-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Cl4zXRz8/Ho3dz/S+VJjwsmfNSjQfBO85uvjrrRsXwMMZuhECcr1F/4vuVckSYCs KqoMJqdFwj7CsasnvyA4Qw== 0000009342-94-000007.txt : 19940404 0000009342-94-000007.hdr.sgml : 19940404 ACCESSION NUMBER: 0000009342-94-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940101 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALDOR ELECTRIC CO CENTRAL INDEX KEY: 0000009342 STANDARD INDUSTRIAL CLASSIFICATION: 3621 IRS NUMBER: 430168840 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-07284 FILM NUMBER: 94519448 BUSINESS ADDRESS: STREET 1: 5711 R S BOREHAM JR ST CITY: FORT SMITH STATE: AR ZIP: 72901 BUSINESS PHONE: 5016464711 10-K 1 BALDOR ELECTRIC CO.'S 1993 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ------------------------ [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended Commission File Number January 1, 1994 1-7284 --------------- ------ B A L D O R E L E C T R I C C O M P A N Y ------------------------------------------------------ (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 St, Fort Smith, Arkansas 72902 (501) 646-4711 - --------------------------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) (Telephone Number) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of Each Class which registered - ----------------------------- ------------------------ Common Stock, $0.10 Par Value New York Stock Exchange Common Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by non-affiliates of the regis- trant based on the closing price on February 25, 1994, was $477,203,000. At February 25, 1994, there were 18,093,009 shares of the registrant's common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the fiscal year ended January 1, 1994, ("the Annual Report to Shareholders for 1993") are incorporated by reference into Part II. Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held May 7, 1994, ("the 1994 Proxy Statement") are incorporated by reference into Parts I and III. PART I Item 1. Business Baldor Electric Company ("the Company") was incorporated in Missouri in 1920. The Company operates primarily in one industry segment which includes the design, manufacture, and sale of electric motors and drives. In addition to electric motors and drives, products include industrial grinders, buffers, polishing lathes, stampings, castings, and repair parts. Baldor has made several small acquisitions; however, the majority of its growth has come internally through broadening its markets and product lines. Products Sales of electric motors represented approximately 85% of the Company's business in 1993, 85% in 1992, and 86% in 1991. The AC motor product line presently ranges in size from 1/50 through 600 horsepower. The DC motor product line presently ranges from 1/50 through 700 horsepower. Industrial drive products, which include servo products, brushless DC and SCR controls, and inverter and vector drives, accounted for approximately 11% of the Company's business in 1993, 10% in 1992, and 9% in 1991. The Company's line of adjustable speed controls ranges from 1/100 to 125 horsepower. With these products, the Company provides its customers the ability to purchase industrial motors and electronic controls (which constitute drives) from one manufacturer. Baldor's motors and drives are designed, manufactured, and marketed for general purpose uses ("stock products") and for individual customer requirements and specifications ("custom products"). Stock product sales represent approximately 64% of the Company's business, with most sales to customers who place orders for immediate shipment. Custom products generally are shipped within four weeks from the date of order. Because of these and other factors, the Company does not believe that its backlog represents an accurate indication of future shipments. Sales and Marketing The products of the Company are marketed throughout the United States and in more than 55 foreign countries. The Company's field sales organization consists of more than 50 independent manufacturer's representatives including 25 in the United States and the remainder in Canada, Europe, Latin America, Australia, and the Far East. Custom products and stock products are sold to original equipment manufac- turers ("OEMs"). Stock products are sold to independent distributors for resale, often as replacement components in industrial machinery which is being modernized or upgraded for improved performance. - 2 - The Company conducts business with a large number of customers and it does not believe that the loss of any single customer would have a material adverse effect on its total business. Competition The Company faces substantial competition in the sales of its products in all markets served. Some of the Company's competitors are larger in size or are divisions of large diversified companies and have substantially greater financial resources. The Company competes by providing its customers better value through product quality and efficiency and better services including availability, shorter lead-times, on-time delivery, product literature, and training. The Company is not aware of any industry-wide statistics from which it can precisely determine its relative portion of the industrial electric motor industry. In the United States, certain industry statistics are available from the U.S. Department of Commerce and the National Electric Manufacturers Association. However, these sources do not include all competitors or all sizes of motors. The Company believes, however, that it is a significant factor in the markets it serves. Manufacturing The Company manufactures many of the components used in its products in- cluding laminations, motor hardware, and aluminum die castings. Manufacturing many of its own components permits the Company to better manage cost, quality, and availability. In addition to the manufacture of components, the Company's motor manufacturing operations include machining, stamping, welding, winding, assembling, and finishing operations. The raw materials necessary for the Company's manufacturing operations are available from several sources. These materials include steel, copper wire, gray iron castings, aluminum, and insulating materials, most of which are purchased from more than one supplier. Although some materials are purchased from a single supplier, the Company believes that alternate sources are available for such materials. Research and Development The Company's design and development of electric motors and drives includes both the development of products which extend the product lines and the modification of existing products to meet new application requirements. Additional development work is done to improve production methods. Costs associated with research, new product development, and product and cost improvements are treated as expenses when incurred and amounted to approximately $12,900,000 in 1993, $11,300,000 in 1992, and $9,900,000 in 1991. - 3 - Environment Compliance with laws relating to the discharge of materials into the envi- ronment or otherwise relating to the protection of the environment has not had a material effect on capital expenditures, earnings, or the competitive position of the Company and is not expected to have such an effect. Employees At January 1, 1994, the Company had 3,102 employees. Executive Officers of the Registrant Information regarding executive officers is contained in Part III, Item 10, and incorporated herein by reference. International Operations For each of the three fiscal years in the period ended January 1, 1994, export and international sales have increased, representing approximately 13.4% of consolidated sales in 1993, 13.3% in 1992, and 12.8% in 1991. See also Note G on page 26 of the Annual Report to Shareholders for 1993. The Company's products are distributed in more than 55 foreign countries, principally in Canada, Europe, Australia, the Far East, and Latin America. The Company's international operations include the Baldor ASR group of companies which was acquired in 1983. Baldor ASR has a sales office located in Switzerland, a sales office located in Germany, and three sales offices located in the United Kingdom. Baldor ASR also has research and manufacturing operations in Germany. The Company has a majority interest in Baldor Electric (Far East) Pte. Ltd., which has locations in Indonesia and Singapore, and a majority interest in Australian Baldor Pty. Limited, with two locations in Australia. Finally, the Company owns Baldor de Mexico, S.A. de C.V., located in Mexico City, and the Company has a minority interest in Baldor Electric (Thailand) Ltd., located in Bangkok, Thailand. All of the affiliate locations except Baldor ASR Germany are sales operations. The Company believes that it is in a position to act on global opportunities as they become available. The Company also believes that there are additional risks attendant to international operations including currency fluctuations and possible restrictions on the movement of funds. However, these risks have not had a material adverse effect on the Company's business. Item 2. Properties - ------------------- The Company believes that its facilities, including equipment and machinery, are in good condition, suitable to current operations, adequately maintained - 4 - and insured, and capable of sufficient additional production levels. The following table sets forth certain information with respect to the Company's properties. AREA LOCATION PRIMARY USE (SQ. FT.) Fort Smith, AR AC motor production 293,350 Distribution and service center 159,500 Administration and engineering offices 69,700 Aluminum die casting 56,400 St. Louis County, Metal stamping and engineering MO toolroom 121,700 DC and miscellaneous motor production 55,600 Columbus, MS AC motor production 140,300 Westville, OK AC and DC motor production 155,000 Fort Mill, SC DC motors, AC motors 110,000 and tachometer production Clarksville, AR Subfractional motor and 86,750 gear motor production Five other Motor, drives, and servomotor 128,900 domestic locations production, and metal stamping Eight foreign Sales and distribution centers 37,900 locations and servodrive production --------- 1,415,100 Certain properties listed above (428,750 sq. ft. in the aggregate) are leased, principally pursuant to Industrial Revenue Bond agreements, and where material, are accounted for as capitalized lease obligations. Certain lease agreements contain purchase options at varying prices and/or renewal options at reduced rentals for extended additional periods. Item 3. Legal Proceedings - -------------------------- The Company is party to a number of legal proceedings incidental to its business, none of which is deemed to be material to its operations or business. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. - 5 - PART II Item 5. Market for the Registrant's Common Equity and Related Shareholder - -------------------------------------------------------------------------- Matters - ------- Information under the captions "Dividends Paid", "Common Stock: Price Range", and "Shareholders" on the inside back cover of the Annual Report to Shareholders for 1993 is incorporated herein by reference. Item 6. Selected Financial Data - -------------------------------- Information under the "Eleven-Year Summary of Financial Data" for years 1989 through 1993 for net sales, net earnings, net earnings per share, dividends per share, long-term obligations, and total assets on page 14 of the Annual Report to Shareholders for 1993 is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations - --------------------- Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 18 and 19 of the Annual Report to Shareholders for 1993 is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data - ---------------------------------------------------- The consolidated financial statements of the Company on pages 20 through 26, the report thereon of Ernst & Young, Independent Auditors, on page 27, and the "Summary of Quarterly Results of Operations (Unaudited)" on page 21 of the Annual Report to Shareholders for 1993 are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and - ------------------------------------------------------------------------ Financial Disclosure - -------------------- Not applicable. - 6 - PART III Item 10. Directors and Executive Officers of the Registrant - ------------------------------------------------------------ The current executive officers of the Company, each of whom is elected for a term of one year or until his successor is elected and qualified, are: Served as Officer Name Age Position Since R. S. Boreham, Jr. 69 Chairman of the Board 1962 R. L. Qualls 60 President and Chief 1986 Executive Officer George A. Schock 86 Assistant Secretary 1944 Theodore W. Atkins 55 Vice President - Industry 1986 Relations and Governmental Affairs Charles H. Cramer 49 Vice President - Personnel 1984 Lloyd G. Davis 46 Chief Financial Officer, 1992 Vice President - Finance, Secretary, and Treasurer James R. Kimzey 55 Vice President - Research 1984 and Engineering Robert L. Null, Jr. 51 Vice President- 1990 Manufacturing John A. McFarland 42 Vice President - Sales 1990 Jerry D. Peerbolte 37 Vice President - Marketing 1990 Each of the executive officers has served as an officer or in a management capacity with Baldor Electric Company for the last five years. There are no family relationships among the executive officers. The information under the caption "Election of Directors" of the 1994 Proxy Statement is incorporated herein by reference. Item 11. Executive Compensation - -------------------------------- Information contained in the 1994 Proxy Statement under the caption "Executive Compensation", except for the information contained in the sub- captions "Report of the Executive and Stock Option Committees" and "Performance Graph", and information under the caption "Information About the Board of Directors and Committees of the Board" is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------ The security ownership by officers and directors included under the caption "Security Ownership of Certain Beneficial Owners and Management" of the 1994 Proxy Statement is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions - -------------------------------------------------------- Information under the caption "Certain Transactions" of the 1994 Proxy Statement is incorporated herein by reference. - 7 - PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K - -------------------------------------------------------------------------- (a) (1) and (2) - The response to this portion of Item 14 is submitted as a separate section of this Report at page 13 hereof. For a listing of all management contracts and compensatory plans or arrangements required to be filed as exhibits to this Form 10-K, see the first four exhibits listed below under Exhibit 10. (3) Listing of Exhibits Exhibit 3(i) - The Restated Articles of Incorporation of Baldor Electric Company (as amended) filed as Exhibit 3.1 to Form 10-K for the year ended December 30, 1989, and incorporated herein by reference. Exhibit 3(ii) - Bylaws of Baldor Electric Company (as amended) dated February 15, 1993, filed as Exhibit 3.2 to Form 10-K for the year ended January 2, 1993, and incorporated herein by reference. Exhibit 4(i) - Rights Agreement dated May 6, 1988, between Baldor Electric Company and Wachovia Bank of North Carolina, N.A. (formerly Wachovia Bank & Trust Company, N.A.), as Rights Agent filed as Exhibit 1 to Registrant's Form 8-K Current Report, dated May 13, 1988, and incorporated herein by reference. Exhibit 4(iii) - The Registrant agrees to furnish to the Securities and Exchange Commission upon request pursuant to Item 601(b)(4)(iii) of Regulation S-K copies of instruments defining the rights of the holders of long-term debt of the Registrant and its consolidated subsidiaries. Exhibit (10) - Exhibits 10(iii)(A)(1) through 10(iii)(A)(4) were previously submitted as exhibits and are incorporated herein by reference: - 10(iii)(A)(1) 1982 Incentive Stock Option Plan (originally filed as Exhibit 10.8 to Form 10-K for year ended December 31, 1981, refiled as Exhibit 10.1 to Form 10-K for the year ended December 28, 1991.) - 10(iii)(A)(2) Officers Compensation Plan (filed as Exhibit 10.6 to Form 10-K for year ended December 31, 1988). - 10(iii)(A)(3) 1987 Incentive Stock Plan (filed as Appendix A to Registrant's Proxy Statement dated April 3, 1987). - 10(iii)(A)(4) 1989 Stock Option Plan for Non-Employee Directors (filed as Exhibit 10 to Form 10-Q for quarter ended September 29, 1990). Exhibit (11) - Computation of earnings per common share. - 8 - Exhibit (13) - Portions of the Annual Report to Shareholders for 1993. The Annual Report is being filed as an exhibit solely for the purpose of incorporating certain provisions thereof by reference. Portions of the An- nual Report not specifically incorporated are not deemed "filed" for the purposes of the Securities Exchange Act of 1934, as amended. Exhibit (21) - Subsidiaries of the Registrant. Exhibit (23) - Consent of Independent Auditors. Exhibit (24) - Powers of Attorney. Included on signature pages 10 and 11. (b) Reports on Form 8-K No reports on Form 8-K have been filed during the last quarter of the period covered by this Report. (c) Exhibits The response to this portion of Item 14 is submitted as a separate section of this Report. (d) Financial Statement Schedules The response to this portion of Item 14 is submitted as a separate section of this Report. - 9 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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) By /s/ R. L. Qualls President and Chief Executive Officer (Chief Executive Officer) Date: March 18, 1994 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints R. S. Boreham, Jr., R. L. Qualls, and George A. Schock and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Report and any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. - 10 - Signature Title Date /s/ R. S. Boreham, Jr. Chairman of the Board of ) R. S. Boreham, Jr. Directors and Chairman of ) the Executive Committee ) ) ) /s/ R. L. Qualls President, Chief Executive ) R. L. Qualls Officer, and Director ) (Principal Executive Officer) ) ) ) /s/ Lloyd G. Davis Chief Financial Officer, ) Lloyd G. Davis Vice President - Finance, ) Secretary, and Treasurer ) (Principal Financial ) and Accounting Officer) ) ) /s/ George A. Schock Assistant Secretary and ) March 18, 1994 George A. Schock Director ) ) ) /s/ Jefferson W. Asher, Jr. Director ) Jefferson W. Asher, Jr. ) ) ) /s/ Fred C. Ballman Director ) Fred C. Ballman ) ) ) /s/ O. A. Baumann Director ) O. A. Baumann ) ) ) /s/ Robert J. Messey Director ) Robert J. Messey ) ) ) /s/ Robert L. Proost Director ) Robert L. Proost ) ) ) /s/ Willis J. Wheat Director ) Willis J. Wheat ) - 11 - ANNUAL REPORT ON FORM 10-K ITEM 14(a)(1) and (2), (c) and (d) LIST OF FINANCIAL STATEMENTS FINANCIAL STATEMENT SCHEDULES CERTAIN EXHIBITS YEAR ENDED JANUARY 1, 1994 BALDOR ELECTRIC COMPANY FORT SMITH, ARKANSAS - 12 - FORM 10-K, ITEM 14(a)(1) and (2) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES BALDOR ELECTRIC COMPANY AND SUBSIDIARIES The following consolidated financial statements of Baldor Electric Company and Subsidiaries, included in the Annual Report to Shareholders for 1993, are incorporated by reference in Item 8: - Consolidated Balance Sheets - January 1, 1994, and January 2, 1993 - Consolidated Statements of Earnings - for the three years in the period ended January 1, 1994 - Consolidated Statements of Cash Flows - for the three years in the period ended January 1, 1994 - Consolidated Statements of Shareholders' Equity - for the three years in the period ended January 1, 1994 - Notes to Consolidated Financial Statements The following consolidated financial statement schedules of Baldor Electric Company and Subsidiaries are included in Item 14(d): - Schedule V Property, Plant and Equipment - Schedule VI Accumulated Depreciation, Depletion, and Amortization of Property, Plant and Equipment - Schedule VIII Valuation and Qualifying Accounts - Schedule IX Short-Term Borrowings - Schedule X Supplementary Income Statement Information All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. - 13 - BALDOR ELECTRIC COMPANY AND SUBSIDIARIES SCHEDULE V PROPERTY, PLANT AND EQUIPMENT (In thousands)
Column A Column B Column C Column D Column E Column F Balance at Other Changes Balance Beginning Additions Add (Deduct) At End Classification of Period at Cost Retirements Describe of Period Year Ended January 1, 1994 Land and improvements $ 3,280 $ 1 $ 164 $ $ 3,117 Buildings and improvements 24,014 2,604 1,714 (112) 24,792 Machinery and equipment 111,455 12,377 4,433 (1,088) 118,311 -------- ------- ------ -------- --------- $138,749 $14,982 $6,311 $(1,200) $ 146,220 ======== ======= ====== ======== ========= Year Ended January 2, 1993 Land and improvements $ 3,119 $ 161 $ $ $ 3,280 Buildings and improvements 21,899 2,693 189 (389) 24,014 Machinery and equipment 105,637 8,778 2,564 (396) 111,455 -------- ------- ------ -------- --------- $130,655 $11,632 $2,753 $ (785) $ 138,749 ======== ======= ====== ======== ========= Year Ended December 28, 1991 Land and improvements $ 3,047 $ 72 $ $ $ 3,119 Buildings and improvements 20,310 1,665 76 21,899 Machinery and equipment 100,989 8,095 3,092 (355) 105,637 -------- ------- ------ -------- --------- $124,346 $ 9,832 $3,168 $ (355) $ 130,655 ======== ======= ====== ======== ========= _______________ Note: Estimated useful lives of property, plant, and equipment used in computing the provision for depreciation were: Land improvements - 5 to 20 years Building and improvements - 15 to 35 years Machinery and equipment - 3 to 15 years Miscellaneous reclassifications. Reclassifications and amounts capitalized for Information Systems, net of amortization of $1,108,000 in 1993, $1,037,000 in 1992, and $1,007,000 in 1991. See Note A to Annual Report to Shareholders for 1993.
- 14 - BALDOR ELECTRIC COMPANY AND SUBSIDIARIES SCHEDULE VI ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT (In thousands)
Column A Column B Column C Column D Column E Column F Additions Balance at Charged to Other Changes Balance Beginning Costs and Add (Deduct) At End Classification of Period Expenses Retirements Describe of Period Year Ended January 1, 1994 Land and improvements $ 980 $ 111 $ $ 1,091 Buildings and improvements 7,641 736 573 7,804 Machinery and equipment 58,971 9,855 3,897 64,929 ------- ------- ------ ------- $67,592 $10,702 $4,470 $73,824 ======= ======= ====== ======= Year Ended January 2, 1993 Land and improvements $ 883 $ 97 $ $ 980 Buildings and improvements 6,876 781 16 7,641 Machinery and equipment 51,617 9,895 2,541 58,971 ------- ------- ------ ------- $59,376 $10,773 $2,557 $67,592 ======= ======= ====== ======= Year Ended December 28, 1991 Land and improvements $ 787 $ 96 $ $ 883 Buildings and improvements 6,212 664 6,876 Machinery and equipment 44,805 10,162 3,350 51,617 ------- ------- ------ ------- $51,804 $10,922 $3,350 $59,376 ======= ======= ====== =======
- 15 - BALDOR ELECTRIC COMPANY AND SUBSIDIARIES SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS (In thousands)
Column A Column B Column C Column D Column E Additions ---------------------- Charged to Charged to Balance at Costs Other Balance Beginning and Accounts Deductions at End of Description of Period Expenses Describe Describe Period Deducted from current assets: Allowance for doubtful accounts 1993 $1,200 $1,197 $ 597 $1,800 1992 935 1,354 1,089 1,200 1991 975 693 733 935 Included in current liabilities: Anticipated warranty costs 1993 $2,500 $ 250 $2,750 1992 2,405 95 2,500 1991 2,450 (45) 2,405 - --------------- Net uncollectible accounts written off during year. Additions/(reductions) to reserve for anticipated warranty costs, net of expenses incurred.
- 16 - BALDOR ELECTRIC COMPANY AND SUBSIDIARIES SCHEDULE IX SHORT-TERM BORROWINGS
Column A Column B Column C Column D Column E Column F Maximum Average Weighted Weighted Amount Amount Average Balance Averaged Outstanding Outstanding Interest Category of Aggregate at End of Interest During During Rate During Short-Term Borrowings Period Rate the Period the Period the Period Year ended January 1, 1994 Notes payable to bank NONE Year ended January 2, 1993 Notes payable to bank NONE $1,085,000 $ 217,000 9.7% Year ended December 28, 1991 Notes payable to bank $1,085,000 10.9% $2,760,000 $2,014,000 10.2% - ----------------- The average amount outstanding during the period was computed by dividing the total of month-end outstanding principal balances by the number of months outstanding. The weighted average interest rate during the period was computed by dividing the actual interest expense by the average short-term debt outstanding. Notes payable to bank consists of international lines of credit borrowing arrangements which have no termination date but are reviewed annually for renewal.
- 17 - BALDOR ELECTRIC COMPANY AND SUBSIDIARIES SCHEDULE X SUPPLEMENTARY INCOME STATEMENT INFORMATION (In thousands) Column A Column B Charged to Costs and Item Expenses Year ended January 1, 1994 Maintenance and repairs $6,186 Year ended January 2, 1993 Maintenance and repairs $5,575 Year ended December 28, 1991 Maintenance and repairs $4,978 _______________ Note: Amounts for depreciation and amortization of intangible assets; taxes, other than payroll and income taxes; royalties; and advertising costs for the three years in the period ended January 1, 1994, are not presented as such amounts are less than 1% of total sales and revenues. - 18 - BALDOR ELECTRIC COMPANY AND SUBSIDIARIES INDEX OF EXHIBITS EXHIBIT NUMBER DESCRIPTION 11 Computation of Earnings Per Common Share 13 Annual Report to Shareholders for 1993 21 Subsidiaries of the Registrant 23 Consent of Independent Auditors 24 Powers of Attorney. Included on signature pages 10 and 11. EX-11 2 BALDOR ELECTRIC CO'S 1993 FORM 10-K EXH. 11 EXHIBIT 11 BALDOR ELECTRIC COMPANY AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE FISCAL YEAR 1993 1992 1991 (In thousands, except per share amounts) Primary Weighted average shares outstanding 17,865 17,668 17,486 Dilutive stock options based on the treasury stock method using the average market price 846 652 421 ------ ------ ------ Total 18,711 18,320 17,907 ====== ====== ====== Net Earnings $19,426 $15,264 $11,922 ======= ======= ======= Per Share Earnings $1.04 $.83 $.67 ===== ==== ==== Fully Diluted Weighted average shares outstanding 17,865 17,668 17,486 Dilutive stock options based on the treasury stock method using the year-end market price, if higher than average market price 993 862 421 ------ ------ ------ Total 18,858 18,530 17,907 ====== ====== ====== Net Earnings $19,426 $15,264 $11,922 ======= ======= ======= Per Share Earnings $1.03 $.82 $.67 ===== ==== ==== _______________ Note: Amounts for 1993-91 have been restated for a six-for-five stock split effected in the form of a 20% stock dividend which was declared during the fourth quarter 1993. See Note E to Annual Report to Shareholders for 1993. EX-13 3 BALDOR ELECTRIC CO'S 1993 FORM 10-K EXH. 13 (1993 ANNUAL REPORT) ELEVEN-YEAR SUMMARY of FINANCIAL DATA (In thousands, except percentages and per-share data)
PER SHARE DATA -------------------- LONG- NET NET NET TOTAL TERM SALES EARNINGS EARNINGS DIVIDENDS ASSETS OBLIGATIONS 1993 $356,595 $19,426 $1.04 $.35 $237,950 $22,474 1992 318,930 15,264 .83 .29 211,941 23,209 1991 286,495 11,922 .67 .27 203,277 24,376 1990 294,030 14,137 .80 .27 200,694 25,299 1989 281,462 13,107 .75 .23 185,474 22,543
1993 Annual Report Page 14 Management's Discussion and Analysis Results of Operations Summary Baldor continued its growth trend in 1993 with record sales and earnings for the year. Baldor leveraged an 11.8% sales increase into a 27.3% earnings increase for the year. We continue to focus on building our drives business, new product introductions, productivity and cost improvements, marketing innovations, education, and training. Net Sales Baldor sells to a broad base of distributors and OEMs domestically and in more than 55 countries through a network of foreign affiliates and distributors. No single customer accounts for more than 1.5% of sales. Sales of $356.6 million in 1993 were up 11.8% over 1992 sales of $318.9 million even though fiscal 1992 contained 53 weeks. Sales in 1991 were $286.5 million. The 1993 sales increase was broad-based across many industries and geographic regions. Sales of new products continue to provide good growth opportunities for Baldor. For instance, our 1993 drives business grew 23.3% over 1992 levels and, for the second year in a row, grew at twice the rate of our motor business. Energy efficiency continues to gain importance in our industry and Baldor's sales of Super-E premium efficient motors grew at over three times the rate of overall sales. In 1993, distributor sales increased 10.0% over 1992 levels and OEM sales increased 12.6% over 1992 levels. The 1992 sales increase of 11.3% over 1991 sales was due to good improvement in almost every aspect of our business including product growth, distributor and OEM mix, and growth across geographic regions. Drive sales were up 23.2% in 1992 over 1991 drive sales. Net Earnings Net earnings of $19.4 million in 1993 exceeded 1992 net earnings of $15.3 million by 27.3%. Net earnings in 1991 were $11.9 million. Price improvement averaged slightly over 2% in both 1993 and 1992. The gross margin percentage increased to 28.3% in 1993 compared to 28.0% in 1992. Both of these were above the 1991 gross margin percentage of 27.8%. The gross margin percentages in 1993 and 1992 improved due to a small, but effective, price increase in both years and continued productivity improvements in both years. Selling and administrative costs as a percentage of sales have improved to 18.2% in 1993, from 19.0% in 1992, and 19.8% in 1991. These improvements have been about evenly split between selling and administrative expenses. We have managed to support increases in sales without significant increases in support costs from these areas. Due to the increased volumes, improved pricing, and cost containment, 1993 pre-tax margins were 9.1%. This compares to 1992 pre-tax margins of 7.8% and 1991 pre-tax margins of 6.8%. International Operations Sales from international operations (foreign affiliates and exports) were $47.6 million in 1993, up 12.4% from 1992 sales of $42.4 million. Sales in 1991 from international operations were $36.7 million. Sales were particularly strong in our Pacific Rim countries and Mexico. Foreign pre-tax earnings for 1993 increased to $1.6 million, a 65.2% increase over the previous year and a 150.6% increase over 1991 levels. Environmental Remediation Baldor believes, based on its review and other factors, that the future costs relating to environmental remediation and compliance will not have a material effect on its results of operations or financial condition. 1993 Annual Report Page 18 Financial Position Summary The continued strength of our balance sheet provides a good foundation for financing growth opportunities, better serving our customers, and increasing value for our shareholders. During 1993, we continued to invest in our future by expanding research and development of new products and improvements of old ones, continuing capital investments for productivity and cost improvements and making additional investments in our employees and customers through education and training. Investments In 1993, we invested $15.0 million in property, plant and equipment, which was up 29.3% compared to 1992. Approximately 50% of Baldor's property, plant and equipment has been purchased in the last five years. Capital investments have been made to improve product quality, increase productivity, lower manufacturing costs, increase capacity and support new products. During 1992, we completed the relocation of our large motor plant from Charlotte, North Carolina, to nearby York County, South Carolina. Also completed in 1992 was the construction of a new R&D center in Fort Smith, Arkansas. Investments in property, plant and equipment for 1994 are anticipated to be $15.0 million to $20.0 million. This range includes a new plant to be located in Ozark, Arkansas, near Fort Smith, to expand capacity for the 15hp to 75hp steel band motors which are now being built in Columbus, Mississippi. The Columbus plant will continue to build cast-iron motors in these sizes. This move will allow for better utilization of the Columbus plant and improve our cost competitiveness in the 15hp to 75hp motors. Baldor's cash flow and financial strength are expected to be adequate to fund these investments. In 1993, we also increased our investments in research and development to $12.9 million from $11.3 million in 1992 and $9.9 million in 1991. During the last three years we have introduced many new products and our commitment to research and development continues to help Baldor maintain a leadership position in the marketplace and to satisfy our customers' needs. Education and training continues to be important at Baldor. During 1993, we made investments in the education and training of our people through classes in value, quality, cost improvement, advanced technical skills, safety, job development and basic literacy. Additionally, we have over 1,000 customer and employee graduates of our sales and product training classes to date. These classes help to increase technical skills in sales and support areas. Current Liquidity Baldor has a very strong current position. Cash flow from operations continues to provide the principal source of liquidity. In 1993, cash flow from operating activities increased to $27.7 million from $25.0 million in 1992. Working capital was $108.6 million at the end of 1993 compared to $97.3 million at the end of 1992. The current ratio, while still very strong, decreased to 3.5 compared to 4.0 at the end of 1992. This decrease was due to the increased volume of business and the investments in receivables, inventory, and property, plant and equipment needed to support the increase. Baldor has available lines of credit of $31.4 million to support domestic and foreign operations. There were no borrowings under these lines at the end of 1993 or 1992. Long-Term Debt and Shareholders' Equity Long-term obligations were 12.3% of capitalization at the end of 1993 compared to 13.8% at the end of 1992. The weighted average interest rate on our long-term debt is 6.4%. Shareholders' equity continues to increase and is at a record level for Baldor. This strong base gives us an excellent opportunity for assuming additional debt to finance expansion opportunities, including acquisitions, which could further enhance the growth of the Company. Return on shareholders' equity for 1993 increased to 12.7% from 10.9% in 1992. In the fourth quarter of 1993, there was a six-for-five stock split and in the fourth quarter of 1992, there was a three-for-two stock split. Both stock splits were effected in the form of stock dividends. Dividend Policy The cash dividend was increased 20.7% during 1993. This is in addition to the 7.4% increase during 1992. Our dividend policy is to make increases periodically, as earnings and financial strength warrant, but also to reinvest a major portion of earnings and internal funds to finance growth opportunities. Our goal is to enable shareholders to obtain increased dividends over time while also participating in the growth of the Company. 1993 Annual Report Page 19 CONSOLIDATED BALANCE SHEETS BALDOR ELECTRIC COMPANY AND SUBSIDIARIES JANUARY 1 JANUARY 2 1994 1993 ASSETS (in thousands) CURRENT ASSETS: Cash and cash equivalents $ 7,310 $ 5,921 Marketable securities 22,914 16,812 Receivables, less allowances of $1,800 and $1,200, respectively 59,566 51,401 Inventories: Finished products 44,544 44,461 Work-in-process 9,351 9,908 Raw material 24,448 20,429 ------- ------- 78,343 74,798 LIFO valuation adjustment (deduction) (24,724) (25,123) ------- ------- 53,619 49,675 Deferred Income Taxes 2,219 Other current assets 6,374 5,531 ------- ------- TOTAL CURRENT ASSETS 152,002 129,340 OTHER ASSETS 13,552 11,444 PROPERTY, PLANT AND EQUIPMENT: Land and improvements 3,117 3,280 Buildings and improvements 24,792 24,014 Machinery and equipment 118,311 111,455 Allowances for depreciation and amortization (deduction) (73,824) (67,592) ------- ------- TOTAL PROPERTY, PLANT AND EQUIPMENT 72,396 71,157 --------- ---------- $ 237,950 $ 211,941 ========= ========== See notes to consolidated financial statements. JANUARY 1 JANUARY 2 1994 1993 LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands, except share data) CURRENT LIABILITIES: Accounts payable $ 12,690 $ 9,340 Employee compensation 4,740 3,761 Profit sharing 4,284 3,371 Anticipated warranty costs 2,750 2,500 Accrued insurance obligations 6,616 4,792 Other accrued expenses 9,710 7,014 Income taxes 2,121 533 Current maturities of long-term obligations 490 686 -------- -------- TOTAL CURRENT LIABILITIES 43,401 31,997 LONG-TERM OBLIGATIONS 22,474 23,209 DEFERRED INCOME TAXES 11,536 11,509 SHAREHOLDERS' EQUITY: Preferred stock, $.10 par value Authorized shares: 5,000,000 Issued and outstanding shares: None Common stock, $.10 par value Authorized shares: 25,000,000 Issued and outstanding shares: 1993--17,968,383; 1992--17,790,200 (excluding 120,387 shares held in treasury in 1993 and 142,809 shares held in treasury in 1992) 1,797 1,483 Additional capital 17,848 15,440 Retained earnings 141,729 128,792 Cumulative translation adjustments (835) (489) --------- --------- TOTAL SHAREHOLDERS' EQUITY 160,539 145,226 --------- --------- $ 237,950 $ 211,941 ========= ========= See notes to consolidated financial statements. 1993 Annual Report Page 20 CONSOLIDATED STATEMENT OF EARNINGS BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
YEARS ENDED JANUARY 1 JANUARY 2 DECEMBER 28 1994 1993 1991 (In thousands, except share data) Net sales $ 356,595 $ 318,930 $ 286,495 Other income, net 1,398 705 707 --------- --------- --------- 357,993 319,635 287,202 Costs and expenses Cost of goods sold 255,557 229,686 206,953 Selling and administrative 64,807 60,697 56,867 Profit sharing 4,284 3,371 2,652 Interest 975 908 1,281 -------- --------- --------- 325,623 294,662 267,753 Earnings Before Income Taxes 32,370 24,973 19,449 Income taxes 12,944 9,709 7,527 --------- --------- --------- NET EARNINGS $ 19,426 $ 15,264 $ 11,922 ========= ========= ========= NET EARNINGS PER COMMON SHARE $ 1.04 $ .83 $ .67 ====== ====== ====== Weighted average shares outstanding 18,710,860 18,319,835 17,907,572 ========== ========== ========== See notes to consolidated financial statements.
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (Unaudited) BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
QUARTER (In thousands, except share data): FIRST SECOND THIRD FOURTH TOTAL 1993 Net sales $86,547 $90,673 $90,703 $88,672 $356,595 Gross profit 24,602 25,874 25,591 24,971 101,038 Net earnings 4,593 5,145 4,853 4,835 19,426 Net earnings per common share 0.25 0.27 0.26 0.26 1.04 1992 Net sales $73,715 $80,028 $79,704 $85,483 $318,930 Gross profit 20,369 22,813 22,341 23,721 89,244 Net earnings 3,406 4,034 3,702 4,122 15,264 Net earnings per common share 0.19 0.22 0.20 0.22 0.83
1993 Annual Report Page 21 CONSOLIDATED STATEMENTS OF CASH FLOWS BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
YEARS ENDED JANUARY 1 JANUARY 2 DECEMBER 28 1994 1993 1991 (In thousands) Operating activities: Net earnings $ 19,426 $ 15,264 $ 11,922 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 12,220 12,148 12,099 Deferred income taxes (2,192) (1,846) (1,446) Changes in operating assets and liabilities: Receivables (8,765) (2,274) 1,992 Inventories (3,944) (268) (805) Other current assets (843) 794 (729) Accounts payable 3,350 (330) (1,657) Accrued expenses 6,662 1,957 (1,205) Income taxes 1,588 (179) (754) Other, net 258 (232) (113) ------ ------ ------ Net cash from operating activities 27,760 25,034 19,304 Investing activities: Additions to property, plant, and equipment (14,983) (11,632) (9,832) Marketable securities purchased (22,914) (16,812) (5,271) Marketable securities sold 16,812 5,271 3,332 Information systems development (252) (652) ------- ------- ------- Net cash used in investing activities (21,085) (23,425) (12,423) Financing activities: Short-term borrowings (repayments) (1,085) (1,191) Reduction of long-term obligations (931) (1,416) (895) Unexpended debt proceeds 472 3,661 629 Repurchase of company stock (103) Dividends paid (6,190) (5,139) (4,668) Stock option plans 1,363 1,516 1,717 ------ ------ ------ Net cash used in financing activities (5,286) (2,463) 4,511) ------- ------ ------ Net increase (decrease) in cash and cash equivalents 1,389 (854) 2,370 Beginning cash and cash equivalents 5,921 6,775 4,405 -------- -------- -------- Ending cash and cash equivalents $ 7,310 $ 5,921 $ 6,775 ======== ======== ======== See notes to consolidated financial statements.
1993 Annual Report Page 22 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY BALDOR ELECTRIC COMPANY AND SUBSIDIARIES
Cumulative Common Stock Additional Retained Translation (In thousands) Shares Amount Capital Earnings Adjustments Total BALANCE AT DECEMBER 29, 1990 9,653 $965 $11,395 $111,906 $(334) $123,932 Stock option plans (net of shares exchanged) 113 11 1,706 1,717 Translation adjustments 470 470 Net earnings 11,922 11,922 Repurchase of common stock (6) (103) (103) Purchase of Sweo Controls, Inc. 20 2 391 393 Cash dividends at $.27 per common share (4,668) (4,668) ----- --- ------ ------- --- ------- BALANCE AT DECEMBER 28, 1991 9,780 978 13,389 119,160 136 133,663 Stock option plans (net of shares exchanged) 99 10 1,506 1,516 Translation adjustments (625) (625) Net earnings 15,264 15,264 Purchase of Sweo Controls, Inc. 22 2 545 547 Three-for-two common stock split effected in the form of a 50% stock dividend 4,924 493 (493) Cash dividends at $.29 per common share (5,139) (5,139) ------ ----- ------ ------- ---- ------- BALANCE AT JANUARY 2, 1993 14,825 1,483 15,440 128,792 (489) 145,226 Stock option plans (net of shares exchanged) 102 10 1,353 1,363 Translation adjustments (346) (346) Net earnings 19,426 19,426 Purchase of Sweo Controls, Inc. 47 5 1,055 1,060 Six-for-five common stock split effected in the form of a 20% stock dividend 2,994 299 (299) Cash dividends at $.35 per common share (6,190) (6,190) ------ ------ ------- -------- ----- -------- BALANCE AT JANUARY 1, 1994 17,968 $1,797 $17,848 $141,729 $(835) $160,539 ====== ====== ======= ======== ===== ======== See notes to consolidated financial statements.
1993 Annual Report Page 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BALDOR ELECTRIC COMPANY AND SUBSIDIARIES January 1, 1994 NOTE A -- SIGNIFICANT ACCOUNTING POLICIES Line of Business: The Company operates primarily in one industry segment which includes the design, manufacture and sale of electric motors and drives. Consolidation: The consolidated financial statements include the accounts of the Company and all its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Fiscal Year: The Company's fiscal year ends on the Saturday nearest to December 31, which results in a 52 or 53 week year. Fiscal year 1993 contained 52 weeks, fiscal year 1992 contained 53 weeks and fiscal year 1991 contained 52 weeks. Cash Equivalents: Cash equivalents consist of highly liquid investments having original maturities of three months or less and are valued at cost which approximates market. Marketable Securities: All marketable securities are valued at cost which approximates market. In May 1993, the Financial Accounting Standards Board issued statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities", which the Company must adopt in the first quarter of 1994. Adoption of this new standard is not expected to have a material effect on the Company's financial statements. Inventories: The Company values inventories at the lower of cost or market, cost being determined principally by the last-in, first-out method (LIFO), except for $9,085,000 in 1993 and $8,855,000 in 1992, at foreign locations, valued by the first-in, first-out method (FIFO). Approximate replacement costs of inventories for January 1, 1994, and January 2, 1993, were $78,343,000 and $74,798,000 respectively. Property, Plant and Equipment: Property, plant and equipment, including assets under capital leases, are stated at cost. Depreciation and amortization are computed principally using the straight-line method over the estimated useful lives of the assets and the remaining term of capital leases, respectively. Information Systems: Costs incurred in developing management information systems are capitalized and included in property, plant and equipment. These costs are amortized over their estimated useful lives from the date the systems become operational. Amortization was $1,108,000 in 1993, $1,037,000 in 1992, and $1,007,000 in 1991. Benefit Plans: The Company has profit sharing plans covering most employees with over two years service. The plans currently provide, subject to certain adjustments, for Company contributions equal to 12% of earnings before income taxes of participating companies. The Company has no expenses related to post-retirement health benefits for retired employees or post-employment benefits. Income Taxes: Income taxes are provided based on the liability method of accounting pursuant to Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". Deferred income taxes are provided on temporary differences between the basis of assets and liabilities reported for financial and tax purposes. Net Earnings Per Common Share: Net earnings per common share are computed by dividing net earnings by the weighted average number of shares of common stock and common stock equivalents (dilutive stock options) outstanding during the year. Since the dilutive effect of common stock options is similar in both calculations, net earnings per common share reflects both primary and fully diluted earnings per share. Research and Development: Costs associated with research, new product development and product cost improvements are treated as expenses when incurred and amounted to approximately $12,900,000 in 1993, $11,300,000 in 1992, and $9,900,000 in 1991. NOTE B -- LONG-TERM OBLIGATIONS Long-term obligations consist of the following: 1993 1992 (in thousands) Industrial Development Bonds due through 2004 at 6.0% fixed rate $ 629 $ 1,214 due through 2004 at 8.25% fixed rate 4,985 5,260 due through 2004 at 5.29% variable rate 3,500 3,500 due through 2009 at 7.75% fixed rate 3,000 3,000 due through 2009 at 7.875% fixed rate 7,200 7,200 due through 2010 at 4.51% variable rate 3,440 3,440 Other Notes Payable 210 281 -------- -------- 22,964 23,895 Less Current Maturities 490 686 -------- -------- $ 22,474 $ 23,209 ======== ======== At January 1, 1994, Industrial Development Bond proceeds of $7,163,000 are included in Other Assets. Certain long-term obligations are collateralized by property, plant and equipment with a net book value of $13,268,000 at January 1, 1994. Maturities of long-term obligations during each of the five fiscal years ending 1998 are: 1994--$490,000; 1995--$453,000; 1996--$488,000; 1997--$972,000; 1998--$930,000. Industrial Development Bonds include capital lease obligations of $8,614,000 at January 1, 1994. Aggregate future minimum capital lease payments at January 1, 1994, are $13,392,000 including interest of $4,778,000. 1993 Annual Report Page 24 Certain long-term obligations require, among other things, that the Company maintain certain financial ratios and restrict cumulative cash dividends and other distributions. Retained earnings of $26,894,000 at January 1, 1994, were unrestricted. At January 1, 1994, the Company had outstanding letters of credit totaling $12,323,000. Interest paid was $1,420,000 in 1993, $1,481,000 in 1992, and $2,009,000 in 1991. The Company had lines of credit aggregating $31,400,000 available at January 1, 1994. These arrangements do not have termination dates but are reviewed annually. Interest on these lines of credit is at rates mutually agreed upon at the time of borrowing. There were no outstanding borrowings under these lines at January 1, 1994 or January 2, 1993. NOTE C -- INCOME TAXES The Company made income tax payments of $13,219,000 in 1993, $10,539,000 in 1992, and $7,796,000 in 1991. Income tax expense consists of the following: 1993 1992 1991 (In thousands) Current: Federal $12,906 $10,126 $ 7,749 State 1,429 1,123 922 Foreign 448 212 302 Deferred: (1,839) (1,752) (1,446) ------ ----- ----- $12,944 $ 9,709 $ 7,527 ======= ======= ======= Deferred income taxes arise from recognizing revenues and expenses in different years for tax and financial statement purposes. The sources of these differences relate primarily to depreciation, certain liabilities and bad debt expense. The following table reconciles the difference between the Company's effective income tax rate and the federal corporate statutory rate: 1993 1992 1991 Statutory federal income tax rate 35.0% 34.0% 34.0% State taxes, net of federal benefit 3.4 3.4 3.4 Other 1.6 1.5 1.3 ---- ---- ---- Effective income tax rate 40.0% 38.9% 38.7% ==== ==== ==== NOTE D -- STOCK PLANS The Company has four plans under which various types of stock options may be granted. Under two plans the Company has granted non-compensatory stock options to employees and district managers, as approved by the shareholders and the Board of Directors, respectively, at prices equal to the market value at the date of grant. Outstanding options expire five, six, and ten years from the date of grant. There are no charges to income in connection with these plans. The shareholders of the Company approved two additional plans which are administered by a Committee of the Board of Directors. These plans can grant shares to employees and non-employee directors. Under these plans, grants can include incentive stock options, non-qualified stock options, restricted shares, formula price shares, and stock appreciation rights. The Committee has granted non-qualified options to purchase shares of restricted stock at 50% of the stock's market value at the date of grant and shares of incentive options to purchase shares at prices not less than market value at the date of grant. Option restrictions lapse after five years or if the Company is acquired. Related compensation expense is amortized over the restriction period. A summary of information regarding the stock plans follows: Non- Compensatory Compensatory Total Plans Plans Shares available for grant 3,745,800 2,125,800 1,620,000 Options outstanding: Balance at January 2, 1993, at $4.05 - $16.39 per share 1,662,527 943,422 719,105 Granted at $8.65 - $21.25 per share 218,400 218,400 Exercised at $4.05 - $14.24 per share (151,541) (93,188) (58,353) Canceled at $9.03 - $18.85 per share (44,400) (39,600) (4,800) -------- ------- ------ Balance at January 1, 1994, at $4.05 - $21.25 per share 1,684,986 810,634 874,352 ========= ======= ======= Shares exercisable at January 1, 1994 1,111,770 470,434 641,336 Shares reserved for future grants: January 2, 1993 581,692 581,692 January 1, 1994 371,692 3,600 368,092 1993 Annual Report Page 25 NOTE E -- SHAREHOLDERS' EQUITY On November 8, 1993, the Company's Board of Directors authorized a six-for- five stock split effected in the form of a 20% stock dividend payable January 7, 1994 to shareholders of record on December 10, 1993. This resulted in the issuance of 2,993,997 additional shares of common stock. All per share and weighted average share amounts have been restated to reflect this stock split. In May 1988, the Company declared a dividend distribution of one Common Stock Purchase Right on each outstanding share of common stock. The Rights entitle holders to buy one share of Baldor common stock for $28 and become exercisable only if a person would acquire or announce a tender or exchange offer to acquire 20% or more of the Company's common stock. If a person acquires 20% or more of the Company's common stock, without the Board of Director's consent, then each Right would entitle its holder to purchase for $28 the number of shares of Baldor stock (or in the event of a merger, a number of shares of the acquiring company's stock) that has a market value of $56. The Rights may be redeemed by the Company at a price of $.018 per Right prior to a person's acquiring 20% or more of the Company's common stock (and in certain events thereafter), and they expire in May 1998. NOTE F -- OPERATING LEASES The Company leases certain computers, buildings, and other equipment under operating lease agreements. Related rental expense was $3,500,000 in 1993, $3,600,000 in 1992, and $3,900,000 in 1991. Future minimum payments for operating leases having noncancelable lease terms in excess of one year are: 1994-$2,126,000, 1995-$1,947,000, 1996-$1,413,000, 1997-$1,194,000; 1998- $75,000; and decline substantially thereafter. NOTE G -- FOREIGN OPERATIONS The Company's foreign operations include both export sales and the results of its foreign affiliates in Europe, Australia, Singapore, and Mexico. Consolidated sales, earnings before income taxes and identifiable assets consist of the following: (In thousands) 1993 1992 1991 Net Sales: United States Companies: Domestic customers $ 308,949 $ 276,536 $ 249,783 Export customers 19,262 16,997 15,193 --------- --------- --------- 328,211 293,533 264,976 Foreign Affiliates 28,384 25,397 21,519 --------- --------- --------- $ 356,595 $ 318,930 $ 286,495 Earnings Before Income Taxes: United States Companies $ 30,746 $ 23,990 $ 18,851 Foreign Affiliates 1,624 983 648 --------- --------- --------- $ 32,370 $ 24,973 $ 19,499 Assets: United States Companies $ 218,509 $ 193,822 $ 185,409 Foreign Affiliates 19,441 18,119 17,868 --------- --------- --------- $ 237,950 $ 211,941 $ 203,277 Assets and liabilities of foreign affiliates are translated into U. S. dollars at year-end exchange rates. Income statement items are generally translated at average exchange rates prevailing during the period. Translation adjustments and certain foreign exchange hedges are recorded in the Cumulative Translation Adjustment account in shareholders' equity. 1993 Annual Report Page 26 REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS Shareholders and Board of Directors Baldor Electric Company and Subsidiaries We have audited the accompanying consolidated balance sheets of Baldor Electric Company and subsidiaries as of January 1, 1994, and January 2, 1993, and the related consolidated statements of earnings, cash flows, and shareholders' equity for each of the three years in the period ended January 1, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Baldor Electric Company and subsidiaries at January 1, 1994, and January 2, 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 1, 1994, in conformity with generally accepted accounting principles. /s/ Ernst & Young St. Louis, Missouri February 4, 1994 REPORT OF MANAGEMENT ON RESPONSIBILITY FOR FINANCIAL REPORTING Baldor management is responsible for the integrity and objectivity of the financial information contained in this Annual Report. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, applying informed judgements and estimates where appropriate. Baldor maintains a system of internal accounting control that provides reasonable assurance that assets are safeguarded and transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. The Audit Committee of the Board of Directors is composed solely of outside directors and is responsible for recommending to the Board the independent accounting firm to be retained for the coming year. The Audit Committee meets regularly with the independent auditors, with the Director of Audit Services, as well as with Baldor management, to review accounting, auditing, internal accounting controls, and financial reporting matters. The independent auditors, Ernst & Young, and the Director of Audit Services have direct access to the Audit Committee without the presence of management to discuss the results of their audits. Ernst & Young, independent certified public accountants, have audited Baldor's financial statements. Management has made available to Ernst & Young all the corporation's financial records and related data, as well as the minutes of shareholders' and directors' meetings. /s/ R. S. Boreham, Jr. Chairman of the Board and Chairman of the Executive Committee /s/ R. L. Qualls President and Chief Executive Officer /s/ Lloyd G. Davis Chief Financial Officer, Vice President - Finance Secretary, and Treasurer 1993 Annual Report Page 27 DIRECTORS & OFFICERS (Photo) Roland S. Boreham, Jr. Chairman of the Board Director for 32 years (Photo) R. L. Qualls President and Chief Executive Officer Director for 6 years (Photo) George A. Schock Assistant Secretary Director for 49 years (Photo) Jefferson W. Asher, Jr. Independent Management Consultant Director for 20 years (Photo) Fred C. Ballman Former Chairman and CEO of the Company (retired) Director for 39 years (Photo) O. A. Baumann Former Company's Manufacturers' Representative (retired) Director for 32 years (Photo) Robert J. Messey Senior Vice President, Chief Financial Officer, and Director, Sverdrup Corporation Director for 1 year (Photo) Robert L. Proost Corporate Vice President and Director of Administration, A.G. Edwards & Sons, Inc. Director for 5 years (Photo) Willis J. Wheat Professor of Management and Marketing, Oklahoma City University Director for 2 years (Photo) Theodore W. Atkins Vice President - Industry Relations & Governmental Affairs (Photo) Charles H. Cramer Vice President - Personnel (Photo) Lloyd G. Davis Vice President - Finance, Chief Financial Officer, Secretary, and Treasurer (Photo) James R. Kimzey Vice President - Research & Engineering (Photo) John A. McFarland Vice President - Sales (Photo) Robert L. Null, Jr. Vice Persident - Manufacturing (Photo) Jerry D. Peerbolte Vice President - Marketing 1993 Annual Report Page 28 SHAREHOLDER INFORMATION DIVIDENDS PAID 1991 1992 1993 1st quarter $ .06 $ .07 $ .08 2nd quarter .07 .07 .08 3rd quarter .07 .07 .09 4th quarter .07 .08 .10 ----- ----- ----- Year $ .27 $ .29 $ .35 COMMON STOCK PRICE RANGE NYSE SYMBOL-BEZ 1992 1993 High Low High Low 1st quarter 13-3/4 12-1/4 19-1/8 16-1/4 2nd quarter 15-1/4 13-1/8 21-1/4 18-3/8 3rd quarter 15-3/4 13-1/2 21-1/2 18-3/8 4th quarter 18-5/8 14-1/2 24-1/2 20-3/8 SHAREHOLDERS 3,510 at January 1, 1994 including shareholders of record and employees through benefit plans. 1993 Annual Report Page 29 EX-21 4 BALDOR ELECTRIC CO'S 1993 FORM 10-K EXH. 21 EXHIBIT 21 BALDOR ELECTRIC COMPANY AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT PLACE OF ORGANIZATION NATURE OF NAME OF SUBSIDIARY OR INCORPORATION OWNERSHIP Southwestern Die Casting Co., Inc. Arkansas 100% Carolina Capacitors, Inc. South Carolina 100% Baldor International, Inc. U.S. Virgin Islands 100% Baldor of Texas, Inc. Oklahoma 100% Baldor de Mexico, S.A. de C.V. Mexico 100% Sweo Controls, Inc. Washington 100% Baldor Holdings, Inc. Delaware 100% Australian Baldor Pty. Limited Australia 60% Baldor Electric (Far East) PTE. Ltd. Singapore 60% Baldor Electric (Thailand) Ltd. Thailand 60% owned by Baldor Electric (Far East) PTE. Ltd. Baldor ASR, AG Switzerland 100% owned by Baldor Holdings, Inc. Baldor ASR GmbH fur Antriebstechnik Germany 100% owned by Baldor Holdings, Inc. Baldor ASR U.K. Limited United Kingdom 100% owned by Baldor Holdings, Inc. EX-23 5 BALDOR ELECTRIC CO'S 1993 FORM 10-K EXH. 23 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Baldor Electric Company and subsidiaries of our report dated February 4, 1994, included in the 1993 Annual Report to Shareholders of Baldor Electric Company and subsidiaries. Our audits also included the financial statement schedules of Baldor Electric Company and subsidiaries listed in Item 14(a). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-8, No. 2-77046) pertaining to the Baldor Electric Company 1982 Incentive Stock Option Plan, (Form S-8, No. 33-16766) pertaining to the Baldor Electric Company 1987 Incentive Stock Plan, (Form S-8, No. 33-28239) pertaining to the Baldor Electric Company Employee Savings Plan, and (Form S-8, No. 33-36421) pertaining to the Baldor Electric Company 1989 Stock Option Plan for Non- Employee Directors of our report dated February 4, 1994, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedules included in this Annual Report (Form10-K) of Baldor Electric Company and subsidiaries. /s/ Ernst & Young St. Louis, Missouri March 31, 1994 -----END PRIVACY-ENHANCED MESSAGE-----