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 28, 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 November 11, 1996
--------------------- -----------------
$.10 par value 6,365,266 shares
FRANKLIN ELECTRIC CO., INC.
Index
PART I. FINANCIAL INFORMATION
- ---------------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of September 28, 1996 (Unaudited)
and December 30, 1995
Condensed Consolidated Statements of
Income for the Three Months and Nine
Months Ended September 28, 1996 and
September 30, 1995 (Unaudited)
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
September 28, 1996 and September 30, 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 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) Sept. 28, December 30,
1996 1995
(Unaudited) (Audited)
--------- -------
ASSETS
Current assets:
Cash and equivalents $ 43,727 $ 32,077
Receivables, less allowances of
$1,460 and $1,351, respectively 19,833 22,526
Inventories (Note 2) 48,127 45,839
Other current assets (including
deferred income taxes of $7,690
and $7,823, respectively) 8,699 8,879
------- -------
Total current assets 120,386 109,321
Property, plant and equipment,
net (Note 3) 37,891 41,670
Deferred and other assets 1,686 2,366
------- -------
Total assets $159,963 $153,357
======= =======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings $ 145 $ 461
Accounts payable 10,979 15,882
Accrued expenses 24,536 23,228
Income taxes 2,577 1,726
------ -------
Total current liabilities 38,237 41,297
Long-term debt 20,301 20,171
Employee benefit plan obligations 4,647 6,069
Other long-term liabilities 4,176 4,956
Deferred income taxes 303 307
Shareowners' equity:
Common stock (Note 5) 633 626
Additional capital 6,533 5,683
Retained earnings 88,916 77,363
Stock subscriptions (1,065) (1,315)
Cumulative translation adjustment ( 194) 600
Loan to ESOP Trust (2,524) (2,400)
------ -------
Total shareowners' equity 92,299 80,557
------- -------
Total liabilities and shareowners' equity. $159,963 $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)
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 28, Sept 30, Sept 28, Sept 30,
1996 1995 1996 1995
---- ---- ---- ----
Net sales $79,380 $66,188 $215,241 $202,418
Costs and expenses:
Cost of sales 59,380 51,234 161,119 156,595
Selling and administrative
expenses 11,409 9,871 32,417 30,277
Interest expense 318 526 978 1,697
Other income, net (399) (500) (1,038) (1,216)
-------- -------- -------- --------
70,708 61,131 193,476 187,353
Income before income taxes 8,672 5,057 21,765 15,065
Income taxes 3,060 1,756 8,064 5,578
-------- -------- -------- --------
Net income $ 5,612 $ 3,301 $13,701 $ 9,487
======== ======== ======== ========
Per share data:
Weighted average
common shares 6,684 6,590 6,676 6,596
======== ======== ======== ========
Net income available to
common shares $ .84 $ .50 $ 2.05 $ 1.44
======== ======== ======== ========
Dividends per common share $ .12 $ .10 $ .34 $ .28
======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements.
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) Nine Months Ended
-----------------
Sept 28 Sept 30,
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 13,701 $ 9,487
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 6,487 6,911
Deferred income taxes - (12)
Loss (Gain) on disposals of
plant and equipment 297 (33)
Changes in assets and liabilities:
Receivables 2,374 1,097
Inventories (3,281) (9,970)
Other current assets 147 (2,217)
Accounts payable and other
accrued expenses (2,085) (5,584)
Employee benefit plan obligations (1,422) 395
Other long-term liabilities (776) (600)
Other, net (43) 89
------- -------
Net cash flows from
operating activities 15,399 (437)
------- -------
Cash flows from investing activities:
Additions to plant and equipment (2,220) (4,399)
Proceeds from sale of
plant and equipment 209 31
Additions to deferred assets (220) (636)
------ --------
Net cash flows from
investing activities (2,231) (5,004)
------ --------
Cash flows from financing activities:
Additions to long-term debt 195 -
Repayment of long-term debt (80) -
Repayment of short-term debt (257) (8,500)
Additions to short-term debt - 3,100
Proceeds from issuance of common stock 592 249
Loan to ESOP Trust (324) -
Repayment of loan to ESOP Trust 200 200
Proceeds from stock subscriptions 25 866
Dividends paid (2,148) (1,745)
------- -------
Net cash flows from
financing activities (1,797) (5,830)
------- -------
Effect of exchange rate changes on cash 279 65
------- -------
Net increase (decrease)
in cash and equivalents 11,650 (11,206)
Cash and equivalents at
beginning of period 32,077 38,890
------ ------
Cash and equivalents at end of period $ 43,727 $ 27,684
====== ======
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 nine months ended September 28, 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) Sept 28, December 30,
1996 1995
---- ----
Raw Materials $ 17,584 $ 17,080
Work in Process 6,063 5,899
Finished Goods 36,827 34,614
LIFO Reserve (12,347) (11,754)
------ ------
Total Inventory $ 48,127 $ 45,839
====== ======
Note 3: Property, Plant and Equipment
- --------------------------------------
Property, plant and equipment at cost consists of the following:
(In thousands) Sept 28, December 30,
1996 1995
---- ----
Land and Building $ 28,987 $ 29,173
Machinery and Equipment 93,641 92,523
------- -------
122,628 121,696
Allowance for Depreciation 84,737 80,026
------- -------
$ 37,891 $ 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 6,337,539 shares of common stock (10,000,000 shares
authorized, $.10 par value) outstanding as of Sept 28, 1996.
Note 6 - Subsequent Event
- -------------------------
On October 18, 1996 the Company's Board of Directors authorized the
repurchase of up to 500,000 shares of its common stock.
Item 2. Management's Discussion And Analysis Of Financial Condition
- --------------------------------------------------------------------
And Results Of Operations
- -------------------------
Operations
- ----------
Net sales for the third quarter of 1996 were $79.4 million, a 20
percent increase compared to 1995 third quarter net sales of $66.2
million. Year to date 1996 net sales were $215.2 million, a 6
percent increase over the comparable 1995 period of $202.4 million.
The increase in net sales was primarily due to higher unit volume
and increases in average selling prices.
Net income for the third quarter of 1996 was $5.6 million, or $.84
per share, an increase of 70 percent compared to the third quarter
of 1995 net income of $3.3 million, or $.50 per share. Year to date
1996 net income was $13.7 million, or $2.05 per share, an increase of
44 percent compared to year to date 1995 net income of $9.5 million,
or $1.44 per share. The increases in third quarter and year to date
net income were primarily attributable to higher net sales and
improvements in the operations of Oil Dynamics, Inc., (ODI), a wholly
owned subsidiary, and in the Company's European operations.
Cost of sales as a percent of net sales for the third quarter of 1996
was 74.8 percent compared to 77.4 percent for the same period in
1995. For the nine-month periods cost of sales as a percent of net
sales for 1996 was 74.9 percent compared to 77.4 percent for 1995.
The decreases for both the quarter and year to date periods were
primarily due to increased sales and decreases in both fixed and
variable manufacturing expenses principally at ODI and the Company's
European operations.
Selling and administrative expenses as a percent of net sales for the
third quarter of 1996 was 14.4 percent compared to 14.9 percent for
the same period in 1995. Year to date selling and administrative
expenses as a percent of net sales for 1996 was 15.1 percent compared
to 15.0 percent for the same period of last year.
Interest expense in the third quarter of 1996 was $.3 million
compared to $.5 million for the same period in 1995. Interest
expense for the year to date 1996 was $1.0 million compared to $1.7
million for the same period last year. The decrease was due to lower
short-term borrowings during 1996.
Included in other income, net for the third quarter of 1996 was $.5
million of interest income and $.2 million of foreign currency
transaction gains compared to $0.5 million of interest income and $.1
million of foreign currency transaction losses for the same period in
1995. For the year to date 1996, other income, net included $1.3
million of interest income and $.2 million of foreign currency
transaction losses compared to $1.3 million of interest income and
$.5 million of foreign currency transaction losses for the same
period of last year. Interest income was attributable to amounts
invested principally in short-term US treasury bills and notes.
Capital Resources and Liquidity
- -------------------------------
Cash and equivalents increased $11.7 million during the first nine
months due to cash provided by operating activities of $15.4
million. During the first nine months of 1996, $2.2 million was
invested in additions to plant and equipment and $2.1 million was
paid as dividends on the Company's common stock. Working capital
increased $14.1 million and the current ratio of the Company was 3.1
and 2.6 at the end of the third quarter of 1996 and 1995,
respectively.
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 third
quarter ended September 28, 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 November 6, 1996 By William H. Lawson
-------------------- ---------------------------
William H. Lawson, Chairman
and Chief Executive Officer
Date November 6, 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)
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 28, Sept 30, Sept 28, Sept 30,
1996 1995 1996 1995
---- ---- ---- ----
Net income available to
common shares and common
share equivalents $5,612 $3,301 $13,701 $9,487
===== ===== ====== =====
Common shares outstanding
beginning of period 6,327 6,240 6,254 6,199
Weighted average of common
shares issued during
the period 6 1 61 29
Dilutive effect of options
outstanding during
the period 351 349 361 368
---- ---- ---- ----
Weighted average of common
shares outstanding during
the period 6,684 6,590 6,676 6,596
===== ===== ===== =====
Net income per weighted
average common share $ .84 $ .50 $ 2.05 $ 1.44
===== ===== ===== =====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 28, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 9-MOS
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<PERIOD-END> SEP-28-1996
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<RECEIVABLES> 19,833
<ALLOWANCES> 1,460
<INVENTORY> 48,127
<CURRENT-ASSETS> 120,386
<PP&E> 122,628
<DEPRECIATION> 84,737
<TOTAL-ASSETS> 159,963
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0
<COMMON> 633
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<TOTAL-LIABILITY-AND-EQUITY> 159,963
<SALES> 215,241
<TOTAL-REVENUES> 0
<CGS> 161,119
<TOTAL-COSTS> 193,476
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<INTEREST-EXPENSE> 978
<INCOME-PRETAX> 21,765
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