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 28, 1997.
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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 72908
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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 28, 1997, there were 26,867,158 shares of the registrant's
common stock outstanding.
<PAGE>
<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 28 JUNE 29 JUNE 28 JUNE 29
1997 1996 1997 1996
------------------- --------------------
(In thousands, except share data)
Net sales $141,929 $129,906 $271,842 $251,459
Other income (net) 408 718 983 1,453
--------- --------- -------- --------
142,337 130,624 272,825 252,912
Cost and expenses:
Cost of goods sold 99,088 91,481 189,925 177,223
Selling and
administrative 23,745 21,861 45,447 42,453
Profit sharing 2,261 1,839 4,347 3,634
Interest 567 855 1,155 1,475
--------- --------- -------- --------
125,661 116,036 240,874 224,785
--------- ---------- -------- --------
Earnings before income
taxes 16,676 14,588 31,951 28,127
Income taxes 6,418 5,617 12,301 10,829
--------- --------- -------- -------
Net earnings $ 10,258 $ 8,971 $ 19,650 $ 17,298
========= ========= ======== ========
Net earnings per common
share $0.37 $0.33 $0.71 $.063
===== ===== ===== =====
Dividends paid per common
share $0.12 $0.10 $0.23 $0.19
===== ===== ===== =====
Weighted average common
shares outstanding 27,875,000 27,023,000 27,550,000 27,424,000
=========== ========== ========== ==========
See the notes to the unaudited condensed consolidated financial
statements.
<PAGE> -2-
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 28 DECEMBER 28
1997 1996
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ASSETS (In thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 5,746 $ 7,950
Marketable securities 15,918 17,892
Receivables, less allowances of
$3,525,000 and $3,200,000,
respectively 90,097 80,183
Inventories:
Finished products 69,414 66,528
Work-in-process 12,897 13,483
Raw materials 35,844 39,162
--------- ---------
118,155 119,173
LIFO valuation adjustment (deduction) (26,595) (26,786)
--------- ---------
91,560 92,387
Other current and deferred tax assets 14,533 19,745
--------- --------
TOTAL CURRENT ASSETS 217,854 218,157
OTHER ASSETS 32,331 11,965
PROPERTY, PLANT AND EQUIPMENT 210,064 202,470
Allowances for depreciation and
amortization (deduction) (115,335) (107,106)
--------- --------
94,729 95,364
--------- --------
$344,914 $325,486
========= ========
The Condensed Consolidated Balance Sheet at December 28, 1996, 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 28 DECEMBER 28
1997 1996
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LIABILITIES AND SHAREHOLDERS' EQUITY (In thousands)
CURRENT LIABILITIES:
Accounts payable $ 21,564 $ 20,314
Employee compensation 5,218 5,932
Profit sharing 4,347 7,645
Anticipated warranty costs 5,200 4,500
Accrued insurance obligations 14,801 14,286
Other accrued expenses 20,496 16,626
Income taxes 3,247 766
Current maturities of long-term obligations 1,125 1,113
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TOTAL CURRENT LIABILITIES 75,998 71,182
LONG-TERM OBLIGATIONS 36,471 45,027
DEFERRED INCOME TAXES 3,989 8,952
SHAREHOLDERS' EQUITY:
Common stock 2,874 2,862
Additional capital 41,936 37,112
Retained earnings 220,605 207,064
Cumulative translation adjustments (259) 346
Treasury stock, at cost (36,700) (47,059)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 228,456 200,325
--------- ---------
$ 344,914 $ 325,486
========= =========
The Condensed Consolidated Balance Sheet at December 28, 1996, has been
derived from the audited Consolidated 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
June 28 June 29
1997 1996
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(In thousands)
Operating activities:
Net earnings $19,650 $17,298
Depreciation and amortization 9,295 8,429
Deferred income taxes (2,110) (3,844)
Changes in operating assets and liabilities:
Receivables (8,651) (6,156)
Inventories 1,801 (5,396)
Other current assets 2,397 3,319
Accounts payable 536 933
Accrued expenses and other liabilities 2,039 (805)
Income taxes 2,108 (1,558)
Other (net) (1,908) (1,937)
------- --------
Net cash provided by operating activities 25,157 10,283
Investing activities:
Additions to property, plant and equipment (7,907) (7,899)
Sales of available-for-sale securities 9,486 27,085
Purchases of available-for-sale securities (7,512) (15,696)
Optimised Control Ltd. (7,597)
------- -------
Net cash provided by (used in)
investing activities (13,530) 3,490
Financing activities:
Additional long-term borrowings 38,000
Reduction of long-term obligations (8,544) (13,022)
Unexpended debt proceeds (184) 522
Dividends paid (6,109) (4,936)
Stock option plans 1,006 2,005
Common stock repurchased (40,925)
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Net cash used in financing activities (13,831) (18,356)
-------- --------
Net decrease in cash and cash equivalents (2,204) (4,583)
Beginning cash and cash equivalents 7,950 6,322
------- -------
Ending cash and cash equivaelnts $ 5,746 $ 1,739
======= =======
See notes to unaudited condensed consolidated financial statements.
<PAGE> -5-
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 28, 1997
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 28, 1996. 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 28, 1997, may not be indicative of the results that
may be expected for the fiscal year ending January 3, 1998.
ACCOUNTING PRONOUNCEMENTS: In February 1997, the Financial
Accounting Standards Board issued Statement No. 128, Earnings Per
Share, which is required to be adopted on December 31, 1997. At
that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all
prior periods. Under the new requirements for computing primary
earnings per share, the dilutive effect of stock options will be
excluded. The impact of Statement No. 128 on the calculation of
primary earnings per share and fully diluted earnings per share
for these quarters is not expected to be material.
In June 1997, the FASB issued Statement No. 130, Reporting
Comprehensive Income. The Statement establishes standards for
the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements.
The Statement is effective for the Company in 1998. The Company
does not anticipate that adoption of this Statement will have a
material impact on the current presentation of its financial
statements.
In June 1997, the FASB issued Statement No. 131, Disclosures
about Segments of an Enterprise and Related Information. The
Statement changes the way public companies report segment
information in annual financial statements and also requires
those companies to report selected segment information in interim
financial reports to shareholders. The proposal superseded FASB
Statement No. 14 on segments. The Statement is effective for the
Company in 1998. The Company is currently evaluating the impact
that the Statement will have on its reporting.
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>
ACQUISITION: On April 5, 1997, Baldor Electric Company acquired
Optimised Control Ltd. ("Optimised") with a combination of cash
and Baldor Common Stock. The acquisition of Optimised has been
accounted for using the purchase method of accounting and
beginning April 5, 1997, the results of Optimised's operations
are included in the accompanying statement of income. The
results of Optimised's operations in the periods presented prior
to April 5, 1997, were not material to the Company.
<PAGE> -7-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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RESULTS OF OPERATIONS
For the 22nd consecutive quarter, sales and earnings set records
for both the quarter and the year-to-date periods. Sales for the
second quarter of 1997 were $141,929,000, up 9.3% over sales of
$129,906,000 for the second quarter of 1996. Year-to-date 1997
sales of $271,842,000 were up 8.1% over year-to-date 1996 sales
of $251,459,000. International sales (exports and sales by
foreign affiliates), which comprise 13.4% of total year-to-date
sales, were about flat for the second quarter and for year-to-
date over the same periods in 1996.
Sales growth was broad-based with growth across many product
lines, industries, and geographic regions. Sales growth in North
America was strong, up approximately 12%; however, European sales
performance was not up to expectations. The corrective actions
taken are expected to yield better European sales results in the
second half of 1997. Both distributor and OEM sales increased
for the quarter and year-to-date. Stronger increases in OEM sales
during 1997 have resulted in a shift between OEM and distributor
sales to approximately 52% and 48% of total sales, respectively.
Year-to-date sales of motor products were up approximately 10%
over year-to-date 1996, but year-to-date drives sales were down
approximately 4% over the same period of 1996. Pricing remained
firm in the first half of 1997 compared to 1996 levels. No price
increases have been announced since October 1995.
Second quarter 1997 net earnings of $10,258,000 were up 14.3%
over second quarter 1996 and year-to-date 1997 net earnings of
$19,650,000 were up 13.6% over the first six months of 1996.
Earnings per common share were $0.37 for the second quarter of
1997 and $0.71 for the first six months of 1997, up 12.1% and
12.7% respectively over 1996 amounts. Earnings per common share
increased less than net earnings due largely to the shares issued
to purchase Optimised Control Ltd.
The second quarter 1997 gross margin as a percent of sales was
30.2% and the year-to-date 1997 gross margin was 30.1% compared
to 29.6% for the second quarter of 1996 and 29.5% year-to-date
1996. For the quarter and the year, margins have benefitted from
steady material costs and the effects of productivity and other
cost improvements.
Second quarter 1997 selling and administrative expenses at 16.7%
of sales remained at the same level as first quarter 1997 and
second quarter 1996. This continues to be the best leverage for
selling and administrative expenses since 1984.
<PAGE> -8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Through the first six months of 1997, the Company's financial
position remained solid. Cash and marketable securities were at
$21.7 million compared to $25.8 million at year-end 1996.
Working capital decreased to $141.9 million at June 28, 1997,
from $146.9 million at December 28, 1996, due in part to the cash
used to purchase Optimised Control Ltd. in the second quarter.
The current ratio at June 28, 1997, remained strong at 2.9
compared to 3.1 at December 28, 1996 and the debt-to-
capitalization ratio (shareholders' equity and long-term
borrowings) was 13.8%.
<PAGE> - 9-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
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On May 3, 1997, 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 2000. Proposal II was a proposal
to amend the Baldor Electric Company 1994 Incentive Stock Plan
as contained in the Company's Proxy Statement dated March 27,
1997. 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
O. A. Baumann 21,209,521 N/A 373,606 N/A
John A. McFarland 21,213,299 N/A 369,828 N/A
Robert L. Proost 21,218,534 N/A 364,593 N/A
Proposal II 20,849,134 503,943 230,050 N/A
Messers Jefferson W. Asher, Jr., Fred C. Ballman, R.S. Boreham,
Jr., Robert J. Messey, R.L. Qualls and Willis J. Wheat, 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 filed a Form 8-K on April 18, 1997, to
report the exemption from registration under the
Securities Act of 1933 on which the registrant relied
when it issued Baldor Common Stock to the former
shareholders of Optimised Control Ltd.in connection with
the registrant's Acquisition of Optimised Control Ltd.
S I G N A T U R E S
-------------------------
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, 1997 By: /s/ Lloyd G. Davis
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(Date) Lloyd G. Davis - Chief Financial
Officer and Executive Vice-President -
Finance (on behalf of the Registrant
and as principal financial officer)
<PAGE> -10-
<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) Omitted - Inapplicable
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> -11-
EXHIBIT 11
BALDOR ELECTRIC COMPANY AND AFFILIATES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS SIX MONTHS
ENDED ENDED
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June 28 June 29 June 28 June 29
1997 1996 1997 1996
(In thousands, except per share data)
Primary
Weighted average shares outstanding 26,811 26,044 26,530 26,470
Dilutive stock options based on the
treasury stock method using the
average market price 1,064 979 1,020 954
------- ------- ------ ------
Total 27,875 27,023 27,550 27,424
======= ====== ====== ======
Net Earnings $10,258 $ 8,971 $19,650 $17,298
======= ======= ======= =======
Per Share Earnings $ 0.37 $ 0.33 $ 0.71 $ 0.63
======= ======= ======= =======
Fully Diluted
Weighted average shares outstanding 26,811 26,044 26,530 26,470
Dilutive stock options based on the
treasury stock method using the
year-end market price, if higher
than average market price 1,155 1,034 1,155 1,034
------ ------ ------ ------
Total 27,966 27,078 27,685 27,504
====== ====== ====== ======
Net Earnings $10,258 $ 8,971 $19,650 $17,298
======= ======= ======= =======
Per Share Earnings $ 0.37 $ 0.33 $ 0.71 $ 0.63
======= ======= ======= =======
<PAGE>
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<NAME> BALDOR ELECTRIC COMPANY
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