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 March 29, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-362
FRANKLIN ELECTRIC CO., INC.
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(Exact name of registrant as specified in its charter)
Indiana 35-0826-7455
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 East Spring Street
Bluffton, Indiana 46714
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(Address of principal executive offices) (Zip Code)
(219) 824-2900
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(Registrant's telephone number, including area code)
Not Applicable
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(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
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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 May 2, 1997
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$.10 par value 5,892,529 shares
<PAGE>
FRANKLIN ELECTRIC CO., INC.
Index
PART I. FINANCIAL INFORMATION
- ---------------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of March 29, 1997 (Unaudited)
and December 28, 1996
Condensed Consolidated Statements of
Income for the Three Months Ended
March 29, 1997 and March 30, 1996 (Unaudited)
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
March 29, 1997 and March 30, 1996 (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
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) March 29, December 28,
1997 1996
(Unaudited) (Audited)
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ASSETS
Current assets:
Cash and equivalents...................... $ 3,507 $ 22,968
Marketable securities..................... 14,920 31,624
Receivables, less allowances of
$1,468 and $1,435, respectively......... 26,505 25,134
Inventories (Note 2)...................... 52,116 42,305
Other current assets (including
deferred income taxes of $7,557
and $7,755, respectively)............... 9,000 9,485
-------- --------
Total current assets.................... 106,048 131,516
Property, plant and equipment, net (Note 3). 37,799 40,097
Deferred and other assets................... 1,491 1,846
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Total assets................................ $145,338 $173,459
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term borrowings..................... $ 19 $ 21
Accounts payable.......................... 8,742 14,049
Accrued expenses.......................... 22,640 24,883
Income taxes.............................. 4,522 4,339
-------- --------
Total current liabilities............... 35,923 43,292
Long-term debt.............................. 20,249 20,276
Employee benefit plan obligations........... 6,469 5,741
Other long-term liabilities................. 4,118 4,144
Deferred income taxes....................... 182 183
Shareowners' equity:
Common stock (Note 5)..................... 589 638
Additional capital........................ 8,038 7,613
Retained earnings......................... 74,499 95,961
Stock subscriptions....................... (829) (997)
Cumulative translation adjustment......... (1,365) (625)
Loan to ESOP Trust........................ (2,292) (2,524)
Minimum pension liability adjustment,
net of taxes............................ (243) (243)
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Total shareowners' equity............... 78,397 99,823
-------- --------
Total liabilities and shareowners' equity... $145,338 $173,459
======== ========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
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March 29, March 30,
1997 1996
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Net sales $64,200 $62,754
Costs and expenses:
Cost of sales........................... 47,709 47,794
Selling and administrative expenses..... 11,464 10,254
Interest expense........................ 345 320
Other income, net....................... (497) (472)
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59,021 57,896
Income before income taxes................ 5,179 4,858
Income taxes.............................. 1,984 1,850
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Net income................................ $ 3,195 $ 3,008
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Per share data:
Weighted average common shares.......... 6,468 6,661
======= =======
Net income available to common shares... $ .49 $ .45
======= =======
Dividends per common share.............. $ .12 $ .10
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See Notes to Condensed Consolidated Financial Statements.
<PAGE>
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) Three Months Ended
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March 29, March 30,
1997 1996
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Cash flows from operating activities:
Net income................................ $ 3,195 $ 3,008
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization........... 1,816 2,111
Deferred income taxes................... - 132
Loss (gain) on disposals of plant
and equipment......................... 38 (25)
Changes in assets and liabilities:
Receivables........................... (1,772) (3,671)
Inventories........................... (10,688) (11,407)
Other current assets.................. 34 (109)
Accounts payable and other accrued
expenses............................ (6,496) (4,095)
Employee benefit plan obligations..... 728 283
Other long-term liabilities........... (5) (206)
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Net cash flows from
operating activities.............. (13,150) (13,979)
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Cash flows from investing activities:
Additions to plant and equipment........ (354) (452)
Proceeds from sale of plant and
equipment............................. 964 -
Proceeds from maturities of marketable
securities ........................... 16,704 -
Other, net.............................. 207 (222)
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Net cash flows from
investing activities................ 17,521 (674)
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Cash flows from financing activities:
Additions to long-term debt............. - 236
Repayment of short-term debt............ - (259)
Proceeds from issuance of common stock.. 399 358
Purchase of common stock ............... (24,000) -
Proceeds from stock subscriptions....... 100 25
Reduction of loan from ESOP Trust....... 232 200
Dividends paid.......................... (707) (629)
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Net cash flows from
financing activities................ (23,976) (69)
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Effect of exchange rate changes on cash... 144 239
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Net decrease in cash and equivalents...... (19,461) (14,483)
Cash and equivalents at
beginning of period..................... 22,968 32,077
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Cash and equivalents at end of period..... $ 3,507 $17,594
======= =======
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
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 three
months ended March 29, 1997 are not necessarily indicative of the results that
may be expected for the year ending January 3, 1998. 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 28, 1996.
Note 2: Inventories
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Inventories consist of the following:
(In thousands) March 29, December 28,
1997 1996
---- ----
Raw Materials........................ $16,776 $15,958
Work in Process...................... 4,946 4,942
Finished Goods....................... 41,644 32,528
LIFO Reserve......................... (11,250) (11,123)
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Total Inventory...................... $52,116 $42,305
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Note 3: Property, Plant and Equipment
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Property, plant and equipment at cost consists of the following:
(In thousands) March 29, December 28,
1997 1996
---- ----
Land and Building.................... $27,314 $28,335
Machinery and Equipment.............. 93,681 95,457
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120,995 123,792
Allowance for Depreciation........... 83,196 83,695
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$37,799 $40,097
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Note 4: Tax Rates
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The effective tax rate on income before income taxes in 1997 and 1996 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 5,892,529 shares of common stock (10,000,000 shares
authorized, $.10 par value) outstanding as of March 29, 1997.
On January 29, 1997, pursuant to the stock repurchase plan authorized by the
Company's Board of Directors in October 1996, the Company completed three
separate, privately negotiated transactions to repurchase 500,000 shares of
the Company's common stock for a total purchase price of $24.0 million. Of
these shares, 175,000 were repurchased from a director of the Company. The
shares were subsequently retired.
Note 6: Earnings Per Share
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In February 1997, the Financial Accounting Standards Boards issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" which
simplifies the method for computing earnings per share. Under the new
requirements, primary earnings per share will be replaced with basic earnings
per share. The statement, which will not impact the results of operations,
financial position or cash flows of the company, is effective for financial
statements issued for periods ending after December 15, 1997 and will be
adopted by the Company in the fourth quarter of 1997.
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And
- ------------------------------------------------------------------------
Results Of Operations
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Operations
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Net sales for the first quarter of 1997 were $64.2 million, a 2 percent
increase over 1996 first quarter net sales of $62.8 million. The increase in
net sales was primarily due to increased export sales. Net income for the
first quarter of 1997 was $3.2 million, or $.49 per share, compared to net
income of $3.0 million, or $.45 per share, for the same period a year ago.
The increase in net income is attributable to higher net sales and lower cost
of sales as a percentage of net sales. Cost of sales as a percentage of net
sales for the first quarter of 1997 was 74.3 percent compared to 76.2 percent
for the same period in 1996. The decrease is principally attributable to
favorable manufacturing variances.
Selling and administrative expenses as a percent of net sales for the first
quarter of 1997 was 17.9 percent compared to 16.3 percent for the same period
in 1996. The increase is primarily a result of higher commissions paid due to
the increase in export sales.
Interest expense was $.3 million for the first quarter of 1997 and 1996.
Included in other income, net, for the first quarter of 1997 was $.5 million
of interest income and $.5 million of foreign currency losses. Interest
income was $.4 million and foreign currency losses were $.1 million for the
same period in 1996. Interest income was attributable to amounts invested
principally in short-term US treasury notes.
Capital Resources and Liquidity
- -------------------------------
Cash, cash equivalents and marketable securities decreased $36.2 million
during the first quarter of 1997. The decrease was principally due to the
repurchase of 500,000 shares of the Company's common stock on January 29,
1997, at an aggregate purchase price of $24.0 million and due to cash used in
operating activities of $13.2 million. The principal use of cash for operating
activities was an increase in inventories of $10.7 million due to typical
seasonal buildup. Working capital decreased $17.9 million during the first
quarter of 1997 and the current ratio was 3.0 at the end of the first quarter
of both 1997 and 1996.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
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The Annual Meeting of Shareholders of the Company was held on April 11, 1997
for the following purposes: 1) To elect three directors for terms expiring at
the 2000 Annual Meeting of Shareholders; and 2) To ratify the appointment of
Deloitte & Touche LLP as independent auditors for the 1997 fiscal year.
The results were:
1) Nominees for Director For Withhold Authority
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Robert H. Little 5,472,851 6,317
Patricia Schaefer 5,472,736 6,432
Gerard E. Veneman 5,464,475 14,693
For Against Abstain
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2) Ratification of
Deloitte & Touche LLP 5,474,508 1,932 2,728
Total shares represented at the Annual Meeting in person or by proxy were
5,479,168 of a total of 5,890,929 shares outstanding. This represented 93
percent of Company common stock and constituted a quorum. Total broker non-
votes were 306,038 shares.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
(11) Computations of Earnings per Share
(b) Reports on Form 8-K
During the three months ended March 29, 1997, a Form 8-K was filed
by the Company dated January 29, 1997, to report the Company's
repurchase of 500,000 shares of its common stock.
<PAGE>
SIGNATURES
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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.
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Registrant
Date May 2, 1997 By William H. Lawson
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William H. Lawson, Chairman
and Chief Executive Officer
(Principal Executive Officer)
Date May 2, 1997 By Jess B. Ford
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Jess B. Ford, Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
Exhibit Index
(11) Computation of Earnings per Share
<PAGE>
EXHIBIT 11
FRANKLIN ELECTRIC CO., INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands, except per share amounts)
Three Months Ended
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March 29, March 30,
1997 1996
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Net income available to
common shares and common
share equivalents....................... $3,195 $3,008
====== ======
Common shares outstanding
beginning of period..................... 6,371 6,254
Weighted average of common
shares issued during
the period.............................. 16 35
Weighted average of common shares
repurchased during the period........... (329) -
Dilutive effect of options
outstanding during
the period.............................. 410 372
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Weighted average of common
shares outstanding during
the period.............................. 6,468 6,661
====== ======
Net income per weighted
average common share.................... $ .49 $ .45
====== ======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE PERIOD ENDED MARCH 29, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> MAR-29-1997
<CASH> 3,507
<SECURITIES> 14,920
<RECEIVABLES> 26,505
<ALLOWANCES> 1,468
<INVENTORY> 52,116
<CURRENT-ASSETS> 106,048
<PP&E> 120,995
<DEPRECIATION> 83,196
<TOTAL-ASSETS> 145,338
<CURRENT-LIABILITIES> 35,923
<BONDS> 0
0
0
<COMMON> 589
<OTHER-SE> 77,808
<TOTAL-LIABILITY-AND-EQUITY> 145,338
<SALES> 64,200
<TOTAL-REVENUES> 64,697
<CGS> 47,709
<TOTAL-COSTS> 59,518
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 345
<INCOME-PRETAX> 5,179
<INCOME-TAX> 1,984
<INCOME-CONTINUING> 3,195
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,195
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.49
</TABLE>
