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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:
-------------------------- ------------------------
January 1, 2000 01-07284
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 72908 (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
------------------- ----------------
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 29, 2000, was $391,956,517.
At February 29, 2000, there were 34,110,183 shares of the registrant's common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended January
1, 2000 (the "Annual Report to Shareholders for 1999"), are incorporated by
reference into Part II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held April 29, 2000 (the "2000 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 in one industry segment which includes the design,
manufacture, and sale of electric motors and drives and related products. Baldor
has made several small acquisitions; however, the majority of its growth has
come internally through broadening its markets and product lines.
Products
The AC motor product and controls line presently ranges in size from 1/50 up to
1200 horsepower. The DC motor product line presently ranges from 1/50 through
700 horsepower. The adjustable speed controls product line ranges from 1/50 to
1000 horsepower. The Company's industrial control products include servo
products, DC controls, position controls, and inverter and vector drives. With
these products, the Company provides its customers the ability to purchase a
"Drive" from one manufacturer. Baldor defines a "Drive" as an industrial motor
and an electronic control. Sales of industrial electric motors represented
approximately 79% of the Company's business in 1999 and 76% in each of the years
1998 and 1997. The bulk of the remaining sales are the results of sales from the
drives product line. In addition to electric motors and drive products, Baldor's
other product lines include speed reducers, industrial grinders, buffers,
polishing lathes, stampings, castings, and repair parts.
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 sales for each of the years 1999, 1998, and 1997. Most
stock product sales are to customers who place their orders for immediate
shipment from current inventory. Custom products generally are shipped within
three 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 60 foreign countries. The Company's field sales organization,
comprised of independent manufacturer's representatives and Company sales
offices, consists of more than 51 groups, including 40 in North America. The
remainder of the Company's representatives is located in various parts of the
world including Europe, Latin America, Australia, and the Far East.
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.
No single customer accounted for more than 5% of sales; therefore, the Company
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 manufacturing 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. The Company believes that alternative sources are
available for such materials.
Research and Engineering
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 $24,881,000 in 1999, $25,300,000 in
1998, and $22,900,000 in 1997.
Environment
Compliance with laws relating to the discharge of materials into the environment
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
As of January 1, 2000, the Company had 3,854 employees.
Executive Officers of the Registrant
Information regarding executive officers is contained in Part III, Item 10, and
incorporated herein by reference.
International Operations
Sales from international operations (foreign affiliates and exports) were
approximately 14% of total sales in 1999 and 15% of total sales for 1998 and
1997. See also Note H on page 24 of the Annual Report to Shareholders for 1999.
The Company's products are distributed in more than 60 foreign countries,
principally in Canada, Europe, Australia, the Far East, and Latin America. In
April 1997, the Company acquired the UK-based Optimised Control Ltd. This
wholly-owned affiliate has sales offices in New Zealand and the UK and a
development facility and a manufacturing facility in the UK. The Baldor Europe
group of companies has sales offices in Switzerland, Germany, Italy, and the
United Kingdom, and development and manufacturing operations in Germany. The
Company owns majority interests in Australian Baldor Pty. Limited, which has
locations in Sydney and Melbourne. The Company wholly owns Baldor Electric (Far
East) Pte. Ltd., located in Singapore, and in the last two years, the Company
has opened sales offices in Taiwan, Japan, and the Philippines. The Company also
wholly owns Baldor de Mexico, S.A. de C.V., located in Leon, Mexico.
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
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 contains 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 79,330
Drives production center 162,000
St. Louis County, MO Metal stamping and engineering toolroom 108,560
DC and miscellaneous motor production 78,825
Columbus, MS AC motor production 156,000
Westville, OK AC and DC motor production 207,250
Fort Mill, SC DC motor, AC motor 108,000
and tachometer production
Clarksville, AR Subfractional motor, gear motor, *165,735
and worm-gear speed reducer production
Ozark, AR AC motor production 84,070
Four other Metal stamping and motor, drives,
domestic locations and servomotor production 133,158
Ten foreign Sales and distribution centers
locations and servodrive production 84,200
---------
1,944,228
Certain properties listed above (*165,735 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. The Company also has available
approximately 350,000 sq. ft. of space available for expansion.
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.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters
Information under the captions "Ticker", "Dividends paid", "Common stock price
range", and "Shareholders" on page 29 of the Annual Report to Shareholders for
1999 is incorporated herein by reference.
Item 6. Selected Financial Data
Information concerning net sales, net earnings, net earnings per share,
dividends per share, long-term obligations, and total assets for the years ended
1995 through 1999 is contained under the caption "Eleven-Year Summary of
Financial Data" on page 14 of the Annual Report to Shareholders for 1999 and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information under the captions "Management's Discussion and Analysis of
Financial Condition" and "Results of Operations" on pages 16 and 17 of the
Annual Report to Shareholders for 1999 is incorporated herein by reference.
Item 7a. Quantitative and Qualitative Disclosure about Market Risk
Information under the sub-caption "Market Risk" of the captions "Management's
Discussion and Analysis of Financial Condition" and "Results of Operations" on
page 17 of the Annual Report to Shareholders for 1999 is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements of the Company and related notes on pages
18 through 26, the "Report of Ernst & Young LLP, Independent Auditors" on page
27, and the "Summary of Quarterly Results of Operations (Unaudited)" on page 19
of the Annual Report to Shareholders for 1999 are incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information contained in the 2000 Proxy Statement under the caption "Proposal 1-
Election of Directors" is incorporated herein by reference. 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. 75 Chairman 1961
R. L. Qualls 66 Vice Chairman 1986
John A. McFarland 48 President and 1990
Chief Executive Officer
Charles H. Cramer 55 Vice President - Personnel 1984
Lloyd G. Davis 52 Executive Vice President, 1992
Chief Operating Officer, and
Secretary
Ronald E. Tucker 42 Chief Financial Officer and 1997
Treasurer
Gene J. Hagedorn 52 Vice President - Materials 1994
James R. Kimzey 61 Executive Vice President - 1984
Research and Reliability
Randy L. Colip 40 Vice President - Sales 1997
Jerry D. Peerbolte 43 Vice President - Marketing 1990
Randal G. Waltman 50 Vice President - Motor 1997
Engineering and Operations
John L. Peeples, III 47 Vice President - International 1998
Eddie L. Holderfield, Sr. 60 Vice President - Fort Smith 1999
Motor Manufacturing
Each of the executive officers has served as an officer or in a management
capacity with the Company for the last five years. There are no family
relationships among the directors or executive officers.
Item 11. Executive Compensation
Information contained in the 2000 Proxy Statement under the caption "Executive
Compensation", except for the information contained in the sub-captions "Report
of the Board of Directors on Executive Compensation" 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 2000
Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) The following consolidated financial statements of Baldor Electric
Company and its affiliates, included in the Annual Report to
Shareholders for 1999, are incorporated by reference in Item 8 of this
Report:
o Consolidated Balance Sheets
- January 1, 2000 and January 2, 1999
o Consolidated Statements of Earnings
- for each of the three years in the period ending January 1, 2000
o Consolidated Statements of Cash Flows
- for each of the three years in the period ending January 1, 2000
o Consolidated Statements of Shareholders' Equity
- for each of the three years in the period ending January 1, 2000
o Notes for Consolidated Financial Statements
(2) The following consolidated financial statement schedule of Baldor
Electric Company and its affiliates is included in Item 14(d) of this
Report:
o Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable.
(3) See Exhibit Index at page 13 of this Report.
(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 13 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 12 hereof.
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. S. Boreham, Jr.
-----------------------------
Chairman
(Principal Executive Officer)
Date: March 24, 2000
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.
Signature Title Date
- --------- ----- ----
/s/ R. S. Boreham, Jr. Chairman and March 24, 2000
- ------------------------------
R. S. Boreham, Jr. Director
/s/ R. L. Qualls Vice Chairman and March 24, 2000
- ------------------------------
R. L. Qualls Director
/s/ John A. McFarland President, March 24, 2000
- ------------------------------
John A. McFarland Chief Executive Officer, and
Director
(Principal Executive Officer)
/s/ Lloyd G. Davis Executive Vice President, March 24, 2000
- ------------------------------
Lloyd G. Davis Chief Operating Officer, and
Secretary
/s/ Ronald E. Tucker Chief Financial Officer and March 24, 2000
- ------------------------------
Ronald E. Tucker Treasurer
(Principal Financial Officer)
/s/ Jefferson W. Asher, Jr. Director March 24, 2000
- ------------------------------
Jefferson W. Asher, Jr.
/s/ Fred C. Ballman Director March 24, 2000
- ------------------------------
Fred C. Ballman
/s/ O. A. Baumann Director March 24, 2000
- ------------------------------
O. A. Baumann
/s/ Richard E. Jaudes Director March 24, 2000
- ------------------------------
Richard E. Jaudes
/s/ Robert J. Messey Director March 24, 2000
- ------------------------------
Robert J. Messey
/s/ Robert L. Proost Director March 24, 2000
- ------------------------------
Robert L. Proost
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 Additions at End of
Description of Period Expenses Describe Describe Period
- ----------- --------- -------- -------- -------- ------
(In thousands)
Deducted from current assets:
Allowance for doubtful accounts
1999 $4,350 $ 568 $ 568(A) $ 0 $4,350
1998 3,525 511 206(A) 520(C) 4,350
1997 3,200 509 184(A) 3,525
Included in current liabilities:
Anticipated warranty costs
1999 $5,925 $ 0 $5,925
1998 5,200 725(B) 5,925
1997 4,500 700(B) 5,200
(A) Net uncollectible accounts written off during year.
(B) Additions to reserve for anticipated warranty costs, net of expenses
incurred.
(C) Additions to reserve for acquisition, net of expenses incurred.
BALDOR ELECTRIC COMPANY AND AFFILIATES
INDEX OF EXHIBITS
Exhibit No. Description
3(i) * Articles of Incorporation (as restated and amended) of
Baldor Electric Company, effective May 2, 1998, filed as
Exhibit 3(i) to the Registrant's Current Report on Form 10-Q
for the quarter ended July 4, 1998.
3(ii) * Bylaws of Baldor Electric Company (as restated and amended),
dated August 2, 1999, filed as Exhibit 3(ii) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended October 2, 1999.
4(i) * Rights Agreement, dated May 6, 1998, 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 the Registrant's Current
Report on Form 8-K dated May 13, 1988, and refiled as Exhibit
4(i) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994.
4(ii) * Amendment Number 1 to the Rights Agreement, dated February
5, 1996, filed as Exhibit 2 to the Registrant's Registration
Statement on Form 8-A/A dated March 21, 1996.
4(iii) * Amendment Number 2 to the Rights Agreement, dated June 1,
1999, filed as Exhibit 4(i)(c) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1999.
10(i) * + 1982 Incentive Stock Option Plan, originally filed as
Exhibit 10.8 to the Registrant's Annual Report on Form 10-K
for year ended December 31, 1981, refiled as Exhibit 10.1 to
the Registrant's Annual Report on Form 10-K for the year ended
December 28, 1991.
10(ii) * + Officers Compensation Plan, originally filed as Exhibit
10.6 to the Registrant's Annual Report on Form 10-K for year
ended December 31, 1988, and refiled as Exhibit 10(iii)(A)(2)
to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994.
10(iii) * + 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 the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.
(continued on next page)
BALDOR ELECTRIC COMPANY AND AFFILIATES
INDEX OF EXHIBITS
(continued from previous page)
Exhibit No. Description
10(iv) * + 1989 Stock Option Plan for Non-Employee Directors, as
restated and amended at the Board of Directors Meeting on
August 10, 1998, filed as Exhibit 10(iii)A.2 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended July 4, 1998.
10(v) * + 1994 Incentive Stock Option Plan, as restated and amended
at the Company's Annual Meeting on May 2, 1998, filed as
Exhibit 10(iii)A.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended July 4, 1998.
10(vi) * + 1996 Stock Option Plan for Non-Employee Directors, as
restated and amended at the Board of Directors Meeting on
August 10, 1998, filed as Exhibit 10(iii)A.3 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended July 4, 1998.
11 Computation of Earnings Per Share, incorporated by reference
in Note J of the Annual Report to Shareholders for 1999
filed as Exhibit 13.
13 Portions of the Annual Report to Shareholders for 1999.
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.
21 Affiliates of the Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney (set forth on signature page hereto).
27 Financial Data Schedule.
The Registrant agrees to furnish to the Securities and Exchange Commission, upon
request, pursuant to Item 601(b)(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.
- --------------
* Previously filed.
+ Management contract or compensatory plan or arrangement.