UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 2, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 01-07284
Baldor Electric Company
Exact name of registrant as specified in its charter
| Missouri | 43-0168840 | |
| State or other jurisdiction of incorporation | IRS Employer Identification No | |
| 5711 R. S. Boreham Jr, St Fort Smith, Arkansas |
72901 | |
| Address of principal executive offices | Zip Code | |
479-646-4711
Registrant’s telephone number, including area code
N/A
Former name, former address and former fiscal year, if changed since last report
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). x Yes ¨ No
At April 30, 2005, there were 33,179,504 shares of the registrant’s common stock outstanding.
Baldor Electric Company and Affiliates
Index
2
PART I — FINANCIAL INFORMATION
| Item 1. | Financial Statements (unaudited) |
Baldor Electric Company and Affiliates
Condensed Consolidated Balance Sheets
| (in thousands, except share data) | Apr 2, 2005 |
Jan 1, 2005 |
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| (unaudited) | ||||||||||||||
| ASSETS |
||||||||||||||
| Current Assets: |
Cash and cash equivalents |
$ | 10,891 | $ | 12,054 | |||||||||
| Marketable securities |
28,180 | 32,392 | ||||||||||||
| Receivables, less allowance for doubtful accounts of $3,258 and $3,308, respectively |
105,166 | 101,088 | ||||||||||||
| Inventories: |
||||||||||||||
| Finished products |
84,776 | 81,078 | ||||||||||||
| Work in process |
12,141 | 12,239 | ||||||||||||
| Raw materials |
62,086 | 59,732 | ||||||||||||
| 159,003 | 153,049 | |||||||||||||
| LIFO valuation adjustment |
(32,481 | ) | (31,544 | ) | ||||||||||
| 126,522 | 121,505 | |||||||||||||
| Prepaid expenses |
4,046 | 3,920 | ||||||||||||
| Other current assets and deferred income taxes |
24,171 | 26,786 | ||||||||||||
| Total Current Assets |
298,976 | 297,745 | ||||||||||||
| Property, Plant and Equipment: |
Land and improvements |
6,126 | 6,126 | |||||||||||
| Buildings and improvements |
60,133 | 60,179 | ||||||||||||
| Machinery and equipment |
308,126 | 303,281 | ||||||||||||
| Accumulated depreciation and amortization |
(236,096 | ) | (232,376 | ) | ||||||||||
| Net Property, Plant and Equipment |
138,289 | 137,210 | ||||||||||||
| Other Assets: |
Goodwill |
62,785 | 62,785 | |||||||||||
| Other |
3,830 | 3,820 | ||||||||||||
| $ | 503,880 | $ | 501,560 | |||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||||||
| Current Liabilities: |
Accounts payable |
$ | 39,045 | $ | 39,075 | |||||||||
| Employee compensation |
9,277 | 7,825 | ||||||||||||
| Profit sharing |
1,911 | 6,885 | ||||||||||||
| Accrued warranty costs |
6,522 | 6,335 | ||||||||||||
| Accrued insurance obligations |
12,375 | 11,613 | ||||||||||||
| Dividends payable |
0 | 4,959 | ||||||||||||
| Other accrued expenses |
4,980 | 6,037 | ||||||||||||
| Income taxes payable |
8,924 | 1,871 | ||||||||||||
| Total Current Liabilities |
83,034 | 84,600 | ||||||||||||
| Long-Term Obligations |
104,025 | 104,025 | ||||||||||||
| Deferred Income Taxes |
29,110 | 29,320 | ||||||||||||
| Shareholders’ Equity: |
Preferred stock, $.10 par value |
|||||||||||||
| Authorized shares: |
5,000,000 | |||||||||||||
| Issued and outstanding shares: None |
||||||||||||||
| Common stock, $.10 par value |
||||||||||||||
| Authorized shares: |
150,000,000 | |||||||||||||
| Issued shares: |
April 2, 2005 | January 1, 2005 | ||||||||||||
| 40,537,147 | 40,423,054 | 4,053 | 4,042 | |||||||||||
| Outstanding shares: |
April 2, 2005 | January 1, 2005 | ||||||||||||
| 33,187,275 | 33,109,762 | |||||||||||||
| Additional capital |
63,205 | 61,117 | ||||||||||||
| Retained earnings |
358,741 | 354,696 | ||||||||||||
| Accumulated other comprehensive (loss) income |
(12 | ) | 1,050 | |||||||||||
| Treasury stock, at cost: |
April 2, 2005 | January 1, 2005 | ||||||||||||
| 7,349,872 | 7,313,292 | (138,276 | ) | (137,290 | ) | |||||||||
| Total Shareholders’ Equity |
287,711 | 283,615 | ||||||||||||
| $ | 503,880 | $ | 501,560 | |||||||||||
See notes to unaudited condensed consolidated financial statements.
3
Baldor Electric Company and Affiliates
Condensed Consolidated Statements of Earnings (Unaudited)
| Three Months Ended | ||||||
| (in thousands, except per share data) | Apr 2, 2005 |
Apr 3, 2004 | ||||
| Net sales |
$ | 170,596 | $ | 152,823 | ||
| Cost of goods sold |
124,185 | 110,635 | ||||
| Gross Margin |
46,411 | 42,188 | ||||
| Selling and administrative |
29,673 | 28,555 | ||||
| Operating Margin |
16,738 | 13,633 | ||||
| Other income |
377 | 505 | ||||
| Profit sharing expense |
1,912 | 1,560 | ||||
| Interest expense |
883 | 773 | ||||
| Earnings before income taxes |
14,320 | 11,805 | ||||
| Income taxes |
5,298 | 4,366 | ||||
| Net Earnings |
$ | 9,022 | $ | 7,439 | ||
| Net earnings per share-basic |
$ | 0.27 | $ | 0.23 | ||
| Net earnings per share-diluted |
$ | 0.27 | $ | 0.22 | ||
| Weighted average shares outstanding-basic |
33,170 | 32,902 | ||||
| Weighted average shares outstanding-diluted |
33,781 | 33,439 | ||||
| Dividends declared and paid per common share |
$ | 0.15 | $ | 0.14 | ||
See notes to unaudited condensed consolidated financial statements.
4
Baldor Electric Company and Affiliates
Condensed Consolidated Statements of Cash Flows (Unaudited)
| Three Months Ended |
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| (in thousands) | Apr 2, 2005 |
Apr 3, 2004 |
||||||
| Operating activities: |
||||||||
| Net earnings |
$ | 9,022 | $ | 7,440 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||
| Losses on sales of marketable securities |
32 | 0 | ||||||
| Depreciation |
4,141 | 4,381 | ||||||
| Amortization |
504 | 468 | ||||||
| Deferred income taxes |
(3,018 | ) | (1,319 | ) | ||||
| Changes in operating assets and liabilities: |
||||||||
| Increase in receivables |
(4,078 | ) | (13,729 | ) | ||||
| Increase in inventories |
(5,017 | ) | (2,144 | ) | ||||
| Decrease in other current assets |
4,889 | 4,833 | ||||||
| Increase in other assets, net |
(532 | ) | (717 | ) | ||||
| (Decrease) increase in accounts payable |
(30 | ) | 9,337 | |||||
| Decrease in accrued expenses and other liabilities |
(8,589 | ) | (6,148 | ) | ||||
| Increase in income taxes payable |
7,053 | 5,644 | ||||||
| Net cash provided by operating activities |
4,377 | 8,046 | ||||||
| Investing activities: |
||||||||
| Additions to property, plant and equipment |
(5,374 | ) | (2,499 | ) | ||||
| Marketable securities purchased |
(2,342 | ) | (7,733 | ) | ||||
| Marketable securities sold |
6,040 | 3,138 | ||||||
| Net cash used in investing activities |
(1,676 | ) | (7,094 | ) | ||||
| Financing activities: |
||||||||
| Reduction of long-term obligations |
0 | (3 | ) | |||||
| Dividends paid |
(4,977 | ) | (4,609 | ) | ||||
| Common stock repurchased |
(393 | ) | 0 | |||||
| Stock option plans |
1,506 | 1,243 | ||||||
| Net cash used in financing activities |
(3,864 | ) | (3,369 | ) | ||||
| Net decrease in cash and cash equivalents |
(1,163 | ) | (2,417 | ) | ||||
| Beginning cash and cash equivalents |
12,054 | 10,635 | ||||||
| Ending cash and cash equivalents |
$ | 10,891 | $ | 8,218 | ||||
See notes to unaudited condensed consolidated financial statements.
5
Baldor Electric Company and Affiliates
Notes to Unaudited Condensed Consolidated Financial Statements
April 2, 2005
NOTE A - Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements, and therefore should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended January 1, 2005. In the opinion of management, all adjustments (consisting only of normal recurring items) considered necessary for a fair presentation have been included. The results of operations for the three months ended April 2, 2005, may not be indicative of the results that may be expected for the fiscal year ending December 31, 2005.
Fiscal Year
The Company’s fiscal year ends on the Saturday nearest to December 31, which results in a 52-week or 53-week year. Fiscal year 2005 will contain 52 weeks. Fiscal year 2004 contained 52 weeks.
Financial Derivatives
The Company recognizes all derivatives on the balance sheet at fair value. Derivatives that are not hedges are adjusted to fair value through earnings. If the derivative is a cash flow hedge, changes in the fair value are recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. If a hedge transaction is terminated, any unrealized gain (loss) at the date of termination is carried in accumulated other comprehensive income (loss) until the hedged item is recognized as earnings. The ineffective portion of a derivative’s change in fair value is recognized in earnings in the period of change.
The Company uses derivatives to moderate the commodity market risks of its business operations. Derivative products, such as futures and option contracts, are considered to be a hedge against changes in the amount of future cash flows related to commodities procurement. Net reductions recognized in cost of sales, related to cash flow hedges, in the first quarter 2005 and 2004 amounted to approximately $1,338,000 and $2,295,000, respectively.
At April 2, 2005, and January 1, 2005, the Company had derivative related balances with a fair value of approximately $2,001,000 and $2,650,000, respectively, recorded in other current assets. The Company had corresponding net after-tax gains of approximately $1,221,000 and $1,616,000 recorded in accumulated other comprehensive income at April 2, 2005, and January 1, 2005, respectively. The Company expects that net after-tax gains, related to cash flow hedges, will be recognized in cost of sales within the next twelve months. The Company generally does not hedge anticipated transactions beyond 18 months.
Segment Reporting
The Company has only one reportable segment; therefore, the condensed consolidated financial statements reflect segment information.
6
Comprehensive Income
Total comprehensive income was approximately $8.0 million and $7.2 million for the first quarter of 2005 and 2004, respectively. The components of comprehensive income are illustrated in the table below:
| Three Months Ended |
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| (in thousands) | Apr 2, 2005 |
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