SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 29, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period
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Commission File Number 1-7284
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BALDOR ELECTRIC COMPANY
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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 Street, Fort Smith, Arkansas 72901
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(Address of principal executive offices) (Zip Code)
(501) 646-4711
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(Registrant's Telephone Number, including Area Code)
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
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At June 29, 1996, there were 26,093,864 shares of the registrant's common
stock outstanding.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 29 JULY 1 JUNE 29 JULY 1
1996 1995 1996 1995
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(In thousands, except share data)
Net sales $129,906 $121,839 $251,459 $236,424
Other income (net) 718 578 1,453 1,106
-------- -------- -------- --------
130,624 122,417 252,912 237,530
Cost and expenses:
Cost of goods sold 91,481 86,141 177,223 167,168
Selling and
administrative 21,861 20,585 42,453 40,029
Profit sharing 1,839 1,822 3,634 3,576
Interest 855 321 1,475 639
-------- -------- -------- --------
116,036 108,869 224,785 211,412
-------- -------- -------- --------
Earnings before income
taxes 14,588 13,548 28,127 26,118
Income taxes 5,617 5,287 10,829 10,186
-------- -------- -------- --------
Net earnings $ 8,971 $ 8,261 $ 17,298 $ 15,932
======== ======== ======== ========
Net earnings per common
share $0.33 $0.29 $0.63 $0.55
===== ===== ===== =====
Dividends paid per common
share $0.10 $0.08 $0.19 $0.16
===== ===== ===== =====
Weighted average common
shares outstanding 27,023,304 28,810,113 27,424,330 28,739,501
========== ========== ========== ==========
See the notes to the unaudited condensed consolidated financial statements.
<PAGE> -2-
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BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 29 DECEMBER 30
1996 1995
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ASSETS (In thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 1,739 $ 6,322
Marketable securities 17,098 28,487
Receivables, less allowances of
$3,100 and $2,800, respectively 83,624 77,768
Inventories:
Finished products 66,200 61,681
Work-in-process 11,980 11,978
Raw materials 37,175 36,972
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115,355 110,631
LIFO valuation adjustment (deduction) (26,270) (26,942)
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89,085 83,689
Other current and deferred tax assets 16,070 15,829
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TOTAL CURRENT ASSETS 207,616 212,095
OTHER ASSETS 13,012 12,296
PROPERTY, PLANT AND EQUIPMENT 188,521 182,214
Allowances for depreciation and
amortization (deduction) (99,750) (93,143)
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88,771 89,071
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$ 309,399 $ 313,462
========= =========
The Condensed Consolidated Balance Sheet at December 30,1995, has been derived
from the audited Consolidated Balance Sheet at that date.
Also see the notes to the unaudited condensed consolidated financial statements.
<PAGE> - 3 -
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 29 DECEMBER 30
1996 1995
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LIABILITIES AND SHAREHOLDERS' EQUITY (In thousands)
CURRENT LIABILITIES:
Accounts payable $ 19,929 $ 18,996
Employee compensation 4,976 5,110
Profit sharing 3,634 7,168
Anticipated warranty costs 4,400 4,100
Accrued insurance obligations 13,853 12,627
Other accrued expenses 13,875 16,080
Income taxes 409 1,967
Current maturities of long-term
obligations 652 978
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TOTAL CURRENT LIABILITIES 61,728 67,026
LONG-TERM OBLIGATIONS 50,559 25,255
DEFERRED INCOME TAXES 9,520 9,804
SHAREHOLDERS' EQUITY:
Common stock 2,842 2,817
Additional capital 34,882 32,476
Retained earnings 194,716 182,354
Cumulative translation adjustments 477 1,246
Treasury stock, at cost (45,325) (7,516)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 187,592 211,377
-------- --------
$309,399 $313,462
======== ========
The Condensed Consolidated Balance Sheet at December 30, 1995, has been derived
from the audited Balance Sheet at that date.
Also see the notes to the unaudited condensed consolidated financial statements.
<PAGE> - 4 -
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
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June 29 July 1
1996 1995
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(In thousands)
Operating activities:
Net earnings $17,298 $15,932
Depreciation and amortization 8,429 7,086
Deferred income taxes (3,844) (1,912)
Changes in operating assets and liabilities:
Receivables (6,156) (7,590)
Inventories (5,396) (11,864)
Other current assets 3,319 2,138
Accounts payable 933 (534)
Accrued expenses and other liabilities (4,347) (3,598)
Income taxes (1,558) 131
Other (net) (1,937) 2,080
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Net cash provided by operating activities 6,741 1,869
Investing activities:
Additions to property, plant and equipment (7,899) (10,816)
Sales of available-for-sale securities 27,085 30,307
Purchases of available-for-sale securities (15,696) (21,214)
------- --------
Net cash provided by (used in) investing
activities 3,490 (1,723)
Financing activities:
Additional long-term borrowings 38,000
Reduction of long-term obligations (13,022) (835)
Unexpended debt proceeds 522 5,373
Dividends paid (4,936) (4,411)
Stock option plans 2,005 853
Common stock repurchased (40,925)
Contributions to benefit plans 3,542
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Net cash provided by (used in) financing
activities (14,814) 980
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Net increase (decrease) in cash and cash
equivalents (4,583) 1,126
Beginning cash and cash equivalents 6,322 8,848
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Ending cash and cash equivalents $ 1,739 $ 9,974
======= =======
See the notes to the unaudited condensed consolidated financial statements.
<PAGE> - 5 -
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 29, 1996
BASIS OF PRESENTATION: The unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements, and therefore should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 30, 1995. In the opinion of management, all adjustments (consisting
only of normal recurring items) considered necessary for a fair presentation
have been included. The results of operations for the six months ended June
29, 1996, may not be indicative of the results that may be expected for the
fiscal year ending December 28, 1996.
RECLASSIFICATION: The Company has reclassified the presentation of certain
prior year information to be consistent with the presentation in the current
year.
<PAGE> - 6 -
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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RESULTS OF OPERATIONS
For the eighteenth consecutive quarter, sales and earnings set records for
both the quarter and the year-to-date periods. Sales for the second quarter
of 1996 were $129,906,000, up 6.6% over sales of $121,839,000 for the second
quarter of 1995. Year-to-date 1996 sales of $251,459,000 were up 6.4% over
year-to-date 1995 sales of $236,424,000. International sales (exports and
sales by foreign affiliates), which comprise 14.3% of total year-to-date
sales, were up 17.3% in the second quarter and up 17.1% year-to-date over the
same periods in 1995.
Sales growth was broad-based with growth across several product lines,
industries, and geographic regions. Both distributor and OEM sales increased
for the quarter and year-to-date. There continued to be a good balance between
distributor and OEM sales for the first six months. Year-to-date 1996 sales of
drives (motors + controls) increased at over four times the overall rate of
sales. Year-to-date 1996 pricing increased over year-to-date 1995 levels by
over 3%.
Second quarter 1996 net earnings of $8,971,000 were up 8.6% over second
quarter 1995 and year-to-date 1996 net earnings of $17,298,000 were also up
8.6% over the first six months of 1995. Earnings per common share were $0.33
for the second quarter of 1996 and $0.63 for the first six months of 1996, up
13.8% and 14.5% respectively over 1995 amounts. Earnings per common share
increased more than net earnings due to the share buy-back program in place
during 1996. Through the first six months of 1996, 2,154,000 common shares
have been repurchased including the 2,000,000 common shares repurchased from
the Estate of Mr. G. A. Schock in February.
The second quarter 1996 gross margin was 29.6% and the year-to-date 1996
gross margin was 29.5% compared to 29.3% for both the second quarter of 1995
and year-to-date 1995. For the quarter and the year, margins have benefitted
from flattening material costs and the effects of productivity and other cost
improvements.
Second quarter 1996 selling and administrative expenses at 16.8% were down
slightly from the 16.9% level where they had remained for several quarters.
This was the best leverage for selling and administrative expenses since
1984.
LIQUIDITY AND CAPITAL RESOURCES
Through the first six months of 1996, the Company's financial position remained
solid. Cash and marketable securities were at $18.8 million compared to
$34.8 million at year-end 1995, even considering the stock repurchase so far
this year, and after paying down $13.0 million of debt. Working capital
increased to $145.9 million at June 29, 1996, from $145.1 million at December
30, 1995. The current ratio at June 29, 1996, remained strong at 3.4 compared
to 3.2 at December 30, 1995 and the debt-to-capitalization ratio (shareholders'
equity and long-term borrowings) was 21.2%.
<PAGE> - 7 -
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
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On May 4, 1996, the Company held its Annual Meeting of Shareholders at which
two proposals were voted on. Proposal I was the election of three Directors
to the Company's Board of Directors for terms expiring in 1999. Proposal II
was a proposal to adopt the Baldor Electric Company 1996 Stock Option Plan
for Non-employee Directors as contained in the Company's Proxy Statement
dated March 28, 1996. The following is a list of the Board's slate of
nominees (who were the only nominees) each of whom were elected, and the
results of shareholder voting on proposal II:
Votes Votes Votes Broker
Proposal FOR AGAINST WITHHELD NON-VOTES
- --------------------- ------------ --------- ---------- ----------
Proposal I
Jefferson W. Asher, Jr. 22,556,612 N/A 358,892 N/A
Robert J. Messey 22,559,346 N/A 356,158 N/A
Willis J. Wheat 22,545,232 N/A 370,272 N/A
Proposal II 19,442,698 3,142,803 330,003 N/A
Messers Fred C Ballman; O.A. Baumann; R.S. Boreham, Jr.; Robert L. Proost;
and R.L. Qualls are the remaining board members, each of whom is expected to
serve out his respective term.
Item 6. Exhibits and Reports on Form 8-K
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a. Exhibits - See the Exhibit Index
b. The registrant did not file any reports on Form 8-K during the most
recently completed fiscal quarter.
S I G N A T U R E S
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Pursuant to the requirements 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)
August 12, 1996 By: /s/ Lloyd G. Davis
- --------------------- -----------------------------
(Date) Lloyd G. Davis - Chief Financial
Officer and Vice-President -
Finance (on behalf of the
Registrant and as principal
financial officer)
<PAGE> - 8 -
<PAGE>
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of Item 601
of Regulation S-K.
Exhibits
Number
- -------- --------------------------------------------------------
2 Omitted - Inapplicable
3(i) Omitted - Inapplicable
3(ii) Omitted - Inapplicable
4 Omitted - Inapplicable
10(iii)(A) The Baldor Electric Company's 1996 Stock Option Plan for
Non-employee Directors originally filed as Exhibit "A" to
Registrant's Proxy Statement filed on March 28, 1996, is
incorporated herein by reference
11 Computation of Earnings Per Common Share - filed herewith
15 Omitted - Inapplicable
18 Omitted - Inapplicable
19 Omitted - Inapplicable
22 Omitted - Inapplicable
23 Omitted - Inapplicable
24 Omitted - Inapplicable
27 Financial Data Schedules - filed herewith
99 Omitted - Inapplicable
<PAGE>
EXHIBIT 11
BALDOR ELECTRIC COMPANY AND AFFILIATES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS SIX MONTHS
ENDED ENDED
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June 29 July 1 June 29 July 1
1996 1995 1996 1995
(In thousands, except per share data)
Primary
Weighted average shares outstanding 26,044 27,583 26,470 27,543
Dilutive stock options based on the
treasury stock method using the
average market price 979 1,227 954 1,197
-------- ------- ------- -------
Total 27,023 28,810 27,424 28,740
======== ======= ======= =======
Net Earnings $ 8,971 $ 8,261 $ 17,298 $15,932
======== ======= ======== =======
Per Share Earnings $ 0.33 $ 0.29 $ 0.63 $ 0.55
======== ======= ======== =======
Fully Diluted
Weighted average shares outstanding 26,044 27,583 26,470 27,543
Dilutive stock options based on the
treasury stock method using the
year-end market price, if higher
than average market price 1,034 1,210 1,034 1,210
-------- ------- -------- -------
Total 27,078 28,793 27,504 28,753
======== ======= ======== =======
Net Earnings $ 8,971 $ 8,261 $ 17,298 $15,932
======== ======= ======== =======
Per Share Earnings $ 0.33 $ 0.29 $ 0.63 $ 0.55
======== ======= ======== =======
<PAGE>
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<NAME> BALDOR ELECTRIC COMPANY
<MULTIPLIER> 1000
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<PERIOD-END> JUN-29-1996
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<COMMON> 2842
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