EX-99.4 5 exhibit99_4.htm EXHIBIT 99.4 Exhibit 99.4

EXHIBIT 99.4
 
FRANKLIN ELECTRIC CO., INC. 
Little Giant Pump Company
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS


The following unaudited pro forma statements give effect to the acquisition of Little Giant Pump Company (the “Company”), a wholly-owned subsidiary of Tecumseh Products Company (the “Parent”), by Franklin Electric Co., Inc. on April 21, 2006 using the purchase method of accounting, after giving effect to the pro forma adjustments described in the accompanying notes. The unaudited pro forma combined condensed consolidated financial statements and related notes thereto should be read in conjunction with the audited and unaudited historical consolidated financial statements and notes of Franklin Electric Co., Inc. and Little Giant, as previously filed on Franklin Electric’s Annual Report on Form 10-K for the year ended December 31, 2005 and Franklin Electric’s Current Report on Form 8-K/A, respectively.

The unaudited pro forma combined condensed statements of operations for the year ended December 31, 2005 and March 31, 2006 give effect to the acquisition of Little Giant Pump Company as if it had occurred on January 1, 2005.  The unaudited pro forma combined condensed balance sheet as of March 31, 2006 is as if the acquisition occurred on March 31, 2006.  
The unaudited pro forma adjustments described in the accompanying notes are based upon preliminary estimates and assumptions that the management of Franklin Electric Co., Inc. believes are reasonable. The pro forma adjustments are based on the information and assumptions available at the time of the acquisition. The purchase price has been allocated on a preliminary basis, with the excess cost allocated to goodwill. These allocations are subject to change and will be complete pending a final fair value analysis of assets acquired and liabilities assumed. These unaudited pro forma combined condensed financial statements are prepared for informational purposes only and are not necessarily indicative of actual results or financial position that would have been achieved had the acquisition of Little Giant been consummated on the dates indicated and are not necessarily indicative of future operating results or financial position of the consolidated companies. The unaudited pro forma combined condensed financial statements do not give effect to any cost savings or incremental costs that may result from the integration of Franklin Electric Co., Inc. and Little Giant Pump Company.


 
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FRANKLIN ELECTRIC CO., INC.
Little Giant Pump Company
Unaudited Pro Forma Combined Condensed Balance Sheet
For The First Quarter Ended 2006


(In thousands)
 (
  
Franklin Electric
April 1, 2006
 
Little Giant
March 31, 2006
 
Pro-Forma
  
 
  
Pro-Forma
Combined
  
 
  
(Historical)
  
(Historical)
  
Adjustments
  
 
  
Condensed
  
Assets
  
 
  
 
          
 
  
Current assets:
  
 
  
 
  
 
  
 
  
 
  
                       
Cash and cash equivalents
  
$
69,378
  
$
217
  
$
(53,062
)
  
(2a
)
$
16,533
  
Receivables
    
42,446
    
16,910
                
59,356
  
Net inter-company receivable
    
-
    
11,128
    
(11,128
)
  
(2b
)
  
-
  
Inventories
    
80,929
    
30,515
                
111,444
  
Deferred income taxes
          
4,928
    
(4,928
)
  
(2e
)
  
-
  
Other current assets
   
14,900
    
285
                
15,185
  
                                 
Total current assets
    
207,653
    
63,983
    
(69,118
)
        
202,518
  
                                 
Property, plant and equipment, net
    
95,861
    
9,625
                
105,486
  
Deferred and other assets
   
22,497
                      
22,497
  
Goodwill and other long-lived assets
    
58,393
    
5,104
    
76,359
    
(2d
)
  
139,856
  
 
Total assets
  
$
384,404
  
$
78,712
  
$
7,241
      
$
470,357
  
 
                      
Liabilities and shareholders’ equity
                     
Current liabilities:
                                
Current maturities of long-term debt and short-term borrowings
  
$
1,309
  
$
-
              
$
1,309
  
Accounts Payable
    
20,508
    
9,531
                
30,039
  
Accrued liabilities
    
28,601
    
5,985
                
34,586
  
Employee benefit plan obligations
          
17,034
    
(17,034
)
  
(2c
)
  
-
  
Income taxes
    
3,433
    
437
                
3,870
  
Total current liabilities
    
53,851
    
32,987
    
(17,034
)
        
69,804
  
Long-term debt
    
12,350
    
-
    
70,000
    
(2a
)
  
82,350
  
Deferred income taxes
    
4,369
    
353
    
(353
)
  
(2e
)
  
4,369
  
Employee benefit plan obligations
    
25,899
                      
25,899
  
Other long-term liabilities
    
5,630
                      
5,630
  
                                 
Shareholders’ equity:
                     
Common shares
    
2,265
    
1
    
(1
)
  
(2b
)
  
2,265
  
Additional capital
    
80,030
    
8,753
    
(8,753
)
  
(2b
)
  
80,030
  
Retained earnings
    
197,625
    
36,618
    
(36,618
)
  
(2b
)
  
197,625
  
Loan to ESOP trust
    
(200
)
  
-
                
(200
)
Accumulated other comprehensive loss
    
2,585
    
-
            
2,585
  
Total shareholders’ equity
    
282,305
    
45,372
    
(45,372
)
        
282,305
  
 
                      
 Total liabilities and shareholders’
equity
  
$
384,404
  
$
78,712
  
$
7,241
      
$
470,357
  

See notes to pro forma combined condensed financial statements

 
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FRANKLIN ELECTRIC CO., INC.
Little Giant Pump Company
Unaudited Pro Forma Combined Condensed Statement of Income
For The Year Ended December 31, 2005

 
 
  
Franklin Electric
 
Little Giant
 
 
  
Pro-Forma
  
 
  
Pro-Forma
Combined
  
(In thousands, except per share data)
 
    
(Historical
)
  
(Historical
)
      
Adjustments
        
Condensed
  
                           
Net sales
  
$
439,559
  
$
106,325
              
$
545,884
  
Cost of sales
    
291,745
    
75,834
                
367,579
  
Gross profit
    
147,814
    
30,491
                
178,305
  
                             
Selling and administrative expenses
    
75,448
    
22,170
                      
97,618
  
Restructuring expense 
    
1,920
    
-
                      
1,920
  
Operating income
    
70,446
    
8,321
                    
78,767
  
                                       
Interest expense
    
(766
)
  
-
        
(6,113
)
  
(3a
)
  
(6,879
)
Other income/(expense), net
    
1,200
    
(50
)
  
))
)
          
1,150
  
Foreign exchange income
    
213
                            
213
  
                                       
Income before income taxes
    
71,093
    
8,271
          
(6,113
)
        
73,251
  
Income taxes
    
25,084
    
3,159
          
(2,398
)
  
(3b
)
  
25,845
  
                                       
Net income
  
$
46,009
  
$
5,112
      
$
(3,715
)
      
$
47,406
  
 
                          
Per share data:
                                      
Basic earnings per share
  
$
2.07
                  
$
2.14
  
 
                          
Diluted earnings per share
  
$
1.98
                  
$
2.04
  
                                       
Dividends per common share
  
$
0.38
                          
$
0 .38
  
 
See notes to pro forma combined condensed financial statements


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FRANKLIN ELECTRIC CO., INC.
Little Giant Pump Company
Unaudited Pro Forma Combined Condensed Statement of Income
For The First Quarter Ended 2006

 
   
Franklin Electric
April 1, 2006
 
Little Giant
March 31, 2006
  
Pro-Forma
  
 
  
Pro-Forma Combined
  
(In thousands, except per share data)  
  
(Historical)
  
(Historical)
  
Adjustments
  
 
  
Condensed
  
   
 
  
2
  
 
  
 
  
 
  
Net sales
  
$
110,980
  
$
26,819
          
$
137,799
  
Cost of sales
    
74,388
    
19,283
            
93,671
  
Gross profit
    
36,592
    
7,536
            
44,128
  
1h
                        
Selling and administrative expenses
    
21,615
    
6,610
                
28,225
  
Operating income
    
14,977
    
926
                
15,903
  
                                 
Interest expense
    
(193
)
  
-
    
(1,406
)
  
(3a
)
  
(1,599
)
Other income, net
   
445
    
319
            
764
  
Foreign exchange loss
    
(45
)
                    
(45
)
                                 
Income before income taxes
    
15,184
    
1,245
    
(1,406
)
        
15,023
  
Income taxes
    
5,485
    
436
    
(494
)
  
(3b
)
  
5,427
  
                                 
Net Income
  
$
9,699
  
$
809
  
$
(912
)
      
$
9,596
  
 
                      
Per share data:
                                
Basic earnings per share
  
$
0.43
              
$
0.42
  
 
                      
Diluted earnings per share
  
$
0.42
              
$
0.42
  
                                 
Dividends per common share
  
$
0.10
                    
$
0.10
  
 
See notes to pro forma combined condensed financial statements



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FRANKLIN ELECTRIC CO., INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
 
1.     Basis of Pro Forma Presentation
 
On April 21, 2006, Franklin Electric Co., Inc. completed the acquisition of Little Giant Pump Company, formerly a wholly-owned subsidiary of Tecumseh Products Company.  The unaudited pro forma combined condensed statements of operations for the year ended December 31, 2005 and March 31, 2006 give effect to the acquisition of Little Giant Pump Company as if it had occurred on January 1, 2005. The unaudited pro forma combined condensed balance sheet as of March 31, 2006 is as if the acquisition occurred on March 31, 2006.  The unaudited pro forma information is based on the historical consolidated financial statements of Franklin Electric and Little Giant Pump Company, as described in the pro forma financial statements, under the purchase method of accounting and accordingly, the respective assets acquired and liabilities assumed have been recorded at their fair market value and consolidated into the net assets of Franklin Electric.
 
A summary of the preliminary purchase price allocation for the acquisition, as if the purchase occurred on March 31, 2006, is as follows:
 
(In thousands)
      
        
Purchase Price:
        
Initial purchase price paid
  
$
120,801
  
Transaction costs paid and accrued
    
2,044
  
Total estimated purchase consideration
  
$
122,845
  
         
Preliminary allocation of purchase price:
      
Net working capital excluding cash
  
$
31,757
  
Property and equipment
    
9,625
  
Goodwill and other long-lived assets
    
81,463
  
Purchase price
  
$
122,845
  
 
Based upon the preliminary purchase price allocation, the total purchase price exceeded the net assets acquired and liabilities assumed when adjusted to fair market value and resulted in goodwill in the pro forma combined condensed financial information of approximately $81,500. These allocations are subject to change, pending post-closing adjustments, and will be considered complete upon a final fair value analysis of assets acquired and liabilities assumed. Thereafter, the adjusted purchase price will be assigned to identifiable tangible and intangible assets. Identifiable tangible assets will be depreciated over their determined useful life. In accordance with SFAS No. 142 “Goodwill and Other Intangible Assets”, the identifiable intangible assets will be amortized over their useful life, based on a pattern of economic benefit or consumption.
 

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2.     Unaudited Pro Forma Combined Condensed Balance Sheet
 
The following adjustments were applied to the Pro Forma Balance Sheet:
 
 
(In thousands)
First Quarter Ended 2006
(a)
Increase cash for amount borrowed under long-term debt of $70,000 less $122,845 in Little Giant purchase consideration and the Company’s cash balance of $217.
 
Record additional Company long-term debt.
($53,062)
 
 
 
$70,000
(b)
Eliminate historic Little Giant Pump Company Shareholder’s Equity, and net inter-company receivables.
($1)
($8,753)
($36,618)
($11,128)
(c)
Eliminate the allocated Little Giant Pump Company post retiree medical benefits, which were administered by the Parent company. With the subsequent acquisition of Little Giant Pump Company by Franklin Electric Co., Inc (see Note 6) the liability recognized by the Parent company will no longer be allocated to the Company.
($17,034)
(d)
Adjust to record Little Giant Pump Company goodwill for excess of purchase price over the preliminary fair values of the assets acquired less the liabilities assumed in accordance with SFAS No. 142 “Goodwill and other Intangible Assets”.
Eliminate the existing Company goodwill.
$81,463
 
 
 
($5,104)
(e)
Eliminate deferred income taxes
($4,928)
($353)

3.     Unaudited Pro Forma Combined Condensed Statement of Income
 
The following adjustments were applied to the Pro Forma Statement of Income:
 
 
 
(In thousands)
Year Ended
December 31, 2005
First Quarter Ended
2006
(a)  
Adjust Franklin Electric interest expense to reflect additional Franklin Electric long-term debt associated with the acquisition of Little Giant Pump Company. The offset to this expense is recorded as accrued liabilities in the balance sheet. The average interest rate applied is 5.3 %.
($6,113)
($1,406)
 
 
(b)
Adjust pro forma income taxes at the effective income tax rate of Franklin Electric for the tax effect of net changes in the results of operations.  The offset to this expense is recorded as income taxes in the balance sheet.
($2,398)
($494)

4.  
If interest rates for the portion of the Company’s long-term debt based on variable rates were to change 1/8 percent for the year ended December 31, 2005 and for the first quarter ended 2006, interest expense would have changed $144 and $33, respectively.
 
 
 
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