<PAGE>
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
March 29,1997.
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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 March 29, 1997, there were 26,366,280 shares of the registrant's
common stock outstanding.
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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
MARCH 29 MARCH 30
1997 1996
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(In thousands, except share data)
Net sales $129,914 $121,553
Other income (net) 575 735
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130,489 122,288
Cost and expenses:
Cost of goods sold 90,837 85,742
Selling and administrative 21,702 20,592
Profit sharing 2,086 1,795
Interest 590 620
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115,215 108,749
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Earnings before income taxes 15,274 13,539
Income taxes 5,882 5,212
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Net earnings $ 9,392 $ 8,327
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Net earnings per common share $ 0.34 $ 0.30
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Dividends paid per common share $ 0.11 $ 0.09
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Weighted average common shares
outstanding 27,236,745 27,869,647
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See notes to unaudited condensed consolidated financial statements.
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BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 29 DECEMBER 28
1997 1996
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ASSETS (In thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 13,848 $ 7,950
Marketable securities 20,024 17,892
Receivables, less allowances of
$3,300,000 and $3,200,000,
respectively 84,690 80,183
Inventories:
Finished products 63,722 66,528
Work-in-process 13,755 13,483
Raw materials 39,089 39,162
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116,566 119,173
LIFO valuation adjustment
(deduction) (26,859) (26,786)
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89,707 92,387
Other current and deferred tax
assets 16,270 19,745
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TOTAL CURRENT ASSETS 224,539 218,157
OTHER ASSETS 12,822 11,965
PROPERTY, PLANT AND EQUIPMENT 204,737 202,470
Allowances for depreciation and
amortization (deduction) (111,018) (107,106)
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93,719 95,364
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$331,080 $325,486
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See notes to unaudited condensed consolidated financial statements.
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BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 29 DECEMBER 28
1997 1996
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LIABILITIES AND SHAREHOLDERS' EQUITY (In thousands)
CURRENT LIABILITIES:
Account payable $ 18,108 $ 20,314
Employee compensation 7,579 5,932
Profit sharing 2,086 7,645
Anticipated warranty costs 4,600 4,500
Accrued insurance obligations 14,094 14,286
Other accrued expenses 18,132 16,626
Income taxes 7,485 766
Current maturities of long-term
obligations 1,108 1,113
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TOTAL CURRENT LIABILITIES 73,192 71,182
LONG-TERM OBLIGATIONS 42,011 45,027
DEFERRED INCOME TAXES 6,470 8,952
SHAREHOLDERS' EQUITY:
Common stock 2,868 2,862
Additional capital 38,492 37,112
Retained earnings 213,569 207,064
Cumulative translation adjustments (328) 346
Treasury stock, at cost (45,194) (47,059)
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TOTAL SHAREHOLDERS' EQUITY 209,407 200,325
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$331,080 $325,486
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See notes to unaudited condensed consolidated financial
statements.
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BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ( UNAUDITED)
THREE MONTHS ENDED
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March 29 March 30
1997 1996
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(In thousands)
Operating activities:
Net earnings $ 9,392 $ 8,327
Depreciation 4,495 4,043
Deferred income taxes (1,042) (698)
Changes in operating assets
and liabilities:
Receivables (4,607) (3,464)
Inventories 2,679 (5,072)
Other current assets 2,035 4,048
Accounts payable (2,206) 3,576
Accrued expenses and other
liabilities (256) (1,597)
Income taxes 6,719 3,088
Other (net) (1,453) (517)
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Net cash provided by operating
activities 15,756 11,734
Investing activities:
Additions to property, plant
and equipment (2,730) (3,030)
Sales of available-for-sale securities 3,853 19,000
Purchases of available-for-sale
securities (5,985) (12,805)
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Net cash (used in) provided by
investing activities (4,862) 3,165
Financing activities:
Additional long-term borrowings 38,000
Reduction of long-term obligations (3,021) (29)
Unexpended bond proceeds (97) (93)
Dividends paid (2,887) (2,328)
Stock option plans 1,009 601
Common stock repurchased (40,110)
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Net cash used in financing
activities (4,996) (3,959)
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Net increase in cash and cash
equivalents 5,898 10,940
Beginning cash and cash equivalents 7,950 6,322
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Ending cash and cash equivalents $13,848 $17,262
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See notes to unaudited condensed consolidated financial statements.
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BALDOR ELECTRIC COMPANY AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 29, 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 three months ended March 29, 1997, may not be
indicative of the results that may be expected for the fiscal year
ending January 3, 1998.
EARNINGS PER SHARE: In February of 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
No. 128, Earnings per Share. This statement established standards
for computing and presents earnings per share (EPS) and is effective
for financial statements issued for periods ending after December
15, 1997, including interim periods. This statement requires
restatement of all prior-period EPS data presented. The company
does not believe the adoption of this statement in the fourth
quarter of 1997 will have a material impact on EPS.
RECLASSIFICATION: The Company has reclassified the presentation of
certain prior year information to be consistent with the presentation
in the current year.
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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 twenty-first consecutive quarter, sales and earnings set
records. Sales for the first quarter of 1997 were $129,914,000, up
6.9% over sales of $121,553,000 for the first quarter of 1996.
International sales (exports and sales by foreign affiliates), which
comprise 13.1% of first quarter sales, were up 1.7% over the same
period last year. Export sales remained solid, however, European
sales were disappointing and not up to expectations. Steps, including
strengthening the European management team, are currently being taken
to correct this situation.
Sales growth was broad-based with growth across many product lines,
industries, and geographic regions. North American sales increased
almost 10%. Sales of motor products were up 10.3% over first
quarter 1996, but drive sales were down 5.3% compared to first
quarter 1996. While both distributor and OEM sales increased for
the quarter, strong OEM sales in the quarter caused a shift between
OEM and distributor sales to approximately 52% and 48% of total sales,
respectively. Pricing remained firm in the first quarter. No price
increases have been announced since October 1995.
First quarter 1997 net earnings of $9,392,000 were up 12.8% over
first quarter 1996 net earnings of $8,327,000. The first quarter
1997 gross margin was 30.1% compared to 29.5% for the first quarter
of 1996. First quarter 1997 selling and administrative expense, as
a percent of sales, was 16.7% which was flat with the fourth quarter
of 1996, but down from 16.9% in the first quarter of 1996. For the
quarter, margins benefitted from flattening material costs and the
effects of productivity and other cost improvements.
LIQUIDITY AND CAPITAL RESOURCES
Through the first three months of 1997, the Company's financial
position remained strong. Cash and marketable securities of $33.9
million were up from $25.8 million at December 28, 1996. Working
capital increased to $151.3 million at March 29, 1997, from $146.9
million at December 28, 1996. The ratio of long-term borrowing to
total capitalization (shareholders' equity and long-term borrowings)
was 16.7% at March 29, 1997, compared to 18.4% at December 28, 1996.
This decrease reflects the continued reduction of the mid-term debt
used to fund the repurchase of 2,000,000 common shares from the
estate of Mr. G. A. Schock. The current ratio at March 29, 1997,
was 3.1 compared to 3.1 at December 28, 1996.
At its meeting on May 3, 1997, the Board of Directors declared a 9%
increase in the regular quarterly cash dividend to $0.12 per share
payable on June 30, 1997, to shareholders of record on June 9, 1997.
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On March 10, 1997, Baldor issued a press release that outlined the
Company's strategy for complying with the requirements of the Energy
Policy Act (EPAct). EPAct generally requires that all general-
purpose motors from 1 to 200 horsepower manufactured after October
24, 1997, for use in the United States meet certain efficiency
levels. Baldor will offer customers two broad lines of energy-
efficient motors; a standard line upgraded to EPAct efficiency
levels and Baldor's Super-E (R) line of premium-efficiency motors.
Baldor's upgrade effort will encompass nearly 1,000 stock motor
ratings and several thousand additional custom specifications.
Baldor regrets that the costs to comply with EPAct will ultimately
have to be passed along to its customers.
SUBSEQUENT EVENTS
On April 5, 1997, Baldor Electric Company acquired all of the
outstanding shares of Optimised Control Ltd ("Optimised") with a
combination of cash and Baldor Common Stock. Optimised,
headquartered in Bristol England, designs and markets an extensive
line of motion control products with annual revenues of about $7
million US, principally in the United Kingdom.
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<PAGE>
PART II. OTHER INFORMATION
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)
May 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)
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EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K.
Exhibits
Number
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2 Omitted - Inapplicable
3(i) Omitted - Inapplicable
3(ii) Omitted - Inapplicable
4 Omitted - Inapplicable
10 Omitted - Inapplicable
11 Computation of Earnings Per Common Share - filed
herewith
12 Omitted - Inapplicable
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
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EXHIBIT 11
BALDOR ELECTRIC COMPANY AND AFFILIATES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS ENDED
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MARCH 29 MARCH 30
1997 1996
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(In thousands, except per share data)
Primary
Weighted average shares outstanding 26,249 26,897
Dilutive stock options based on the
treasury stock method using the
average market price 988 973
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Total 27,237 27,870
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Net Earnings $ 9,392 $ 8,327
Per Share Earnings $ 0.34 $ 0.30
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Fully Diluted
Weighted average shares outstanding 26,249 26,897
Dilutive stock options based on the
treasury stock method using the
year-end market price, if higher
than average market price 977 949
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Total 27,226 27,846
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Net Earnings $ 9,392 $ 8,327
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Per Share Earnings $ 0.34 $ 0.30
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