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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 1, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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 [ ]
At July 1, 2000, there were 33,815,218 shares of the registrant's common stock
outstanding.
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Index
Baldor Electric Company and Affiliates
Part 1. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated statements of earnings-Six months ended
July 1, 2000 and July 3, 1999
Condensed consolidated balance sheets-July 1, 2000 and
January 1, 2000
Condensed consolidated statements of cash flow-Six months ended
July 1, 2000 and July 3, 1999
Notes to condensed consolidated financial statements-July 1, 2000
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 6. Exhibits and Reports on Form 8-K
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
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<TABLE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
JULY 1 JULY 3 JULY 1 JULY 3
(In thousands, except share data) 2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 160,970 $ 152,130 $ 317,044 $ 294,263
Other income (net) 563 350 890 874
----------- ----------- ----------- -----------
161,533 152,480 317,934 295,137
Cost and expenses: Cost of goods sold 110,853 105,794 217,913 204,288
Selling and administrative 27,054 25,584 53,244 49,435
Profit sharing 2,722 2,492 5,246 4,813
Interest 847 826 1,924 1,509
----------- ----------- ----------- -----------
141,476 134,696 278,327 260,045
----------- ----------- ----------- -----------
Earnings before income taxes 20,057 17,784 39,607 35,092
Income taxes 7,522 6,754 14,852 13,331
----------- ----------- ----------- -----------
NET EARNINGS $ 12,535 $ 11,030 $ 24,755 $ 21,761
=========== =========== =========== ===========
Net earnings per share-diluted $0.36 $0.30 $0.71 $0.59
=========== =========== =========== ===========
Net earnings per share-basic $0.37 $0.30 $0.72 $0.60
=========== =========== =========== ===========
Weighted average shares outstanding-diluted 34,507,770 36,952,028 34,784,879 37,042,383
=========== =========== =========== ===========
Weighted average shares outstanding-basic 33,926,099 36,170,533 34,247,695 36,271,880
=========== =========== =========== ===========
Dividends paid per common share $0.12 $0.11 $0.24 $0.22
=========== =========== =========== ===========
See notes to unaudited condensed consolidated financial statements.
</TABLE>
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<TABLE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
JULY 1 JANUARY 1
2000 2000
-------- ---------
<S> <C> <C>
ASSETS (in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 1,751 $ 12,103
Marketable securities 15,192 30,805
Receivables, less allowance of $4,350 111,138 98,470
Inventories: Finished products 82,493 75,351
Work in process 10,686 9,728
Raw materials 44,570 47,677
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137,749 132,756
LIFO valuation adjustment (deduction) (26,299) (26,571)
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111,450 106,185
Other current and deferred tax assets 21,146 24,767
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TOTAL CURRENT ASSETS 260,677 272,330
OTHER ASSETS 26,770 26,809
NET PROPERTY, PLANT AND EQUIPMENT 124,250 124,802
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$411,697 $423,941
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 23,957 $ 26,774
Employee compensation 5,618 6,021
Profit sharing 5,216 9,417
Anticipated warranty costs 5,925 5,925
Accrued insurance obligations 14,344 15,675
Other accrued expenses 16,808 18,205
Income Taxes 9,038 5,752
Current portion of long-term obligations 640 605
-------- --------
TOTAL CURRENT LIABILITIES 81,546 88,374
LONG-TERM OBLIGATIONS 65,665 56,305
DEFERRED INCOME TAXES 13,601 13,153
SHAREHOLDERS' EQUITY
Common stock 3,884 3,872
Additional capital 36,334 34,971
Retained earnings 308,095 291,741
Accumulated other comprehensive income (3,606) (2,676)
Treasury stock , at cost (93,822) (61,799)
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TOTAL SHAREHOLDERS' EQUITY 250,885 266,109
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$411,697 $423,941
======== ========
See notes to unaudited condensed consolidated financial statements.
</TABLE>
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BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
SIX MONTHS ENDED
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JULY 1 JULY 3
2000 1999
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<S> <C> <C>
(In thousands)
OPERATING ACTIVITIES:
Net earnings $ 24,755 $ 21,761
Depreciation and amortization 10,071 10,387
Deferred income taxes 495 1,787
Changes in operating assets and liabilities:
Receivables (12,668) (11,512)
Inventories (5,264) 2,578
Other current assets 3,573 5,652
Accounts payable (2,837) 4,070
Accrued expenses and other liabilities (7,310) (9,802)
Income taxes 3,286 751
Other, net (3,024) (5,732)
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Net cash provided from operating activities 11,077 19,940
INVESTING ACTIVITIES:
Additions to property, plant and equipment (7,640) (5,393)
Sales of available-for-sale securities 19,625 8,106
Purchases of available-for-sale securities (4,012) (12,786)
Acquisitions 0 0
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Net cash used in investing activities 7,973 (10,073)
FINANCING ACTIVITIES:
Additional long-term borrowings 9,395 0
Reduction of long-term obligations 0 (562)
Unexpended debt proceeds (5) (124)
Dividends paid (8,144) (7,958)
Common stock repurchases (31,852) (13,035)
Stock option plans 1,204 875
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Net cash used in financing activities (29,402) (20,804)
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NET DECREASE IN CASH & CASH EQUIVALENTS (10,352) (10,937)
BEGINNING CASH AND CASH EQUIVALENTS 12,103 24,793
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ENDING CASH AND CASH EQUIVALENTS $ 1,751 $ 13,856
======== ========
See notes to unaudited condensed consolidated financial statements.
</TABLE>
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Baldor Electric Company and Affiliates
Notes to Unaudited Condensed Consolidated Financial Statements
July 1, 2000
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 1,
2000. 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 1, 2000, may not be indicative of the results that may be expected
for the fiscal year ending December 30, 2000.
COMPREHENSIVE INCOME: Total comprehensive income was approximately
$12.2 and $11.1 million for the second quarter of 2000 and 1999 and was
approximately $24.0 million and $21.5 million for the six months ended
July 1, 2000 and July 3, 1999. 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.
FINANCIAL DERIVATIVES: In June 1999, the Financial Accounting Standards
Board issued SFAS No. 137 to defer the effective date of SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 now becomes effective for Baldor in the second quarter of 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.
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NOTE B EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (EPS):
<TABLE>
<CAPTION>
Three Months Ended
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(In thousands, except per share data) July 1, 2000 July 3, 1999
------------ ------------
<S> <C> <C>
Numerator Reconciliation:
Net earnings $12,535 $11,030
======= =======
Denominator Reconciliation:
The denominator for basic EPS:
Weighted average shares 33,926 36,171
Effect of dilutive securities:
Stock options 582 781
--- ---
The denominator for diluted EPS-adjusted
weighted average shares 34,508 36,952
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Basic earnings per share $0.37 $0.30
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Diluted earnings per share $0.36 $0.30
===== =====
<CAPTION>
Six Months Ended
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(In thousands, except per share data) July 1, 2000 July 3, 1999
------------ ------------
<S> <C> <C>
Numerator Reconciliation:
Net earnings $24,755 $21,761
======= =======
Denominator Reconciliation:
The denominator for basic EPS:
Weighted average shares 34,248 36,272
Effect of dilutive securities:
Stock options 537 770
--- ---
The denominator for diluted EPS-adjusted
weighted average shares 34,785 37,042
====== ======
Basic earnings per share $0.72 $0.60
===== =====
Diluted earnings per share $0.71 $0.59
===== =====
</TABLE>
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Second quarter 2000 sales were the highest quarterly sales ever for the
Company, increasing 5.8% over second quarter 1999 and 3.1% over first
quarter 2000. Gross margin improved to 31.1% in second quarter 2000
compared to 30.5% for second quarter 1999. For the first six months
gross margin improved to 31.3% compared to 30.6% for the same period in
1999. Operating margin for the second quarter increased to 14.3% from
13.6% for the same period in 1999. Operating margin for the first six
months improved to 14.5% compared to 13.8% in 1999. The second quarter
effective tax rate of 37.5% was down slightly from 38% in 1999.
Net earnings of $12,535,000 for the second quarter increased 13.6%
compared to the same quarter of 1999. Earnings of $24,755,000 for the
first six months of 2000 were a 13.8% improvement over the same period
in 1999. Earnings per share of $0.36 increased 20% in the second
quarter compared to the same quarter of 1999 in part due to the stock
repurchase plan authorized by the Board. EPS of $.71 for the first six
months of 2000 advanced 20% from $.59 for the same period in 1999.
Pretax earnings for second quarter 2000 grew 12.8% to $20,057,000
compared to $17,784,000 for second quarter 1999. Pretax earnings of
$24,755,000 for the first six months of 2000 improved 12.9% from the
same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Baldor's financial position remains solid. The current ratio was 3.2
and the debt-to-capitalization ratio increased to 20.7% for second
quarter versus 17.6% for second quarter 1999. Return on average equity
was 18.1% compared to 16.4% for second quarter 1999. During the
second quarter Baldor repurchased 252,000 shares under the stock
repurchase program. To date 3.97 million of the authorized 6.0 million
shares have been repurchased since the stock repurchase program began in
September 1998.
YEAR 2000
The Company's comprehensive Year 2000 initiative was implemented timely
and successfully with no significant problems. We did not experience
any disruptions from our suppliers or financial institutions nor has any
Baldor product been affected by the 2000 date. We are ready with our
new Company-wide information system to improve visibility and reaction
time to customer orders, reduce lead times, support international
operations, improve productivity and better manage inventory for the new
millennium.
This Form 10-Q may contain statements that 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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk or market risk
factors since the 1999 Annual Report to Shareholders.
PART II. OTHER INFORMATION
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
During the second quarter of 2000, 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 April 29, 2000, 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 2003. 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
Merlin J. Augustine, Jr. 27,328,719 N/A 608,083
John A. McFarland 26,419,619 N/A 1,517,183
Robert L. Proost 27,453,529 N/A 483,273
The remaining board members are listed below and each is expected to
serve out his respective term:
Jefferson W. Asher, Jr. R. S. Boreham, Jr. Robert L. Proost
Fred C. Ballman Robert J. Messey R. L. Qualls
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit Number Description
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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
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BALDOR ELECTRIC COMPANY
(Registrant)
Date: August 14, 2000 By: /s/ Ronald E. Tucker
---------------------
Ronald E. Tucker - Chief Financial Officer
(on behalf of the Registrant and as Chief
Financial Officer)
10
