UNITED STATES
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:
December 28, 1996 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 72908 (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. [ ]
The aggregate market value of voting stock held by non-affiliates of the regis-
trant based on the closing price on February 21, 1997, was $476,165,105.
At February 21, 1997, there were 26,239,308 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 28, 1996 (the "Annual Report to Shareholders for 1996"), are
incorporated by reference into Part II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held May 3, 1997 (the "1997 Proxy Statement"), are incorporated by reference
into Parts I and III.
PART I
Item 1. Business
- -----------------
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 industrial electric motors represented approximately 76% of the
Company's business in 1996, 78% in 1995, and 80% in 1994. The AC motor product
line presently ranges in size from 1/50 through 800 horsepower. The DC motor
product line presently ranges from 1/50 through 700 horsepower.
The Company also sells industrial control products, which include servo
products, DC controls, and inverter and vector drives. The Company's line of
adjustable speed controls ranges from 1/50 through 800 horsepower. With these
products, the Company provides its customers the ability to purchase a "Drive",
which Baldor defines as an industrial motor and an electronic control, from one
manufacturer. Sales of drives were approximately 22% of total 1996 sales, 20%
of total 1995 sales, and 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 63% of the Company's total sales in 1996, 62% in 1995, and 63%
in 1994. 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
25 in the United States. The remainder of the Company's representatives are
located in various parts of the world, including Canada, Europe, Latin America,
Australia, and the Far East.
- 2 -
Custom products and stock products are sold to original equipment manufacturers
("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 does not
believe that the loss of any single customer would have a material 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 position in 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 including
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, 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 avail-
able 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 $19,900,000 in 1996, $17,200,000 in 1995, and $14,800,000 in
1994.
- 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 financial position
of the Company and is not expected to have such an effect.
Employees
At December 28, 1996, the Company had 3,645 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 28, 1996,
export and international sales revenues have increased and represented 14.5%
of consolidated sales in 1996, 14.0% in 1995, and 13.1% in 1994. See also Note
H on page 25 of the Annual Report to Shareholders for 1996.
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 owns majority
interests in Baldor Electric (Far East) Pte. Ltd., located in Singapore, and
Australian Baldor Pty. Limited which has locations in Sydney and Melbourne.
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.
- 4 -
Item 2. Properties
- -------------------
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.
AREA
LOCATION PRIMARY USE (SQ. FT.)
Fort Smith, AR AC motor production 298,150
Distribution and service center 208,000
Administration and engineering offices 70,950
Aluminum die casting 76,400
St. Louis County, MO Metal stamping and engineering toolroom 131,700
DC and miscellaneous motor production 55,600
Columbus, MS AC motor production 141,000
Westville, OK AC and DC motor production 166,300
Fort Mill, SC DC motor, AC motor 108,000
and tachometer production
Clarksville, AR Subfractional motor, gear motor, 166,000
and worm-gear speed reducer production
Ozark, AR AC motor production 77,300
Five other Metal stamping and motor, drives,
domestic locations and servomotor production 123,100
Eight foreign Sales and distribution centers 37,900
locations and servodrive production
---------
1,660,400
Certain properties listed above (436,200 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 page 29 of the Annual Report to Shareholders for 1996 is
incorporated herein by reference.
Item 6. Selected Financial Data
- --------------------------------
Information under the caption "Eleven-Year Summary of Financial Data" only for
years 1992 through 1996 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 1996 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 1996 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 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 1996 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. 72 Chairman of the Board 1961
R. L. Qualls 63 Vice Chairman and 1986
Chief Executive Officer
John A. McFarland 45 President 1990
Robert D. Butler 54 Vice President - Operations 1996
D. Christine Clemons 32 Controller 1995
Charles H. Cramer 52 Vice President - Personnel 1984
Lloyd G. Davis 49 Chief Financial Officer, 1992
Executive Vice President - Finance,
Secretary, and Treasurer
Gene J. Hagedorn 49 Vice President - Materials 1994
James R. Kimzey 58 Executive Vice President - 1984
Research and Engineering
Robert L. Null, Jr. 54 Vice President - Manufacturing 1990
Jerry D. Peerbolte 40 Vice President - Marketing 1990
Each of the executive officers, except Robert D. Butler, has served as an
officer or in a management capacity with Baldor Electric Company for the last
five years.
Mr. Butler, who joined the Company in 1996, previously operated Manufacturing
Services International which provided manufacturing consulting services to
small and medium sized U.S. based companies for more than the previous five
years.
There are no family relationships among the directors or executive officers.
The information under the caption "Election of Directors" of the 1997 Proxy
Statement is incorporated herein by reference.
- 7 -
Item 11. Executive Compensation
- --------------------------------
Information contained in the 1997 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
- ------------------------------------------------------------------------
The security ownership by officers and directors included under the caption
"Security Ownership of Certain Beneficial Owners and Management" of the 1997
Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
NONE
- 8 -
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.
(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.
Exhibit (10) - Exhibits 10(iii)(A)(1) through 10(iii)(A)(6) 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 refiled as Exhibit
10(iii)(A)(2) to Form 10-K for the year ended
December 31, 1994.)
- 9 -
- 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)(a) 1994 Incentive Stock Option Plan (filed as
Exhibit A to Registrant's Proxy Statement dated
April 4, 1994).
- 10(iii)(A)(5)(b) Amendment #1 to the 1994 Incentive Stock Option
Plan - filed herewith.
- 10(iii)(A)(6) 1996 Stock Option Plan for Non-Employee
Directors (filed as Exhibit A to Registrant's
Proxy Statement dated March 28, 1996).
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 1996.
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 11 and
12.
(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 16 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 14 hereof.
- 10 -
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
-------------------------------------
Vice Chairman and
Chief Executive Officer
(Chief Executive Officer)
Date: March 27, 1997
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 John A.
McFarland, 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.
- 11 -
Signature Title Date
--------- ----- ----
/s/ R. S. Boreham, Jr. Chairman of the Board of )
- ---------------------------- Directors )
R. S. Boreham, Jr. )
)
)
/s/ R. L. Qualls Vice Chairman, Chief Executive )
- ---------------------------- Officer, and Director )
R. L. Qualls (Principal Executive Officer) )
)
)
/s/ John A. McFarland President and Director )
- ---------------------------- )
John A. McFarland )
)
)
/s/ Lloyd G. Davis Chief Financial Officer, )
- ---------------------------- Executive Vice President - )
Lloyd G. Davis Finance, Secretary, and )
Treasurer (Principal Financial )
and Accounting Officer) )
)
)
/s/ Jefferson W. Asher, Jr. Director ) March 27, 1997
- ---------------------------- )
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 )
- 12 -
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 28, 1996
BALDOR ELECTRIC COMPANY
FORT SMITH, ARKANSAS
- 13 -
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 1996, are
incorporated by reference in Item 8:
- Consolidated Balance Sheets
- December 28, 1996 and December 30, 1995
- Consolidated Statements of Earnings
- for the three years in the period ended December 28, 1996
- Consolidated Statements of Cash Flows
- for the three years in the period ended December 28, 1996
- Consolidated Statements of Shareholders' Equity
- for the three years in the period ended December 28, 1996
- 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 accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
- 14 -
BALDOR ELECTRIC COMPANY AND AFFILIATES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
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
- ----------- --------- -------- -------- -------- ---------
(In thousands)
Deducted from current assets:
Allowance for doubtful accounts
1996 $2,800 $ 695 $ 295(A) $3,200
1995 2,250 886 336(A) 2,800
1994 1,800 623 173(A) 2,250
Included in current liabilities:
Anticipated warranty costs
1996 $4,100 $ 400(B) $4,500
1995 3,700 400(B) 4,100
1994 2,750 950(B) 3,700
- -----------------
(A) Net uncollectible accounts written off during year.
(B) Additions/(reductions) to reserve for anticipated warranty costs, net of
expenses incurred.
- 15 -
BALDOR ELECTRIC COMPANY AND AFFILIATES
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2 Omitted - Inapplicable
3(i) Omitted - Inapplicable
3(ii) Omitted - Inapplicable
4(i) Omitted - Inapplicable
9 Omitted - Inapplicable
10(iii)(A)(5)(b)Amendment #1 to the 1994 Incentive Stock Option Plan - filed
herewith
11 Computation of Earnings Per Common Share - filed herewith
12 Omitted - Inapplicable
13 Portions of the Annual Report to Shareholders for 1996 -
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 11 and 12
27 Financial Data Schedules - filed herewith
- 16 -