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 March 30, 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 April 24, 1996
--------------------- --------------
$.10 par value 6,314,099 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 March 30, 1996 (Unaudited)
and December 30, 1995
Condensed Consolidated Statements of
Income for the First Quarter ended
March 30, 1996 and April 1, 1995 (Unaudited)
Condensed Consolidated Statements of
Cash Flows for the First Quarter ended
March 30, 1996 and April 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) March 30, December 30,
1996 1995
(Unaudited) (Audited)
----------- ---------
ASSETS
Current assets:
Cash and equivalents.................... $ 17,594 $ 32,077
Receivables, less allowances of
$1,393 and $1,351, respectively....... 26,100 22,526
Inventories (Note 2).................... 56,830 45,839
Other current assets (including
deferred income taxes of $7,690
and $7,823, respectively)............. 8,947 8,879
------- -------
Total current assets.................. 109,471 109,321
Property, plant and equipment,
net (Note 3)............................ 40,275 41,670
Deferred and other assets................. 2,248 2,366
------- -------
Total assets.............................. $151,994 $153,357
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings................... $ 190 $ 461
Accounts payable........................ 11,244 15,882
Accrued expenses........................ 22,748 23,228
Income taxes............................ 2,642 1,726
------- -------
Total current liabilities............. 36,824 41,297
Long-term debt............................ 20,379 20,171
Employee benefit plan obligations......... 6,352 6,069
Other long-term liabilities............... 4,545 4,956
Deferred income taxes..................... 306 307
Shareowners' equity:
Common stock (Note 5)................... 631 626
Additional capital...................... 6,309 5,683
Retained earnings....................... 79,743 77,363
Stock subscriptions..................... (1,213) (1,315)
Cumulative translation adjustment....... 318 600
Loan to ESOP Trust...................... (2,200) (2,400)
------- -------
Total shareowners' equity............. 83,588 80,557
------- -------
Total liabilities and shareowners' equity. $151,994 $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)
First Quarter Ended
-------------------
March 30, April 1,
1996 1995
---- ----
Net sales $ 62,754 $ 59,788
Costs and expenses:
Cost of sales........................... 47,844 46,491
Selling and administrative expenses..... 10,229 10,411
Interest expense........................ 320 654
Other income, net....................... (497) (437)
------- -------
57,896 57,119
Income before income taxes................ 4,858 2,669
Income taxes.............................. 1,850 1,025
------- -------
Net income................................ $ 3,008 $ 1,644
======== ========
Per share data:
Weighted average common shares.......... 6,661 6,603
===== =====
Net income available to common shares... $ .45 $ .25
======== ========
Dividends per common share................ $ .10 $ .08
======== ========
See Notes to Condensed Consolidated Financial Statements.
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) First Quarter Ended
-------------------
March 30, April 1,
1996 1995
---- ----
Cash flows from operating activities:
Net income................................ $ 3,008 $ 1,644
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization........... 2,111 2,364
Deferred income taxes................... 132 185
Gain on disposals of
plant and equipment................... (25) (17)
Changes in assets and liabilities:
Receivables........................... (3,671) (6,631)
Inventories........................... (11,407) (11,299)
Other current assets.................. (223) (1,865)
Accounts payable and other
accrued expenses.................... (4,095) (591)
Employee benefit plan obligations..... 283 89
Other long-term liabilities........... (206) (682)
Other, net............................ 114 127
------- -------
Net cash flows from
operating activities.............. (13,979) (16,676)
------- -------
Cash flows from investing activities:
Additions to plant and equipment........ (452) (774)
Proceeds from sale of
plant and equipment................... - 28
Additions to deferred assets............ (222) (604)
------- -------
Net cash flows from
investing activities................ (674) (1,350)
------- -------
Cash flows from financing activities:
Additions to long-term debt............. 236 -
Repayment of short-term debt............ (259) -
Additions to short-term borrowings...... - 3,100
Proceeds from issuance of common stock.. 358 70
Repayment of loan to ESOP Trust......... 200 200
Proceeds from stock subscriptions....... 25 -
Dividends paid.......................... (629) (498)
------- -------
Net cash flows from
financing activities................ (69) 2,872
------- -------
Effect of exchange rate changes on cash... 239 (332)
------- -------
Net decrease in cash and equivalents...... (14,483) (15,486)
Cash and equivalents at
beginning of period..................... 32,077 38,890
------- -------
Cash and equivalents at
end of period........................... $ 17,594 $ 23,404
======== ========
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 March 30, 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) March 30, December 30,
1996 1995
---- ----
Raw Materials........................ $ 17,169 $ 17,080
Work in Process...................... 6,066 5,899
Finished Goods....................... 45,510 34,614
LIFO Reserve......................... (11,915) (11,754)
------- -------
Total Inventory...................... $ 56,830 $ 45,839
======== ========
Note 3: Property, Plant and Equipment
- --------------------------------------
Property, plant and equipment at cost consists of the following:
(In thousands) March 30, December 30,
1996 1995
---- ----
Land and Building.................... $ 29,173 $ 29,173
Machinery and Equipment.............. 92,683 92,523
------- -------
121,856 121,696
Allowance for Depreciation........... 81,581 80,026
------- -------
$ 40,275 $ 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 6,313,899 shares of common stock (10,000,000 shares
authorized, $.10 par value) outstanding as of March 30, 1996.
Item 2. Management's Discussion And Analysis Of Financial Condition
- --------------------------------------------------------------------
And Results Of Operations
- --------------------------
Operations
- ----------
Net sales for the first quarter of 1996 were $62.8 million, a 5
percent increase over 1995 first quarter net sales of $59.8 million.
The increase in net sales was due to increases in both average
selling prices and unit volume. Net income for the first quarter of
1996 was $3.0 million, or $.45 per share, compared to net income of
$1.6 million, or $.25 per share for the same period a year ago. The
increase in net income is primarily attributable to improvements in
the Company's European operations. Cost of sales as a percent of net
sales for the first quarter of 1996 was 76.2 percent compared to 77.8
percent for the same period in 1995. The decrease is principally
attributable to decreases in both fixed and variable manufacturing
expenses at the Company's European operations.
Interest expense was $.3 million for the first quarter of 1996
compared to $.7 million for the same period a year ago. The decrease
is due to lower short-term borrowings in the first quarter of this
year. Included in other income, net, for the first quarter of 1996
was $.4 million of interest income and $.1 million of foreign
currency transaction losses. Interest income was $.5 million and
foreign currency transaction losses were $.2 million for the same
period a year ago. Interest income was attributable to amounts
invested principally in short-term US treasury bills and notes.
Capital Resources and Liquidity
- -------------------------------
Cash decreased $14.5 million during the first quarter of 1996
principally due to cash used in operating activities of $14.0
million. Changes in working capital items accounted for most of the
cash used. Inventories increased $11.0 million due to a typical
seasonal build up. Working capital increased $4.6 million and the
current ratio was 3.0 at the end of the first quarter of 1996 versus
2.6 at the end of the first quarter of 1995.
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 first
quarter ended March 30, 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 By WILLIAM H. LAWSON
--------------------- --------------------------------
William H. Lawson, Chairman
and Chief Executive Officer
Date 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)
First Quarter Ended
-------------------
March 30, April 1,
1996 1995
---- ----
Net income available to
common shares and common
share equivalents....................... $3,008 $1,644
====== ======
Common shares outstanding
beginning of period..................... 6,254 6,199
Weighted average of common
shares issued during
the period.............................. 35 15
Dilutive effect of options
outstanding during
the period.............................. 372 389
----- -----
Weighted average of common
shares outstanding during
the period.............................. 6,661 6,603
===== =====
Net income per weighted
average common share.................... $.45 $.25
==== ====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE PERIOD ENDED MARCH 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 17,594
<SECURITIES> 0
<RECEIVABLES> 26,100
<ALLOWANCES> 1,393
<INVENTORY> 56,830
<CURRENT-ASSETS> 109,471
<PP&E> 121,856
<DEPRECIATION> 81,581
<TOTAL-ASSETS> 151,994
<CURRENT-LIABILITIES> 36,824
<BONDS> 0
0
0
<COMMON> 631
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 151,994
<SALES> 62,754
<TOTAL-REVENUES> 0
<CGS> 47,844
<TOTAL-COSTS> 57,896
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 320
<INCOME-PRETAX> 4,858
<INCOME-TAX> 1,850
<INCOME-CONTINUING> 3,008
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,008
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
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