FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----- -----
Commission file number 0-362
FRANKLIN ELECTRIC CO., INC.
(Exact name of registrant as specified in its charter)
Indiana 35-0826-7455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 East Spring Street 46714
Bluffton, Indiana (Zip Code)
(Address of principal executive offices)
(219) 824-2900
(Registrant's telephone number, including area code)
Not Applicable
(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, and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock May 2, 1995
--------------------- -----------
$.10 par value 6,222,422 shares
FRANKLIN ELECTRIC CO., INC.
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of April 1, 1995 (Unaudited)
and December 31, 1994..........................
Condensed Consolidated Statements of
Income for the First Quarter ended
April 1, 1995 and April 2, 1994 (Unaudited)....
Condensed Consolidated Statements of
Cash Flows for the Quarter ended
April 1, 1995 and April 2, 1994 (Unaudited)....
Notes to Condensed Consolidated
Financial Statements (Unaudited)...............
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations..........................
PART II. OTHER INFORMATION
Item 4. Results of Votes of Holders....................
Item 6. Exhibits and Reports on Form 8-K...............
Signatures.................................................
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
[CAPTION]
April 1, December 31,
1995 1994
(Unaudited) (Audited)
----------- ---------
[S] [C] [C]
ASSETS
Current assets:
Cash and equivalents.................... $ 23,404 $ 38,890
Receivables, less allowances of
$1,332 and $1,271, respectively....... 28,580 21,864
Inventories (Note 2).................... 49,518 37,755
Other current assets (including
deferred income taxes of $7,170
and $6,287, respectively)............. 9,559 7,669
------- -------
Total current assets.................. 111,061 106,178
Property, plant and equipment,
net (Note 3)............................ 41,169 41,896
Deferred and other assets................. 3,558 3,507
------- -------
Total assets.............................. $155,788 $151,581
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings................... $ 18,300 $ 15,200
Accounts payable........................ 11,222 12,296
Accrued expenses........................ 27,606 27,372
Income taxes............................ 3,153 2,890
------- -------
Total current liabilities............. 60,281 57,758
Long-term debt............................ 20,000 20,000
Other long-term liabilities............... 7,628 8,096
Deferred income taxes..................... 850 862
Shareowners' equity:
Common stock (Note 5)................... 622 620
Additional capital...................... 5,416 4,667
Retained earnings....................... 65,377 64,231
Stock subscriptions..................... (2,556) (2,112)
Cumulative translation adjustment....... 570 59
Loan to ESOP Trust...................... (2,400) (2,600)
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Total shareowners' equity............. 67,029 64,865
------- -------
Total liabilities and shareowners' equity. $155,788 $151,581
======== ========
See Notes to Condensed Consolidated Financial Statements.
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
[CAPTION]
First Quarter Ended
-------------------
April 1, April 2,
1995 1994
---- ----
[S] [C] [C]
Net sales $ 59,788 $ 50,350
Costs and expenses:
Cost of sales........................... 46,491 37,847
Selling and administrative expenses..... 10,411 7,717
Interest expense........................ 654 589
Other income............................ (437) (344)
------- -------
57,119 45,809
Equity in earnings of affiliates.......... - 468
------- -------
Income before income taxes................ 2,669 5,009
Income taxes.............................. 1,025 1,748
------- -------
Net income................................ 1,644 3,261
Dividends on preferred stock.............. - 153
Net income available to common shares
and common share equivalents............ $ 1,644 $ 3,108
======== ========
Per share data
Weighted average common shares.......... 6,603 6,517
===== =====
Net income available to common shares... $ .25 $ .48
======== ========
Dividends per common share................ $ .08 $ .05
Dividends per preferred share............. $ - $ 2.63
See Notes to Condensed Consolidated Financial Statements.
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
[CAPTION]
First Quarter Ended
-------------------
April 1, April 2,
1995 1994
---- ----
[S] [C] [C]
Cash flows from operating activities:
Net income................................ $ 1,644 $ 3,261
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization........... 2,491 1,861
Equity in earnings of affiliates,
less dividends........................ - (468)
Deferred income taxes................... 185 -
Gain on disposals of
plant and equipment................... (17) (5)
Changes in assets and liabilities:
Receivables............................. (6,631) (5,884)
Inventories............................. (11,299) (4,411)
Other current assets.................... (1,865) (44)
Accounts payable and other
current liabilities................... (753) 1,738
Other long-term liabilities............. (431) 252
------- -------
Net cash flows from
operating activities................ (16,676) (3,700)
------- -------
Cash flows from investing activities:
Additions to plant and equipment........ (774) (649)
Proceeds from sale of
plant and equipment................... 28 10
Additions to deferred assets............ (604) -
------- -------
Net cash flows from
investing activities................ (1,350) (639)
------- -------
Cash flows from financing activities:
Repayment of short-term debt............ - (70)
Additions of short-term borrowings...... 3,100 -
Redemption of preferred stock........... - (5,818)
Proceeds from issuance of common stock.. 70 42
Purchases of common stock............... - (3,757)
Repayment of loan to ESOP Trust......... 200 200
Dividends (preferred and common
stock) paid........................... (498) (459)
------- -------
Net cash flows from
financing activities................ 2,872 (9,862)
------- -------
Effect of exchange rate changes on cash... (332) (124)
------- -------
Net increase (decrease) in cash
and equivalents......................... (15,486) (14,325)
Cash and equivalents at
beginning of period..................... 38,890 39,087
------- -------
Cash and equivalents at
end of period........................... $ 23,404 $ 24,762
======== ========
See Notes to Condensed Consolidated Financial Statements.
FRANKLIN ELECTRIC CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Condensed Consolidated Financial Statements
- ----------------------------------------------------
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles 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 generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the quarter ended April 1, 1995
are not necessarily indicative of the results that may be expected for
the year ended December 30, 1995. For further information, refer to
the consolidated financial statements and footnotes thereto included
in Franklin Electric Co., Inc.'s annual report on Form 10-K for the
year ended December 31, 1994.
Note 2: Inventories
- --------------------
Inventories consist of the following:
(In thousands)
[CAPTION]
April 1, December 31,
1995 1994
---- ----
[S] [C] [C]
Raw Materials........................ $ 20,251 $ 17,584
Work in Process...................... 4,995 5,201
Finished Goods....................... 35,519 25,982
LIFO Reserve......................... (11,247) (11,012)
------- -------
Total Inventory...................... $ 49,518 $ 37,755
======== ========
Note 3: Property, Plant and Equipment
- --------------------------------------
Property, plant and equipment at cost consists of the following:
(In thousands)
[CAPTION]
April 1, December 31,
1995 1994
---- ----
[S] [C] [C]
Land and Building.................... $ 28,228 $ 28,210
Machinery and Equipment.............. 89,221 88,169
------- -------
117,449 116,379
Allowance for Depreciation........... 76,280 74,483
------- -------
$ 41,169 $ 41,896
======== ========
Note 4: Tax Rates
- ------------------
The effective tax rate on income before income taxes in 1995 and 1994
varies from the United States statutory rate of 35 percent principally
due to the effect of state and foreign income taxes.
Note 5: Shareowners' Equity
- ----------------------------
During the first quarter, the Company issued 20,000 common shares
valued at $640,000 under the 1988 Executive Stock Purchase Plan.
The Company had 6,222,422 shares of common stock (10,000,000 shares
authorized, $.10 par value) outstanding as of April 1, 1995.
Item 2. Management's Discussion And Analysis Of Financial Condition
- --------------------------------------------------------------------
And Results Of Operations
- -------------------------
Operations
- ----------
Sales for the first quarter of 1995 were $59.8 million, an increase of
19 percent from 1994 first quarter sales of $50.4 million. The
increase in sales was primarily due to the inclusion of Oil Dynamics,
Inc. on a fully consolidated basis for the first quarter of 1995 and
due to increases in international unit volume. Previously, Oil
Dynamics, Inc. was a fifty percent owned equity investee.
Earnings for the first quarter of 1995 were $1.6 million, or $.25 per
share, a decrease of 50 percent compared to the first quarter of 1994
earnings of $3.3 million, or $.48 per share. The decrease in net
income was primarily due to a 2.6 percent increase in cost of sales as
a percent of net sales.
Cost of sales as a percent of net sales for the first quarter of 1995
was 77.8 percent compared to 75.2 percent for the same period in 1994.
Cost of sales as a percent of sales increased in the first quarter of
1995 due to a 3.7 percent increase in fixed expenses as a percent of
net sales which was partially offset by a 1.1 percent decrease in
variable expenses. The increase in fixed expenses was primarily due
to the inclusion of Oil Dynamics, Inc. and increases in planned
expenses in support of international operations. The decrease in
variable expenses was primarily due to changes in product mix.
Selling and administrative expenses in the first quarter of 1995 were
$10.4 million compared to $7.7 million for the same period in 1994.
The increase was primarily due to the inclusion of Oil Dynamics, Inc.
on a fully consolidated basis and due to investments in systems and
people in support of international operations.
Included in other expense (income) was $541,000 of interest income and
$183,000 of foreign currency transaction losses for the first quarter
of 1995. Included in other expense (income) was $308,000 of interest
income and $22,000 of foreign currency transaction losses for the same
period a year ago. Interest income was primarily due to cash balances
invested principally in short-term U.S. treasury bills and notes.
Equity in the earnings of affiliates was $0 for the first quarter of
1995 compared to $468,000 for the same period a year ago. The results
of operations of previously 50 percent owned joint venture, Oil
Dynamics, Inc., were incorporated on a fully consolidated basis for
the first quarter of 1995.
Capital Resources and Liquidity
- -------------------------------
Cash at the end of the first quarter 1995 was $23.4 million compared
to $38.9 million at the end of 1994. Accounts receivable increased
$6.7 million and inventories increased $11.8 million from 1994.
Accounts receivable increased primarily due to the typical seasonal
nature of certain customers' industries. Inventories increased
primarily due to a decrease in North American submersible motor
shipments as the industry used accumulated inventory. Working capital
increased $2.4 million and the current ratio of the Company was 1.8 at
the end of the first quarter of 1995 and at the end of 1994.
During the quarter, the Company borrowed an additional $3.1 million on
a short-term basis to finance current working capital requirements.
PART II. OTHER INFORMATION
Item 4. Results of Votes of Holders
- ------------------------------------
The Annual Meeting of Shareholders of the Company was held on April
13, 1995 for the following purposes:
1. To elect two directors for terms expiring at the 1998 Annual
Meeting of Shareholders; and 2. To ratify the appointment of Deloitte
& Touche LLP as independent auditors for the 1995 fiscal year.
The results were:
Nominee for Director For Withhold Authority
- -------------------- --- ------------------
William H. Lawson 5,703,058 10,550
Donald J. Schneider 5,702,904 10,704
For Against Abstain
--- ------- -------
Ratification of
Deloitte & Touche LLP 5,680,887 7,670 25,051
Total broker non-votes were 360,634 shares. Total shares represented
at the Annual Meeting in person or by proxy were 5,713,608 shares of a
total of 6,221,522 shares outstanding. This represented 92 percent of
Company common stock and constituted a quorum.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
(11) Computations of Earnings per Share
(b) Reports on Form 8-K
On March 27, 1995 Franklin Electric Co., Inc. amended its
current report on Form 8-K, filed December 9, 1994, to
include the required Item 7 financial statements and proforma
financial information.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this quarterly report to be signed on
its behalf by the undersigned thereunto duly authorized.
FRANKLIN ELECTRIC CO., INC.
---------------------------
Registrant
Date May 12 By William H. Lawson
--------------------- --------------------------------
William H. Lawson, Chairman
and Chief Executive Officer
Date May 12 By Michael J. Sloan
--------------------- --------------------------------
Michael J. Sloan, Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Exhibit Index
(11) Computation of Earnings per Share.................
EXHIBIT 11
FRANKLIN ELECTRIC CO., INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands, except per share amounts)
[CAPTION]
First Quarter Ended
-------------------
April 1, April 2,
1995 1994
---- ----
[S] [C] [C]
Net income available to
common shares and common
share equivalents....................... $1,644 $3,108
====== ======
Common shares outstanding
beginning of period..................... 6,199 6,231
Weighted average of common
shares issued during
the period.............................. 15 11
Weighted average of common
shares purchased during
the period.............................. - (81)
Dilutive effect of options
outstanding during
the period.............................. 389 356
----- -----
Weighted average of common
shares outstanding during
the period.............................. 6,603 6,517
===== =====
Net income per weighted
average common share.................... $.25 $.48
==== ====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE PERIOD ENDED APRIL 1, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000038725
<NAME> FRANKLIN ELECTRIC CO., INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> APR-1-1995
<CASH> 23,404
<SECURITIES> 0
<RECEIVABLES> 29,912
<ALLOWANCES> 1,332
<INVENTORY> 49,518
<CURRENT-ASSETS> 111,061
<PP&E> 117,449
<DEPRECIATION> 76,280
<TOTAL-ASSETS> 155,788
<CURRENT-LIABILITIES> 60,281
<BONDS> 0
<COMMON> 622
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 155,788
<SALES> 59,788
<TOTAL-REVENUES> 0
<CGS> 46,491
<TOTAL-COSTS> 57,119
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 654
<INCOME-PRETAX> 2,669
<INCOME-TAX> 1,025
<INCOME-CONTINUING> 1,644
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<NET-INCOME> 1,644
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
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