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
December 30, 1995 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
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(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
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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
registrant based on the closing price on February 23, 1996, was
$409,926,203.
At February 23, 1996, there were 25,851,846 shares of the registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended
December 30, 1995 (the "Annual Report to Shareholders for 1995") are
incorporated by reference into Part II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders to
be held May 4, 1996 (the "1996 Proxy Statement") are incorporated by
reference into Parts I and III.
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<PAGE>
PART I
Item 1. Business
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Baldor Electric Company ("Baldor" or 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 speed
reducers, 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 82% of the Company's
business in 1995, 84% in 1994, and 85% in 1993. 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 control products, which include servo products, brushless DC
and SCR controls, and inverter and vector drives, accounted for
approximately 16% of the Company's total sales in 1995, 13% in 1994, and
11% in 1993. The Company's line of adjustable speed controls ranges from
1/50 to 600 horsepower. With these products, the Company provides its
customers the ability to purchase industrial motors and electronic
controls (which constitute drives) from one manufacturer. Sales of drives
were estimated to be slightly more than 20% of total 1995 sales compared
to just under 18% of total 1994 sales.
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
represented approximately 62% of the Company's 1995 business. Most stock
product sales are to customers who place orders for immediate shipment
from current inventory. 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 26 in the United States and the remainder in various parts of
the world including 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 also sold to independent distributors
for resale, often as replacement components in industrial machinery which
is being modernized or upgraded for improved performance.
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 effect on
its total business.
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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 that it is a
significant factor in the markets it serves and that its share of the
market has increased over the past several years.
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, many 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 $17,200,000 in 1995, $14,800,000 in 1994, and
$12,900,000 in 1993.
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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 financial
position of the Company and is not expected to have such an effect.
Employees
At December 30, 1995, the Company had 3,580 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 December 30, 1995,
export and international sales revenues have increased and represented
14.0% of consolidated sales in 1995, 13.1% in 1994, and 13.4% in 1993.
See also Note J on page 26 of the Annual Report to Shareholders for 1995.
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 sales offices
located in Switzerland, Germany, Italy and the United Kingdom. Baldor ASR
also has development and manufacturing operations in Germany. The Company
has majority interests in Baldor Electric (Far East) Pte. Ltd., located in
Singapore, Baldor Electric (Thailand) Ltd., located in Bangkok, Baldor
Electric (Indonesia) Ltd., located in Jakarta, and Australian Baldor Pty.
Limited which has locations in Sydney and Melbourne. Finally, the Company
wholly owns Baldor de Mexico, S.A. de C.V., located in Mexico City.
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 significant 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 for current operations,
adequately maintained and insured, and capable of sufficient additional
production levels. The following table sets forth certain information
with respect to the Company's properties.
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<PAGE>
AREA
LOCATION PRIMARY USE (SQ. FT.)
Fort Smith, AR AC motor production 296,542
Distribution and service center 159,500
Administration and engineering offices 69,800
Aluminum die casting 76,400
St. Louis County, MO Metal stamping and engineering 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
Knoxville, AR Worm-gear speed reducers 100,000
Clarksville, AR Subfractional motor and 86,750
gear motor production
Ozark, AR AC motor production 77,300
Five other Metal stamping and motor, drives,
domestic locations and servomotor production 130,325
Eight foreign Sales and distribution centers 37,900
locations and servodrive production
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1,617,117
Certain properties listed above (528,750 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.
In mid 1996, the Company expects to replace the leased Knoxville,
Arkansas, facility with a Company owned 83,000 square foot facility to be
constructed at the Clarksville, Arkansas, plant site.
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
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Not applicable.
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<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
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Information under the captions "Dividends Paid", "Common Stock Price
Range", and "Shareholders" on page 29 of the Annual Report to Shareholders
for 1995 is incorporated herein by reference.
Item 6. Selected Financial Data
- --------------------------------
Information under the caption "Eleven Year Summary of Financial Data" only
for years 1991 through 1995 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 1995 is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 18 and 19 of the Annual Report to Shareholders for
1995 is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
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The consolidated financial statements of the Company on pages 20 through
26, the report thereon of Ernst & Young LLP, Independent Auditors, on page
27, and the "Summary of Quarterly Results of Operations (Unaudited)" on
page 21 of the Annual Report to Shareholders for 1995 are incorporated
herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
- ------------------------------------------------------------------------
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. 71 Chairman of the Board 1961
R.L. Qualls 62 President and Chief Executive 1986
Officer
Theodore W. Atkins 57 Vice President - Industry 1986
Relations and Government Affairs
D. Christine Clemons 31 Controller 1995
Charles H. Cramer 51 Vice President - Personnel 1984
Lloyd G. Davis 48 Chief Financial Officer, 1992
Vice President - Finance,
Secretary, and Treasurer
Gene J. Hagedorn 48 Vice President - Materials 1994
James R. Kimzey 57 Vice President - Research 1984
and Engineering
John A. McFarland 44 Vice President - Sales 1990
Robert L. Null, Jr. 53 Vice President - Manufacturing 1990
Jerry D. Peerbolte 39 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 directors or executive officers. The
information under the caption "Election of Directors" of the 1996 Proxy
Statement is incorporated herein by reference.
Item 11. Executive Compensation
- --------------------------------
Information contained in the 1996 Proxy Statement under the caption
"Information About the Board of Directors and Committees of the Board" and
information 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" 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 1996
Proxy Statement is incorporated herin by reference.
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<PAGE>
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information under the caption "Certain Transactions" of the 1996 Proxy
Statement is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
(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.
(3) Listing of Exhibits
Exhibit 3(i) - The Restated Articles of Incorporation of Baldor
Electric Company, effective March 14, 1995, filed as Exhibit 3(i)
to Form 10-K for the year ended December 31, 1994.
Exhibit 3(ii) - Bylaws of Baldor Electric Company (as amended)
dated February 6, 1995, filed as Exhibit 3(ii) to Form 10-K for
the year ended December 31, 1994.
Exhibit 4(i)(a) - 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
originally filed as Exhibit 1 to Registrant's Form 8-K Current
Report, dated May 13, 1988, and refiled as Exhibit 4(i) to Form
10-K for the year ended December 31, 1994.
Exhibit 4(i)(b) - Amendment Number 1 to the Shareholders' Rights
Agreement dated February 5, 1996 filed as Exhibit 2 to
Registrant's Form 8-A/A dated March 21, 1996.
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 affiliates.
<PAGE> - 8 -
<PAGE>
Exhibit (10) - Exhibits 10(iii)(A)(1) through 10(iii)(A)(5) 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 (originally filed
as Exhibit 10.6 to Form 10-K for year ended
December 31, 1988, and filed as Exhibit
10(iii)(A)(2) to Form 10-K for the year
ended December 31, 1994.)
. 10(iii)(A)(3) 1987 Incentive Stock Plan (originally filed as
Appendix A to Registrant's Proxy Statement
dated April 3, 1987, and refiled as Exhibit
10(iii)(A)(3) to Form 10-K for the year
ended December 31, 1994.
. 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.)
. 10(iii)(A)(5) 1994 Incentive Stock Plan (filed as Exhibit A
to Registrant's Proxy Statement dated April
4, 1994).
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 exhibits listed above under Exhibit 10.
Exhibit (11) - Computation of earnings per common share filed
herewith.
Exhibit (13) - Portions of the Annual Report to Shareholders for
1995. The Annual Report is being filed as an exhibit solely for
the purpose of incorporating certain provisions thereof by
reference. Portions of the Annual Report not specifically
incorporated are not deemed "filed" for the purposes of the
Securities Exchange Act of 1934, as amended.
Exhibit (21) - Affiliates of the Registrant filed herewith.
Exhibit (23) - Consent of Independent Auditors filed herewith.
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
See Exhibit Index at page 15 of this Report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate
section of this Report at page 13 hereof.
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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 28, 1996
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints R. S. Boreham, Jr. and R. L. Qualls, 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.
<PAGE> - 10 -
<PAGE>
Signature Title Date
--------- ----- ----
/s/ R. S. Boreham, Jr. Chairman of the Board of )
- ---------------------------- Directors and Chairman of )
R. S. Boreham, Jr. the Executive Committee )
)
)
/s/ R. L. Qualls President, Chief Executive )
- ---------------------------- Officer, and Director )
R. L. Qualls (Principal Executive Officer) )
)
)
/s/ Lloyd G. Davis Chief Financial Officer, )
- ---------------------------- Vice President - Finance, )
Lloyd G. Davis Secretary, and Treasure )
(Principal Financial )
and Accounting Officer) )
)
/s/ Jefferson W. Asher, Jr. Director )March 28, 1996
- ---------------------------- )
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 )
<PAGE> - 11 -
<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 DECEMBER 30, 1995
BALDOR ELECTRIC COMPANY
FORT SMITH, ARKANSAS
<PAGE> - 12 -
<PAGE>
FORM 10-K, ITEM 14(a)(1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
BALDOR ELECTRIC COMPANY AND AFFILIATES
The following consolidated financial statements of Baldor Electric Company
and Affiliates, included in the Annual Report to Shareholders for 1995,
are incorporated by reference in Item 8:
Consolidated Balance Sheets
- December 30, 1995 and December 31, 1994
Consolidated Statements of Earnings
- for the three years in the period ended December 30, 1995
Consolidated Statements of Cash Flows
- for the three years in the period ended December 30, 1995
Consolidated Statements of Shareholders' Equity
- for the three years in the period ended December 30, 1995
Notes to Consolidated Financial Statements
The following consolidated financial statement schedules of Baldor
Electric Company and Affiliates are included in Item 14(d):
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accoun-
ting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.
<PAGE> - 13 -
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
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
- ----------- --------- -------- -------- -------- ---------
(In thousands)
Deducted from current assets:
Allowance for doubtful accounts
1995 $2,250 $ 886 $ 336(A) $2,800
1994 1,800 623 173(A) 2,250
1993 1,200 1,197 597(A) 1,800
Included in current liabilities:
Anticipated warranty costs
1995 $3,700 $ 400(B) $4,100
1994 2,750 950(B) 3,700
1993 2,500 250(B) 2,750
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(A) Net uncollectible accounts written off during year.
(B) Additions/(reductions) to reserve for anticipated warranty costs, net of
expenses incurred.
<PAGE> - 14 -
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2 Omitted - Inapplicable
3(i) Omitted - Inapplicable
3(ii) Omitted - Inapplicable
4(i) Omitted - Inapplicable
9 Omitted - Inapplicable
10 Omitted - Inapplicable
11 Computation of Earnings Per Common Share - filed herewith
12 Omitted - Inapplicable
13 Annual Report to Shareholders for 1995 - filed herewith
16 Omitted - Inapplicable
18 Omitted - Inapplicable
21 Affiliates of the Registrant - filed herewith
22 Omitted - Inapplicable
23 Consent of Independent Auditors - filed herewith
24 Powers of Attorney - Included on signature pages 10 and 11
27 Financial Data Schedules - filed herewith
28 Omitted - Inapplicable
99 Omitted - Inapplicable
<PAGE> - 15 -
EXHIBIT 11
BALDOR ELECTRIC COMPANY AND AFFILIATES
COMPUTATION OF EARNINGS PER COMMON SHARE
FISCAL YEAR
-----------------------------------
1995 1994 1993
(In thousands, except per share amounts)
Primary
Weighted average shares outstanding 27,647 27,266 26,797
Dilutive stock options based on the
treasury stock method using the
average market price 1,244 1,237 1,269
------ ------ ------
Total 28,891 28,503 28,066
====== ====== ======
Net Earnings $32,305 $26,359 $19,426
======= ======= =======
Per Share Earnings $1.12 $0.92 $0.69
===== ===== =====
Fully Diluted
Weighted average shares outstanding 27,647 27,266 26,797
Dilutive stock options based on the
treasury stock method using the
year-end market price, if higher
than average market price 1,202 1,345 1,489
------ ------ ------
Total 28,849 28,611 28,286
====== ====== ======
Net Earnings $32,305 $26,359 $19,426
======= ======= =======
Per Share Earnings $1.12 $0.92 $0.69
===== ===== =====
- ------------------------
Note:Amounts for 1994-93 have been restated for a three-for-two stock
split effected in the form of a 50% stock dividend which was declared
during the third quarter 1995. See Note F to Annual Report to
Shareholders for 1995.
Management's Discussion and Analysis
Results of Operations
Summary
In 1995, Baldor posted its fourth consecutive yearly record sales and
earnings performance. A 13.1% sales increase was leveraged into a 22.6%
earnings increase. Baldor believes its inventory availability, improved
productivity, reduced manufacturing costs, and aggressive new product
introductions are important competitive advantages which are helping to
expand market share and provide better value to its customers and
shareholders.
Net Sales
Baldor serves many industries by selling to a broad base of distributors
and OEMs both domestically and in more than 55 countries. No single
customer accounts for more than 3.0% of 1995 sales. Sales of $473.1
million in 1995 were up 13.1% over 1994 sales of $418.2 million. Sales
in 1993 were $356.6 million.
The increase in 1995 sales over 1994 sales was about evenly split
between improved pricing, increased volumes and product mix shifts.
Energy-efficiency remains important in our industry. Sales of drives
grew at more than double the 1995 overall sales growth rate and sales of
Super-E(tm) premium-efficient motors also continued strong. Overall,
sales of new products introduced in the past five years accounted for
well over 25% of 1995 sales. In 1995, distributor sales increased
approximately 14% over 1994 levels and OEM sales increased approximately
17% over 1994 levels.
The 1994 sales increase of 17.3% over 1993 sales was due in part to the
sales of new products, including drives products and Super-E(tm) premium-
efficient motors, both of which grew significantly faster than the
overall sales growth rate. Price improvement averaged just over 2% in
1994.
<PAGE>
Net Earnings
Net earnings of $32.3 million in 1995 exceeded 1994 net earnings of
$26.4 million by $5.9 million or 22.6%. Net earnings in 1993 were $19.4
million.
The gross margin percentage increased to 29.3% in 1995 from 28.9% in
1994 and 28.3% in 1993. The gross margin percentages in 1995 and 1994
improved due to increased volumes, continued productivity improvements,
and better teamwork throughout the organization in both years.
Increases in raw material prices were offset by increases in selling
prices in both years.
Selling and administrative costs as a percentage of sales improved to
16.9% in 1995, from 17.3% in 1994, and 18.2% in 1993. As the result of
a continued emphasis on productivity improvements, Baldor has managed to
achieve increases in sales without significant increases in support
costs in these areas.
The 1995 pre-tax margin of 11.2% shows good improvement over the 1994
pre-tax margin of 10.3% and the 1993 pre-tax margin of 9.1%. This
improvement is due to the increased volumes, improved pricing, and
continued emphasis on productivity and cost improvements.
International Operations
Sales from international operations (foreign affiliates and exports)
were $66.0 million in 1995, up 20.9% from 1994 sales of $54.6 million.
Sales in 1993 from international operations were $47.6 million.
International sales were particularly strong in Europe for both 1995 and
1994. Foreign pre-tax earnings for 1995 decreased to $1.2 million from
$1.7 million in 1994 due mainly to the decline in the Mexican peso.
Foreign pre-tax earnings were $1.6 million in 1993.
Impact of Inflation
Inflation had a nominal impact on operations during the last three
years. Pressures on margins due to increases in raw material prices
were offset through increases in selling prices over the last three
years. Other increases in operating costs were consistent with the
general inflation rate, and were more than offset by productivity
improvements.
<PAGE>
Baldor values its inventory principally on the LIFO basis, which more
closely matches current costs with current revenues and has resulted in
a more conservative valuation of inventory over time. Almost half of
Baldor's machinery and equipment has been acquired during the last 5
years; thus depreciation expense approximates the effect of current
costs.
Environmental Remediation
Management believes, based on their internal reviews and other factors,
that the future costs relating to environmental remediation and
compliance will not have a material effect on the capital expenditures,
earnings, or competitive position of the Company.
Financial Position
Summary
Baldor improved its already strong financial condition in 1995. The
Company's high liquidity and low debt ratios provide a strong base for
better serving its customers, financing growth opportunities, and
maintaining flexibility.
During 1995, Baldor continued to invest in its future by expanding
research and development for new and existing products, by continuing
capital investments for capacity, productivity and cost improvements,
and by making additional investments in its employees and customers
through education and training. Based on the Company's strong financial
condition, 1995 saw a three-for-two stock split and an increase in the
dividend rate.
Investments
In 1995, Baldor invested $23.1 million in property, plant and equipment.
Capital investments were made to improve product quality, increase
productivity, lower manufacturing costs, increase capacity, and support
new products.
Investments in property, plant and equipment for 1996 should be
approximately the same as 1995. This includes a new plant in
Clarksville, Arkansas, to house gear production and an expansion of the
finished goods warehouse in Fort Smith. Baldor's cash flow and
<PAGE>
financial strength are expected to be adequate to fund these anticipated
future investments.
In 1995, Baldor also increased its investments in research and
development to $17.2 million from $14.8 million in 1994 and $12.9
million in 1993. Baldor's commitment to research and development
continues to help it maintain a leadership position in the marketplace
and to satisfy its customers' needs.
Current Liquidity
Cash flow from operations continues to provide the principal source of
the Company's liquidity. Due mainly to increased finished goods levels,
1995 cash flow from operating activities decreased to $24.2 million from
$31.9 million in 1994. Working capital was $145.1 million at the end of
1995 compared to $118.6 million at the end of 1994. The current ratio
increased to 3.2 compared to 2.9 at the end of 1994. Baldor also has
available lines of credit of $30 million to support operations. There
were no borrowings under these lines at the end of 1995 or 1994.
Long-Term Debt and Shareholders' Equity
Long-term obligations were 10.7% of total capitalization at the end of
1995 compared to 12.5% at the end of 1994. The 1995 weighted average
interest rate on long-term debt was 6.5%. Shareholders' equity
continues to increase and at December 30, 1995 was at a record level for
Baldor. This strong capital base gives the Company an excellent
opportunity to finance expansion opportunities as they arise. Return on
average shareholders' equity increased to 16.3% for 1995 from 15.3% in
1994. In the third quarter of 1995, there was a three-for-two stock
split effected in the form of a 50% stock dividend. All per share
amounts have been restated to reflect this split. The cash dividend was
also increased 12.5% during 1995. This is in addition to the 20.0%
increase during 1994.
Subsequent to year end, on February 16, 1996, Baldor purchased 2,000,000
shares of its common stock from the Estate of Mr. G. A. Shock for $19.00
per share. This purchase was at a discount to the market and was funded
with a mid-term bank loan.
<PAGE>
CONSOLIDATED BALANCE SHEETS
BALDOR ELECTRIC COMPANY AND AFFILIATES
DECEMBER 30 DECEMBER 31
1995 1994
----------- -----------
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,322 $ 8,848
Marketable securities 28,487 25,996
Receivables, less allowances
of $2,800 and $2,250, respectively 77,768 71,003
Inventories:
Finished products 61,681 48,516
Work-in-process 11,978 11,933
Raw materials 36,972 29,408
---------- ----------
110,631 89,857
LIFO valuation adjustment (deduction) (26,942) (25,759)
---------- ----------
83,689 64,098
Other current and deferred tax
assets 15,829 11,227
---------- ----------
TOTAL CURRENT ASSETS 212,095 181,172
OTHER ASSETS 12,296 20,481
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 3,558 3,303
Buildings and improvements 29,587 27,745
Machinery and equipment 149,069 131,991
Allowances for depreciation and
amortization (deduction) (93,143) (81,537)
---------- ----------
NET PROPERTY, PLANT AND
EQUIPMENT 89,071 81,502
---------- ----------
$ 313,462 $ 283,155
========== ==========
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
BALDOR ELECTRIC COMPANY AND AFFILIATES
DECEMBER 30 DECEMBER 31
1995 1994
----------- -----------
(In thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 18,996 $ 18,802
Employee compensation 5,110 5,776
Profit sharing 7,168 5,789
Anticipated warranty costs 4,100 3,700
Accrued insurance obligations 12,627 9,156
Other accrued expenses 16,080 15,697
Income taxes 1,967 2,777
Current maturities of long-term
obligations 978 925
---------- ----------
TOTAL CURRENT LIABILITIES 67,026 62,622
LONG-TERM OBLIGATIONS 25,255 26,303
DEFERRED INCOME TAXES 9,804 9,968
SHAREHOLDERS' EQUITY:
Preferred stock, $0.10 par value
Authorized shares: 5,000,000
Issued and outstanding shares: None
Common stock, $0.10 par value
Authorized shares: 50,000,000
Issued and outstanding shares:
1995--27,870,297; 1994--27,465,644
(excluding 297,741 shares held
in treasury in 1995 and 158,015
shares held in treasury in 1994) 2,787 1,831
Additional capital 24,990 21,958
Retained earnings 182,354 160,024
Cumulative translation adjustments 1,246 449
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 211,377 184,262
---------- ----------
$ 313,462 $ 283,155
========== ==========
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
BALDOR ELECTRIC COMPANY AND AFFILIATES
YEARS ENDED
------------------------------------------
DECEMBER 30 DECEMBER 31 JANUARY 1
1995 1994 1994
------------------------------------------
(In thousands, except share data)
Net sales $ 473,103 $ 418,152 $ 356,595
Other income, net 2,596 1,668 1,398
--------- --------- ---------
475,699 419,820 357,993
Costs and expenses
Cost of goods sold $ 334,306 297,212 255,557
Selling and administrative 80,019 72,329 64,807
Profit sharing 7,168 5,788 4,284
Interest 1,260 1,279 975
---------- --------- ---------
422,753 376,608 325,623
Earnings Before Income Taxes 52,946 43,212 32,370
Income taxes 20,641 16,853 12,944
---------- --------- ---------
NET EARNINGS $ 32,305 $ 26,359 $ 19,426
========== ========= =========
NET EARNINGS PER COMMON SHARE $1.12 $0.92 $0.69
===== ===== =====
Weighted average common shares
outstanding 28,891,293 28,503,273 28,066,290
========== ========== ==========
See notes to consolidated financial statements.
<PAGE>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (Unaudited)
BALDOR ELECTRIC COMPANY AND AFFILIATES
QUARTER
---------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- ------- ------- ------- -------
(In thousands, except share data)
1995
Net sales $114,585 $121,839 $120,044 $116,635 $473,103
Gross profit 33,558 35,698 35,190 34,351 138,797
Net earnings 7,671 8,261 8,276 8,097 32,305
Net earnings per
common share 0.26 0.29 0.29 0.28 1.12
1994
Net sales $97,476 $104,812 $105,432 $110,432 $418,152
Gross profit 27,905 30,145 30,646 32,244 120,940
Net earnings 5,678 6,602 6,818 7,261 26,359
Net earnings per
common share 0.20 0.23 0.24 0.25 0.92
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BALDOR ELECTRIC COMPANY AND AFFILIATES
YEARS ENDED
----------------------------------------
DECEMBER 30 DECEMBER 31 JANUARY 1
1995 1994 1994
----------------------------------------
(In thousands)
Operating activities:
Net earnings $ 32,305 $ 26,359 $ 19,426
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 15,583 13,121 12,220
Deferred income taxes (1,979) (3,882) (2,192)
Changes in operating assets and
liabilities:
Receivables (7,315) (11,887) (8,765)
Inventories (19,591) (10,480) (3,944)
Other current assets (3,020) (52) (843)
Accounts payable 194 6,113 3,350
Accrued expenses 4,967 12,017 6,662
Income taxes (810) 656 1,588
Other, net 3,851 (70) 258
---------- ---------- --------
Net cash from operating activities 24,185 31,895 27,760
Investing activities:
Additions to property, plant
and equipment (23,112) (22,131) (14,983)
Marketable securities purchased (50,881) (45,153) (22,914)
Marketable securities sold 48,987 41,388 16,812
---------- --------- ---------
Net cash used in investing activities (25,006) (25,896) (21,085)
Financing activities:
Additional long-term borrowings 6,000
Reduction of long-term obligations (995) (1,737) (931)
Unexpended debt proceeds 5,641 (5,220) 472
Dividends paid (9,416) (7,648) (6,190)
Stock option plans 3,065 4,144 1,363
---------- ---------- --------
Net cash used in financing activities (1,705) (4,461) (5,286)
Net increase (decrease) in cash and
cash equivalents (2,526) 1,538 1,389
Beginning cash and cash equivalents 8,848 7,310 5,921
---------- ----------- ---------
Ending cash and cash equivalents $ 6,322 $ 8,848 $ 7,310
========== ========== =========
See notes to consolidated financial statements.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BALDOR ELECTRIC COMPANY AND AFFILIATES
<CAPTION>
Common Stock Cumulative
------------ Additional Retained Translation
Shares Amount Capital Earnings Adjustments Total
------ ------ ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
(In thousands, except per share amounts)
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 $0.23
per common share (6,190) (6,190)
------ ------ ------- -------- ----- -------
BALANCE AT JANUARY 1, 1994 17,968 1,797 17,848 141,729 (835) 160,539
Stock option plans,
net of shares exchanged 342 34 4,110 4,144
Translation adjustments 1,284 1,284
Net earnings 26,359 26,359
Securities valuation adjustment,
net of deferred taxes of $267 (416) (416)
Cash dividends at $0.28
per common share (7,648) (7,648)
------ ------ ------- -------- ----- -------
BALANCE AT DECEMBER 31, 1994 18,310 1,831 21,958 160,024 449 184,262
Stock option plans,
net of shares exchanged 332 33 3,032 3,065
Translation adjustments 797 797
Net earnings 32,305 32,305
Securities valuation adjustment,
net of deferred taxes of $233 364 364
Three-for-two common stock
split effected in the form
of a 50% stock dividend 9,228 923 (923)
Cash dividends at $0.34 per
common share (9,416) (9,416)
------ ------ ------- --------- ------ --------
BALANCE AT DECEMBER 30, 1995 27,870 $2,787 $24,990 $182,354 $1,246 $211,377
====== ====== ======= ======== ====== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
ELEVEN-YEAR SUMMARY OF FINANCIAL DATA
(In thousands, except percentages and per-share data)
PER SHARE DATA
-----------------------
LONG-
NET NET NET TOTAL TERM
SALES EARNINGS EARNINGS DIVIDENDS ASSETS OBLIGATIONS
1995 $473,103 $32,305 $1.12 $0.34 $313,462 $25,255
1994 418,152 26,359 0.92 0.28 283,155 26,303
1993 356,595 19,426 0.69 0.23 237,950 22,474
1992 318,930 15,264 0.56 0.19 211,941 23,209
1991 286,495 11,922 0.44 0.18 203,277 24,376
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BALDOR ELECTRIC COMPANY AND AFFILIATES
December 30, 1995
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.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
statements and accompanying notes. Actual results may differ from those
estimates.
Consolidation: The consolidated financial statements include the
accounts of the Company and all its affiliates. 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 years 1993,
1994 and 1995 all 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 classified as
available-for-sale and are available to support current operations or to
take advantage of other investment opportunities. These securities are
stated at estimated fair value based upon market quotes. Unrealized
gains and losses, net of tax, are computed on the basis of specific
identification and are included in retained earnings. Realized gains,
realized losses, and declines in value, judged to be other-than-
temporary, are included in Other Income. The cost of securities sold is
based on the specific identification method and interest earned is
included in Other Income.
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 $9,513,000 in 1994 and $10,836,000 in 1995 at
foreign locations, valued by the first-in, first-out method (FIFO).
<PAGE>
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.
Long-Lived Assets: In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. The Company will adopt this statement in the
first quarter of 1996 and, based on current circumstances, does not
believe the effect of the adoption will be material.
Benefit Plans: The Company has a profit sharing plan covering most
employees with over two years service. Baldor contributes 12% of
earnings before income taxes of participating companies to the Plan.
Income Taxes: Income taxes are provided based on the liability method
of accounting. Deferred income taxes are provided for the expected
future tax consequences of 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, $14,800,000
in 1994, and $17,200,000 in 1995.
Reclassification: The Company has reclassified the presentation of
certain prior year information to be consistent with the presentation in
the current year.
<PAGE>
NOTE B -- LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
1995 1994
---- ----
(in thousands)
due through 2004 at 6.0% fixed rate $ 308 $ 431
due through 2004 at 8.25% fixed rate 4,365 4,685
due through 2004 at 5.35% variable rate 2,300 2,300
due through 2004 at 5.29% fixed rate 5,525 6,000
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 5.15% variable rate 3,440 3,440
Notes payable to banks
due November 1, 2003 at 11.8% 95 172
------- -------
26,233 27,228
Less current maturities 978 925
------- -------
$25,255 $26,303
======= =======
At December 30, 1995, Industrial Development Bond proceeds of $6,742,000
are included in Other Assets. Certain long-term obligations are
collateralized by property, plant and equipment with a net book value of
$16,139,000 at December 30, 1995.
Maturities of long-term obligations during each of the five fiscal years
ending 2000 are: 1996--$978,000; 1997--$1,488,000; 1998--$1,475,000;
1999--$1,585,000; and 2000--$1,690,000. Industrial Development Bonds
include capital lease obligations of $7,673,000 at December 30, 1995.
Aggregate future minimum capital lease payments at December 30, 1995, are
$11,163,000 including interest of $3,490,000.
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 $42,409,000 at
December 30, 1995, were unrestricted. At December 30, 1995, the Company
had outstanding letters of credit totaling $7,850,000.
Interest paid was $1,730,000 in 1995, $1,565,000 in 1994, and $1,420,000
in 1993.
The Company had lines of credit aggregating $30,000,000 available at
December 30, 1995. 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 December 30, 1995.
<PAGE>
NOTE C -- MARKETABLE SECURITIES
Baldor currently invests in only high quality, short-term investments
which it classifies as available-for-sale. As such, there were no
significant differences between amortized cost and estimated fair value at
December 30, 1995 or December 31, 1994. Additionally, because investments
are short-term and are generally allowed to mature, realized gains and
loss for both years have been minimal.
The following table presents the estimated fair value breakdown of
investment by category.
December 30, December 31,
1995 1994
------------ ------------
(In thousands)
Municipal debt securities $18,079 $ 4,164
U.S.corporate debt securities 10,970 17,171
U.S.Treasury & agency securities 2,938 5,647
Other debt securities 4,871 1,976
------- -------
36,858 28,958
Less cash equivalents 8,371 2,962
------- -------
$28,487 $25,996
======= =======
The estimated fair value of debt and marketable equity securities at
December 30, 1995 was $23,552,000 due in one year or less, $1,997,000 due
in one to three years, and $2,938,000 due after three years. Because of
the short-term nature of the investments, expected maturities and
contractual maturities are normally the same.
<PAGE>
NOTE D -- INCOME TAXES
The Company made income tax payments of $21,643,000 in 1995, $18,830,000
in 1994, and $13,219,000 in 1993. Income tax expense consists of the
following:
1995 1994 1993
---- ---- ----
(in thousands)
Current: Federal $19,125 $18,679 $12,906
State 2,614 1,757 1,429
Foreign 776 566 448
Deferred (1,874) (4,149) (1,839)
------- ------- -------
$20,641 $16,853 $12,944
======= ======= =======
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax 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:
1995 1994 1993
---- ---- ----
Statutory federal income tax rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 3.3 3.4 3.4
Other 0.7 0.6 1.6
---- ---- ----
Effective income tax rate 39.0% 39.0% 40.0%
<PAGE>
NOTE E -- FINANCIAL DERIVATIVES
Hedging of Foreign Exchange Risks
- ---------------------------------
As a result of having various foreign operations, the Company engages in
a limited amount of hedging to minimize the effects of fluctuating
foreign currencies on its intercompany pricing. The Company's investment
in foreign currency options is included in Other Current Assets at cost,
less realized gains deferred, and is amortized to Other Income over the
period in which intercompany sales to foreign affiliates occur; generally
within the following twelve months.
At December 30, 1995 and December 31, 1994 the investments in foreign
currency derivatives were not significant.
Hedging of Copper and Aluminum Requirements
- -------------------------------------------
The Company purchases significant amounts of copper and aluminum, key
ingredients in its motor production, under short-term firm price
contracts which are renegotiated annually. In order to hedge itself from
exposure to price fluctuations on these two metals, the Company purchases
various options, the cost of which is carried in Other Current Assets,
net of realized gains deferred, and is amortized to Cost of Goods Sold
over the period that the metal is used.
The net unamortized costs with respect to the Company's metal hedging
programs were not material at December 30, 1995 and December 31, 1994.
<PAGE>
NOTE F -- SHAREHOLDERS' EQUITY
On August 7, 1995, the Company's Board of Directors authorized a three-
for-two stock split effected in the form of a 50% stock dividend payable
September 6, 1995 to shareholders of record on August 18, 1995. This
resulted in the issuance of 9,228,086 additional shares of common stock.
All per share and weighted average share amounts have been restated to
reflect this stock split.
The Company maintains a shareholder rights plan intended to encourage a
potential acquiror to negotiate directly with the Board of Directors.
The purpose of the plan is to ensure the best possible treatment for all
shareholders. Under the terms of the plan, one Common Stock Purchase
Right (a Right) is associated with each outstanding share of common
stock. If an acquiring person acquires 20% or more of the Baldor common
stock then outstanding, the Rights become exercisable and would cause
substantial dilution. Effectively, each such Right would entitle its
holder (excluding the 20% owner) to purchase shares of Baldor common
stock for half of the then current market price, subject to certain
restrictions per the plan. Until a Right is exercised, the holder of the
Right is not entitled to any of the benefits of being a shareholder of
the Company.
NOTE G -- SUBSEQUENT EVENTS
On February 16, 1996, Baldor purchased 2,000,000 shares of its common
stock from the estate of Mr. G. A. Shock for $19.00 per share. This
purchase was at a discount to the market and was funded with a mid-term
bank loan.
At their February 5, 1996 meeting, the Board of Directors updated the
shareholder rights plan by extending the expiration date to May 2008 and
by modifying certain other plan definitions to make the plan more
effective.
<PAGE>
NOTE H -- STOCK PLANS
The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees. The Company
has four plans under which various types of stock options may be granted.
Additionally, the Company has one plan that expired November 9, 1991
except as to options then outstanding.
Under two plans, the Company has granted non-compensatory stock options
to employees and district managers at prices equal to market value at the
date of grant. Outstanding options expire either five or ten years from
the date of grant. There are no charges to income in connection with the
non-compensatory stock option plans.
In addition to the two non-compensatory plans, there are three
compensatory plans which are administered by the Option 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
incentive options to purchase shares at prices not less than market value
at the date of grant and non-qualified options to purchase shares of
restricted stock at 50% of the stock's market value at the date of grant.
Restrictions lapse on these shares after five years or if the Company is
acquired. Related compensaton expense is amortized over the restriction
period.
A summary of information regarding the stock plans follows:
NUMBER OF SHARES
---------------------------------------
Non-
Compensatory Compensatory
Total Plans Plans
--------- ------------ ------------
Shares available for grant 7,343,700 3,413,700 3,930,000
Options outstanding:
Balance at January 1, 1995,
at $2.701-$17.667 per share 2,258,118 866,991 1,391,127
Granted at $8.958-$19.583 per share 314,100 314,100
Exercised at $2.778-$18.083 per share (461,839) (229,763) (232,076)
Canceled at $12.569-$18.083 per share (21,750) (21,750)
--------- --------- ---------
Balance at December 30, 1995,
at $2.701-$19.583 per share 2,088,629 637,228 1,451,401
========= ========= =========
Shares exercisable at
December 30, 1995 1,602,260 594,291 1,007,969
Shares reserved for future grants:
December 31, 1994 1,974,288 149,400 1,824,888
December 30, 1995 1,678,967 149,400 1,529,567
<PAGE>
NOTE I -- OPERATING LEASES
The Company leases certain computers, buildings, and other equipment
under operating lease agreements. Related rental expense was $4,300,000
in 1995, $3,900,000 in 1994, and $3,500,000 in 1993. Future minimum
payments for operating leases having noncancelable lease terms in excess
of one year are: 1996--$2,123,000, 1997--$1,982,000, 1998--$846,000,
1999--$726,000, 2000--$688,000; and decline substantially thereafter.
NOTE J -- 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:
1995 1994 1993
---- ---- ----
(in thousands)
Net Sales:
United States Companies
Domestic customers $407,078 $363,548 $308,949
Export customers 25,068 21,232 19,262
-------- -------- --------
432,146 384,780 328,211
Foreign Affiliates 40,957 33,372 28,384
-------- -------- --------
$473,103 $418,152 $356,595
======== ======== ========
Earnings Before Income Taxes:
United States Companies $ 51,723 $ 41,508 $ 30,746
Foreign Affiliates 1,223 1,704 1,624
-------- -------- --------
$ 52,946 $ 43,212 $ 32,370
======== ======== ========
Assets:
United States Companies $285,381 $261,984 $218,509
Foreign Affiliates 28,081 21,171 19,441
-------- -------- --------
$313,462 $283,155 $237,950
======== ======== ========
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 are recorded in the Cumulative Translation
Adjustment account in shareholders' equity.
<PAGE>
SHAREHOLDERS AND BOARD OF DIRECTORS
BALDOR ELECTRIC COMPANY AND AFFILIATES
We have audited the accompanying consolidated balance sheets of Baldor
Electric Company and affiliates as of December 30, 1995 and December 31,
1994, and the related consolidated statements of earnings, cash flows and
shareholders' equity for each of the three years in the period ended
December 30, 1995. 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 affiliates at December 30, 1995, and December
31, 1994, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 30, 1995,
in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
- ---------------------
St. Louis, Missouri
February 2, 1996
Except for Note G, as
to which the date is
February 16, 1996
<PAGE>
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 LLP, 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 LLP, independent certified public accountants, have audited
Baldor's financial statements. Management has made available to Ernst &
Young LLP all the corporation's financial records and related data, as
well as the minutes of shareholders' and directors' meetings.
/s/ R. S. Boreham, Jr.
-------------------------------------
R. S. Boreham, Jr.
Chairman of the Board and
Chairman of the Executive Committee
/s/ R. L. Qualls
-------------------------------------
R. L. Qualls
President and Chief Executive Officer
/s/ Lloyd G. Davis
-------------------------------------
Lloyd G. Davis
Chief Financial Officer,
Vice President - Finance,
Secretary, and Treasurer
<PAGE>
SHAREHOLDER INFORMATION
DIVIDEND POLICY
To periodically increase dividends as earnings and financial strength
warrant, but also to reinvest a major portion of earnings to help finance
growth opportunities. The objective being for shareholders to obtain
dividend increases over time, while also participating in the growth of
the Company.
DIVIDENDS PAID 1995 1994 1993
1st quarter $ .08 $ .06 $ .05
2nd quarter .08 .07 .05
3rd quarter .09 .07 .06
4th quarter .09 .08 .07
----- ----- -----
Year $ .34 $ .28 $ .23
COMMON STOCK PRICE RANGE
NYSE SYMBOL-BEZ
1995 1994
---------------------- -----------------------
High Low High Low
1st quarter 19-1/2 17-1/4 18-3/8 15-1/8
2nd quarter 19-7/8 18-3/8 16-1/2 14-1/8
3rd quarter 26-1/2 19-1/8 16-1/2 14-5/8
4th quarter 25-1/4 20 18 16-1/8
SHAREHOLDERS
3,981 at December 30, 1995 including shareholders of record and employees
through benefit plans.
<PAGE>
DIRECTORS & OFFICERS
(Photo)
Roland S. Boreham, Jr. Chairman of the Board
Director since 1961
(Photo)
R. L. Qualls President and Chief Executive Officer
Director since 1987
(Photo)
Jefferson W. Asher, Jr. Independent Management Consultant
Director since 1973
(Photo)
Fred C. Ballman Former Chairman and
Chief Executive Officer (retired)
Director from 1944 to 1982 and since 1992
(Photo)
O. A. Baumann Former Manufacturer's Representative
for the Company (retired)
Director since 1961
(Photo)
Robert J. Messey Senior Vice President, Chief Executive Officer
and Director of Sverdrup Corporation
Director since 1993
(Photo)
Robert L. Proost Corporate Vice President and Director of
Administration of A.G. Edwards & Sons, Inc.
Director since 1988
(Photo)
Willis J. Wheat Professor of Management and Marketing
at Oklahoma City University
Director since 1991
(Photo)
Theodore W. Atkins Vice President - Industry Relations &
Governmental Affairs
(Photo)
D. Christine Clemons Controller
(Photo)
Charles H. Cramer Vice President - Personnel
(Photo)
Lloyd G. Davis Vice President - Finance,
Chief Financial Officer,
Secretary, and Treasurer
(Photo)
Gene J. Hagedorn Vice President - Materials
(Photo)
James R. Kimzey Vice President - Research & Engineering
(Photo)
John A. McFarland Vice President - Sales
<PAGE>
(Photo)
Robert L. Null, Jr. Vice President - Manufacturing
(Photo)
Jerry D. Peerbolte Vice President - Marketing
EXHIBIT 21
BALDOR ELECTRIC COMPANY AND AFFILIATES
AFFILIATES OF THE REGISTRANT
PLACE OF ORGANIZATION NATURE OF
NAME OF AFFILIATE OR INCORPORATION OWNERSHIP
- ----------------- --------------------- ---------
Baldor of Arkansas Arkansas 100%
Baldor of Nevada, Inc. Nevada 100%
BEC Business Trust Massachusetts 100% (1)
Baldor of Texas, L.P Texas 100% (2)
Baldor International, Inc. U.S.Virgin Islands 100%
Carolina Capacitors, Inc. South Carolina 100%
Southwestern Die Casting Co.,Inc. Arkansas 100%
Sweo Controls, Inc. Washington 100%
Baldor Holdings, Inc. Delaware 100%
Baldor de Mexico,S.A.de C.V. Mexico 100% (3)
Baldor ASR, AG Switzerland 100% (3)
Baldor ASR GmbH fuer Antriebstechnik Germany 100% (3)
Baldor ASR U.K. Limited United Kingdom 100% (3)
Baldor Italia S.R.L. Italy 100% (4)
Australian Baldor Pty. Limited Australia 60%
Baldor Electric (Far East) PTE. Ltd. Singapore 60%
Baldor Electric (Thailand) Ltd. Thailand 100% (5)
Baldor Industrial Automation PTE.Ltd. Singapore 100% (5)
Baldor Electric (Indonesia) Ltd. Indonesia 100% (5)
(1) 100% owned by Baldor of Nevada
(2) 99% owned by BEC Business Trust (LP) and 1% owned by Baldor of
Arkansas (GP)
(3) 100% owned by Baldor Holdings, Inc.
(4) 98% owned by Baldor Holdings, Inc., 2% owned by Baldor ASR GmbH fuer
Antriebstechnik.
(5) 100% owned by Baldor Electric (Far East) PTE. Ltd.
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 affiliates of our report dated
February 2, 1996 (except for Note G, as to which the date is February 16,
1996), included in the 1995 Annual Report to Shareholders of Baldor
Electric Company and affiliates.
Our audits also included the financial statement schedules of Baldor
Electric Company and affiliates 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, (Form S-8, No. 33-36421) pertaining to the Baldor Electric
Company 1989 Stock Option Plan for Non-Employee Directors and (Forms S-8,
No. 33-59281 and No. 33-60731) pertaining to the Baldor Electric Company
1994 Incentive Stock Plan of our report dated February 2, 1996, (except
for Note G, as to which the date is February 16, 1996), 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 (Form 10-K)
of Baldor Electric Company and affiliates.
/s/ Ernst & Young LLP
- ---------------------
St. Louis, Missouri
March 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Audited amounts from fiscal year ended December 30, 1995.
</LEGEND>
<CIK> 0000009342
<NAME> BALDOR ELECTRIC COMPANY
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<FISCAL-YEAR-END> DEC-30-1995 DEC-31-1994
<PERIOD-END> DEC-30-1995 DEC-31-1994
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<NET-INCOME> 32305 26359
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