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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended January 3, 2004

OR

For the transition period from                      to                     

Commission File Number 01-07284

Baldor Electric Company

Exact name of registrant as specified in its charter

Registrant’s telephone number, including area code 479-646-4711

Securities registered pursuant to section 12(b) of the Act:

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. ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨

The aggregate market value of voting stock held by non-affiliates of the registrant based on the closing price on June 28, 2003, was $558,079,703.

At March 10, 2004, there were 32,924,728 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 3, 2004 (the “2003 Annual Report to Shareholders”), are incorporated by reference into Part II and Part III.

Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held April 24, 2004 (the “2004 Proxy Statement”), are incorporated by reference into Part III.

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PART I

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, drives, generators 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 line presently ranges in size from 1/50 up to 1500 horsepower. The DC motor product line presently ranges from 1/50 through 800 horsepower. The adjustable speed controls product line ranges from 1/50 to 900 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. The Company’s power generator line ranges from 1.3 kilowatts to 2000 kilowatts. Sales of industrial electric motors represented approximately 78% of the Company’s business in 2003, 79% in 2002, and 81% in 2001. Almost all of the remaining sales were of power generators, drives, speed reducers, industrial grinders, buffers, polishing lathes, stampings, castings, and repair parts.

Baldor’s industrial motors and drives are designed, manufactured, and marketed for general purpose uses (“stock products”) and to individual customer requirements and specifications (“custom products”). Stock products represented approximately 62% of total product sales in 2003 and 65% in each of 2002 and 2001. Most stock product sales are to customers who place their orders for immediate shipment from current inventory. Custom products generally are shipped within two 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 personnel, consists of more than 70 locations, including 39 in North America. The remainder of the Company’s representatives are 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 that 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.

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Competition

The Company faces substantial competition in the sale 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 product availability, shorter lead-times, on-time delivery, local support, 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 Electrical 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, stamped steel parts, 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, insulating materials, and diesel engines. Many of these materials 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, drives and generators include 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 $21,932,000 in 2003, $22,484,000 in 2002, and $24,415,000 in 2001.

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 February 28, 2004, the Company had 3,696 employees.

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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 15% of total sales in 2003, 14% of total sales in each of the years 2002 and 2001. See also Note I on page 28 of the 2003 Annual Report to Shareholders.

The Company’s products are distributed in more than 60 foreign countries, principally in Canada, Mexico, Europe, Australia, the Far East, and Latin America. Baldor’s wholly-owned affiliate, UK-based Optimised Control Ltd., has sales offices and a development and manufacturing facility in the UK. Baldor and its affiliates in Europe have sales offices in Germany and Switzerland. 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 Baldor Japan Corporation located in Yokohama, Japan, and has sales offices in Taiwan 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 effect on the Company’s business.

Access to Filings on Company Website

The Company makes available its Forms 10-K, 10-Q, 8-K, and amendments thereto on its corporate website when filed with the SEC. These filings, along with the Company’s Annual Reports to Shareholders and Proxy Statements, may be viewed online free of charge by accessing the Company’s website at www.baldor.com and selecting the Investor Relations section.

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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 contains information with respect to the Company’s properties.

The Company also has approximately 350,000 sq. ft. of space available for expansion, currently fully leased to outside firms.

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.

Not applicable.

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PART II

Information under the captions “Ticker”, “Dividends Paid”, “Common stock price range”, and “Shareholders”, on page 33 of the 2003 Annual Report to Shareholders, is incorporated herein by reference.

During the fourth quarter of 2003, certain District Managers exercised non-qualified stock options previously granted to them under the Baldor Electric Company 1990 Stock Option Plan for District Managers (the “DM Plan”). The exercise price paid by the District Managers equaled the fair market value on the date of the grant. The total amount of shares granted under the DM Plan is approximately 1% of the outstanding shares of Baldor common stock. None of the transactions were registered under the Securities Act of 1933, as amended (the “Act”), in reliance upon the exemption from registration afforded by Section 4(2) of the Act. The Company deems this exemption to be appropriate given that there are a limited number of participants in the DM Plan and all parties are knowledgeable about the Company.

Information concerning net sales, net earnings, net earnings per share, dividends per share, long-term obligations, and total assets for the years ended 1993 through 2003 is contained under the caption “Eleven-Year Summary of Financial Data” on page 16 of the 2003 Annual Report to Shareholders and is incorporated herein by reference.

Information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 18 through 20 of the 2003 Annual Report to Shareholders is incorporated herein by reference.

Information under the sub-caption “Market Risk” of the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 19 of the 2003 Annual Report to Shareholders is incorporated herein by reference.

The consolidated financial statements of the Company and related notes on pages 21 through 30, the “Report of Ernst & Young LLP, Independent Auditors” and “Report of Management on Responsibility for Financial Reporting” on page 31, and the “Summary of Quarterly Results of Operations (unaudited)” on page 22 of the 2003 Annual Report to Shareholders are incorporated herein by reference.

Not Applicable.

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The Company has established and maintains disclosure controls and procedures to ensure that information required to be disclosed is gathered, analyzed and disclosed in its reports filed pursuant to the Securities and Exchange Act of 1934. The Company’s principal executive officer and principal financial officer have concluded, based on their evaluation as of the end of the period covered by this report under the supervision and with participation of the Company’s management, that the Company’s disclosure controls and procedures are effective. In addition, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART III

Information contained in the 2004 Proxy Statement under the captions “Proposal 1 - Election of Directors”, “Code of Ethics”, “Statement of Audit Committee Member Independence and Financial Expertise”, and “Section 16(a) Beneficial Ownership Reporting Compliance” 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:

Each of the executive officers has served as an officer or in a management capacity with the Company for the last five years except for Jeffrey R. Hubert. Mr. Hubert joined Baldor in July 2001 as the Company’s Director of Business Development. Prior to joining Baldor, Mr. Hubert spent 15 years in the motor business in various areas of sales, marketing, customer service, and application engineering. There are no family relationships among the directors or executive officers.

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Information contained in the 2004 Proxy Statement under the caption “Executive Compensation”, except for the information contained in the sub-captions “Board Report on Executive Compensation” and “Performance Graph”, is incorporated herein by reference. Information contained in the 2004 Proxy Statement under the caption “Proposal 1 – Election of Directors” paragraph headed “Director Compensation” is also incorporated herein by reference.

The security ownership by officers, directors, and beneficial owners of more than five percent of the Company’s Common Stock included under the caption “Security Ownership of Certain Beneficial Owners and Management” of the 2004 Proxy Statement is incorporated herein by reference.

Information about equity compensation plans not approved by security holders contained in the 2003 Annual Report to Shareholders under the caption “Note K Stock Plans” is incorporated herein by reference. The following table contains information regarding the number of shares of common stock that may be issued pursuant to the Company’s equity compensation plans as of January 3, 2004.

Equity Compensation Plan Information

Richard E. Jaudes, a member of the Board of Directors of the Company, is also a partner at Thompson Coburn LLP, a law firm that provides legal counsel to the Company. R. L. Qualls, also a member of the Board of Directors of the Company, provided management consulting services for Baldor during fiscal year 2003 for which he was paid $48,000. These consulting services were provided on as as-needed basis and there was no formal arrangement between Dr. Qualls and Baldor as to the terms of the consulting services.

Information contained in the 2004 Proxy Statement under the caption “Independent Auditors” is incorporated herein by reference.

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PART IV

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.

None

See Exhibit Index at page 14 of this Report.

The response to this portion of Item 15 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.

Date: March 18, 2004

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints R. S. Boreham, Jr. 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.

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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 PAGE FOR FORM 10-K FOR YEAR ENDED JANUARY 3, 2004.

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BALDOR ELECTRIC COMPANY AND AFFILIATES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

(In thousands)

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BALDOR ELECTRIC COMPANY AND AFFILIATES

INDEX OF EXHIBITS

(continued on next page)

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BALDOR ELECTRIC COMPANY AND AFFILIATES

INDEX OF EXHIBITS

(continued from previous page)

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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