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 September 27, 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 September 27, 1997, there were 26,949,747 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 NINE MONTHS ENDED
SEPTEMBER 27 SEPTEMBER 28 SEPTEMBER 27 SEPTEMBER 28
1997 1996 1997 1996
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(In thousands, except share data)
Net sales $142,494 $125,111 $414,336 $376,570
Other income (net) 401 578 1,384 2,032
--------- --------- --------- ---------
142,895 125,689 415,720 378,602
Cost and expenses:
Cost of goods sold 99,511 87,800 289,436 265,024
Selling and
administrative 23,928 20,993 69,375 63,446
Profit sharing 2,219 2,062 6,566 5,697
Interest 504 633 1,659 2,107
--------- --------- --------- ---------
126,162 111,488 367,036 336,274
--------- --------- --------- ---------
Earnings before income
taxes 16,733 14,201 48,684 42,328
Income taxes 6,442 5,467 18,742 16,296
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Net earnings $ 10,291 $ 8,734 $ 29,942 $ 26,032
========= ========= ========= =========
Net earnings per common
share $0.37 $0.32 $1.08 $0.95
===== ===== ===== =====
Dividends paid per common
share $0.12 $0.10 $0.35 $0.29
===== ===== ===== =====
Weighted average common
shares outstanding 28,078,000 27,048,000 27,718,000 27,282,000
========== ========== ========== ==========
See the notes to the unaudited condensed consolidated financial statements.
<PAGE> - 2 -
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 27 DECEMBER 28
1997 1996
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ASSETS (In thousands )
CURRENT ASSETS:
Cash and cash equivalents $ 10,139 $ 7,950
Marketable securities 14,310 17,892
Receivables, less allowances of
$3,525,000 and $3,200,000, respectively 94,142 80,183
Inventories:
Finished products 65,763 66,528
Work-in-process 12,979 13,483
Raw materials 37,117 39,162
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115,859 119,173
LIFO valuation adjustment (deduction) (26,395) (26,786)
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89,464 92,387
Other current and deferred tax assets 12,358 19,745
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TOTAL CURRENT ASSETS 220,413 218,157
OTHER ASSETS 33,527 11,965
PROPERTY, PLANT AND EQUIPMENT 218,549 202,470
Allowances for depreciation and
amortization (deduction) (119,441) (107,106)
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99,108 95,364
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$353,048 $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 state-
ments.
<PAGE> - 3 -
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 27 DECEMBER 28
1997 1996
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LIABILITIES AND SHAREHOLDERS' EQUITY (In thousands)
CURRENT LIABILITIES:
Accounts payable $ 24,593 $ 20,314
Employee compensation 7,329 5,932
Profit sharing 6,566 7,645
Anticipated warranty costs 5,200 4,500
Accrued insurance obligations 15,472 14,286
Other accrued expenses 20,632 16,626
Income taxes 766
Current maturities of long-term obligations 1,130 1,113
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TOTAL CURRENT LIABILITIES 80,922 71,182
LONG-TERM OBLIGATIONS 31,304 45,027
DEFERRED INCOME TAXES 4,852 8,952
SHAREHOLDERS' EQUITY:
Common stock 2,884 2,862
Additional capital 43,334 37,112
Retained earnings 227,499 207,064
Cumulative translation adjustments (537) 346
Treasury stock, at cost (37,210) (47,059)
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TOTAL SHAREHOLDERS' EQUITY 235,970 200,325
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$353,048 $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)
NINE MONTHS ENDED
September 27 September 28
1997 1996
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(In thousands)
Operating activities:
Net earnings $29,942 $26,032
Depreciation and amortization 14,282 12,872
Deferred income taxes 844 (3,973)
Changes in operating assets and liabilities:
Receivables (12,696) (5,512)
Inventories 3,896 (6,407)
Other current assets 2,483 1,528
Accounts payable 3,564 1,967
Accrued expenses and other liabilities 7,176 6,617
Income taxes (1,139) (3,597)
Other (net) (3,774) (1,232)
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Net cash provided by operating activities 44,578 28,295
Investing activities:
Additions to property, plant and equipment (16,960) (13,560)
Sales of available-for-sale securities 15,051 38,200
Purchases of available-for-sale securities (11,469) (26,865)
Optimised Control Ltd (7,597)
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Net cash used in investing activities (20,975) (2,225)
Financing activities:
Additional long-term borrowings 38,000
Reduction of long-term obligations (13,706) (15,952)
Unexpended debt proceeds (269) 440
Dividends paid (9,343) (7,554)
Stock option plans 1,904 2,580
Common stock repurchased (41,488)
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Net cash used in financing activities (21,414) (23,974)
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Net increase in cash and cash equivalents 2,189 2,096
Beginning cash and cash equivalents 7,950 6,322
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Ending cash and cash equivalents $ 10,139 $ 8,418
========== ==========
See notes to unaudited condensed consolidated financial statements.
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<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 27, 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 nine months ended September 27, 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 the Company
is required to adopt 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 calculating "basic
earnings per share" (which will replace the term "primary earnings per share"),
the dilutive effect of stock options will be excluded. The difference between
basic earnings per share and previously reported primary earnings per share is
expected to be immaterial for each quarter presented.
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.
<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 and
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Results of Operations
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RESULTS OF OPERATIONS
For the 23rd consecutive quarter, sales and earnings set records for both the
quarter and the first nine months of 1997. Sales for the third quarter of 1997
were $142,494,000, up 13.9% over sales of $125,111,000 for the third quarter of
1996. Year-to-date 1997 sales of $414,336,000 were up 10.0% over year-to-date
1996 sales of $376,570,000. International sales (exports and sales by foreign
affiliates), which comprise 13.8% of total year-to-date sales, were up 19.2% for
the third quarter and up 6.9% 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. Third quarter 1997 sales growth in North America was
strong, up approximately 14% over third quarter 1996 levels. European sales
performance improved in the third quarter 1997 with double digit increases
compared to third quarter 1996. Both distributor and OEM sales increased for
the quarter and year-to-date. Stronger increases in distributor sales during
the third quarter resulted in a shift between OEM and distributor sales to
approximately 51% and 49% of total sales, respectively. Third quarter sales of
motor products were up approximately 11% over the same period last year. For
the same period, sales of controls and servo products (which now include the
products of Optimised) were up approximately 27% from third quarter 1996.
Year-to-date sales of motor products were up approximately 11% over year-to-date
1996, and year-to-date drives sales were up approximately 7% over the same
period of 1996. Pricing softened slightly in third quarter 1997 compared to
third quarter 1996. A price increase goes into effect this October for EPAct-
related products only.
Third quarter 1997 net earnings of $10,291,000 were up 17.8% over third quarter
1996 and year-to-date 1997 net earnings of $29,942,000 were up 15.0% over the
first nine months of 1996. Earnings per common share were $0.37 for the third
quarter of 1997 and $1.08 for the first nine months of 1997, up 15.6% and 13.7%
respectively over 1996 amounts. Earnings per common share increased less than
net earnings due largely to the shares issued to purchase Optimised Control Ltd.
Third quarter 1997 pre-tax margins were 11.7% compared to 11.3% for third
quarter 1996 and year-to-date pre-tax margins were 11.7% compared to 11.2% for
the same period of 1996.
The third 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 29.8% for the third quarter
of 1996 and 29.6% year-to-date 1996. For the quarter and the year, margins have
benefitted from stable material costs and the effects of productivity and other
cost improvements.
Third quarter 1997 selling and administrative expenses at 16.8% of sales
remained about flat with the first and second quarter 1997 and with third
quarter 1996.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position remained solid through the first nine months of
1997. Cash and marketable securities were at $24.4 million compared to $25.8
million at year-end 1996. Working capital decreased to $139.5 million at
September 27, 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 September 27, 1997, remained strong at 2.8 compared to 3.1 at December
28, 1996 and the debt-to-capitalization ratio (shareholders' equity and long-
term borrowings) was 11.5%.
<PAGE> - 9 -
<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 under-
signed thereunto duly authorized.
BALDOR ELECTRIC COMPANY
(Registrant)
October 23, 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 NINE MONTHS
ENDED ENDED
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September 27 September 28 September 27 September 28
1997 1996 1997 1996
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(In thousands, except per share data)
Primary
Weighted average
shares outstanding 26,907 26,151 26,656 26,364
Dilutive stock options
based on the treasury
stock method using the
average market price 1,171 897 1,062 918
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Total 28,078 27,048 27,718 27,282
======= ======= ======= =======
Net Earnings $ 10,291 $ 8,734 $ 29,942 $ 26,032
======= ======= ======= =======
Per Share Earnings $ 0.37 $ 0.32 $ 1.08 $ 0.95
======= ======= ======= =======
Fully Diluted
Weighted average
shares outstanding 26,907 26,151 26,656 26,364
Dilutive stock options
based on the treasury
stock method using the
period-end market price,
if higher than average
market price 1,155 848 1,155 848
------- ------- ------- -------
Total 28,062 26,999 27,811 27,212
======= ======= ======= =======
Net Earnings $ 10,291 $ 8,734 $ 29,942 $ 26,032
======= ======= ======= =======
Per Share Earnings $ 0.37 $ 0.32 $ 1.08 0.95
======= ======= ======= =======
<PAGE>
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<CIK> 0000009342
<NAME> BALDOR ELECTRIC COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-3-1998
<PERIOD-END> SEP-27-1997
<CASH> 10139
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