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