SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
BALDOR ELECTRIC COMPANY
-------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
BALDOR ELECTRIC COMPANY
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To be held May 1, 1999
To the Shareholders:
The Annual Meeting of Shareholders of Baldor Electric Company, a Missouri
corporation, will be held at the Holiday Inn, 700 Rogers Avenue, Fort Smith,
Arkansas, on Saturday, May 1, 1999, at 10:30 a.m., local time, for the following
purposes:
1. To elect directors; and
2. To transact such other business as may properly come before the meeting and
all adjournments thereof.
The Board of Directors has fixed the close of business on March 17, 1999, as the
record date for the determination of the shareholders entitled to notice of, and
to vote at, the Annual Meeting and all adjournments thereof.
By Order of the Board of Directors
Lloyd G. Davis
Secretary
March 26, 1999
Even if you expect to attend the meeting in person, please mark, date, and sign
the enclosed proxy and return it in the enclosed return envelope. The return
envelope does not require postage if mailed in the United States. Shareholders
who attend the meeting may revoke their proxies and vote in person if they so
desire.
<PAGE>
BALDOR ELECTRIC COMPANY
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited on behalf of the Board of Directors of Baldor
Electric Company (the "Company") for use at the Annual Meeting of its
shareholders to be held at the Holiday Inn, 700 Rogers Avenue, Fort Smith,
Arkansas, on Saturday, May 1, 1999, at 10:30 a.m, local time.
The Company's principal executive offices are located at 5711 R. S. Boreham, Jr.
Street, Fort Smith, Arkansas 72908. This Proxy Statement and the accompanying
form of proxy are first being sent to shareholders on or about March 26, 1999.
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or facsimile, by regular employees of the Company, without additional
compensation. Brokerage firms, banks, nominees and others will be requested to
forward proxy materials to the beneficial owners of the Company's Common Stock
held of record by them. No solicitation is to be made by specially engaged
employees or other paid solicitors.
VOTING
Only the holders of record of the Company's Common Stock, par value $0.10 per
share (the "Common Stock") at the close of business on March 17, 1999, will be
entitled to notice of and to vote at the Annual Meeting. There were 36,165,011
shares of Common Stock of the Company outstanding as of the close of business on
March 17, 1999. Each share of Common Stock entitles the holder to one vote on
each item of business to be presented for shareholder vote at the Annual
Meeting.
A majority of the issued and outstanding shares entitled to vote and represented
in person or by proxy will constitute a quorum for the transaction of business
at the Annual Meeting. Shares represented by properly executed proxies will be
counted for the purpose of determining whether a quorum exists. The affirmative
vote of the holders of a majority of the shares constituting the quorum is
required to elect directors. The persons named in the proxy are authorized to
vote the shares of the shareholders giving the proxy for any nominee except
those nominees with respect to whom authority has been withheld. Proxies which
are marked to "withhold authority" will have the same effect as if the shares
represented thereby were voted against such nominee or nominees. If the form of
proxy is signed and returned without any direction given, shares of the
Company's Common Stock will be voted for the election of the Board's slate of
nominees. If the form of proxy is executed and returned to the Company, it
nevertheless may be revoked at any time before it is exercised either by written
notice to the Secretary of the Company or by attending the meeting and voting in
person.
1
<PAGE>
The Board knows of no matters other than the election of directors to be
presented for consideration at the Annual Meeting. If any other matters properly
come before the meeting, the proxies solicited hereby will be voted on such
matters in accordance with the judgment of the persons voting such proxies.
The Company maintains the Baldor Electric Company Employees' Profit Sharing and
Savings Plan (the "Profit Sharing and Savings Plan"). One of the investment
alternatives for employee- participants is the Baldor Stock Fund.
Employee-participants have the right under the Profit Sharing and Savings Plan
to direct the trustee thereof how to vote the shares of Common Stock that are
allocated to their accounts. The Profit Sharing and Savings Plan requires the
trustee to vote the shares of Common Stock not yet allocated to the accounts of
employee-participants in proportion to the votes cast by employee-participants.
PROPOSAL 1:
ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation and Bylaws, as amended, provide
for a classified Board of Directors, with the Board divided into three classes
whose terms expire at different times. Three members are to be elected to the
Board of Directors in 1999, each to serve for a term of three years.
The persons named in the enclosed form of proxy intend to vote such proxy for
the election of the three nominees named below as directors of the Company,
unless the shareholder indicates on the form of proxy that the vote for any one
or more of the nominees should be withheld or contrary directions are indicated.
The Board of Directors has no reason to doubt the availability of the nominees
and each has indicated a willingness to serve if elected. If any nominee shall
decline or be unable to serve, it is intended that, in the discretion of the
Board of Directors, either the size of the Board will be reduced or the proxies
will vote for a substitute nominee designated by the Board of Directors.
Information Regarding the Nominees for Directors
to be Elected in 1999 for Terms Ending in 2002
Jefferson W. Asher, Jr. ... Independent Management Consultant providing
assistance to corporations, attorneys, banking institutions, and other
creditors; Director of California Beach Restaurants, Inc.; Age 74; Present term
expires in May 1999; Director of the Company since 1973.
Richard E. Jaudes ... Partner at Thompson Coburn, law firm which provides legal
counsel to the Company, since 1997; for over five years prior to 1997, a partner
at Peper, Martin, Jensen, Maichel and Hetlage, law firm which also provides
legal counsel to the Company; Age 56.
Robert J. Messey ... Senior Vice President and Chief Financial Officer of
Sverdrup Corporation, a wholly owned subsidiary of Jacobs Engineering Group Inc
which specializes in engineering, construction, and architecture; Age 53;
Present term expires in May 1999; Director of the Company since 1993.
2
<PAGE>
Information Regarding the Directors Who Are Not Nominees for Election
and Whose Terms Continue Beyond 1999 or Expire during 1999
Fred C. Ballman ... Former Chairman and Chief Executive Officer of the Company
(retired); Age 86; Present term expires in May 2001; Director of the Company
from 1944 to 1982 and since 1992.
O. A. Baumann ... The Company's manufacturer's sales representative in St.
Louis, Missouri, from 1947 to 1987 (retired); Age 77; Present term expires in
May 2000; Director of the Company since 1961.
R. S. Boreham, Jr. ... Chairman of the Board of the Company since 1981; Chief
Executive Officer of the Company from 1978 through 1992; Director of U.S.A.
Truck, Inc.; Age 74; Present term expires in May 2001; Director of the Company
since 1961.
John A. McFarland ... President of the Company since November 1996; Executive
Vice President - Sales and Marketing of the Company from August 1996 to November
1996; Vice President - Sales of the Company from May 1991 to August 1996; Age
47; Present term expires in May 2000; Director of the Company since August 1996.
Robert L. Proost ... Corporate Vice President, Treasurer, and Director of
Administration, A.G. Edwards & Sons, Inc., securities brokerage and investment
banking, which has historically provided investment banking services to the
Company; Director of A. G. Edwards, Inc.; Age 61; Present term expires in May
2000; Director of the Company since 1988.
R. L. Qualls ... Vice Chairman of the Board of the Company since November 1996;
Chief Executive Officer of the Company from 1993 through 1997; President of the
Company from 1990 through 1996; Director of Bank of the Ozarks, Inc.; Age 65;
Present term expires in May 2001; Director of the Company since 1987.
Willis J. Wheat ... President Emeritus of Oklahoma City University; Professor of
Management and Marketing, Oklahoma City University, 1987 through 1995; Age 73;
Present term expires in May 1999; Not seeking re-election to the Board; Director
of the Company since 1991.
3
<PAGE>
Information About the Board of Directors
and Committees of the Board
Board of Directors ... In addition to its normal responsibilities, the Board of
Directors, as a whole, approves executive compensation and administers the 1981
Incentive Stock Plan (the "1981 Plan"), which has expired except for options
outstanding. During the fiscal year ended January 2, 1999 ("fiscal year 1998"),
four meetings of the Board of Directors were held. The current members of the
Company's Board of Directors are:
R. S. Boreham, Jr................................Chairman
Jefferson W. Asher, Jr.
Fred C. Ballman
O. A. Baumann
John A. McFarland
Robert J. Messey
Robert L. Proost
R. L. Qualls
Willis J. Wheat
Executive Committee ... Between meetings of the Board, the Executive Committee
is empowered to act in lieu of the Board of Directors except on those matters
for which the Board of Directors has specifically reserved authority to itself
or as set forth in the Company's Bylaws, as amended. The Executive Committee
administers the 1989 Stock Option Plan for Non- Employee Directors (the "1989
Plan"), which has expired except for options outstanding, and the 1996 Stock
Option Plan for Non-Employee Directors (the "1996 Plan"). Because the Executive
Committee is comprised of those directors who are also executive officers and
employees of the Company, members of the Executive Committee are not eligible to
participate in these two plans. The Executive Committee held 12 meetings during
fiscal year 1998. The current members of the Executive Committee are:
R. S. Boreham, Jr. ..............................Chairman
John A. McFarland
R. L. Qualls
Audit Committee ... The Audit Committee performs the following functions:
assists in the selection of independent auditors, directs and supervises
investigations into matters relating to audit functions, reviews with
independent auditors the plans and results of the audit engagement, reviews the
degree of independence of the auditors, considers the range of audit and
non-audit fees, and reviews the adequacy of the Company's system of internal
accounting controls. The Audit Committee is comprised of non-employee directors.
This Committee held three meetings during fiscal year 1998. The current members
of the Audit Committee are:
Jefferson W. Asher, Jr...........................Chairman
Robert J. Messey
Robert L. Proost
4
<PAGE>
Stock Option Committee ... The Stock Option Committee administers the Company's
1987 Incentive Stock Plan (the "1987 Plan"), which is expired except for
outstanding options, and the 1994 Incentive Stock Plan (the "1994 Plan"), both
of which are employee stock plans. The Stock Option Committee also administers
the 1990 Stock Plan for District Managers (the "1990 Plan"). Awards can be made
from the 1994 Plan and the 1990 Plan and the Stock Option Committee has the
exclusive authority to determine which of the eligible participants are to
receive awards and to determine the amount and the terms and conditions of the
awards made to each participant. The Stock Option Committee is comprised of
non-employee directors. This Committee held five meetings during fiscal year
1998. The current members of the Stock Option Committee are:
Robert J. Messey................................. Chairman
Robert L. Proost
Willis J. Wheat
Nominating Committee ... The Nominating Committee is responsible for proposing a
slate of directors for election by the shareholders at each annual meeting and
proposing candidates to fill any vacancies on the Board. The Nominating
Committee is comprised of directors, none of whom are nominees for directors to
be elected in 1999. This Committee held two meetings during fiscal year 1998.
John A. McFarland................................ Chairman
R. S. Boreham, Jr.
R. L. Qualls
Director Compensation ... Under the terms of the 1996 Plan, all non-employee
directors received an option grant on January 30, 1998, to purchase 3,240 shares
of the Company's Common Stock having an exercise price of $22.8125 (the
composite closing price of the Common Stock on that date) and an additional
option to purchase 2,160 shares of the Company's Common Stock having an exercise
price of $11.40625 (50% of the composite closing price of the Common Stock on
that date). Annual option grants become exercisable in five equal installments
beginning on the grant's first anniversary. All options expire ten years after
the grant date. Non-employee directors are also compensated for their services
on the board. A summary of the quarterly fees paid to non-employee directors for
board and committee service for fiscal year 1998 follows:
Board member.....................................$ 3,900
Audit Committee Chairman.........................$ 2,900
Audit Committee member...........................$ 1,800
Stock Option Committee member....................$ 700
5
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 17, 1999, regarding all
persons known to the Company to be the beneficial owners of more than five
percent of the Company's Common Stock. The table also includes security
ownership for each director of the Company, nominees for election as directors,
each of the executive officers named in the Summary Compensation Table (the
"Named Executive Officers"), and all executive officers and directors as a
group.
Number of Percent of
Name Shares Class (1)
------------------------------ ---------------- --------
The Baldor Electric Company
Profit Sharing and Savings Plan 4,182,905 (2) 10.0 %
P. O. Box 2400
Fort Smith, Arkansas 72902
Fred C. Ballman 3,025,904 (3) 8.4 %
P. O. Box 6638
Fort Smith, Arkansas 72906
R. S. Boreham, Jr. 1,618,104 (4) 4.5 %
O. A. Baumann 618,298 (5) 1.7 %
Lloyd G. Davis 282,575 (6) *
R. L. Qualls 267,588 (7) *
John A. McFarland 239,017 (8) *
James R. Kimzey 235,063 (9) *
Jefferson W. Asher, Jr. 74,059 (10) *
Robert L. Proost 59,640 (11) *
Robert J. Messey 42,489 (12) *
Willis J. Wheat 25,853 (13) *
Richard E. Jaudes 1,066 (14) *
All executive officers and directors
as a group (19 persons) 7,033,492 (15) 18.8 %
- ---------------
* Less than 1%.
6
<PAGE>
(1) Percentage is calculated in accordance with Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934, as amended. The numerator consists of
the number of shares of Baldor Common Stock owned by each individual
(including shares issuable upon exercise of employee stock options
which are currently exercisable or exercisable within 60 days of March
17, 1999). The denominator consists of all issued and outstanding
shares of Baldor Common Stock plus those shares which are issuable upon
the exercise of employee stock options referenced above.
(2) Based on correspondence dated March 18, 1999, received from the trustee
of the Company's Profit Sharing and Savings Plan, participants in such
Plan have sole voting power and shared investment power over 4,182,785
shares and shared voting and shared investment power over 120 shares.
(3) Shared voting and shared investment power over 3,020,504 shares;
includes exercisable options to purchase 5,400 shares.
(4) Shared voting and shared investment power over 188,982 shares; sole
voting and sole investment power over 1,274,365 shares; sole voting and
shared investment power over 1,125 shares in the Profit Sharing and
Savings Plan; includes exercisable options to purchase 153,632 shares.
(5) Shared voting and shared investment power over 580,498 shares;
includes exercisable options to purchase 37,800 shares.
(6) Sole voting and sole investment power over 76,300 shares; shared voting
and shared investment power over 6,752 shares; sole voting and shared
investment power over 18,011 shares and shared voting and shared
investment power over 2,380 shares in the Profit Sharing and Savings
Plan; includes exercisable options to purchase 137,333 shares directly
and 41,799 indirectly.
(7) Sole voting and sole investment power over 177,066 shares; sole voting
and shared investment power over 1,897 shares in the Profit Sharing and
Savings Plan; includes exercisable options to purchase 88,625 shares.
(8) Sole voting and sole investment power over 30,385 shares; shared voting
and shared investment power over 60,514 shares; sole voting and shared
investment power over 22,738 shares in the Profit Sharing and Savings
Plan; includes exercisable options to purchase 125,380 shares.
(9) Shared voting and shared investment power over 56,444 shares; sole
voting and sole investment power over 20,579 shares; sole voting and
shared investment power over 8,387 shares in the Profit Sharing and
Savings Plan; includes exercisable options to purchase 149,653 shares.
(10) Sole voting and sole investment power over 52,459 shares; includes
exercisable options to purchase 21,600 shares.
(11) Sole voting and sole investment power over 28,320 shares; includes
exercisable options to purchase 31,320 shares.
(12) Sole voting and sole investment power over 2,762 shares; shared voting
and shared investment power over 1,927 shares; includes exercisable
options to purchase 37,800 shares.
(13) Shared voting and shared investment power over 15,053 shares; includes
exercisable options to purchase 10,800 shares.
(14) Sole voting and sole investment power.
(15) Sole voting and sole investment power over 1,744,216 shares; shared
voting and shared investment power over 4,009,029 shares; sole voting
and shared investment power over 113,514 shares in the Profit Sharing
and Savings Plan; includes exercisable options to purchase 1,166,733
shares.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation paid
during each of the Company's last three fiscal years to each of the Company's
Named Executive Officers.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Principal Position Year Salary Bonus Compensation Awards Options Payouts Compensation (1)
- --------------------------- ---- ------ ----- ------------ ------ ------- ------- ----------------
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. S. Boreham, Jr. 1998 350,000 332,710 0 0 25,000 0 58,657
Chairman of the Board of Directors 1997 325,000 320,287 0 0 26,000 0 102,512
1996 275,000 282,030 0 0 37,332 0 98,749
John A. McFarland 1998 190,000 171,108 0 0 25,000 0 19,230
President 1997 160,000 147,825 0 0 26,000 0 20,977
1996 132,000 110,761 0 0 22,000 0 20,431
R. L. Qualls 1998 175,000 166,355 0 0 17,000 0 34,256
Vice Chairman of the 1997 315,000 310,432 0 0 26,000 0 42,642
Board of Directors 1996 300,000 307,669 0 0 37,332 0 62,046
Lloyd G. Davis 1998 160,000 129,282 0 0 17,000 0 21,113
Chief Financial Officer, 1997 149,000 118,260 0 0 17,333 0 23,241
Executive Vice President - Finance, 1996 132,000 110,761 0 0 22,000 0 22,729
Secretary, and Treasurer
James R. Kimzey 1998 157,000 118,825 0 0 17,000 0 19,061
Executive Vice President - 1997 149,000 118,260 0 0 17,333 0 23,930
Research and Engineering 1996 128,000 84,096 0 0 22,000 0 23,218
</TABLE>
- ---------------
(1) The amounts disclosed in this column include contributions by the Company
Profit Sharing and Savings Plan, a defined contribution plan. This is two
plans in one: a profit sharing plan and a 401(k) savings plan. The Company
makes the contribution to the profit sharing plan which equals 12% of
pre-tax earnings for participating companies. The contribution is
allocated among eligible employees in proportion to their total
compensation. The Company makes matching contributions to the savings plan
at a rate no greater than 25% of the first 6% of the participating
employee's compensation. Due to the limits on the total amount of Company
and employee contributions, the above Named Executive Officers did not
receive their full allocation amounts to the Profit Sharing and Savings
Plan. The Company also maintains a split-dollar life insurance plan for
all executive officers. The Company makes the premium payments on the
split-dollar life insurance policies which vary according to age and
insurance coverage for each officer. Each executive officer reimburses the
Company for a portion of the premium that represents the full value
attributable to term life coverage. The amounts included as compensation
for each Named Executive Officer were calculated using the interest
foregone method which more accurately reflects the benefit received by the
participant. The fiscal year 1998 amounts in this column represent Company
contributions consisting of the following:
Contributions Contributions Split-Dollar
to the to the Life Insurance
Name Profit Sharing Plan Savings Plan Premiums
---- ------------------- ------------ --------
($) ($) ($)
R. S. Boreham, Jr. 15,546 2,188 40,923
John A. McFarland 15,546 1,900 1,784
R. L. Qualls 15,546 2,187 16,523
Lloyd G. Davis 15,546 2,400 3,167
James R. Kimzey 15,546 1,570 1,945
8
<PAGE>
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Individual Grants
--------------------------------------------------------------
Number of % of Total Market
Securities Options/SARs Price
Underlying Granted to Exercise on Grant Date
Options Employees in or Base Grant Expiration Present
Name Granted Fiscal Year Price Date Date Value (1)
- ---------------------- ------------- ------------- --------- -------- ------------ ----------
(#) ($/sh) ($/sh) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. S. Boreham, Jr. 20,000 (2) 4.0% 23.00 23.00 02/09/2008 124,200
5,000 (3) 1.0% 11.50 23.00 02/09/2008 63,650
John A. McFarland 20,000 (2) 4.0% 23.00 23.00 02/09/2008 124,200
5,000 (3) 1.0% 11.50 23.00 02/09/2008 63,650
R. L. Qualls 13,000 (2) 2.6% 23.00 23.00 02/09/2008 80,730
4,000 (3) 0.8% 11.50 23.00 02/09/2008 50,920
Lloyd G. Davis 13,000 (2) 2.6% 23.00 23.00 02/09/2008 80,730
4,000 (3) 0.8% 11.50 23.00 02/09/2008 50,920
James R. Kimzey 13,000 (2) 2.6% 23.00 23.00 02/09/2008 80,730
4,000 (3) 0.8% 11.50 23.00 02/09/2008 50,920
</TABLE>
- ---------------
(1) The Company used the Black-Scholes option pricing model to determine grant
date present value. Calculations are based on a ten-year option term and
estimated assumptions of: a seven-year estimated life; interest rate of
5.7%; annual dividend yield of 1.7%; and volatility of 16.6%. Because the
present values are based on estimates and assumptions, the amounts
reflected in this table may not be achieved.
(2) Incentive stock options to purchase shares of Common Stock of the Company
were granted at the composite closing price of the Common Stock on the
date of grant and are 100% exercisable six months and one day following
the grant date.
(3) Non-qualified options to purchase shares of restricted Common Stock of the
Company were granted at 50% of the composite closing price of the Common
Stock on the date of grant with full vesting occurring on the fifth
anniversary date. Vesting may be accelerated by early exercise or when
certain events relating to change of the Company's ownership occurs. Until
vesting occurs, the restricted shares acquired on exercise of such
options: (a) have dividend rights, (b) may be voted, (c) cannot be sold or
transferred until they are vested, and (d) are forfeitable under certain
circumstances. The options are 100% exercisable six months and one day
following the grant date.
9
<PAGE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
<CAPTION>
Number of
Securities Underlying Value of
Shares Unexercised Unexercised
Acquired on Value Options/SARs In-the-Money Options
Name Exercise Realized (1) at FY-End (#) at FY-End ($) (2)
- -------------------- ------------ ---------- ------------------------------ ------------------------------
(#) ($) (Exercisable) (Unexercisable) (Exercisable) (Unexercisable)
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
R. S. Boreham, Jr. 12,691 204,764 162,432 0 1,131,896 0
John A. McFarland 30,033 481,604 156,320 0 1,286,286 0
R. L. Qualls 42,000 937,625 88,625 0 523,166 0
Lloyd G. Davis 8,166 144,792 139,333 0 1,195,111 0
James R. Kimzey 18,666 356,643 149,653 0 1,528,567 0
</TABLE>
- ---------------
(1) Represents the difference between the option exercise price and the
composite closing price of the Common Stock on the date of exercise
multiplied by the number of shares acquired upon exercise.
(2) Represents the difference between the $20.25 composite closing price of
the Common Stock as reported by the New York Stock Exchange on January 1,
1999, the last trading day of fiscal year 1998, and the exercise price of
the options multiplied by the number of shares of Common Stock underlying
the options. The numbers shown reflect the value of options accumulated
over an eight-year period.
Change-of-Control Arrangements
Pursuant to agreements under the 1987 Plan and the 1994 Plan, outstanding
restricted Common Stock of the Company acquired by an early exercise of a
non-qualified stock option will fully vest and be free of restrictions without
the requirement of any further act by the Company or shareholder in the event of
a "Change-of-Control" of the Company as defined in those agreements.
Compensation Committee Interlocks and Insider Participation
Although the Company has no standing compensation committee of the Board of
Directors, the Executive Committee performs functions similar to those
customarily performed by such committees by making recommendations to the Board;
however, the Board of Directors, as a whole, approves the salary and bonus
remuneration arrangements for directors and executive officers. The Board of
Directors administers the 1981 Plan and the Stock Option Committee administers
the 1987 Plan and the 1994 Plan, all Plans relating to employees. The Executive
Committee administers the 1989 Plan and the 1996 Plan, both relating to
non-employee directors. The 1981, 1987, and 1989 Plans have expired except for
options outstanding. The members of the Executive Committee are the following
directors who are also executive officers: R. S. Boreham, Jr., John A.
McFarland, and R. L. Qualls. The members of the Stock Option Committee are the
following non-employee directors: Robert J. Messey, Robert L. Proost, and Willis
J. Wheat.
10
<PAGE>
Report of the Board of Directors on Executive Compensation
The Company applies a consistent philosophy to compensation for all employees,
including senior management. This philosophy is based on the premise that the
achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives. The Company strives to achieve
those objectives through teamwork that is focused on meeting the expectations of
customers and shareholders.
The Company's Officers' Compensation Plan (the "Plan") is objective, formula
driven, and has been consistently applied since 1973. The Plan is designed to
ensure that an appropriate relationship exists between executive pay and the
creation of shareholder value. The primary goals of the Plan are to ensure that
total compensation is fair internally, is competitive externally, and offers
performance motivation. For purposes of this report, total compensation is
defined as salary plus bonus. The Plan combines annual base compensation with a
bonus based upon the Company's performance. The Company believes that the goals
of the Plan are met by providing competitive compensation which will motivate
and retain key employees.
Total compensation for all executive officers is established within the range of
salaries and bonuses for persons holding similar positions at other
comparably-sized manufacturing companies utilizing independent salary survey
data. The survey data is a composite of all manufacturing companies that are
comparably-sized based upon sales volume. The independent survey does not
provide a detailed list of all participating companies; however, many of the
participating companies are listed, some of which are included in the
Performance Graph. In general, the total compensation for all executive officers
is expected to be slightly below the median for similar positions compared to
the independent survey data. This is accomplished by establishing the annual
base portion of compensation at the low end of the survey with the potential
incentive portion being slightly above the median. This results in a greater
emphasis being placed upon the Company's performance.
The total compensation individual officers may earn is subjective based upon the
individual's position, experience, and ability to impact the Company's
performance. In establishing each officer's annual base and potential bonus
portion of compensation, additional consideration includes the individual's past
performance, initiative and achievement, and future potential, as well as the
Company's performance.
The potential bonus pool is based upon the sales and earnings performance of the
Company and the relative weights are 75% sales and 25% earnings. Compensation
attributable to the sales component increases or decreases in relation to sales.
Compensation attributable to the earnings component increases if earnings exceed
a percentage of shareholders' equity as determined by the Board of Directors and
decreases if earnings are less than such amount. Each individual executive
officer's participation in the potential bonus pool is determined as described
above and is assigned such that if the Company achieves its sales and earnings
objectives, the salary and bonus combined will be competitive with the industry
and will remain consistent with the Company's philosophy and the Plan. The
outcome of the Company's sales and earnings for fiscal year 1998 resulted in
actual bonuses equaling 43% to 49% of total compensation for the Named Executive
Officers.
11
<PAGE>
The Company's Executive Committee of the Board as a whole performs the functions
similar to "CEO" responsibilities. The members of the Executive Committee are R.
S. Boreham, Jr. (Chairman), John A. McFarland, and R. L. Qualls. Each member of
the Company's Executive Committee of the Board is an employee of the Company and
is one of the Named Executive Officers. The total compensation for each
individual member of the Executive Committee is slightly below the median of
comparably-sized manufacturing companies. The total compensation for each member
was competitive and reflective of the Company's performance. The Committee
members as a whole had 48% of their total compensation at risk in the form of
performance bonuses. In 1998, 39% of the combined increase in the Committee's
total compensation over 1997 total compensation was the results of improved
sales and earnings.
The Company also maintains stock option plans to provide additional incentives
to executive officers and other employees to work to maximize shareholder value.
The Stock Option Committee has granted incentive options to purchase shares of
Common Stock of the Company (at the composite closing price of the Common Stock
on the date of grant) and non-qualified options to purchase shares of restricted
stock (at 50% of the composite closing price of the Common Stock on the date of
grant) to executive officers and other employees. Grants were made in fiscal
year 1998 to Named Executive Officers and other employees to continue to
encourage long-term growth and profitability. The number of options granted to
each executive officer is subjective based upon individual performance, future
potential, and ability to impact the Company's performance.
Each member of the Company's Executive Committee of the Board received incentive
stock options to purchase shares of Common Stock. The decision regarding the
number of options granted to each member individually were subjective based upon
the ability of the individual to impact the Company's performance as well as
individual performance and future potential. The members of the Executive
Committee as a whole received incentive stock options to purchase 53,000 shares
of Common Stock, which represented 11% of the total shares granted.
The Board of Directors, as a whole, and the Board's Executive Committee and
Stock Option Committee, as appropriate, continually review the executive
compensation policies in regards to Section 162(m) of the Internal Revenue Code
of 1986 as amended, pertaining to the Company's $1,000,000 deductibility
limitation for applicable compensation paid to Named Executive Officers. In
1998, the deductibility of the Company's executive compensation was not affected
by the limitation under Section 162(m).
BOARD OF DIRECTORS
R. S. Boreham, Jr.....................................Chairman
Jefferson W. Asher, Jr. Robert J. Messey
Fred C. Ballman Robert L. Proost
O. A. Baumann R. L. Qualls
John A. McFarland Willis J. Wheat
12
<PAGE>
Performance Graph
Comparison of Five-Year Cumulative Total Return
Compound Annual Growth Rate
- - ------------------------------
Baldor $185 13.1%
S&P 500 $294 24.1%
DJ EE $239 19.0%
12/93 12/94 12/95 12/96 12/97 12/98
----- ----- ----- ----- ----- -----
Baldor $100 $115 $131 $163 $195 $185
S&P 500 $100 $101 $139 $171 $229 $294
DJ ELQ $100 $104 $136 $166 $204 $239
Assumes $100 invested at year-end 1993 in Baldor Electric
Company, the S&P 500 Index, and the DJ ELQ Index.
13
<PAGE>
SHAREHOLDER PROPOSALS
Any shareholder of the Company eligible to vote in an election may make
shareholder proposals and, with respect to (2) and (3) below, the following
qualifications apply in determining whether notice is timely relating to the
exercise of discretionary voting authority. Proposals relating to the 2000
Annual Meeting must qualify as follows: (1) Proposals must be received by the
Company by December 2, 1999, in order to be included in the printed proxy
materials; (2) Proposals received after December 2, 1999, may be presented if
received by the Company by March 8, 2000; (3) Proposals received after March 8,
2000, may be presented only at the discretion of the Chairman of the Board; and
(4) Any nominations for election to the Board of Directors must be received by
the Company no later than March 23, 2000. The Nominating Committee of the
Company's Board of Directors will consider candidates for Board membership
proposed by shareholders who have complied with the appropriate procedures. All
shareholder proposal presentations, nominations, and notifications of such must
comply with the procedures as written in the Company's Bylaws as amended.
INDEPENDENT AUDITORS
The Company is presently utilizing the services of Ernst & Young LLP, which has
been the Company's independent auditors since 1972. The Audit Committee and the
Board of Directors will consider the reappointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending January 1, 2000, at
the Company's next regular Board of Directors meeting in May. The Company has no
reason to believe that Ernst & Young LLP will not be reappointed.
Representatives of Ernst & Young LLP will be present at the Annual Meeting with
an opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for
consideration at the meeting by the Board of Directors or by shareholders who
have requested inclusion of proposals in the Proxy Statement. If any other
matter shall properly come before the meeting, the persons named in the
accompanying form of proxy intend to vote on such matters in accordance with
their judgment.
March 26, 1999
14
<PAGE>
(FRONT OF PROXY CARD)
COMMON STOCK COMMON STOCK
BALDOR ELECTRIC COMPANY
Proxy Solicited on Behalf of the Board of Directors
for Annual Meeting of Shareholders on May 1, 1999
The undersigned hereby appoints R. S. Boreham, Jr. and R. L. Qualls, and each of
them, with power of substitution, as proxies of the undersigned, to attend the
Annual Meeting of Shareholders of Baldor Electric Company, to be held at the
Holiday Inn, 700 Rogers Avenue, Fort Smith, Arkansas, on Saturday, May 1, 1999,
at 10:30 a.m. local time, and all adjournments thereof, and there to vote, as
indicated on the reverse side of this card, the shares of Common Stock of Baldor
Electric Company which the undersigned is entitled to vote with all the powers
the undersigned would possess if present at the meeting.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. In their discretion, the proxies are authorized
to vote upon such other business as may properly come before the meeting and all
adjournments thereof.
If no direction is made, this proxy will be voted FOR the election directors.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear(s) hereon. When signing as Attorney,
Executor, Trustee, Guardian, or Officer of a Corporation, please give title as
such. For joint accounts, all named holders should sign. If you receive more
than one proxy, please sign all cards and return in the accompanying
postage-paid envelopes.
HAS YOUR ADDRESS CHANGED? _________________________________________________
================================================================================
DO YOU HAVE ANY COMMENTS? _________________________________________________
================================================================================
<PAGE>
(BACK OF PROXY CARD)
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
---------------------------------------------------
BALDOR ELECTRIC COMPANY
---------------------------------------------------
COMMON STOCK
CONTROL NUMBER:
RECORD DATE SHARES:
NAME
ADDRESS
CITY STATE ZIP
Please be sure to sign and date this Proxy.
Date _______________________
Shareholder sign here ___________________________________________________
Co-owner sign here _____________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR":
1. Election of Directors
[ ] For All Nominees [ ] Withhold [ ] For All Except
Nominees: Jefferson W. Asher, Jr.
Richard E. Jaudes
Robert J. Messey
To withhold authority to vote for any nominee listed above, mark the
"For All Except" box and write the name(s) of the nominee(s) from whom
you wish to withhold authority to vote in the space provided below.
-----------------------------------------------------------
Mark box at right if an address change or comment has been noted on the reverse
side of this card. [ ]
DETACH CARD DETACH CARD
<PAGE>
(FRONT OF DIRECTION CARD)
PROFIT SHARING AND SAVINGS PLAN PROFIT SHARING AND SAVINGS PLAN
BALDOR ELECTRIC COMPANY
Annual Meeting of Shareholders on May 1, 1999
The undersigned, a participant in the Baldor Electric Company Profit Sharing and
Savings Plan (the "Plan") hereby directs Wachovia Bank of North Carolina, N.A.,
as Trustee (the "Trustee") of the Plan Trust (the "Trust"), at the Annual
Meeting of Shareholders of Baldor Electric Company, to be held at the Holiday
Inn, 700 Rogers Avenue, Fort Smith, Arkansas, on Saturday, May 1, 1999, at 10:30
a.m. local time, and all adjournments thereof, to vote, as indicated on the
reverse side of this direction card, the shares of Common Stock of Baldor
Electric Company which the undersigned is entitled to vote with all the powers
the undersigned would possess if present at the meeting.
This direction card, when properly executed, will be voted in the manner
directed herein by the undersigned participant. As Trustee, you are authorized
to vote the shares of the undersigned upon such other business as may properly
come before the meeting and all adjournments thereof.
If no direction is made,
voting will be controlled by the terms of the Plan and the Trust.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear(s) hereon. When signing as Attorney,
Executor, Trustee, Guardian, or Officer of a Corporation, please give title as
such. For joint accounts, all named holders should sign. If you receive more
than one direction card, please sign all cards and return in the accompanying
postage-paid envelopes.
HAS YOUR ADDRESS CHANGED? _________________________________________________
================================================================================
DO YOU HAVE ANY COMMENTS? _________________________________________________
================================================================================
<PAGE>
(BACK OF DIRECTION CARD)
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
-------------------------------------------------------------
BALDOR ELECTRIC COMPANY
-------------------------------------------------------------
PROFIT SHARING AND SAVINGS PLAN
CONTROL NUMBER:
RECORD DATE SHARES:
NAME
ADDRESS
CITY STATE ZIP
Please be sure to sign and date this Direction Card.
Date _______________________
Participant sign here ___________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR":
1. Election of Directors
[ ] For All Nominees [ ] Withhold [ ] For All Except
Nominees: Jefferson W. Asher, Jr.
Richard E. Jaudes
Robert J. Messey
To withhold authority to vote for any nominee listed above, mark the
"For All Except" box and write the name(s) of the nominee(s) from whom
you wish to withhold authority to vote in the space provided below.
-----------------------------------------------------------
Mark box at right if an address change or comment has been noted on the reverse
side of this card. [ ]
DETACH CARD DETACH CARD
<PAGE>
