UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-7284
BALDOR ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Missouri 43-0168840
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5711 R.S. Boreham, Jr Street, Fort Smith, Arkansas 72908
(Address of principal executive offices) (Zip Code)
(501) 646-4711
(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 [ ]
At July 3, 1999, there were 38,563,486 shares of the registrant's common stock
outstanding.
<PAGE>
Index
Baldor Electric Company and Affiliates
Part 1. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated statements of earnings-Three months and
six months ended July 3, 1999 and July 4, 1998
Condensed consolidated balance sheets-July 3, 1999 and January 2, 1999
Condensed consolidated statements of cash flow-Six months ended
July 3, 1999 and July 4, 1998
Notes to condensed consolidated financial statements-July 3, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Part 2. Other Information
Item 2. Recent Sales of Unregistered Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- ------------------------
July 3 July 4 July 3 July 4
(In thousands, except share data) 1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 152,130 $ 152,083 $ 294,263 $ 306,292
Other income (net) 350 323 874 827
----------- ----------- ----------- -----------
152,480 152,406 295,137 307,119
Cost and expenses: Cost of goods sold 105,794 105,961 204,288 213,588
Selling and administrative 25,584 25,225 49,435 50,750
Profit sharing 2,492 2,225 4,813 4,732
Interest 826 375 1,509 750
----------- ----------- ----------- -----------
134,696 133,786 260,045 269,820
----------- ----------- ----------- -----------
Earnings before income taxes 17,784 18,620 35,092 37,299
Income taxes 6,754 7,076 13,331 14,174
----------- ----------- ----------- -----------
NET EARNINGS $ 11,030 $ 11,544 $ 21,761 $ 23,125
=========== =========== =========== ===========
Net earnings per share-diluted $0.30 $0.30 $0.59 $0.61
=========== =========== =========== ===========
Net earnings per share-basic $0.30 $0.31 $0.60 $0.63
=========== =========== =========== ===========
Weighted average shares outstanding-diluted 36,952,028 38,582,552 37,042,383 38,166,175
=========== =========== =========== ===========
Weighted average shares outstanding-basic 36,170,533 37,187,294 36,271,880 36,807,415
=========== =========== =========== ===========
Dividends paid per common share $0.11 $0.10 $0.22 $0.20
=========== =========== =========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Baldor Electric Company and Affiliates
Condensed Consolidated Balance Sheets
July 3 January 2
1999 1999
-------- ---------
<S> <C> <C>
ASSETS (in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 13,856 $ 24,793
Marketable securities 18,676 13,996
Receivables, less allowance of $4,350 101,582 90,045
Inventories: Finished products 72,444 74,561
Work in process 9,641 12,939
Raw materials 44,970 42,477
--------- ---------
127,055 129,977
LIFO valuation adjustment (deduction) (25,826) (26,170)
--------- ---------
101,229 103,807
Other current and deferred tax assets 18,195 23,847
--------- ---------
TOTAL CURRENT ASSETS 253,538 256,488
OTHER ASSETS 32,902 32,301
NET PROPERTY, PLANT AND EQUIPMENT 122,766 123,137
========= =========
$ 409,206 $ 411,926
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 22,970 $ 18,900
Employee compensation 5,764 5,620
Profit sharing 4,785 9,420
Anticipated warranty costs 6,070 5,925
Accrued insurance obligations 14,420 15,960
Other accrued expenses 16,136 20,052
Income Taxes 4,256 3,505
Current portion of long-term obligations 940 980
--------- ---------
TOTAL CURRENT LIABILITIES 75,341 80,362
LONG-TERM OBLIGATIONS 56,493 57,015
DEFERRED INCOME TAXES 12,103 10,257
SHAREHOLDERS' EQUITY
Common stock 3,856 3,841
Additional capital 33,211 31,495
Retained earnings 277,929 264,545
Accumulated other comprehensive income (675) (428)
Treasury stock , at cost (49,052) (35,161)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 265,269 264,292
--------- ---------
$ 409,206 $ 411,926
========= =========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
-----------------------------
July 3 July 4
1999 1998
--------- --------
(In thousands)
<S> <C> <C>
Operating activities:
Net earnings $ 21,761 $ 23,125
Depreciation and amortization 10,387 10,367
Deferred income taxes 1,014
Changes in operating assets and liabilities:
Receivables (11,512) (8,697)
Inventories 2,578 (7,825)
Other current assets 5,652 (3,867)
Accounts payable 4,070 4,670
Accrued expenses and other liabilities (9,802) (6,527)
Income taxes 751 (1,054)
Other , net (3,945) (995)
--------- ---------
Net cash provided from operating activities 19,940 10,211
Investing activities:
Additions to property, plant and equipment (5,393) (17,491)
Sales of available-for-sale securities 8,106 10,822
Purchases of available-for-sale securities (12,786) (11,437)
Acquisitions 0 732
--------- ---------
Net cash used in investing activities (10,073) (17,374)
Financing activities:
Additional long-term borrowings 0 5,750
Reduction of long-term obligations (562) (545)
Unexpended debt proceeds (124) (150)
Dividends paid (7,958) (7,428)
Common stock repurchases (13,035)
Stock option plans 875 2,170
--------- ---------
Net cash used in financing activities (20,804) (203)
--------- ---------
Net decrease in cash & cash equivalents (10,937) (7,366)
Beginning cash and cash equivalents 24,793 9,575
--------- ---------
Ending cash and cash equivalents $ 13,856 $ 2,209
========= =========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
Baldor Electric Company and Affiliates
Notes to Unaudited Condensed Consolidated Financial Statements
July 3, 1999
Note A Significant Accounting Policies
Basis of Presentation: The unaudited condensed 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 January 2,
1999. 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 July 3, 1999, may
not be indicative of the results that may be expected for the fiscal year ending
January 1, 2000.
Comprehensive Income: Total comprehensive income was approximately $11.1 million
and $13.3 million for the second quarter of 1999 and 1998 and was approximately
$21.5 million and $22.8 million for the six months ending July 3, 1999, and July
4, 1998. Cumulative translation adjustments are the only significant items
included in other comprehensive income.
Segment Reporting: The Company has only one reportable segment; therefore, the
consolidated financial statements reflect segment information.
Computer Software Costs: In 1998, the AICPA issued Statement of Position (SOP)
98-1, Accounting For the Costs of Computer Software Developed For or Obtained
For Internal-Use. The Company adopted the SOP during the second quarter of 1998.
The adoption of SOP 98-1 did not have a material effect on the Company's results
of operations.
Financial Derivatives: In 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement becomes effective
for the first quarter in fiscal year 2001. The Statement will require companies
to recognize all derivatives on the balance sheet at fair value. The Company's
use of derivatives is minimal, and management continues to study the effects of
adopting the standard and currently believes the adoption will not have a
material effect.
<PAGE>
Note B Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share (EPS):
Three Months Ended
------------------
(In thousands, except per share data) July 3, 1999 July 4, 1998
------------ ------------
Numerator Reconciliation:
Net earnings $ 11,030 $ 11,544
======== ========
Denominator Reconciliation:
The denominator for basic EPS:
Weighted average shares 36,171 37,187
Effect of dilutive securities:
Stock options 781 1,396
--- -----
The denominator for diluted EPS-adjusted
weighted average shares 36,952 38,583
====== ======
Basic earnings per share $ 0.30 $ 0.31
====== ======
Diluted earnings per share $ 0.30 $ 0.30
====== ======
Six Months Ended
----------------
(In thousands, except per share data) July 3, 1999 July 4, 1998
------------ ------------
Numerator Reconciliation:
Net earnings $ 21,761 $ 23,125
======== ========
Denominator Reconciliation:
The denominator for basic EPS:
Weighted average shares 36,272 36,807
Effect of dilutive securities:
Stock options 770 1,359
--- -----
The denominator for diluted EPS-adjusted
weighted average shares 37,042 38,166
====== ======
Basic earnings per share $ 0.60 $ 0.63
====== ======
Diluted earnings per share $ 0.59 $ 0.61
====== ======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Second quarter sales for 1999 increased over the same quarter of 1998 to become
a record sales quarter. Second quarter 1999 sales increased 7% over first
quarter 1999 and 12% over fourth quarter 1998 sales. The mix between Distributor
and OEM sales remained split at approximately 50%.
Second quarter 1999 net earnings of $11,030,000 were down 4.4% over 1998 net
earnings of $11,544,000. Net earnings for the six month period in 1999 was
$21,761,000 compared to $23,125,000 for 1998. The decline in net earnings is due
partially to interest costs from debt and a decline in European operations.
Gross margin improved to 30.6% for the first six months of 1999 compared to
30.3% for same period in 1998. The operating margin for the first six months in
1999 was 13.8% compared to 13.7% for 1998.
Sales from foreign affiliates were approximately 14% of consolidated sales for
the six month period in 1999 compared to 15.0% of sales for the same period in
1998. Comparing the first six months of 1999 to 1998, international operations
included growth in Australia and the Far East, while sales and earnings declined
in Europe.
Liquidity and Capital Resources
Baldor's financial position remains solid with cash and marketable securities at
$32.5 million compared to a balance of $38.8 million at the end of 1998. The
current ratio strengthened to 3.4 and the debt-to-capitalization ratio was 17.6%
compared to 17.7% at the end of 1998. Cash flows from operations increased to
$19.9 million compared to $10.2 million for the six months of 1999 and 1998. The
Company's strong balance sheet and cash flows have allowed the repurchase of 1.5
million shares of common stock since our stock repurchase program began in
September 1998. The Company has also authorized another stock repurchase program
to buy back an additional 1.5 million shares through December 2000.
Year 2000
The Company's comprehensive Year 2000 initiative is being managed internally.
The Company's goal is to ensure that there is no material adverse effect on
operations and that transactions with customers, vendors and financial
institutions will be operational in the year 2000. A new Company-wide
information system that is certified by the vendor to be Year 2000 compliant was
purchased in 1996. This fully integrated information reporting system was
purchased to improve visibility and reaction time to customer orders, reduce
lead times, support international operations, improve productivity and better
manage inventory. The Company has adhered to its implementation schedule and
completed installation in July 1999. The system is in operation and we will
complete final testing in our off-site recovery location in the fourth quarter
of 1999.
<PAGE>
The Company has evaluated other potential areas, such as vendor compliance, shop
floor technology, and other infrastructure such as phone and alarm systems.
These non-information systems are expected to function properly in the year
2000. Our manufacturing process equipment has been checked and is expected to be
operational in the Year 2000. The cost of addressing these systems for the year
2000 is not material.
We continue to monitor suppliers and financial institutions obtaining written
verification of their compliance status. While we can not guarantee the
performance of outside parties, our suppliers and financial institutions are
indicating that they will be Y2K compliant. We will continue to evaluate
suppliers; and if necessary, establish contingency plans in an attempt to
minimize disruptions.
The only product that the Company presently produces that utilizes a real-time
clock and a date stamp is the Baldor SmartMotor . This date stamp is used only
for run time and fault logging. It is not used in any control function and in
this capacity will function in the year 2000.
Based upon the procedures described and results achieved, the Company does not
anticipate a materially adverse affect from the Year 2000. Our Company views the
Year 2000 with seriousness and is pleased with the status of our Year 2000
readiness. We will continue to test and monitor our preparedness and address any
complications that may arise.
This Form 10-Q may contain statements which may constitute "forward-looking
statements". Such statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Prospective investors are
cautioned that actual results and experience may differ materially from the
forward-looking statements as a result of many factors, possibly including
changes in economic conditions, competition, fluctuations in raw materials, and
other unanticipated events and conditions. These statements are only as of the
date of this Form 10-Q.
Item 3. Market Risk
There have been no material changes in market risk or market risk factors since
the 1998 Annual Report to Shareholders.
<PAGE>
PART II. OTHER INFORMATION
Item 2. Recent Sales of Unregistered Securities
During the second quarter of 1999, certain District Managers exercised
non-qualified stock options previously granted to them under the Baldor Electric
Company 1990 Stock Option Plan for District Managers (the DM Plan). The exercise
price paid by the District Manager equaled the fair market value on the date of
grant. The total amount of shares granted under the DM Plan is less than 1% of
the outstanding shares of Baldor common stock.
None of the transactions were registered under the Securities Act of 1933, as
amended (the "Act"), in reliance upon the exemption from registration afforded
by Section 4(2) of the Act. The Company deems this exemption to be appropriate
given that there are a limited number of participants in the DM Plan and all
parties are knowledgeable about the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting on May 1, 1999, at which shareholders voted
on one proposal. Proposal I was the election of three Directors to the Company's
Board of Directors for terms expiring in 2002. 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 I:
Votes Votes Votes
Proposal For Against Withheld
- -------- --- ------- --------
Proposal I
Jefferson W. Asher, Jr. 27,216,754 N/A 291,528
Richard E. Jaudes 27,213,674 N/A 294,608
Robert J. Messey 27,220,508 N/A 287,774
The remaining board members are listed below and each is expected to serve out
his respective term:
Fred C. Ballman R. S. Boreham, Jr. Robert L. Proost
O. A. Baumann John A. McFarland R. L. Qualls
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit Number Description
4(i)(c) Second amendment to the Shareholders' Rights Agreement
dated February 5, 1996, filed as Exhibit 2 to
Registrant's Form 8-A/A dated march 21, 1996.
27 Financial Data Schedules-filed herewith in electronic
filing of Form 10-Q.
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
---------------------------
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)
Date: August 17, 1999 By: /s/ Lloyd G. Davis
--------------- ----------------------
Lloyd G. Davis - Executive Vice President-
Finance, Chief Financial Officer, Secretary
and Treasurer(on behalf of the Registrant
and as principal financial officer)
<PAGE>
SECOND AMENDMENT TO RIGHTS AGREEMENT
Recitals
This Second Amendment to Rights Agreement (the "Second Amendment") is made and
entered into by and among Wachovia Bank of North Carolina, N.A. ("Wachovia"),
Baldor Electric Company, a Missouri corporation, ("Baldor") and Continental
Stock Transfer & Trust Company, a New York banking corporation formed under
banking laws of the state of New York and having corporate trust powers pursuant
thereto ("Continental"), and will be effective as of the 1st day of June , 1999.
WHEREAS, Wachovia is currently the transfer agent, registrar and dividend paying
agent for the common stock of Baldor and is the "Rights Agent" as that term is
defined in, and pursuant to, that certain Baldor Electric Company Rights
Agreement dated as of May 6, 1988, by and among Baldor and Wachovia as amended
by Amendment #1 thereto dated as of February 5, 1996 (collectively the "Rights
Agreement"); and
WHEREAS, effective October 16, 1998, Wachovia subcontracted with Boston
EquiServe to perform Wachovia's duties as the rights agent under the Rights
Agreement; and
WHEREAS, Wachovia desires to resign as the Rights Agent under the Rights
Agreement, Baldor desires that Continental, rather than Boston EquiServe serve
as successor Rights Agent and Continental is willing to serve as successor
Rights Agent; and
WHEREAS, Section 21 of the Rights Agreement must be amended so that Continental
is able to qualify to serve as Rights Agent and the Executive Committee of the
Board of Directors of Baldor, by unanimous written consent dated as of May 3,
1999: (i) approved the amendment of Section 21 so that Continental shall so
qualify, (ii) approved the resignation of Wachovia as Rights Agent under the
Rights Agreement, (iii) approved the appointment of Continental as the successor
Rights Agent under the Rights Agreement, (iv) approved any and all other
amendments to the Rights Agreement which such officers may deem necessary,
desirable, convenient or appropriate to permit or otherwise induce Continental
to serve as Rights Agent, and (v) authorized the proper officers to take any and
all other actions deemed necessary to carry out the intent of the foregoing; and
WHEREAS, the parties hereto wish to acknowledge that immediately after the
approval of the amendment of Section 21 of the Rights Agreement, Wachovia shall
resign as Rights Agent and Continental shall be appointed the successor Rights
Agent; and
WHEREAS, Sections 1, 2, 3, 4, 5, 6 and 7 hereof are deemed to have occurred in
the order set forth in the Second Amendment, such that Wachovia shall not be
deemed to have resigned as Rights Agent until the amendments of Section 21 of
the Rights Agreement is effective, and Continental shall not be deemed to have
been appointed successor Rights Agent until Wachovia shall be deemed to have
resigned and Continental shall have made the representations and warranties to
Baldor set forth in Section 3 below, following which the address of the Rights
Agent shall be deemed to have changed as set forth in Section 5 below, and
certain other provisions contained in the Rights Agreement shall be deemed to
have been amended as set forth in Section 7 below.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
Section 1. Section 21 of the Rights Agreement is hereby modified and
amended by deleting the fifth sentence (not including the
caption) in its entirety and replacing it with:
Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be either: (a) a
banking corporation organized and doing business
under the laws of the United States or of any state
of the United States, in good standing, which is
authorized under such laws to exercise corporate
trust powers and is subject to supervision or
examination by federal or state authority and which
has at the time of its appointment as Rights Agent a
combined capital, surplus and blanket bond insurance
of at least $25,000,000; or (b) an affiliate of such
a banking corporation with trust powers.
Section 2. Upon the effectiveness of the amendment of Section 21 of
the Rights Agreement pursuant hereto, Wachovia hereby resigns
as the Rights Agent under the Rights Agreement.
Section 3. Effective upon the resignation of Wachovia as Rights Agent,
Continental hereby represents and warrants that it meets the
eligibility requirements to be the successor Rights Agent (as
described in Section 1 of the Second Amendment (which is the
same as Section 21 of the Rights Agreement as amended by this
Second Amendment) (the "Rights Agreement as Amended").
Section 4. Effective upon the resignation of Wachovia as
Rights Agent, Continental hereby accepts, and agrees
pursuant to Sections 20 and 21 of the Rights Agreement as
Amended to perform, all of the rights, powers, duties and
obligations as Rights Agent under, and in accordance with
the terms of, the Rights Agreement as Amended. In executing
this Second Amendment, Continental shall be entitled to all
the privileges and immunities afforded to the Rights Agent
under the terms and conditions of the Rights Agreement as
Amended. Section 5. The address to which all notices and
communications to Continental as Rights Agent are to be
delivered (in lieu of the prior address of Wachovia as the
prior Rights Agent) is: Continental Stock Transfer & Trust
Company 2 Broadway New York, New York 10004 and Section 25
of the Rights Agreement is hereby deemed amended to reflect
this new address for the Rights Agent. Section 6.
Henceforth, the term "Rights Agent" as used in the Rights
Agreement shall mean Continental. In furtherance of the
foregoing, the legend required on certificates of Baldor
common stock pursuant to Section 3(c) of the Rights
Agreement shall read as follows:
This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in the
Rights Agreement dated as of May 6, 1988, as amended
by the First Amendment thereto dated as of February
5, 1996, as further amended as of June 1, 1999,
between Baldor Electric Company (the "Company") and
Continental Stock Transfer & Trust Company (the
"Rights Agreement as Amended"), the terms of which
are hereby incorporated herein by reference and a
copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set
forth in the Rights Agreement as Amended, such Rights
will be evidenced by separate certificates and will
no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a
copy of the Rights Agreement as Amended without
charge promptly after receipt of a written request
therefor. Under certain circumstances, Rights
beneficially owned by Acquiring Persons (as defined
in the Rights Agreement as Amended) and any
subsequent holder of such Rights may become null and
void.
Section 7. The following provisions of the Rights Agreement are hereby amended
as set forth below:
(a) Section 1(e) of the Rights Agreement is hereby
amended in its entirety to read as follows:
"Business Day" shall mean any day other than
a Saturday, Sunday, or a day on which the
Rights Agent is authorized or obligated by
law or executive order to close.
(b) Section 1(f) of the Rights Agreement is hereby
amended in its entirety to read as follows:
"Close of Business" on any given date shall
mean 5:00 P.M. E.S.T.or E.D.T, as
appropriate, on such date; provided,
however, that if such date is not a
Business Day, it shall mean 5:00 P.M.
E.S.T. or E.D.T., as appropriate, on the
next succeeding Business Day.
(c) Section 5(b) of the Rights Agreement is hereby
amended in its entirety to read as follows:
Following the Distribution Date, the Rights
Agent will keep or cause to be kept, at one
of its offices, books for registration and
transfer of the Rights Certificates issued
hereunder. Such books shall show the names
and addresses of the respective holders of
the Rights Certificates, the number of
Rights evidenced on its face by each of the
Rights Certificates and the date of each of
the Rights Certificates.
Section 23(a)(i) of the Rights Agreement is hereby
amended such that the words "Winston-Salem, North
Carolina time," are deleted and replaced with "E.S.T.
or E.D.T., as appropriate".
Section 8. All references in the Rights Agreement to this "Agreement",
the "Rights Agreement and any other references of similar
import shall henceforth mean the Rights Agreement as Amended
and any further amendments or modifications thereof.
Section 9. All of the provisions of the Rights Agreement not amended
by this amendment shall remain in full force and.
Section 10. In the event of any inconsistency or conflict between this
Second Amendment and the Rights Agreement, the terms,
provisions and conditions contained in this Second Amendment
shall govern and control.
Section 11. (a) This Second Amendment, as it amends the
Rights Agreement, constitutes the entire agreement
and understanding of the parties with respect to the
subject matter hereof, and it supersedes all prior
negotiations, commitments, representations and
undertakings of the parties with respect to the
subject matter hereof.
(b) This Second Amendment shall be binding upon and inure
to the benefit of Baldor, Wachovia, Continental and
their respective successors and permitted assigns.
(c) This Second Amendment shall be deemed to be a
contract made under the laws of the State of Missouri
and for all purposes shall be governed by and
construed in accordance with the laws of such State
applicable to contracts made and to be performed
entirely within such state.
(d) This Second Amendment may be executed in
counterparts, each of which shall be deemed an
original, but all of which together shall constitute
one and the same instrument.
(e) Any capitalized word not otherwise defined in this
Second Amendment shall have the meaning given to such
word in the Rights Agreement.
(f) The Second Amendment may not be modified except by a
writing signed by authorized representatives of the
parties to the Second Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
Rights Agreement to be executed by their respective duly authorized officers as
of the 3rd day of May, 1999.
Baldor Electric Company Attest:
By: __________________________________ By: _______________________________
Name: _______________________________ Name: ____________________________
Title: ________________________________ Title: _____________________________
Wachovia Bank of North Carolina, N.A.
as resigning Rights Agent Attest:
By: __________________________________ By: _______________________________
Name: _______________________________ Name: ____________________________
Title: ________________________________ Title: _____________________________
Continental Stock Transfer & Trust Company
as successor Rights Agent Attest:
By: __________________________________ By: _______________________________
Name: _______________________________ Name: ____________________________
Title: ________________________________ Title: _____________________________
<PAGE>
OFFICER'S CERTIFICATE
The undersigned, Lloyd G. Davis, the duly authorized Secretary of Baldor
Electric Company (the "Company") hereby certifies that, pursuant to Section 26
of the Rights Agreement dated May 6, 1988 by and between the Company and
Wachovia Bank of North Carolina, N.A., as amended by Amendment #1 dated February
5, 1996, the Attached Amendment No. 2 to the Rights Agreement is in compliance
with Section 26 of the Rights Agreement as Amended.
IN WITNESS WHEREOF, the undersigned has executed this Officer's Certificate as
of this 3rd day of May 1999.
/s/ Lloyd G. Davis
------------------
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JUL-03-1999
<CASH> 13856
<SECURITIES> 18676
<RECEIVABLES> 105932
<ALLOWANCES> 4350
<INVENTORY> 101229
<CURRENT-ASSETS> 253538
<PP&E> 270730
<DEPRECIATION> 147964
<TOTAL-ASSETS> 409206
<CURRENT-LIABILITIES> 75341
<BONDS> 56493
0
0
<COMMON> 3856
<OTHER-SE> 261413
<TOTAL-LIABILITY-AND-EQUITY> 409206
<SALES> 294263
<TOTAL-REVENUES> 295137
<CGS> 204288
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<INCOME-TAX> 13331
<INCOME-CONTINUING> 21761
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21761
<EPS-BASIC> 0.60
<EPS-DILUTED> 0.59
</TABLE>
