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 June 29, 1996
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 July 22, 1996
--------------------- -------------
$.10 par value 6,327,099 shares
The Exhibit Index is located on page 11
FRANKLIN ELECTRIC CO., INC.
Index
PART I. FINANCIAL INFORMATION
- ---------------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of June 29, 1996 (Unaudited)
and December 30, 1995
Condensed Consolidated Statements of
Income for the Second Quarter and First
Half ended June 29, 1996 and
July 1, 1995 (Unaudited)
Condensed Consolidated Statements of
Cash Flows for the First Half ended
June 29, 1996 and July 1, 1995 (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. Submission of Matters to a Vote of
Security 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) June 29, December 30,
1996 1995
(Unaudited) (Audited)
----------- ---------
ASSETS
Current assets:
Cash and equivalents $ 22,975 $ 32,077
Receivables, less allowances of
$1,411 and $1,351, respectively 25,601 22,526
Inventories (Note 2) 56,701 45,839
Other current assets (including
deferred income taxes of $7,690
and $7,823, respectively) 8,514 8,879
------- -------
Total current assets 113,791 109,321
Property, plant and equipment,
net (Note 3) 39,038 41,670
Deferred and other assets 2,238 2,366
------- -------
Total assets $155,067 $153,357
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings $ 212 $ 461
Accounts payable 10,417 15,882
Accrued expenses 24,289 23,228
Income taxes 1,309 1,726
------- -------
Total current liabilities 36,227 41,297
Long-term debt 20,313 20,171
Employee benefit plan obligations 6,691 6,069
Other long-term liabilities 4,359 4,956
Deferred income taxes 307 307
Shareowners' equity:
Common stock (Note 5) 633 626
Additional capital 6,420 5,683
Retained earnings 84,064 77,363
Stock subscriptions (1,136) (1,315)
Cumulative translation adjustment ( 287) 600
Loan to ESOP Trust (2,524) (2,400)
------- -------
Total shareowners' equity 87,170 80,557
------- -------
Total liabilities and shareowners' equity $155,067 $153,357
======== ========
See Notes to Condensed Consolidated Financial Statements.
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Second Qtr Ended First Half Ended
---------------- ----------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
---- ---- ---- ----
Net sales $73,107 $76,442 $135,861 $136,230
Costs and expenses:
Cost of sales 53,895 58,869 101,739 105,361
Selling and admin expenses 10,779 9,995 21,008 20,406
Interest expense 340 518 660 1,171
Other income, net (142) (279) (639) (716)
------ ------ ------- -------
64,872 69,103 122,768 126,222
Income before income taxes 8,235 7,339 13,093 10,008
Income taxes 3,154 2,797 5,004 3,822
------ ------ ------- -------
Net income $ 5,081 $ 4,542 $ 8,089 $ 6,186
======= ======= ======= =======
Per share data:
Weighted average common shares 6,674 6,598 6,667 6,594
======= ======= ======= =======
Net income available to common
shares $ .76 $ .69 $ 1.21 $ .94
======= ======= ======= =======
Dividends per common share $ .12 $ .10 $ .22 $ .18
======= ======= ======= =======
See Notes to Condensed Consolidated Financial Statements.
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) First Half Ended
----------------
June 29, July 1,
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 8,089 $ 6,186
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 4,272 4,916
Deferred income taxes - (24)
Gain on disposals of
plant and equipment (34) (29)
Changes in assets and liabilities:
Receivables (3,503) (9,562)
Inventories (12,056) (10,567)
Other current assets 320 (1,040)
Accounts payable and other
accrued expenses (4,199) (433)
Employee benefit plan obligations 622 3
Other long-term liabilities (384) (298)
Other, net (217) 104
------- -------
Net cash flows from
operating activities (7,090) (10,744)
------- -------
Cash flows from investing activities:
Additions to plant and equipment (1,100) (2,436)
Proceeds from sale of
plant and equipment 41 33
Additions to deferred assets (246) (634)
------- -------
Net cash flows from
investing activities (1,305) (3,037)
------- -------
Cash flows from financing activities:
Additions to long-term debt 166 -
Repayment of long-term debt (10) -
Repayment of short-term debt (197) (8,500)
Additions to short-term borrowings - 3,100
Proceeds from issuance of common stock 468 219
Loan to ESOP Trust (324) -
Repayment of loan to ESOP Trust 200 200
Proceeds from stock subscriptions 25 -
Dividends paid (1,388) (1,121)
------- -------
Net cash flows from
financing activities (1,060) (6,102)
------- -------
Effect of exchange rate changes on cash 353 (1,299)
------- -------
Net decrease in cash and equivalents (9,102) (21,182)
Cash and equivalents at
beginning of period 32,077 38,890
------- -------
Cash and equivalents at
end of period $ 22,975 $ 17,708
======== ========
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 and first half ended June 29, 1996 are not necessarily
indicative of the results that may be expected for the year ending
December 28, 1996. 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 30, 1995.
Note 2: Inventories
- --------------------
Inventories consist of the following:
(In thousands) June 29, December 30,
1996 1995
---- ----
Raw Materials $ 16,942 $ 17,080
Work in Process 6,223 5,899
Finished Goods 45,688 34,614
LIFO Reserve (12,152) (11,754)
------- -------
Total Inventory $ 56,701 $ 45,839
======== ========
Note 3: Property, Plant and Equipment
- --------------------------------------
Property, plant and equipment at cost consists of the following:
(In thousands) June 29, December 30,
1996 1995
---- ----
Land and Building $ 28,917 $ 29,173
Machinery and Equipment 92,840 92,523
------- -------
121,757 121,696
Allowance for Depreciation 82,719 80,026
------- -------
$ 39,038 $ 41,670
======== ========
Note 4: Tax Rates
- ------------------
The effective tax rate on income before income taxes in 1996 and 1995
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
- ----------------------------
The Company had 6,327,099 shares of common stock (10,000,000 shares
authorized, $.10 par value) outstanding as of June 29, 1996.
Item 2. Management's Discussion And Analysis Of Financial Condition
- ---------------------------------------------------------------------
And Results of Operations
- -------------------------
Operations
- ----------
Net sales for the second quarter of 1996 were $73.1 million, a
decrease of 4 percent from 1995 second quarter net sales of $76.4
million. Year to date 1996 net sales were $135.9 million, compared
to year to date 1995 net sales of $136.2 million. The change in net
sales was primarily due to lower unit volume, partially offset by
increases in average selling prices.
Net income for the second quarter of 1996 was $5.1 million, or $.76
per share, an increase of 12 percent compared to the second quarter
of 1995 net income of $4.5 million, or $.69 per share due primarily
to improvements in the Company's European operations and Oil
Dynamics, Inc., a wholly owned subsidiary. Year to date 1996 net
income was $8.1 million, or $1.21 per share, an increase of 31
percent compared to year to date 1995 net income of $6.2 million, or
$.94 per share. The increase in year to date net income was
primarily attributable to improvements in the Company's European
operations.
Cost of sales as a percent of net sales for the second quarter of
1996 was 73.7 percent compared to 77.0 percent for the same period in
1995. Cost of sales as a percent of net sales for the year to date
1996 was 74.9 percent compared to 77.3 percent for the same period in
1995. Cost of sales as a percent of net sales decreased for both the
quarter and year to date primarily due to decreases in both fixed and
variable manufacturing expenses at the Company's European operations.
Selling and administrative expenses as a percent of net sales for the
second quarter of 1996 was 14.7 percent compared to 13.1 percent for
the same period in 1995. Selling and administrative expenses as a
percent of net sales for the year to date 1996 was 15.5 percent
compared to 15.0 percent for the same period of last year.
Interest expense in the second quarter of 1996 was $.3 million
compared to $.5 million for the same period in 1995. Interest
expense for the first half of 1996 was $.7 million compared to $1.2
million for the same period in 1995. The decrease was due to lower
short-term borrowings during the first half of this year.
Included in other income, net for the second quarter of 1996 and 1995
was $.3 million of interest income and $.3 million of foreign
currency losses. Included in other income, net for the year to date
1996 was $.7 million of interest income and $.3 million of foreign
currency losses compared to $.9 million of interest income and $.5
million of foreign currency losses for the same period in 1995.
Interest income was attributable to amounts invested principally in
short-term US treasury bills and notes.
Capital Resources and Liquidity
- -------------------------------
Cash and equivalents decreased $9.1 million during the first half of
1996 principally due to cash used in operating activities of $7.1
million. Changes in working capital items accounted for most of the
cash used in operating activities. The primary factor was an
increase in inventory due to a typical seasonal build up and lower
sales because of unusually wet weather conditions over much of the
Company's principal markets. Working capital increased $9.5 million
and the current ratio of the Company was 3.1 and 2.6 at the end of
the second quarter of 1996 and 1995, respectively.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The Annual Meeting of Shareholders of the Company was held on April
12, 1996 for the following purposes: 1) To elect three directors for
terms expiring at the 1999 Annual Meeting of Shareholders; 2) To
ratify the appointment of Deloitte & Touche LLP as independent
auditors for the 1996 fiscal year; 3) To approve the 1996 Employee
Stock Option Plan; and 4) To approve the 1996 Nonemployee Director
Stock Option Plan.
The results were:
1) Nominees for Director For Withhold Authority
--------------------- --- ------------------
John B. Lindsay 5,707,909 10,357
Juris Vikmanis 5,707,183 11,083
Howard B. Witt 5,708,547 9,719
Delivered
For Against Abstain Non-Votes
--- ------- ------- ---------
2) Ratification of
Deloitte & Touche LLP 5,708,860 6,275 3,131 -
3) Approval of 1996 Employee
Stock Option Plan 4,677,490 142,659 33,247 864,870
4) Approval of 1996 Nonemployee
Director Stock Option Plan 3,943,549 291,610 675,833 807,274
Total shares represented at the Annual Meeting in person or by proxy
were 5,718,266 of a total of 6,288,999 shares outstanding. This
represented 91 percent of Company common stock and constituted a
quorum. Total broker non-votes were 467,568 shares.
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 June 29, 1996.
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 25, 1996 By William H. Lawson
-------------------- --------------------------------
William H. Lawson, Chairman
and Chief Executive Officer
Date July 25, 1996 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)
Second Qtr Ended First Half Ended
---------------- ----------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
---- ---- ---- ----
Net income available to
common shares and common
share equivalents $5,081 $4,542 $8,089 $6,186
====== ====== ====== ======
Common shares outstanding
beginning of period 6,314 6,222 6,254 6,199
Weighted average of common
shares issued during
the period 9 9 52 23
Dilutive effect of options
outstanding during
the period 351 367 361 372
----- ----- ----- -----
Weighted average of common
shares outstanding during
the period 6,674 6,598 6,667 6,594
====== ====== ====== ======
Net income per weighted
average common share $ .76 $ .69 $ 1.21 $ .94
====== ====== ====== ======
15
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE PERIOD ENDED JUNE 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 22,975
<SECURITIES> 0
<RECEIVABLES> 25,601
<ALLOWANCES> 1,411
<INVENTORY> 56,701
<CURRENT-ASSETS> 113,791
<PP&E> 121,757
<DEPRECIATION> 82,719
<TOTAL-ASSETS> 155,067
<CURRENT-LIABILITIES> 36,227
<BONDS> 0
0
0
<COMMON> 633
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 155,067
<SALES> 135,861
<TOTAL-REVENUES> 0
<CGS> 101,739
<TOTAL-COSTS> 122,768
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 660
<INCOME-PRETAX> 13,093
<INCOME-TAX> 5,004
<INCOME-CONTINUING> 8,089
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<NET-INCOME> 8,089
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
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