1, 1994 17,968 $1,797 $17,848 $141,729 $(835) $160,539
====== ====== ======= ======== ===== ========
See notes to consolidated financial statements.
</TABLE>
1993 Annual Report Page 23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
January 1, 1994
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Line of Business: The Company operates primarily in one industry segment
which includes the design, manufacture and sale of electric motors and drives.
Consolidation: The consolidated financial statements include the accounts of
the Company and all its subsidiaries. Intercompany accounts and transactions
have been eliminated in consolidation.
Fiscal Year: The Company's fiscal year ends on the Saturday nearest to
December 31, which results in a 52 or 53 week year. Fiscal year 1993
contained 52 weeks, fiscal year 1992 contained 53 weeks and fiscal year 1991
contained 52 weeks.
Cash Equivalents: Cash equivalents consist of highly liquid investments
having original maturities of three months or less and are valued at cost which
approximates market.
Marketable Securities: All marketable securities are valued at cost which
approximates market. In May 1993, the Financial Accounting Standards
Board issued statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", which the
Company must adopt in the first quarter of 1994. Adoption of this new
standard is not expected to have a material effect on the Company's financial
statements.
Inventories: The Company values inventories at the lower of cost or market,
cost being determined principally by the last-in, first-out method (LIFO),
except for $9,085,000 in 1993 and $8,855,000 in 1992, at foreign locations,
valued by the first-in, first-out method (FIFO). Approximate replacement
costs of inventories for January 1, 1994, and January 2, 1993, were $78,343,000
and $74,798,000 respectively.
Property, Plant and Equipment: Property, plant and equipment, including
assets under capital leases, are stated at cost. Depreciation and amortization
are computed principally using the straight-line method over the estimated
useful lives of the assets and the remaining term of capital leases,
respectively.
Information Systems: Costs incurred in developing management information
systems are capitalized and included in property, plant and equipment. These
costs are amortized over their estimated useful lives from the date the systems
become operational. Amortization was $1,108,000 in 1993, $1,037,000 in 1992,
and $1,007,000 in 1991.
Benefit Plans: The Company has profit sharing plans covering most
employees with over two years service. The plans currently provide, subject
to certain adjustments, for Company contributions equal to 12% of earnings
before income taxes of participating companies. The Company has no
expenses related to post-retirement health benefits for retired employees or
post-employment benefits.
Income Taxes: Income taxes are provided based on the liability method of
accounting pursuant to Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes". Deferred income taxes are
provided on temporary differences between the basis of assets and liabilities
reported for financial and tax purposes.
Net Earnings Per Common Share: Net earnings per common share are
computed by dividing net earnings by the weighted average number of shares
of common stock and common stock equivalents (dilutive stock options)
outstanding during the year. Since the dilutive effect of common stock
options is similar in both calculations, net earnings per common share reflects
both primary and fully diluted earnings per share.
Research and Development: Costs associated with research, new product
development and product cost improvements are treated as expenses when
incurred and amounted to approximately $12,900,000 in 1993, $11,300,000 in
1992, and $9,900,000 in 1991.
NOTE B -- LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
1993 1992
(in thousands)
Industrial Development Bonds
due through 2004 at 6.0% fixed rate $ 629 $ 1,214
due through 2004 at 8.25% fixed rate 4,985 5,260
due through 2004 at 5.29% variable rate 3,500 3,500
due through 2009 at 7.75% fixed rate 3,000 3,000
due through 2009 at 7.875% fixed rate 7,200 7,200
due through 2010 at 4.51% variable rate 3,440 3,440
Other Notes Payable 210 281
-------- --------
22,964 23,895
Less Current Maturities 490 686
-------- --------
$ 22,474 $ 23,209
======== ========
At January 1, 1994, Industrial Development Bond proceeds of $7,163,000 are
included in Other Assets. Certain long-term obligations are collateralized by
property, plant and equipment with a net book value of $13,268,000 at
January 1, 1994.
Maturities of long-term obligations during each of the five fiscal years ending
1998 are: 1994--$490,000; 1995--$453,000; 1996--$488,000; 1997--$972,000;
1998--$930,000. Industrial Development Bonds include capital lease
obligations of $8,614,000 at January 1, 1994. Aggregate future minimum
capital lease payments at January 1, 1994, are $13,392,000 including interest
of $4,778,000.
1993 Annual Report Page 24
<PAGE>
Certain long-term obligations require, among other things, that the Company
maintain certain financial ratios and restrict cumulative cash dividends and
other distributions. Retained earnings of $26,894,000 at January 1, 1994, were
unrestricted. At January 1, 1994, the Company had outstanding letters of
credit totaling $12,323,000.
Interest paid was $1,420,000 in 1993, $1,481,000 in 1992, and $2,009,000 in
1991.
The Company had lines of credit aggregating $31,400,000 available at January
1, 1994. These arrangements do not have termination dates but are reviewed
annually. Interest on these lines of credit is at rates mutually agreed upon at
the time of borrowing. There were no outstanding borrowings under these
lines at January 1, 1994 or January 2, 1993.
NOTE C -- INCOME TAXES
The Company made income tax payments of $13,219,000 in 1993, $10,539,000
in 1992, and $7,796,000 in 1991. Income tax expense consists of the following:
1993 1992 1991
(In thousands)
Current:
Federal $12,906 $10,126 $ 7,749
State 1,429 1,123 922
Foreign 448 212 302
Deferred: (1,839) (1,752) (1,446)
------ ----- -----
$12,944 $ 9,709 $ 7,527
======= ======= =======
Deferred income taxes arise from recognizing revenues and expenses in
different years for tax and financial statement purposes. The sources of these
differences relate primarily to depreciation, certain liabilities and bad debt
expense.
The following table reconciles the difference between the Company's effective
income tax rate and the federal corporate statutory rate:
1993 1992 1991
Statutory federal
income tax rate 35.0% 34.0% 34.0%
State taxes, net of
federal benefit 3.4 3.4 3.4
Other 1.6 1.5 1.3
---- ---- ----
Effective income tax rate 40.0% 38.9% 38.7%
==== ==== ====
NOTE D -- STOCK PLANS
The Company has four plans under which various types of stock options may
be granted. Under two plans the Company has granted non-compensatory
stock options to employees and district managers, as approved by the
shareholders and the Board of Directors, respectively, at prices equal to the
market value at the date of grant. Outstanding options expire five, six, and
ten years from the date of grant. There are no charges to income in
connection with these plans.
The shareholders of the Company approved two additional plans which are
administered by a Committee of the Board of Directors. These plans can
grant shares to employees and non-employee directors. Under these plans,
grants can include incentive stock options, non-qualified stock options,
restricted shares, formula price shares, and stock appreciation rights. The
Committee has granted non-qualified options to purchase shares of restricted
stock at 50% of the stock's market value at the date of grant and shares of
incentive options to purchase shares at prices not less than market value at
the date of grant. Option restrictions lapse after five years or if the Company
is acquired. Related compensation expense is amortized over the restriction
period.
A summary of information regarding the stock plans follows:
Non-
Compensatory Compensatory
Total Plans Plans
Shares available for grant 3,745,800 2,125,800 1,620,000
Options outstanding:
Balance at January 2, 1993,
at $4.05 - $16.39
per share 1,662,527 943,422 719,105
Granted at $8.65 -
$21.25 per share 218,400 218,400
Exercised at $4.05 -
$14.24 per share (151,541) (93,188) (58,353)
Canceled at $9.03 -
$18.85 per share (44,400) (39,600) (4,800)
-------- ------- ------
Balance at January 1, 1994,
at $4.05 - $21.25
per share 1,684,986 810,634 874,352
========= ======= =======
Shares exercisable at
January 1, 1994 1,111,770 470,434 641,336
Shares reserved for future
grants:
January 2, 1993 581,692 581,692
January 1, 1994 371,692 3,600 368,092
1993 Annual Report Page 25
<PAGE>
NOTE E -- SHAREHOLDERS' EQUITY
On November 8, 1993, the Company's Board of Directors authorized a six-for-
five stock split effected in the form of a 20% stock dividend payable January
7, 1994 to shareholders of record on December 10, 1993. This resulted in the
issuance of 2,993,997 additional shares of common stock. All per share and
weighted average share amounts have been restated to reflect this stock split.
In May 1988, the Company declared a dividend distribution of one Common
Stock Purchase Right on each outstanding share of common stock. The
Rights entitle holders to buy one share of Baldor common stock for $28 and
become exercisable only if a person would acquire or announce a tender or
exchange offer to acquire 20% or more of the Company's common stock. If
a person acquires 20% or more of the Company's common stock, without the
Board of Director's consent, then each Right would entitle its holder to
purchase for $28 the number of shares of Baldor stock (or in the event of a
merger, a number of shares of the acquiring company's stock) that has a
market value of $56. The Rights may be redeemed by the Company at a
price of $.018 per Right prior to a person's acquiring 20% or more of the
Company's common stock (and in certain events thereafter), and they expire
in May 1998.
NOTE F -- OPERATING LEASES
The Company leases certain computers, buildings, and other equipment under
operating lease agreements. Related rental expense was $3,500,000 in 1993,
$3,600,000 in 1992, and $3,900,000 in 1991. Future minimum payments for
operating leases having noncancelable lease terms in excess of one year are:
1994-$2,126,000, 1995-$1,947,000, 1996-$1,413,000, 1997-$1,194,000; 1998-
$75,000; and decline substantially thereafter.
NOTE G -- FOREIGN OPERATIONS
The Company's foreign operations include both export sales and the results
of its foreign affiliates in Europe, Australia, Singapore, and Mexico.
Consolidated sales, earnings before income taxes and identifiable assets
consist of the following:
(In thousands) 1993 1992 1991
Net Sales:
United States Companies:
Domestic customers $ 308,949 $ 276,536 $ 249,783
Export customers 19,262 16,997 15,193
--------- --------- ---------
328,211 293,533 264,976
Foreign Affiliates 28,384 25,397 21,519
--------- --------- ---------
$ 356,595 $ 318,930 $ 286,495
Earnings Before Income Taxes:
United States Companies $ 30,746 $ 23,990 $ 18,851
Foreign Affiliates 1,624 983 648
--------- --------- ---------
$ 32,370 $ 24,973 $ 19,499
Assets:
United States Companies $ 218,509 $ 193,822 $ 185,409
Foreign Affiliates 19,441 18,119 17,868
--------- --------- ---------
$ 237,950 $ 211,941 $ 203,277
Assets and liabilities of foreign affiliates are translated into U. S. dollars
at year-end exchange rates. Income statement items are generally translated
at average exchange rates prevailing during the period. Translation
adjustments and certain foreign exchange hedges are recorded in the
Cumulative Translation Adjustment account in shareholders' equity.
1993 Annual Report Page 26
<PAGE>
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
Shareholders and Board of Directors
Baldor Electric Company and Subsidiaries
We have audited the accompanying consolidated balance sheets of Baldor
Electric Company and subsidiaries as of January 1, 1994, and January 2, 1993,
and the related consolidated statements of earnings, cash flows, and
shareholders' equity for each of the three years in the period ended January
1, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Baldor Electric
Company and subsidiaries at January 1, 1994, and January 2, 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 1, 1994, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young
St. Louis, Missouri
February 4, 1994
REPORT OF MANAGEMENT ON RESPONSIBILITY FOR FINANCIAL REPORTING
Baldor management is responsible for the integrity and objectivity of the
financial information contained in this Annual Report. The accompanying
financial statements have been prepared in conformity with generally accepted
accounting principles, applying informed judgements and estimates where
appropriate.
Baldor maintains a system of internal accounting control that provides
reasonable assurance that assets are safeguarded and transactions are
executed in accordance with management's authorization and recorded
properly to permit the preparation of financial statements in accordance with
generally accepted accounting principles.
The Audit Committee of the Board of Directors is composed solely of outside
directors and is responsible for recommending to the Board the independent
accounting firm to be retained for the coming year. The Audit Committee
meets regularly with the independent auditors, with the Director of Audit
Services, as well as with Baldor management, to review accounting, auditing,
internal accounting controls, and financial reporting matters. The
independent auditors, Ernst & Young, and the Director of Audit Services
have direct access to the Audit Committee without the presence of
management to discuss the results of their audits.
Ernst & Young, independent certified public accountants, have audited
Baldor's financial statements. Management has made available to Ernst &
Young all the corporation's financial records and related data, as well as the
minutes of shareholders' and directors' meetings.
/s/ R. S. Boreham, Jr.
Chairman of the Board and
Chairman of the Executive Committee
/s/ R. L. Qualls
President and Chief Executive Officer
/s/ Lloyd G. Davis
Chief Financial Officer,
Vice President - Finance
Secretary, and Treasurer
1993 Annual Report Page 27
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DIRECTORS & OFFICERS
(Photo)
Roland S. Boreham, Jr. Chairman of the Board
Director for 32 years
(Photo)
R. L. Qualls President and Chief Executive Officer
Director for 6 years
(Photo)
George A. Schock Assistant Secretary
Director for 49 years
(Photo)
Jefferson W. Asher, Jr. Independent Management Consultant
Director for 20 years
(Photo)
Fred C. Ballman Former Chairman and CEO of the Company
(retired)
Director for 39 years
(Photo)
O. A. Baumann Former Company's Manufacturers'
Representative (retired)
Director for 32 years
(Photo)
Robert J. Messey Senior Vice President, Chief Financial
Officer, and Director, Sverdrup Corporation
Director for 1 year
(Photo)
Robert L. Proost Corporate Vice President and Director of
Administration, A.G. Edwards & Sons, Inc.
Director for 5 years
(Photo)
Willis J. Wheat Professor of Management and Marketing,
Oklahoma City University
Director for 2 years
(Photo)
Theodore W. Atkins Vice President - Industry Relations &
Governmental Affairs
(Photo)
Charles H. Cramer Vice President - Personnel
(Photo)
Lloyd G. Davis Vice President - Finance, Chief Financial
Officer, Secretary, and Treasurer
(Photo)
James R. Kimzey Vice President - Research & Engineering
(Photo)
John A. McFarland Vice President - Sales
(Photo)
Robert L. Null, Jr. Vice Persident - Manufacturing
(Photo)
Jerry D. Peerbolte Vice President - Marketing
1993 Annual Report Page 28
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SHAREHOLDER INFORMATION
DIVIDENDS PAID
1991 1992 1993
1st quarter $ .06 $ .07 $ .08
2nd quarter .07 .07 .08
3rd quarter .07 .07 .09
4th quarter .07 .08 .10
----- ----- -----
Year $ .27 $ .29 $ .35
COMMON STOCK PRICE
RANGE NYSE SYMBOL-BEZ
1992 1993
High Low High Low
1st quarter 13-3/4 12-1/4 19-1/8 16-1/4
2nd quarter 15-1/4 13-1/8 21-1/4 18-3/8
3rd quarter 15-3/4 13-1/2 21-1/2 18-3/8
4th quarter 18-5/8 14-1/2 24-1/2 20-3/8
SHAREHOLDERS
3,510 at January 1, 1994 including shareholders of record and employees
through benefit plans.
1993 Annual Report Page 29
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EXHIBIT 21
BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
PLACE OF ORGANIZATION NATURE OF
NAME OF SUBSIDIARY OR INCORPORATION OWNERSHIP
Southwestern Die Casting Co., Inc. Arkansas 100%
Carolina Capacitors, Inc. South Carolina 100%
Baldor International, Inc. U.S. Virgin Islands 100%
Baldor of Texas, Inc. Oklahoma 100%
Baldor de Mexico, S.A. de C.V. Mexico 100%
Sweo Controls, Inc. Washington 100%
Baldor Holdings, Inc. Delaware 100%
Australian Baldor Pty. Limited Australia 60%
Baldor Electric (Far East) PTE. Ltd. Singapore 60%
Baldor Electric (Thailand) Ltd. Thailand 60%
owned by
Baldor
Electric
(Far East)
PTE. Ltd.
Baldor ASR, AG Switzerland 100%
owned by
Baldor
Holdings,
Inc.
Baldor ASR GmbH fur
Antriebstechnik Germany 100%
owned by
Baldor
Holdings,
Inc.
Baldor ASR U.K. Limited United Kingdom 100%
owned by
Baldor
Holdings,
Inc.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Baldor Electric Company and subsidiaries of our report dated February 4,
1994, included in the 1993 Annual Report to Shareholders of Baldor Electric
Company and subsidiaries.
Our audits also included the financial statement schedules of Baldor Electric
Company and subsidiaries listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedules referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8, No. 2-77046) pertaining to the Baldor Electric Company 1982 Incentive
Stock Option Plan, (Form S-8, No. 33-16766) pertaining to the Baldor Electric
Company 1987 Incentive Stock Plan, (Form S-8, No. 33-28239) pertaining to the
Baldor Electric Company Employee Savings Plan, and (Form S-8, No. 33-36421)
pertaining to the Baldor Electric Company 1989 Stock Option Plan for Non-
Employee Directors of our report dated February 4, 1994, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedules included in this Annual Report (Form10-K) of Baldor Electric
Company and subsidiaries.
/s/ Ernst & Young
St. Louis, Missouri
March 31, 1994
