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 July 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 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 July 21, 1995
--------------------- -------------
$.10 par value 6,239,602 shares
FRANKLIN ELECTRIC CO., INC.
Index
PART I. FINANCIAL INFORMATION
- ---------------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of July 1, 1995 (Unaudited)
and December 31, 1994
Condensed Consolidated Statements of
Income for the Second Quarter and
First Half ended July 1, 1995 and
July 2, 1994 (Unaudited)
Condensed Consolidated Statements of
Cash Flows for the First Half ended
July 1, 1995 and July 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) July 1, December 31,
1995 1994
(Unaudited) (Audited)
----------- ---------
ASSETS
Current assets:
Cash and equivalents.................... $ 17,708 $ 38,890
Receivables (less allowances of
$1,388 and $1,271, respectively)...... 31,922 21,864
Inventories (Note 2).................... 48,884 37,755
Other current assets (including
deferred income taxes of $7,383
and $6,287, respectively)............. 8,758 7,669
------- -------
Total current assets.................. 107,272 106,178
Property, plant and equipment,
at cost (Note 3)........................ 41,229 41,896
Deferred and other assets................. 2,880 3,507
------- -------
Total assets.............................. $151,381 $151,581
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings (Note 5).......... $ 9,800 $ 15,200
Accounts payable........................ 11,012 12,296
Accrued expenses........................ 28,554 27,372
Income taxes............................ 2,044 2,890
------- -------
Total current liabilities............. 51,410 57,758
Long-term debt............................ 20,000 20,000
Other long-term liabilities............... 7,723 8,096
Deferred income taxes..................... 850 862
Shareowners' equity:
Common stock (Note 6)................... 624 620
Additional capital...................... 5,556 4,667
Retained earnings....................... 69,296 64,231
Stock subscriptions..................... (2,434) (2,112)
Cumulative translation adjustments...... 756 59
Loan to ESOP Trust...................... (2,400) (2,600)
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Total shareowners' equity............. 71,398 64,865
------- -------
Total liabilities and shareowners' equity. $151,381 $151,581
======== ========
See Notes to Condensed Consolidated Financial Statements.
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Second Qtr Ended First Half
Ended
---------------- ------------
- ----]
(In thousands, except per share amounts) July 1, July 2, July 1,
July 2,
1995 1994 1995
1994
---- ---- ---- -
- ---
Net sales $76,442 $64,772 $136,230
$115,122
Costs and expenses:
Cost of sales....................... 58,869 47,485 105,361
85,332
Selling and administrative expenses. 9,995 8,494 20,406
16,211
Interest expense.................... 518 591 1,171
1,180
Other income........................ (279) (665) (716)
(1,009)
------ ------ ------- ---
- ----
69,103 55,905 126,222
101,714
Equity in earnings of affiliates...... - 202 -
670
------ ------ ------- ---
- ----
Income before income taxes............ 7,339 9,069 10,008
14,078
Income taxes.......................... 2,797 3,419 3,822
5,167
------ ------ ------- ---
- ----
Net income............................ 4,542 5,650 6,186
8,911
Dividends on preferred stock.......... - - -
153
------ ------ ------- ---
- ----
Net income available to common shares
and common share equivalents........ $ 4,542 $ 5,650 $ 6,186 $
8,758
======= ======= ========
========
Per share data:
Weighted average common shares...... 6,598 6,494 6,594
6,506
===== ===== =====
=====
Net income available to
common shares..................... $ .69 $ .87 $ .94 $
1.35
======= ======= ========
========
Dividends per common share............ $ .10 $ .08 $ .18 $
.13
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) First Half Ended
----------------
July 1, July 2,
1995 1994
---- ----
Cash flows from operating activities:
Net income................................ $ 6,186 $ 8,911
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization........... 5,020 3,439
Equity in earnings of affiliates,
less dividends........................ - (670)
Deferred income taxes................... (24) -
Gain on disposals of
plant and equipment................... (29) (136)
Changes in assets and liabilities:
Receivables............................. (9,562) (5,684)
Inventories............................. (10,567) (4,279)
Other current assets.................... (1,040) 23
Accounts payable and other
current liabilities................... (433) 4,491
Other long-term liabilities............. (295) 522
------- -------
Net cash flows from
operating activities................ (10,744) 6,617
------- -------
Cash flows from investing activities:
Additions to plant and equipment........ (2,436) (1,993)
Proceeds from sale of
plant and equipment................... 33 258
Additions to deferred assets............ (634) -
------- -------
Net cash flows from
investing activities................ (3,037) (1,735)
------- -------
Cash flows from financing activities:
Repayment of short-term borrowings...... (8,500) (69)
Additions of short-term borrowings...... 3,100 -
Redemption of preferred stock........... - (5,818)
Proceeds from issuance of common stock.. 219 93
Purchases of common stock............... - (3,757)
Repayment of loan to ESOP Trust......... 200 200
Dividends (preferred and common
stock) paid........................... (1,121) (951)
------- -------
Net cash flows from
financing activities................ (6,102) (10,302)
------- -------
Effect of exchange rate changes on cash... (1,299) (122)
------- -------
Net decrease in cash and equivalents...... (21,182) (5,542)
Cash and equivalents at
beginning of period..................... 38,890 39,087
------- -------
Cash and equivalents at
end of period........................... $ 17,708 $ 33,545
======== ========
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 adjustments) considered necessary for a fair presentation
have been included. Operating results for the quarter and first half
ended July 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) July 1, December 31,
1995 1994
---- ----
Raw Materials........................ $ 21,214 $ 17,584
Work in Process...................... 5,002 5,201
Finished Goods....................... 34,214 25,982
LIFO Reserve......................... (11,546) (11,012)
------- -------
Total Inventory...................... $ 48,884 $ 37,755
======== ========
Note 3: Property, Plant and Equipment
- --------------------------------------
Property, plant and equipment at cost consists of the following:
(In thousands) July 1, December 31,
1995 1994
---- ----
Land and Buildings................... $ 28,532 $ 28,210
Machinery and Equipment.............. 90,926 88,169
------- -------
119,458 116,379
Allowance for Depreciation........... 78,229 74,483
------- -------
$ 41,229 $ 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: Short-Term Borrowings
- ------------------------------
On May 12, 1995, the Company repaid $8.5 million of short-term
borrowings on a line of credit, bearing interest at LIBOR plus 1.5
percent, that would have been due November 27, 1995.
Note 6: 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 6,239,602 shares of common stock (10,000,000 shares
authorized, $.10 par value) outstanding as of July 1, 1995.
Item 2. Management's Discussion And Analysis Of Financial Condition
- ---------------------------------------------------------------------
And Results Of Operations
- -------------------------
Operations
- ----------
Net sales for the second quarter of 1995 were $76.4 million, an
increase of 18 percent from 1994 second quarter net sales of $64.8
million. Year to date 1995 net sales were $136.2 million, an increase
of 18 percent from year to date 1994 net sales of $115.1 million. The
increase in net sales was due to both the inclusion of Oil Dynamics,
Inc. on a fully consolidated basis for 1995 and due to increases in
unit volume. Previously, Oil Dynamics, Inc. was a fifty percent owned
equity investee.
Net income for the second quarter of 1995 was $4.5 million, or $.69
per share, a decrease of 20 percent compared to the second quarter of
1994 net income of $5.7 million, or $.87 per share. Year to date 1995
net income was $6.2 million, or $.94 per share, a decrease of 31
percent compared to year to date 1994 net income of $8.9 million, or
$1.35 per share. The decrease in net income was principally due to an
increase in cost of sales as a percent of net sales and foreign
currency transaction losses in both the second quarter and year to
date 1995 compared to the same periods in 1994.
Cost of sales as a percent of net sales for the second quarter of 1995
was 77.0 percent compared to 73.3 percent for the same period in 1994.
Cost of sales as a percent of net sales for the first half of 1995 was
77.3 percent compared to 74.1 percent for the same period in 1994.
Cost of sales as a percent of net sales increased in the second
quarter of 1995 due to a 3.0 percent increase in fixed manufacturing
expenses as a percent of net sales. Cost of sales as a percent of net
sales increased for the first half of 1995 due to a 3.3 percent
increase in fixed manufacturing expenses as a percent of net sales.
The increase in fixed manufacturing expenses as a percent of net sales
was due to the inclusion of Oil Dynamics, Inc. and increases in
planned expenses in support of international operations.
Selling and administrative expenses in the second quarter of 1995 were
$10.0 million compared to $8.5 million for the same period in 1994.
Selling and administrative expenses for the first half of 1995 were
$20.4 million compared to $16.2 million for the same period in 1994.
The increase was 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 $336,000 of interest income and
$271,000 of foreign currency transaction losses for the second quarter
of 1995 compared to $376,000 of interest income and $140,000 of
foreign currency transaction gains for the same period a year ago.
Included in other expense (income) was $877,000 of interest income and
$454,000 of foreign currency transaction losses for the first half of
1995 compared to $684,000 of interest income and $119,000 of foreign
currency transaction gains for the same period a year ago. The
increase in foreign currency transaction losses was due to the
fluctuation of the Italian Lira against the German Mark and the
fluctuation of the U.S. Dollar against the Australian Dollar and the
German Mark. Interest income was attributable to amounts invested
principally in short-term U.S. treasury bills and notes.
Equity in the earnings of affiliates was $0 for the second quarter and
first half of 1995 compared to $202,000 and $670,000 for the same
periods 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 second quarter and first half of
1995.
Capital Resources and Liquidity
- -------------------------------
Cash at the end of the second quarter of 1995 was $17.7 million
compared to $38.9 million at the end of 1994. Accounts receivable
increased $10.1 million and inventories increased $11.1 million from
1994. Accounts receivable increased due to increased sales in June as
the result of a sales promotion. Inventories increased primarily due
to a decrease in North American submersible motor shipments compared
to plan as the industry continued to use accumulated inventory.
Working capital increased $7.4 million and the current ratio of the
Company was 2.1 at the end of the second quarter of 1995 and 1.8 at
the end of 1994.
During the first half of 1995, the Company borrowed an additional $3.1
million on a short-term basis to finance current working capital
requirements. During the second quarter, the Company repaid $8.5
million of short-term borrowings on a line of credit (see Note 5).
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
There were no reports on Form 8-K filed for the second
quarter ended July 1, 1995.
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 July 26 By William H. Lawson
--------------------- --------------------------------
William H. Lawson, Chairman
and Chief Executive Officer
Date July 26 By D. W. Pfister
--------------------- --------------------------------
D. W. Pfister, 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)
Second Qtr Ended First Half Ended
---------------- ----------------
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
---- ---- ---- ----
Net income available to
common shares and common
share equivalents........... $ 4,542 $ 5,650 $ 6,186 $ 8,758
======= ======= ======= =======
Common shares outstanding
beginning of period......... 6,222 6,143 6,199 6,231
Weighted average of common
shares issued during
the period.................. 9 24 23 28
Weighted average of common
shares purchased during
the period.................. - - - (95)
Dilutive effect of options
outstanding during
the period.................. 367 327 372 342
----- ----- ----- -----
Weighted average of common
shares outstanding during
the period.................. 6,598 6,494 6,594 6,506
===== ===== ===== =====
Net income per weighted
average common share........ $.69 $.87 $.94 $1.35
==== ==== ==== =====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE PERIOD ENDED JULY 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> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> JUL-1-1995
<CASH> 17,708
<SECURITIES> 0
<RECEIVABLES> 31,922
<ALLOWANCES> 1,388
<INVENTORY> 48,884
<CURRENT-ASSETS> 107,272
<PP&E> 119,458
<DEPRECIATION> 78,229
<TOTAL-ASSETS> 151,381
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<COMMON> 624
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0
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<SALES> 136,230
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<CGS> 105,361
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,171
<INCOME-PRETAX> 10,008
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