SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[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
December 30, 1995 1-7284
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B A L D O R E L E C T R I C C O M P A N Y
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(Exact name of registrant as specified in its charter)
Missouri 43-0168840
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5711 R. S. Boreham, Jr St, Fort Smith, Arkansas 72902 (501) 646-4711
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(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
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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
registrant based on the closing price on February 23, 1996, was
$409,926,203.
At February 23, 1996, there were 25,851,846 shares of the registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended
December 30, 1995 (the "Annual Report to Shareholders for 1995") are
incorporated by reference into Part II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders to
be held May 4, 1996 (the "1996 Proxy Statement") are incorporated by
reference into Parts I and III.
PART I
Item 1. Business
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Baldor Electric Company ("Baldor" or 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 speed
reducers, 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 82% of the Company's
business in 1995, 84% in 1994, and 85% in 1993. 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 control products, which include servo products, brushless DC
and SCR controls, and inverter and vector drives, accounted for
approximately 16% of the Company's total sales in 1995, 13% in 1994, and
11% in 1993. The Company's line of adjustable speed controls ranges from
1/50 to 600 horsepower. With these products, the Company provides its
customers the ability to purchase industrial motors and electronic
controls (which constitute drives) from one manufacturer. Sales of drives
were estimated to be slightly more than 20% of total 1995 sales compared
to just under 18% of total 1994 sales.
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
represented approximately 62% of the Company's 1995 business. Most stock
product sales are to customers who place orders for immediate shipment
from current inventory. 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 26 in the United States and the remainder in various parts of
the world including 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 also sold to independent distributors
for resale, often as replacement components in industrial machinery which
is being modernized or upgraded for improved performance.
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 effect on
its total business.
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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 that it is a
significant factor in the markets it serves and that its share of the
market has increased over the past several years.
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, many 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 $17,200,000 in 1995, $14,800,000 in 1994, and
$12,900,000 in 1993.
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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 financial
position of the Company and is not expected to have such an effect.
Employees
At December 30, 1995, the Company had 3,580 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 December 30, 1995,
export and international sales revenues have increased and represented
14.0% of consolidated sales in 1995, 13.1% in 1994, and 13.4% in 1993.
See also Note J on page 26 of the Annual Report to Shareholders for 1995.
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 sales offices
located in Switzerland, Germany, Italy and the United Kingdom. Baldor ASR
also has development and manufacturing operations in Germany. The Company
has majority interests in Baldor Electric (Far East) Pte. Ltd., located in
Singapore, Baldor Electric (Thailand) Ltd., located in Bangkok, Baldor
Electric (Indonesia) Ltd., located in Jakarta, and Australian Baldor Pty.
Limited which has locations in Sydney and Melbourne. Finally, the Company
wholly owns Baldor de Mexico, S.A. de C.V., located in Mexico City.
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 significant adverse effect on the
Company's business.
Item 2. Properties
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The Company believes that its facilities, including equipment and
machinery, are in good condition, suitable for current operations,
adequately maintained and insured, and capable of sufficient additional
production levels. The following table sets forth certain information
with respect to the Company's properties.
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AREA
LOCATION PRIMARY USE (SQ. FT.)
Fort Smith, AR AC motor production 296,542
Distribution and service center 159,500
Administration and engineering offices 69,800
Aluminum die casting 76,400
St. Louis County, MO Metal stamping and engineering 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
Knoxville, AR Worm-gear speed reducers 100,000
Clarksville, AR Subfractional motor and 86,750
gear motor production
Ozark, AR AC motor production 77,300
Five other Metal stamping and motor, drives,
domestic locations and servomotor production 130,325
Eight foreign Sales and distribution centers 37,900
locations and servodrive production
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1,617,117
Certain properties listed above (528,750 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.
In mid 1996, the Company expects to replace the leased Knoxville,
Arkansas, facility with a Company owned 83,000 square foot facility to be
constructed at the Clarksville, Arkansas, plant site.
Item 3. Legal Proceedings
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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
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Not applicable.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
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Information under the captions "Dividends Paid", "Common Stock Price
Range", and "Shareholders" on page 29 of the Annual Report to Shareholders
for 1995 is incorporated herein by reference.
Item 6. Selected Financial Data
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Information under the caption "Eleven Year Summary of Financial Data" only
for years 1991 through 1995 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 1995 is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 18 and 19 of the Annual Report to Shareholders for
1995 is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
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The consolidated financial statements of the Company on pages 20 through
26, the report thereon of Ernst & Young LLP, Independent Auditors, on page
27, and the "Summary of Quarterly Results of Operations (Unaudited)" on
page 21 of the Annual Report to Shareholders for 1995 are incorporated
herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
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Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant
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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
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R.S. Boreham, Jr. 71 Chairman of the Board 1961
R.L. Qualls 62 President and Chief Executive 1986
Officer
Theodore W. Atkins 57 Vice President - Industry 1986
Relations and Government Affairs
D. Christine Clemons 31 Controller 1995
Charles H. Cramer 51 Vice President - Personnel 1984
Lloyd G. Davis 48 Chief Financial Officer, 1992
Vice President - Finance,
Secretary, and Treasurer
Gene J. Hagedorn 48 Vice President - Materials 1994
James R. Kimzey 57 Vice President - Research 1984
and Engineering
John A. McFarland 44 Vice President - Sales 1990
Robert L. Null, Jr. 53 Vice President - Manufacturing 1990
Jerry D. Peerbolte 39 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 directors or executive officers. The
information under the caption "Election of Directors" of the 1996 Proxy
Statement is incorporated herein by reference.
Item 11. Executive Compensation
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Information contained in the 1996 Proxy Statement under the caption
"Information About the Board of Directors and Committees of the Board" and
information 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" is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
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The security ownership by officers and directors included under the caption
"Security Ownership of Certain Beneficial Owners and Management" of the 1996
Proxy Statement is incorporated herin by reference.
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Item 13. Certain Relationships and Related Transactions
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Information under the caption "Certain Transactions" of the 1996 Proxy
Statement is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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(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.
(3) Listing of Exhibits
Exhibit 3(i) - The Restated Articles of Incorporation of Baldor
Electric Company, effective March 14, 1995, filed as Exhibit 3(i)
to Form 10-K for the year ended December 31, 1994.
Exhibit 3(ii) - Bylaws of Baldor Electric Company (as amended)
dated February 6, 1995, filed as Exhibit 3(ii) to Form 10-K for
the year ended December 31, 1994.
Exhibit 4(i)(a) - 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
originally filed as Exhibit 1 to Registrant's Form 8-K Current
Report, dated May 13, 1988, and refiled as Exhibit 4(i) to Form
10-K for the year ended December 31, 1994.
Exhibit 4(i)(b) - Amendment Number 1 to the Shareholders' Rights
Agreement dated February 5, 1996 filed as Exhibit 2 to
Registrant's Form 8-A/A dated March 21, 1996.
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 affiliates.
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Exhibit (10) - Exhibits 10(iii)(A)(1) through 10(iii)(A)(5) 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 (originally filed
as Exhibit 10.6 to Form 10-K for year ended
December 31, 1988, and filed as Exhibit
10(iii)(A)(2) to Form 10-K for the year
ended December 31, 1994.)
. 10(iii)(A)(3) 1987 Incentive Stock Plan (originally filed as
Appendix A to Registrant's Proxy Statement
dated April 3, 1987, and refiled as Exhibit
10(iii)(A)(3) to Form 10-K for the year
ended December 31, 1994.
. 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.)
. 10(iii)(A)(5) 1994 Incentive Stock Plan (filed as Exhibit A
to Registrant's Proxy Statement dated April
4, 1994).
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 exhibits listed above under Exhibit 10.
Exhibit (11) - Computation of earnings per common share filed
herewith.
Exhibit (13) - Portions of the Annual Report to Shareholders for
1995. The Annual Report is being filed as an exhibit solely for
the purpose of incorporating certain provisions thereof by
reference. Portions of the Annual Report not specifically
incorporated are not deemed "filed" for the purposes of the
Securities Exchange Act of 1934, as amended.
Exhibit (21) - Affiliates of the Registrant filed herewith.
Exhibit (23) - Consent of Independent Auditors filed herewith.
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
See Exhibit Index at page 15 of this Report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate
section of this Report at page 13 hereof.
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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
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President and Chief Executive Officer
(Chief Executive Officer)
Date: March 28, 1996
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints R. S. Boreham, Jr. and R. L. Qualls, 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.
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Signature Title Date
--------- ----- ----
/s/ R. S. Boreham, Jr. Chairman of the Board of )
- ---------------------------- Directors and Chairman of )
R. S. Boreham, Jr. the Executive Committee )
)
)
/s/ R. L. Qualls President, Chief Executive )
- ---------------------------- Officer, and Director )
R. L. Qualls (Principal Executive Officer) )
)
)
/s/ Lloyd G. Davis Chief Financial Officer, )
- ---------------------------- Vice President - Finance, )
Lloyd G. Davis Secretary, and Treasure )
(Principal Financial )
and Accounting Officer) )
)
/s/ Jefferson W. Asher, Jr. Director )March 28, 1996
- ---------------------------- )
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 )
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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 DECEMBER 30, 1995
BALDOR ELECTRIC COMPANY
FORT SMITH, ARKANSAS
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FORM 10-K, ITEM 14(a)(1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
BALDOR ELECTRIC COMPANY AND AFFILIATES
The following consolidated financial statements of Baldor Electric Company
and Affiliates, included in the Annual Report to Shareholders for 1995,
are incorporated by reference in Item 8:
Consolidated Balance Sheets
- December 30, 1995 and December 31, 1994
Consolidated Statements of Earnings
- for the three years in the period ended December 30, 1995
Consolidated Statements of Cash Flows
- for the three years in the period ended December 30, 1995
Consolidated Statements of Shareholders' Equity
- for the three years in the period ended December 30, 1995
Notes to Consolidated Financial Statements
The following consolidated financial statement schedules of Baldor
Electric Company and Affiliates are included in Item 14(d):
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accoun-
ting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.
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BALDOR ELECTRIC COMPANY AND AFFILIATES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
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Additions
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Charged to Charged to
Balance at Costs Other Balance
Beginning and Accounts Deductions at End of
Description of Period Expenses Describe Describe Period
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(In thousands)
Deducted from current assets:
Allowance for doubtful accounts
1995 $2,250 $ 886 $ 336(A) $2,800
1994 1,800 623 173(A) 2,250
1993 1,200 1,197 597(A) 1,800
Included in current liabilities:
Anticipated warranty costs
1995 $3,700 $ 400(B) $4,100
1994 2,750 950(B) 3,700
1993 2,500 250(B) 2,750
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(A) Net uncollectible accounts written off during year.
(B) Additions/(reductions) to reserve for anticipated warranty costs, net of
expenses incurred.
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BALDOR ELECTRIC COMPANY AND AFFILIATES
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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2 Omitted - Inapplicable
3(i) Omitted - Inapplicable
3(ii) Omitted - Inapplicable
4(i) Omitted - Inapplicable
9 Omitted - Inapplicable
10 Omitted - Inapplicable
11 Computation of Earnings Per Common Share - filed herewith
12 Omitted - Inapplicable
13 Annual Report to Shareholders for 1995 - filed herewith
16 Omitted - Inapplicable
18 Omitted - Inapplicable
21 Affiliates of the Registrant - filed herewith
22 Omitted - Inapplicable
23 Consent of Independent Auditors - filed herewith
24 Powers of Attorney - Included on signature pages 10 and 11
27 Financial Data Schedules - filed herewith
28 Omitted - Inapplicable
99 Omitted - Inapplicable
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