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.
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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.
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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 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.
Item 2. Properties - -------------------
The Company believes that its facilities, including equipment and machinery, are in good condition, suitable to current operations, adequately maintained
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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.
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.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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PART II
Item 5.
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.
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.
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.
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.
Item 9. Changes in and Disagreements with Accountants on Accounting and - ------------------------------------------------------------------------ Financial Disclosure - --------------------
Not applicable.
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PART III
Item 10.
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.
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.
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.
Item 13. Certain Relationships and Related Transactions - --------------------------------------------------------
Information under the caption "Certain Transactions" of the 1994 Proxy Statement is incorporated herein by reference.
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PART IV
Item 14.
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.
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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.
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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 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.
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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 )
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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 JANUARY 1, 1994
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 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.
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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
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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.
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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.