10-Q 1 r_10q3-03.txt THIRD QUARTER 2003 10-Q 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 27, 2003 ------------------ 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 35-0827455 ------- ---------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 400 EAST SPRING STREET BLUFFTON, INDIANA 46714 ----------------- ----- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (260) 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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 3, 2003 --------------------- ---------------- $.10 PAR VALUE 10,898,272 SHARES 2 FRANKLIN ELECTRIC CO., INC. Index Page PART I. FINANCIAL INFORMATION Number --------------------------------- ------ Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of September 27, 2003 and December 28, 2002 ........................ 3 Condensed Consolidated Statements of Income for the Third Quarter and Nine Months Ended September 27, 2003 and September 28, 2002 ........................... 4 Condensed Consolidated Statements Of Cash Flows for the Nine Months Ended September 27, 2003 and September 28, 2002 ........................... 5 Notes to Condensed Consolidated Financial Statements ......................... 6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 9-11 Item 3. Quantitative and Qualitative Disclosures About Market Risk............................. 11-12 Item 4. Controls and Procedures ...................... 12 PART II. OTHER INFORMATION ----------------------------- Item 6. Exhibits and Reports on Form 8-K.............. 13 Signatures................................................ 14 ---------- Exhibit Index............................................. 15 ------------- Exhibits.................................................. 16-21 -------- 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ----------------------------- FRANKLIN ELECTRIC CO., INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) Sept. 27, Dec. 28, 2003 2002 ---- ---- ASSETS Current assets: Cash and equivalents.................... $ 18,064 $ 20,133 Receivables, less allowances of $1,987 and $1,907, respectively....... 34,302 31,711 Inventories (Note 2).................... 53,233 48,268 Other current assets (including deferred income taxes of $8,718 and $8,615, respectively)............. 13,262 12,897 -------- ------- Total current assets.................. 118,861 113,009 Property, plant and equipment, net (Note 3)............................ 77,740 76,033 Deferred and other assets (including deferred income taxes of $1,391)........ 15,228 16,504 Goodwill.................................. 54,747 53,037 -------- -------- Total assets.............................. $266,576 $258,583 ======== ======== LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Current maturities of long-term debt and short-term borrowings........ $ 1,477 $ 1,467 Accounts payable........................ 14,523 18,584 Accrued expenses........................ 30,373 28,484 Income taxes............................ 5,793 1,712 -------- -------- Total current liabilities............. 52,166 50,247 Long-term debt............................ 15,923 25,946 Employee benefit plan obligations......... 20,868 23,988 Other long-term liabilities............... 5,386 5,264 Shareowners' equity: Common stock (Note 5)................... 1,082 1,082 Additional capital...................... 42,807 34,079 Retained earnings....................... 131,091 125,308 Loan to ESOP Trust...................... (897) (1,130) Accumulated other comprehensive loss (Note 7)......................... (1,850) (6,201) -------- -------- Total shareowners' equity............. 172,233 153,138 -------- -------- Total liabilities and shareowners' equity. $266,576 $258,583 ======== ======== See Notes to Condensed Consolidated Financial Statements. 4 FRANKLIN ELECTRIC CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Third Quarter Ended Nine Months Ended ------------------- ----------------- Sept. 27, Sept. 28, Sept. 27, Sept. 28, 2003 2002 2003 2002 Net sales.............................. $99,685 $97,125 $263,303 $258,876 Cost of sales.......................... 68,917 67,572 183,780 184,872 ------- ------- -------- -------- Gross Profit........................... 30,768 29,553 79,523 74,004 Selling and administrative expenses.... 14,933 13,957 43,567 39,046 ------- ------- -------- -------- Operating Income....................... 15,835 15,596 35,956 34,958 Interest expense....................... (313) (367) (975) (1,026) Other income, net...................... 14 61 248 268 Foreign exchange gain (loss)........... (278) (327) 404 777 ------- ------- -------- -------- Income before income taxes............. 15,258 14,963 35,633 34,977 Income taxes........................... 4,745 5,335 11,724 12,661 ------- ------- -------- -------- Net income............................. $10,513 $ 9,628 $ 23,909 $ 22,316 ======= ======= ======== ======== Per share data (Note 6): Net income per common share.......... $ 0.97 $ 0.89 $ 2.22 $ 2.07 ======= ======= ======== ======== Net income per common share, assuming dilution.................. $ 0.93 $ 0.85 $ 2.12 $ 1.96 ======= ======= ======== ======== Dividends per common share........... $ 0.14 $ 0.13 $ 0.41 $ 0.38 ======= ======= ======== ======== See Notes to Condensed Consolidated Financial Statements. 5 FRANKLIN ELECTRIC CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended ----------------- Sept. 27, Sept. 28, 2003 2002 ---- ---- Cash flows from operating activities: Net income................................ $23,909 $22,316 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization........... 10,329 9,848 Loss on disposals of plant and equipment............................. 436 2 Changes in assets and liabilities: Receivables........................... (1,083) 1 Inventories........................... (2,882) 3,504 Accounts payable and other accrued expenses............................ 1,992 1,096 Employee benefit plan obligations..... (3,245) 885 Other, net............................ (915) (1,965) ------- -------- Net cash flows from operating activities.... 28,541 35,687 ------- -------- Cash flows from investing activities: Additions to plant and equipment.......... (8,925) (9,016) Proceeds from sale of plant and equipment............................... 243 19 Additions to deferred assets.............. (433) (14,232) Cash paid for acquisitions, net of cash acquired.................... - (30,344) Proceeds from maturities of marketable securities ............................. - 2,999 ------- ------- Net cash flows from investing activities.... (9,115) (50,574) ------- ------- Cash flows from financing activities: Borrowing on long-term debt............... 6,648 8,350 Repayment of long-term debt............... (18,407) (208) Borrowing on line of credit and short-term borrowings............... 11,000 3,000 Repayment of line of credit and short-term borrowings............... (11,024) (3,013) Proceeds from issuance of common stock.... 3,282 1,731 Purchase of Common Stock.................. (9,782) (2,253) Reduction of loan to ESOP Trust........... 233 232 Dividends paid............................ (4,420) (4,098) ------- ------- Net cash flows from financing activities.... (22,470) 3,741 ------- ------- Effect of exchange rate changes on cash..... 975 935 ------- ------- Net change in cash and equivalents.......... (2,069) (10,211) Cash and equivalents at beginning of period. 20,133 20,750 ------- ------- Cash and equivalents at end of period....... $18,064 $10,539 ======= ======= See Notes to Condensed Consolidated Financial Statements. 6 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 accounting principles generally accepted in the United States of America 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 accounting entries and adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and the results of operations for the interim periods have been made. Operating results for the nine months ended September 27, 2003 are not necessarily indicative of the results that may be expected for the year ending January 3, 2004. For further information, including a discussion of Franklin Electric's significant accounting policies, 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, 2002. Note 2: Inventories -------------------- Inventories consist of the following: (In thousands) Sept. 27, Dec. 28, 2003 2002 ---- ---- Raw Materials........................ $15,060 $16,115 Work in Process...................... 6,733 7,481 Finished Goods....................... 41,498 33,905 LIFO Reserve......................... (10,058) (9,233) ------- ------- Total Inventory...................... $53,233 $48,268 ======= ======= Note 3: Property, Plant and Equipment -------------------------------------- Property, plant and equipment, at cost, consists of the following: (In thousands) Sept. 27, Dec. 28, 2003 2002 ---- ---- Land and Building.................... $ 40,206 $ 34,126 Machinery and Equipment.............. 145,796 141,347 -------- -------- 186,002 175,473 Allowance for Depreciation........... 108,262 99,440 -------- -------- $ 77,740 $ 76,033 ======== ======== Note 4: Tax Rates ------------------ The effective tax rate on income before income taxes in 2003 and 2002 varies from the United States statutory rate of 35 percent principally due to the effect of state and foreign income taxes and related tax credits. 7 Note 5: Shareowners' Equity ---------------------------- The Company has 25,000,000 authorized shares of common stock, $.10 par value, of which 10,823,200 shares of common stock were outstanding as of September 27, 2003. During the first quarter, under terms of a Company stock option plan, an officer of the company remitted 76,588 shares ($3.9 million) of Company common stock as consideration for stock issued upon the exercise of stock options. The Company recorded a $1.8 million reduction in its deferred tax liability and a $1.8 million increase to shareowners' equity as a result of the exercise. The shares delivered to the company were subsequently retired. Note 6: Earnings Per Share --------------------------- Following is the computation of basic and diluted earnings per share: (In thousands, except Third Qtr. Ended Nine Months Ended ---------------- ----------------- per share amounts) Sept. 27, Sept. 28, Sept. 27,Sept. 28, 2003 2002 2003 2002 ---- ---- ---- ---- Numerator: Net Income..................... $10,513 $ 9,628 $23,909 $22,316 ======= ======= ======= ======= Denominator: Basic Weighted average common shares....................... 10,813 10,824 10,783 10,781 Diluted Effect of dilutive securities: Employee and director stock options.............. 544 502 503 607 ------ ------- ------- ------- Adjusted weighted average common shares................ 11,357 11,326 11,286 11,388 ====== ====== ======= ======= Basic earnings per share......... $ 0.97 $ 0.89 $ 2.22 $ 2.07 ====== ====== ======= ======= Diluted earnings per share....... $ 0.93 $ 0.85 $ 2.12 $ 1.96 ====== ====== ======= ======= 8 Note 7: Other Comprehensive Income ----------------------------------- Comprehensive income is as follows: (In thousands) Third Qtr. Ended Nine Months Ended ---------------- ----------------- Sept. 27, Sept. 28, Sept. 27,Sept. 28, 2003 2002 2003 2002 ---- ---- ---- ---- Net income......................... $10,513 $ 9,628 $23,909 $22,316 Other comprehensive gain: Foreign currency translation adjustments..................... 391 (566) 4,351 3,551 ------- ------- ------- ------- Comprehensive income, net of tax... $10,904 $ 9,062 $28,260 $25,867 ======= ======= ======= ======= Accumulated other comprehensive loss consists of the following: (In thousands) Sept. 27, Dec. 28, 2003 2002 ---- ---- Cumulative translation adjustment........... $ 2,100 $(2,251) Minimum pension liability adjustment, net of tax................................ (3,950) (3,950) ------- ------- $(1,850) $(6,201) ======= ======= Note 8: Contingencies and Commitments -------------------------------------- The Company is defending various claims and legal actions including environmental matters, which have arisen in the ordinary course of business. In the opinion of management, after discussion with counsel, these claims and legal actions can be successfully defended or resolved without a material adverse effect on the Company's financial position, results of operations, and net cash flows. The Company provides warranties on most of its products. The warranty terms vary but are generally two years from date of manufacture or one year from date of installation. Provisions for estimated expenses related to product warranty are made at the time products are sold or when specific warranty issues are identified. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims. The Company actively studies trends of warranty claims and takes action to improve product quality and minimize warranty claims. The Company believes that the warranty reserve is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the reserve. Below is a table that shows the activity in the warranty accrual accounts: (In thousands) Third Qtr. Ended Nine Months Ended ---------------- ----------------- Sept. 27, Sept 28, Sept. 27,Sept. 28, 2003 2002 2003 2002 ---- ---- ---- ---- Beginning Balance.................. $5,531 $5,221 $5,308 $4,970 Accruals related to product warranties............... 1,245 1,540 3,283 3,781 Reductions for payments made....... 1,179 1,106 2,994 3,096 ------ ------ ------ ------ Ending Balance..................... $5,597 $5,655 $5,597 $5,655 ====== ====== ====== ====== 9 Note 9: Stock-Based Compensation --------------------------------- The Company accounts for stock-based employee compensation plans under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees." No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the stock at date of grant. As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," the Company follows the disclosure requirements only of SFAS No. 123. The following table illustrates the proforma effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123: (In Thousands, Except Third Qtr. Ended Nine Months Ended ---------------- ----------------- Per Share Amounts) Sept. 27, Sept. 28 Sept. 27, Sept. 28 2003 2002 2003 2002 ---- ---- ---- ---- Net income as reported ........... $10,513 $9,628 $23,909 $22,316 Deduct: Stock-based employee compensation cost, net of income tax.......... 394 342 1,236 964 ------- ------ ------- ------- Pro forma net income ............. $10,119 $9,286 $22,673 $21,352 ======= ====== ======= ======= Earnings per share: Basic - as reported............... $ 0.97 $ 0.89 $ 2.22 $ 2.07 Basic - pro forma................. $ 0.94 $ 0.86 $ 2.10 $ 1.98 Diluted - as reported............. $ 0.93 $ 0.85 $ 2.12 $ 1.96 Diluted - pro forma............... $ 0.89 $ 0.82 $ 2.01 $ 1.87 Note 10: Reclassifications --------------------------- The Company has reclassified certain deferred and other assets to goodwill as of the third quarter of 2003. Amounts in prior year have been reclassified to conform to the current year presentation. In addition, subsequent to the end of the third quarter, the Company performed its annual impairment testing required by SFAS No. 142. No impairment loss was required to be recorded. Item 2. Management's Discussion And Analysis Of Financial Condition And ------------------------------------------------------------------------ Results Of Operations --------------------- Operations ---------- Sales for the third quarter of 2003 were $99.7 million, up $2.6 million or 2.6 percent compared to sales of $97.1 million for the same period a year ago. Foreign currencies, particularly the euro, strengthened relative to the U.S. dollar since the third quarter of 2002. The impact of this change in exchange rates was a $3.7 million increase in the Company's reported third quarter 2003 sales. Excluding the impact of stronger foreign currencies, the Company's sales were down about 1 percent primarily due to lower demand for water systems products in North America partially offset by increased export sales. 10 Lower demand in North America is attributed to extremely wet weather conditions in the eastern half of the country. Sales of fueling systems products increased $1.5 million from the same period last year or about 9 percent of comparable fueling systems products sales for the prior year. For the first nine months of 2003, sales were $263.3 million, an increase of 1.7 percent compared to 2002 sales of $258.9 million. Sales for the first nine months of 2003 were increased by the strengthening of foreign currencies ($11.3 million) and inclusion of INCON sales ($4.1 million). Excluding the impact of the change in exchange rates and INCON sales, the Company's sales were down about 4.2 percent primarily due to lower demand in North America and Europa (i.e., Europe, Middle East and North Africa). Cost of sales as a percent of net sales for the third quarter of 2003 was 69.1 percent, a decrease from 69.6 percent for the same period in 2002. Cost of sales as a percent of net sales for the year to date 2003 was 69.8 percent, a decrease from 71.4 percent for the same period in 2002. The decrease is attributable to productivity improvements and cost reductions as well as increased sales of fueling system products as a percentage of total sales. Selling and administrative expenses as a percent of net sales for the third quarter of 2003 were 14.9 percent compared to 14.4 percent for the same period in 2002. Selling and administrative expenses as a percent of net sales for year to date 2003 were 16.5 percent compared to 15.1 percent for the year to date 2002. The year to date increase in selling and administrative expenses of $4.5 million was primarily attributable to the impact of stronger foreign currencies, $1.3 million, primarily the euro; the INCON acquisition, $1.2 million; and selling costs associated with new product launches. The effective tax rate on income before income taxes in 2003 and 2002 varies from the United States statutory rate of 35 percent principally due to the effect of state and foreign income taxes and related tax credits. The effective tax rate for the first nine months of 2003 has decreased to about 33 percent from the prior year effective rate of 36 percent due to the benefits (some of which are applicable to the current year only) realized from increased tax credits from tax planning activities. Net income for the third quarter of 2003 was $10.5 million, or $.93 per diluted share, a 9 percent increase compared to net income of $9.6 million, or $.85 per diluted share, for the same period a year ago. Year to date 2003 net income was $23.9 million, or $2.12 per diluted share, a 7 percent increase compared to year to date 2002 net income of $22.3 million, or $1.96 per diluted share. During the third quarter the Company's Board of Directors approved a manufacturing re-alignment program. The program includes expanding production capacity in Mexico and the Czech Republic. It also includes curtailing some manufacturing operations in the USA and Western Europe. The total capital investment required to implement the program is expected to be $20 million. The capital will be invested from 2004 through 2006. In addition, the Company also estimates that for full year 2003 the incremental expenses associated with the construction and start-up of these facilities, as well as the recently completed facility in China, to be $1 million incurred relatively evenly throughout the year. During the two year period beginning January, 2004, management currently estimates that the one-time costs associated with construction and start-up of the new facilities and consolidation of existing operations will total approximately $10 million. Based on current plans, more than half of these incremental costs will be recognized in the last three quarters of 2004 with the balance expected to be recognized in the first three quarters of 2005. These costs will be recognized 11 as incurred and are anticipated to result in a material reduction in the cost structure of the Company in late 2005 and beyond. Capital Resources and Liquidity ------------------------------- Cash and cash equivalents decreased $2.1 million during the first nine months of 2003. The principal source of cash was earnings from operations, $23.9 million. Cash was used to repay long term debt, $18.4 million, fund payments to employee benefit plans, $4.0 million and increases in inventories, $2.9 million. Working capital increased $3.9 million during the first nine months of 2003. The current ratio was 2.3 and 2.2 at September 27, 2003 and December 28, 2002, respectively. Net cash flows used in investing activities were $9.1 million and were principally used for additions to plant and equipment, $8.9 million. The Company also purchased $9.8 million of its common stock during the first nine months of 2003. Critical Accounting Policies and Estimates ------------------------------------------ Management's discussion and analysis of its financial condition and results of operations are based upon the Company's condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an on-going basis, management evaluates its estimates, including those related to revenue recognition, allowance for doubtful accounts, accounts receivable, inventories, recoverability of long-lived assets, intangible assets, income taxes, warranty obligations, pensions and other employee benefit plan obligations, and contingencies. Management bases its estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of ----------------------------------------------------------------------------- 1995 ---- Any forward looking statements contained herein involve risks and uncertainties, including but not limited to, general economic and currency conditions, various conditions specific to the Company's business and industry, market demand, competitive factors, supply constraints, technology factors, government and regulatory actions, the Company's accounting policies, future trends, and other risks which are detailed in the Company's Securities and Exchange Commission filings. These risks and uncertainties may cause actual results to differ materially from those indicated by the forward looking statements. Item 3. Quantitative and Qualitative Disclosures about Market Risk ------------------------------------------------------------------- The Company is subject to market risk associated with changes in foreign currency exchange rates and interest rates. Foreign currency exchange rate 12 risk is mitigated through several means: maintenance of local production facilities in the markets served, invoicing of customers in the same currency as the source of the products, prompt settlement of intercompany balances utilizing a global netting system and limited use of foreign currency denominated debt. Interest rate exposure is limited to variable rate interest borrowings under the Company's revolving credit agreement and an interest rate swap agreement. Item 4. Controls and Procedures -------------------------------- The Company's management carried out an evaluation, under the supervision and with the participation of the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Company's Chief Executive Officer and the Company's Chief Financial Officer concluded that as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company and its subsidiaries required to be included in the Company's periodic SEC filings. 13 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K ----------------------------------------- (a) Exhibits (Filed with this quarterly report) (31) Rule 13a-14(a)/15d-14 Certifications (i) Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (ii) Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (32) Section 1350 Certifications (i) Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (ii) Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. (b) Reports on Form 8-K A Current Report on Form 8-K was filed with the SEC by the Company on April 15, 2003, pursuant to Item 9, "Regulation FD Disclosure" and Item 12, "Disclosure of Results of Operations and Financial Condition", to report the Company's issuance of a press release setting forth its first-quarter 2003 earnings. A Current Report on Form 8-K was filed with the SEC by the Company on July 16, 2003, pursuant to Item 9, "Regulation FD Disclosure" and Item 12, "Disclosure of Results of Operations and Financial Condition", to report the Company's issuance of a press release setting forth its second-quarter 2003 earnings. 14 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 xxxxxx xx, 2003 By /s/ R. Scott Trumbull ---------------------- --------------------------- R. Scott Trumbull, Chairman and Chief Executive Officer (Principal Executive Officer) Date xxxxxx xx, 2003 By /s/ Gregg C. Sengstack ---------------------- --------------------------- Gregg C. Sengstack, Senior Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) 15 FRANKLIN ELECTRIC CO., INC. EXHIBIT INDEX TO THE SECOND QUARTER REPORT ON FORM 10-Q FOR THE SECOND QUARTER ENDED June 28, 2003 Exhibit Number Description ------ ----------- (31) Rule 13a-14(a)/15d-14 Certifications (i) Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (ii) Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (32) Section 1350 Certifications (i) Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (ii) Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 16 EXHIBIT (31)(i) --------------- CERTIFICATION OF CHIEF EXECUTIVE OFFICER ---------------------------------------- PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 --------------------------------------------------------- I, R. Scott Trumbull, Chairman and Chief Executive Officer of Franklin Electric Co., Inc., certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Franklin Electric Co., Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and 17 b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 3, 2003 ----------------------- /s/ R. Scott Trumbull ------------------------ R. Scott Trumbull Chairman and Chief Executive Officer Franklin Electric Co., Inc. 18 EXHIBIT (31)(ii) ---------------- CERTIFICATION OF CHIEF FINANCIAL OFFICER ---------------------------------------- PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 --------------------------------------------------------- I, Gregg C. Sengstack, Senior Vice President, Chief Financial Officer and Secretary of Franklin Electric Co., Inc., certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Franklin Electric Co., Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and 19 b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 3, 2003 ---------------------- /s/ Gregg C. Sengstack ---------------------- Gregg C. Sengstack Senior Vice President, Chief Financial Officer and Secretary Franklin Electric Co., Inc. 20 EXHIBIT (32)(i) CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO 18 U.S.C. --------------------------------------------------------------------------- SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF ---------------------------------------------------------------------------- 2002 ---- In connection with the Quarterly Report of Franklin Electric Co., Inc. (the "Company") on Form 10-Q for the period ending June 28, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, R. Scott Trumbull, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 3, 2003 --------------------------- /s/ R. Scott Trumbull --------------------------- R. Scott Trumbull Chairman and Chief Executive Officer Franklin Electric Co., Inc. The certification accompanies the Report pursuant to section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by Franklin Electric Co., Inc. for purposes of section 18 of the Securities Exchange Act of 1934, as amended. A signed original of the written statement required by section 906 has been provided to Franklin Electric Co., Inc. and will be retained by Franklin Electric Co., Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 21 EXHIBIT (32)(ii) CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO 18 U.S.C. ---------------------------------------------------------------------------- SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF ---------------------------------------------------------------------------- 2002 ---- In connection with the Quarterly Report of Franklin Electric Co., Inc. (the "Company") on Form 10-Q for the period ending June 28, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gregg C. Sengstack, Senior Vice President, Chief Financial Officer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: xxxxxx xx, 2003 --------------------------- /s/ Gregg C. Sengstack --------------------------- Gregg C. Sengstack Senior Vice President, Chief Financial Officer and Secretary Franklin Electric Co., Inc. The certification accompanies the Report pursuant to section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by Franklin Electric Co., Inc. for purposes of section 18 of the Securities Exchange Act of 1934, as amended. A signed original of the written statement required by section 906 has been provided to Franklin Electric Co., Inc. and will be retained by Franklin Electric Co., Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 5