FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 November 6, 1995
--------------------- ----------------
$.10 par value 6,252,002 shares
FRANKLIN ELECTRIC CO., INC.
Index
PART I. FINANCIAL INFORMATION
- ---------------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1995 (Unaudited)
and December 31, 1994
Condensed Consolidated Statements of
Income for the Third Quarter and
Three Quarters ended September 30, 1995
and October 1, 1994 (Unaudited)
Condensed Consolidated Statements of
Cash Flows for the Three Quarters ended
September 30, 1995 and October 1, 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 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) September 30, December 31,
1995 1994
(Unaudited) (Audited)
----------- ---------
ASSETS
Current assets:
Cash and equivalents.................... $ 27,684 $ 38,890
Receivables (less allowances of
$1,395 and $1,271, respectively)...... 21,100 21,864
Inventories (Note 2).................... 47,957 37,755
Other current assets (including
deferred income taxes of $8,673
and $6,287, respectively)............. 9,915 7,669
------- -------
Total current assets.................. 106,656 106,178
Property, plant and equipment,
at cost (Note 3)........................ 41,400 41,896
Deferred and other assets................. 2,622 3,507
------- -------
Total assets.............................. $150,678 $151,581
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings (Note 5).......... $ 9,800 $ 15,200
Accounts payable........................ 9,471 12,296
Accrued expenses........................ 27,413 27,372
Income taxes............................ 459 2,890
------- -------
Total current liabilities............. 47,143 57,758
Long-term debt............................ 20,000 20,000
Other long-term liabilities............... 7,891 8,096
Deferred income taxes..................... 850 862
Shareowners' equity:
Common stock (Note 6)................... 624 620
Additional capital...................... 5,577 4,667
Retained earnings....................... 71,973 64,231
Stock subscriptions..................... (1,512) (2,112)
Cumulative translation adjustments...... 532 59
Loan to ESOP Trust...................... (2,400) (2,600)
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Total shareowners' equity............. 74,794 64,865
------- -------
Total liabilities and shareowners' equity. $150,678 $151,581
======== ========
See Notes to Condensed Consolidated Financial Statements.
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Third Qtr Ended Three Qtrs Ended
--------------- ----------------
(In thousands, except per share amounts) Sept 30, Oct 1, Sept 30,
Oct 1,
1995 1994 1995
1994
---- ---- ----
- ----
Net sales $66,188 $60,013 $202,418
$175,135
Costs and expenses:
Cost of sales....................... 51,234 44,945 156,595
130,277
Selling and administrative expenses. 9,871 7,740 30,277
23,951
Interest expense.................... 526 365 1,697
1,545
Other income, net................... (500) (573) (1,216)
(1,582)
------ ------ ------- --
- -----
61,131 52,477 187,353
154,191
Equity in earnings of affiliate....... - (138) -
532
------ ------ -------- --
- -----
Income before income taxes............ 5,057 7,398 15,065
21,476
Income taxes.......................... 1,756 2,849 5,578
8,016
------ ------ ------- --
- -----
Net income............................ 3,301 4,549 9,487
13,460
Dividends on preferred stock.......... - - -
153
------ ------ ------- --
- -----
Net income available to common shares
and common share equivalents........ $ 3,301 $ 4,549 $ 9,487 $
13,307
======= ======= ========
========
Per share data:
Weighted average common shares...... 6,590 6,557 6,596
6,523
===== ===== =====
=====
Net income available to
common shares..................... $ .50 $ .69 $ 1.44 $
2.04
======= ======= ========
========
Dividends per common share............ $ .10 $ .08 $ .28 $
.21
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) Three Qtrs Ended
----------------
Sept 30, Oct 1,
1995 1994
---- ----
Cash flows from operating activities:
Net income................................ $ 9,487 $ 13,460
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization........... 7,000 5,275
Equity in earnings of affiliate......... - (532)
Deferred income taxes................... (12) -
Gain on disposals of
plant and equipment................... (33) (249)
Changes in assets and liabilities:
Receivables............................. 1,097 1,187
Inventories............................. (9,970) (3,210)
Other current assets.................... (2,217) (114)
Accounts payable and other
current liabilities................... (5,584) 4,820
Other long-term liabilities............. (205) 789
------- -------
Net cash flows from
operating activities................ (437) 21,426
------- -------
Cash flows from investing activities:
Additions to plant and equipment........ (4,399) (3,708)
Proceeds from sale of
plant and equipment................... 31 293
Additions to deferred assets............ (636) -
------- -------
Net cash flows from
investing activities................ (5,004) (3,415)
------- -------
Cash flows from financing activities:
Repayment of short-term borrowings...... (8,500) (69)
Proceeds from short-term borrowings..... 3,100 -
Repayment of long-term debt............. - (10,084)
Redemption of preferred stock........... - (5,818)
Proceeds from issuance of common stock.. 249 109
Proceeds from stock subscriptions....... 866 -
Purchases of common stock............... - (3,757)
Repayment of loan to ESOP Trust......... 200 200
Dividends (preferred and common
stock) paid........................... (1,745) (1,424)
------- -------
Net cash flows from
financing activities................ (5,830) (20,843)
------- -------
Effect of exchange rate changes on cash... 65 (298)
------- -------
Net decrease in cash and equivalents...... (11,206) (3,130)
Cash and equivalents at
beginning of period..................... 38,890 39,087
------- -------
Cash and equivalents at
end of period........................... $ 27,684 $ 35,957
======== ========
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 three quarters ended September 30, 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) September 30, December 31,
1995 1994
---- ----
Raw Materials........................ $ 19,095 $ 17,584
Work in Process...................... 5,476 5,201
Finished Goods....................... 35,507 25,982
LIFO Reserve......................... (12,121) (11,012)
------- -------
Total Inventory...................... $ 47,957 $ 37,755
======== ========
Note 3: Property, Plant and Equipment
- --------------------------------------
Property, plant and equipment at cost consists of the following:
(In thousands) September 30, December 31,
1995 1994
---- ----
Land and Buildings................... $ 28,754 $ 28,210
Machinery and Equipment.............. 91,190 88,169
------- -------
119,944 116,379
Allowance for Depreciation........... 78,544 74,483
------- -------
$ 41,400 $ 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
- ------------------------------
During the first quarter of 1995, the Company borrowed an additional
$3.1 million on a short-term basis to finance current working capital
requirements.
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 of 1995, the Company issued 20,000 common
shares valued at $640,000 under the 1988 Executive Stock Purchase
Plan.
The Company had 6,242,002 shares of common stock (10,000,000 shares
authorized, $.10 par value) outstanding as of September 30, 1995.
Item 2. Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
- ---------------------------------------------------------------------
- -------------------------
Operations
- ----------
Net sales for the third quarter of 1995 were $66.2 million, a 10
percent increase over 1994 third quarter net sales of $60.0 million.
Year to date 1995 net sales were $202.4 million, a 16 percent
increase over comparable period 1994 net sales of $175.1 million.
The increase in net sales was due to both the inclusion of Oil
Dynamics, Inc. ("ODI") on a fully consolidated basis for 1995 and
increases in unit volume. Previously, Oil Dynamics, Inc. was a fifty
percent owned equity investee accounted for as an unconsolidated
affiliate.
Net income for the third quarter of 1995 was $3.3 million, or $.50
per share, compared to net income of $4.5 million, or $.69 per share
for the same period in 1994. Year to date 1995 net income was $9.5
million, or $1.44 per share, compared to 1994 net income of $13.5
million, or $2.04 per share. The decrease in net income for both the
quarter and year to date periods was principally due to an increase
in cost of sales as a percent of net sales primarily at ODI and the
Company's German subsidiary and foreign currency transaction losses.
Cost of sales as a percent of net sales for the third quarter of 1995
was 77.4 percent compared to 74.9 percent for the same period in
1994. On a year to date basis, cost of sales as a percent of net
sales for 1995 was 77.4 percent compared to 74.4 percent for the
corresponding 1994 period. The increase in both the quarter and year
to date periods was principally due to increases in fixed
manufacturing expenses as a percent of net sales due to the inclusion
of Oil Dynamics, Inc. and increases in planned expenses in support of
international operations.
Selling and administrative expenses in the third quarter of 1995 were
$9.9 million compared to $7.7 million for the same period in 1994.
On a year to date basis, 1995 selling and administrative expenses
were $30.3 million compared to $24.0 million for the prior year
period. The increase was principally 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 income for the third quarter was $472,000 of
interest income and $88,000 of foreign currency transaction losses
for 1995 compared to $426,000 of interest income and $80,000 of
foreign currency transaction gains for the same period a year ago.
Other income for the year to date period included $1.3 million of
interest income and $542,000 of foreign currency losses for 1995
compared to $1.1 million of interest income and $199,000 of foreign
currency transaction gains for the same period a year ago. The
increase in foreign currency transaction losses was primarily due to
the fluctuation of the Italian Lira against the German Mark and the
fluctuation of the U.S. Dollar against the Australian and Mexican
currencies. Interest income was attributable to amounts invested
principally in short-term U.S. treasury bills and notes.
Equity in the previously unconsolidated earnings of ODI was a loss of
$138,000 in the 1994 third quarter and income of $532,000 for the
1994 year to date period.
Capital Resources and Liquidity
- -------------------------------
Cash flow from operations for the 1995 year to date period decreased
$21 million from the comparable 1994 period due primarily to
increases in inventory, reductions in current liabilities and lower
net earnings.
Inventories increased principally due to a decrease in North American
submersible motor shipments compared to plan as the industry
continued to consume accumulated inventory. Cash at the end of the
third quarter of 1995 was $27.7 million compared to $38.9 million at
the end of 1994. Working capital increased $11.1 million and the
current ratio of the Company was 2.3 at the end of the third quarter
of 1995 and 1.8 at the end of 1994.
During the first quarter 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 of 1995, the Company repaid
$8.5 million of short-term borrowings on a line of credit.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
(11) Computation of Earnings per Share
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the third
quarter ended September 30, 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 November 13, 1995 By WILLIAM H. LAWSON
--------------------- --------------------------------
William H. Lawson, Chairman
and Chief Executive Officer
Date November 13, 1995 By JESS B. FORD
--------------------- --------------------------------
Jess B. Ford, 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)
Third Qtr Ended Three Qtrs Ended
--------------- ----------------
Sept 30, Oct 1, Sept 30, Oct 1,
1995 1994 1995 1994
---- ---- ---- ----
Net income available to
common shares and common
share equivalents........... $ 3,301 $ 4,549 $ 9,487 $13,307
======= ======= ======= =======
Common shares outstanding
beginning of period......... 6,240 6,195 6,199 6,231
Weighted average of common
shares issued during
the period.................. 1 2 29 44
Weighted average of common
shares purchased during
the period.................. - - - (100)
Dilutive effect of options
outstanding during
the period.................. 349 360 368 348
----- ----- ----- -----
Weighted average of common
shares outstanding during
the period.................. 6,590 6,557 6,596 6,523
===== ===== ===== =====
Net income per weighted
average common share........ $.50 $.69 $1.44 $2.04
==== ==== ===== =====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 27,684
<SECURITIES> 0
<RECEIVABLES> 21,100
<ALLOWANCES> 1,395
<INVENTORY> 47,957
<CURRENT-ASSETS> 106,656
<PP&E> 119,944
<DEPRECIATION> 78,544
<TOTAL-ASSETS> 150,678
<CURRENT-LIABILITIES> 47,143
<BONDS> 0
<COMMON> 624
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 150,678
<SALES> 202,418
<TOTAL-REVENUES> 0
<CGS> 156,595
<TOTAL-COSTS> 187,353
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,697
<INCOME-PRETAX> 15,065
<INCOME-TAX> 5,578
<INCOME-CONTINUING> 9,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,487
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.44
</TABLE>
