PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
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BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 October 2 September 30 October 2
(In thousands, except share data) 2000 1999 2000 1999
Net sales $153,114 $144,349 $470,158 $438,612
Other income (net) 383 568 1,273 1,442
153,497 144,917 471,431 440,054
Cost and expenses: Cost of goods sold 106,169 100,111 324,082 304,399
Selling and administrative 25,609 24,110 78,854 73,545
Profit sharing 2,473 2,154 7,719 6,967
Interest 869 725 2,792 2,235
135,120 127,100 413,447 387,146
Earnings before income taxes 18,377 17,817 57,984 52,908
Income taxes 6,892 6,774 21,744 20,105
NET EARNINGS $11,485 $11,043 $36,240 $32,803
Net earnings per share-diluted $0.33 $0.30 $1.05 $0.89
Net earnings per share-basic $0.34 $0.31 $1.06 $0.91
Weighted average shares outstanding-diluted 34,334,993 36,653,008 34,634,950 36,901,065
Weighted average shares outstanding-basic 33,717,519 35,982,533 34,070,970 36,175,431
Dividends paid per common share $0.13 $0.11 $0.37 $0.33
See notes to unaudited condensed consolidated financial statements.
Baldor Electric Company and Affiliates
Condensed Consolidated Balance Sheets
(Unaudited)
September 30 January 1
2000 2000
ASSETS (in thousands)
CURRENT ASSETS
Cash and cash equivalents $8,539 $12,103
Marketable securities 10,743 30,805
Receivables, less allowance of $4,350 110,583 98,470
Inventories: Finished products 79,122 75,351
Work in process 10,643 9,728
Raw materials 48,078 47,677
137,843 132,756
LIFO valuation adjustment (deduction) (26,117) (26,571)
111,726 106,185
Other current and deferred tax assets 20,941 24,767
TOTAL CURRENT ASSETS 262,532 272,330
OTHER ASSETS 26,340 26,809
NET PROPERTY, PLANT AND EQUIPMENT 125,611 124,802
$414,483 $423,941
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $32,062 $26,774
Employee compensation 7,198 6,021
Profit sharing 7,689 9,417
Anticipated warranty costs 5,925 5,925
Accrued insurance obligations 15,382 15,675
Other accrued expenses 13,522 18,205
Income Taxes 6,473 5,752
Current portion of long-term obligations 640 605
TOTAL CURRENT LIABILITIES 88,891 88,374
LONG-TERM OBLIGATIONS 57,665 56,305
DEFERRED INCOME TAXES 13,724 13,153
SHAREHOLDERS' EQUITY
Common stock 3,890 3,872
Additional capital 36,986 34,971
Retained earnings 315,127 291,741
Accumulated other comprehensive income (4,303) (2,676)
TREASURY STOCK , AT COST (97,497) (61,799)
TOTAL SHAREHOLDERS' EQUITY 254,203 266,109
$414,483 $423,941
See notes to unaudited condensed consolidated financial statements.
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
September 30 October 2
2000 1999
(In thousands)
Operating activities:
Net earnings $36,240 $32,803
Depreciation and amortization 15,014 15,672
Deferred income taxes 660 5,068
Changes in operating assets and liabilities:
Receivables (12,112) (15,952)
Inventories (5,541) 5,661
Other current assets 3,738 5,296
Accounts payable 5,268 5,876
Accrued expenses and other liabilities (5,505) (7,518)
Income taxes 721 (2,806)
Other , net (4,494) (8,786)
NET CASH PROVIDED FROM OPERATING ACTIVITIES 33,989 35,314
Investing activities:
Additions to property, plant and equipment (12,811) (8,967)
Net (purchases) sales of marketable securities 20,062 (14,200)
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES 7,251 (23,167)
Financing activities:
Net additions (reductions) of long-term obligations 1,395 (562)
Unexpended debt proceeds (12) (54)
Dividends paid (12,523) (11,912)
Common stock repurchases (35,151) (17,915)
Stock option plans 1,487 1,421
NET CASH USED IN FINANCING ACTIVITIES (44,804) (29,022)
Net decrease in cash & cash equivalents (3,564) (16,875)
Beginning cash and cash equivalents 12,103 24,793
Ending cash and cash equivalents $8,539 $7,918
See notes to unaudited condensed consolidated financial statements.
Baldor Electric Company and Affiliates
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 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 nine months ended September 30, 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 $11.0 million and $10.2 million for the third quarter of 2000 and
1999, respectively, and was approximately $35.0 million and $31.7 million for the nine months ended September 30, 2000 and October 2,
1999, respectively. 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. 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):
Three Months Ended
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(In thousands, except per share data) September 30, 2000 October 2, 1999
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Numerator Reconciliation:
Net earnings $ 11,485 $ 11,043
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Denominator Reconciliation:
The denominator for basic EPS:
Weighted average shares 33,718 35,983
Effect of dilutive securities:
Stock options 617 670
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The denominator for diluted EPS-adjusted
weighted average shares 34,335 36,653
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Basic earnings per share $ 0.34 $ 0.31
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Diluted earnings per share $ 0.33 $ 0.30
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Nine Months Ended
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(In thousands, except per share data) September 30, 2000 October 2, 1999
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Numerator Reconciliation:
Net earnings $ 36,240 $ 32,803
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Denominator Reconciliation:
The denominator for basic EPS:
Weighted average shares 34,071 36,175
Effect of dilutive securities:
Stock options 564 726
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The denominator for diluted EPS-adjusted
weighted average shares 34,635 36,901
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Basic earnings per share $ 1.06 $ 0.91
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Diluted earnings per share $ 1.05 $ 0.89
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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Third quarter 2000 sales were the highest third quarter sales ever for the Company, increasing 6.1% over third quarter 1999. Gross
margin improved to 30.7% in third quarter 2000 compared to 30.6% for third quarter 1999. For the first nine months gross margin
improved to 31.1% compared to 30.6% for the same period in 1999. Operating margin of 13.9% for the third quarter was equal to third
quarter 1999. Operating margin for the first nine months improved to 14.3% compared to 13.8% in 1999. The third quarter effective
tax rate of 37.5% was down slightly from 38% in 1999.
Net earnings of $11.49 million for the third quarter increased 4.0% from third quarter 1999. Earnings of $36.24 million for the
first nine months of 2000 were a 10.5% improvement over the same period in 1999. Earnings per share of $0.33 increased 10% compared
to the same quarter of 1999 in part due to the stock repurchase plan authorized by the Board. EPS of $1.05 for the first nine months
of 2000 advanced 18% from $.89 for the same period in 1999. Pretax earnings for third quarter 2000 grew 3.1% to $18.38 million
compared to $17.82 million for third quarter 1999. Pretax earnings of $57.98 million for the first nine months of 2000 improved 9.6%
from the same period in 1999.
Liquidity and Capital Resources
Baldor's financial position remains solid. The current ratio was 3.0 and the debt-to-total capital ratio was 18.5% as of September
30. Return on average equity was 18.2% for the quarter compared to 16.2% for third quarter 1999. During the third quarter Baldor
repurchased 176,200 shares under the stock repurchase program. To date 4.1 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.
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 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: November 9, 2000 By: /s/ Ronald E. Tucker
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Ronald E. Tucker - Chief Financial Officer (on
behalf of the Registrant and as Chief
Financial Officer)
