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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 April 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 April 1, 2000, there were 34,056,165 shares of the registrant's
common stock outstanding.
1
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Index
Baldor Electric Company and Affiliates
Part 1. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated statements of earnings-Three
months ended April 1, 2000 and April 3, 1999
Condensed consolidated balance sheets-April 1, 2000
and January 1, 2000
Condensed consolidated statements of cash flow-Three
months ended April 1, 2000 and April 3, 1999
Notes to condensed consolidated financial statements-
April 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
2
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
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APRIL 1 APRIL 3
(In thousands, except share data) 2000 1999
----------- -----------
<S> <C> <C>
Net sales $ 156,074 $ 142,133
Other income (net) 327 524
156,401 142,657
Cost and expenses: Cost of goods sold 107,060 98,494
Selling and administrative 26,190 23,850
Profit sharing 2,524 2,321
Interest 1,076 684
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136,850 125,349
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Earnings before income taxes 19,551 17,308
Income taxes 7,331 6,577
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NET EARNINGS $ 12,220 $ 10,731
=========== ===========
Net earnings per share-diluted $0.35 $0.29
=========== ===========
Net earnings per share-basic $0.35 $0.30
=========== ===========
Weighted average shares outstanding-diluted 35,070,064 37,146,814
=========== ===========
Weighted average shares outstanding-basic 34,569,291 36,373,226
=========== ===========
Dividends paid per common share $0.12 $0.11
=========== ===========
See notes to unaudited condensed consolidated financial statements.
</TABLE>
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<TABLE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
APRIL 1 JANUARY 1
2000 2000
-------- --------
<S> <C> <C>
ASSETS (in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 1,837 $ 12,103
Marketable securities 21,725 30,805
Receivables, less allowance of $4,350 107,424 98,470
Inventories: Finished products 77,253 75,351
Work in process 10,406 9,728
Raw materials 45,749 47,677
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133,408 132,756
LIFO valuation adjustment (deduction) (26,390) (26,571)
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107,018 106,185
Other current and deferred tax assets 22,635 24,767
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TOTAL CURRENT ASSETS 260,639 272,330
OTHER ASSETS 26,299 26,809
NET PROPERTY, PLANT AND EQUIPMENT 124,193 124,802
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$411,131 $423,941
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 27,325 $ 26,774
Employee compensation 8,897 6,021
Profit sharing 2,494 9,417
Anticipated warranty costs 5,925 5,925
Accrued insurance obligations 14,429 15,675
Other accrued expenses 16,373 18,205
Income Taxes 11,763 5,752
Current portion of long-term obligations 605 605
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TOTAL CURRENT LIABILITIES 87,811 88,374
LONG-TERM OBLIGATIONS 62,305 56,305
DEFERRED INCOME TAXES 13,532 13,153
SHAREHOLDERS' EQUITY
Common stock 3,880 3,872
Additional capital 35,829 34,971
Retained earnings 299,599 291,741
Accumulated other comprehensive income (3,116) (2,676)
Treasury stock, at cost (88,709) (61,799)
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TOTAL SHAREHOLDERS' EQUITY 247,483 266,109
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$411,131 $423,941
======== ========
See notes to unaudited condensed consolidated financial statements.
</TABLE>
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<TABLE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
<CAPTION>
THREE MONTHS ENDED
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APRIL 1 APRIL 3
2000 1999
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<S> <C> <C>
(In thousands)
OPERATING ACTIVITIES:
Net earnings $ 12,220 $ 10,731
Depreciation and amortization 5,095 5,143
Deferred income taxes 380 274
Changes in operating assets and liabilities:
Receivables (8,954) (2,954)
Inventories (833) (1,187)
Other current assets 2,132 5,101
Accounts payable 531 1,578
Accrued expenses (7,104) (9,353)
Income taxes 6,011 5,098
Other, net (1,243) (3,436)
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Net cash from operating activities 8,235 10,995
INVESTING ACTIVITIES:
Additions to property, plant and equipment (3,447) (2,807)
Marketable securities purchased (3,146) (5,709)
Marketable securities sold 12,226 6,290
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Net cash used in investing activities 5,633 (2,226)
FINANCING ACTIVITIES:
Additional long-term obligations 6,000 13
Unexpended debt proceeds (8) (71)
Dividends paid (4,084) (3,981)
Stock repurchases (26,837) (11,531)
Stock option plans 795 684
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Net cash used in financing activities (24,134) (14,886)
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NET DECREASE IN CASH & CASH EQUIVALENTS (10,266) (6,117)
BEGINNING CASH AND CASH EQUIVALENTS 12,103 24,793
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ENDING CASH AND CASH EQUIVALENTS $ 1,837 $ 18,676
======== ========
See notes to unaudited condensed consolidated financial statements.
</TABLE>
5
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Baldor Electric Company and Affiliates
Notes to Unaudited Condensed Consolidated Financial Statements
April 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 three months
ended April 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
$11.8 and $10.4 million for the first quarter of 2000 and 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 first 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.
NOTE B EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (EPS):
<TABLE>
<CAPTION>
April 1, 2000 April 3, 1999
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<S> <C> <C>
(In thousands, except per share data)
Numerator Reconciliation:
Net earnings $ 12,220 $ 10,731
========== ==========
Denominator Reconciliation:
The denominator for basic EPS:
Weighted average shares 34,569,291 36,373,226
Effect of dilutive securities:
Stock options 500,773 773,588
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The denominator for diluted EPS-adjusted
weighted average shares 35,070,064 37,146,814
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Diluted earnings per share $0.35 $0.29
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Basic earnings per share $0.35 $0.30
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</TABLE>
6
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
First quarter sales for 2000 were the highest quarterly sales ever for
the Company, up 10% from first quarter 1999 and 12.5% over fourth
quarter 1999. Gross margins and operating margins also set new records.
Gross margins improved to 31.4% in first quarter 2000 compared to 30.7%
for first quarter 1999 and 31.2% for fourth quarter 1999. Operating
margins were 14.6% compared to 13.9% and 14.5% for first and fourth
quarters 1999, respectively. The first quarter effective tax rate of
37.5% was down slightly from 38% in 1999.
Earnings of $12,220,000 for the first quarter increased 14% compared to
the same quarter of 1999. Earnings per share of $0.35 increased 21% in
the first quarter compared to the same quarter of 1999 in part due to
the stock repurchase plan authorized by the Board. Pretax margins
increased to $19,500,000 compared to $17,300,000 for first quarter 1999
and $17,600,000 for fourth quarter 1999.
LIQUIDITY AND CAPITAL RESOURCES
Baldor's financial position remains solid. The current ratio was 3.0
and the debt-to-capitalization ratio increased to 20.1% for first
quarter versus 18.0% for first quarter 1999. Return on average equity
was 17.8% compared to 17.1% for first quarter 1999. An additional 1.5
million shares was authorized by the Board, subsequent to the balance
sheet date, to be repurchased bringing the total repurchase authorized
to 6.0 million shares. During the first quarter Baldor repurchased 1.7
million shares under the stock repurchase program. A total of 3.7
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.
7
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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 first 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 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: May 6, 2000 By: /s/ Ronald E. Tucker
-------------- ----------------------------
Ronald E. Tucker - Chief Financial Officer
(on behalf of the Registrant and as
Chief Financial Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> APR-01-2000
<CASH> 1,837
<SECURITIES> 21,725
<RECEIVABLES> 111,774
<ALLOWANCES> 4,350
<INVENTORY> 107,018
<CURRENT-ASSETS> 22,635
<PP&E> 284,063
<DEPRECIATION> 159,870
<TOTAL-ASSETS> 411,131
<CURRENT-LIABILITIES> 87,811
<BONDS> 62,305
<COMMON> 3,880
0
0
<OTHER-SE> 243,603
<TOTAL-LIABILITY-AND-EQUITY> 411,131
<SALES> 156,074
<TOTAL-REVENUES> 156,401
<CGS> 107,060
<TOTAL-COSTS> 136,850
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,076
<INCOME-PRETAX> 19,551
<INCOME-TAX> 7,331
<INCOME-CONTINUING> 12,220
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,220
<EPS-BASIC> 0.35
<EPS-DILUTED> 0.35
</TABLE>
