EX-99 2 exhibit_99.htm PRESS RELEASE WITH FINANCIALS exhibit_99.htm
Exhibit Index

EXHIBIT NO. (99) Press release, dated July 28, 2008 issued by Franklin Electric Co., Inc.

EXHIBIT 99

ADDITIONAL EXHIBITS

Press Release

 
 
 


For Immediate Release
For Further Information
 
Refer to: John J. Haines
 
260-824-2900

FRANKLIN ELECTRIC COMPANY
REPORTS RECORD SALES IN SECOND QUARTER 2008 RESULTS

Bluffton, Indiana - July 28, 2008 -- Franklin Electric Co., Inc. (NASDAQ:FELE) reported diluted earnings per share of $0.66 for the second quarter of 2008, an increase of approximately 135 percent compared to second quarter of 2007 earnings per share of $0.28. Second quarter 2008 net income of $15.3 million increased approximately 130 percent compared to $6.6 million for the same period a year ago.

Second quarter sales were a record $201.7 million, up $49.2 million or 32 percent compared to $152.5 million in 2007.  Sales from businesses acquired during the last 12 months were $30 million and these businesses achieved organic growth of $4.5 million or 18 percent.  Sales revenue increased by $7.0 million in the quarter due to foreign exchange rate changes.  Overall organic growth for the quarter, including organic growth achieved by acquired businesses and foreign exchange rate changes, was $23.7 million or 16 percent.

Gross profit improved to 32.1 percent of sales in the second quarter of 2008 and was approximately 370 basis points higher than the second quarter of 2007.  The Company’s operating income was a record $26.4 million in the second quarter, up $15.3 million or about 140 percent compared to $11.1 million for the second quarter 2007. Operating margins for the quarter were 13.1 percent compared to 7.3 percent last year.

Franklin Electric Chairman and Chief Executive Officer R. Scott Trumbull stated, “We were particularly pleased with the margin improvement that we achieved during the second quarter in spite of the residential housing decline and weak general economic conditions in several key market areas. The improvement was broad based as operating margins in Water increased by 480 basis points and in Fueling by 590 basis points.  In both Water Systems and Fueling Systems we continued to gain share in key markets and experience significant sales increases in developing regions.  While we are benefiting from sales growth in California due to the vapor control mandate, we are laying a solid foundation for sustainable sales and earnings growth in our other Water and Fueling global markets.”

Water Systems sales worldwide were $157.4 million, up $37.4 million or 31 percent for the second quarter of 2008 compared to the same period for 2007.  The Water Systems segment achieved organic sales growth of 10 percent during the quarter.  Organic growth was driven by strong sales to the agricultural segment world wide, increased pump sales in the United States, and solid sales growth in developing regions.  Growth in these sectors offset generally weak sales to the residential market in the United States and portions of Western Europe.

 
 
 

Water Systems operating income was $26.2 million for the quarter, up $12.0 million or 85 percent versus the second quarter of 2007.  Operating margins improved versus prior year by 480 basis points.  Water Systems segment margin improvements were the result of higher sales volumes, which combined with spending controls, resulting in significant fixed cost leverage during the quarter.  Water Systems margins also benefited from reduced promotional price activity and favorable product mix shifts.

Fueling Systems sales worldwide were $44.3 million, an increase of $11.8 million or 37 percent for the second quarter of 2008 compared to the same period for 2007. All of the sales increase for the quarter was organic.  Fueling revenue growth was led by vapor recovery system sales in California and sales in international markets.

Fueling Systems operating income was $10.9 million, an increase of $4.8 million or about 80 percent versus second quarter 2007. Operating margins improved versus prior year by 590 basis points.  The margin improvement primarily resulted from fixed cost leverage due to surging sales.

The Company’s selling, general and administrative (“SG&A”) expenses increased by $6.5 million in the second quarter of 2008 compared to the second quarter last year. The acquisitions of Pump Brands (South Africa), the pump division of Monarch Industries (Canada), Schneider Motobombas (Brazil), and Western Pumps (United States) added approximately $5.6 million of SG&A expenses to the Water Systems segment for the second quarter of 2008. Other SG&A increases were primarily related to higher compensation expenses.  Second quarter SG&A expenses as a percentage of sales declined by 190 basis points versus prior year.

Fixed Costs (which we define as fixed manufacturing costs, restructuring costs and SG&A less commissions) leverage improved operating margin about 360 basis points during the second quarter of 2008 versus the second quarter 2007. The Company anticipates fixed spending leverage will improve operating margin about 220 basis points for the full year 2008 from 2007. The ramp up of the new pump plant in Linares, Mexico will cause the Company’s fixed spending rate to be greater in the second half than the first half of the year.  There were no restructuring charges in the second quarter of 2008 and there were $0.4 million in the second quarter of 2007.

Cash and equivalents were $42.8 million at the end of the second quarter of 2008 versus $63.8 million of cash and investments at the end of the second quarter 2007. Cash was used in the first half of 2008 as accounts receivable increased consistent with sales volume increases.  Inventory also increased overall during the first half of 2008 to support the increased demand in fueling and international water markets offset by decreases in the Water Systems inventory in the US. Other primary uses of cash during the first half of 2008 were for acquisitions and capital expenditures.

Additionally, on Friday, July 25, the Board of Directors of Franklin Electric declared a quarterly cash dividend of twelve and one half cents per share payable August 21, 2008 to shareowners of record on August 7, 2008.

 
 
 

Mr. Trumbull added:

“While pleased with the progress we have made to date, we are mindful of the challenges we anticipate in the second half of the year as we expect significant material and freight cost increases.   Our plan is to offset these cost increases with purchasing initiatives, productivity gains, and price increases, but weak economic conditions in several key market areas make our outlook less certain for sustaining the rate of performance improvement that we achieved during the first half of the year.” 

A conference call to review earnings and other developments in the business will commence at approximately 5:00pm EDT. The call-in number is 877-407-0778 for domestic calls and 201-689-8565 for international calls. A replay of the conference call will be available until midnight on August 4, 2008, by dialing 877-660-6853 for domestic calls and 201-612-7415 for international calls. The replay account number is 286 and the conference ID is 291620. 

Franklin Electric is a global leader in the production and marketing of systems and components for the movement of water and automotive fuels. Recognized as a technical leader in its specialties, Franklin serves customers around the world in residential, commercial, agricultural, industrial, municipal, and fueling applications.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including those relating to the Company’s financial results, business goals and sales growth, involve risks and uncertainties, including but not limited to, risks and uncertainties with respect to general economic and currency conditions, various conditions specific to the Company’s business and industry, weather conditions, new housing starts, market demand, competitive factors, changes in distribution channels, supply constraints, technology factors, litigation, 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, included in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ending December 29, 2007, Exhibit 99.1 attached thereto and in Item 1A of Part II of the Company’s Quarterly Reports on Form 10-Q. These risks and uncertainties may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements made herein are based on information currently available, and the Company assumes no obligation to update any forward-looking statements.


 
 
 
 

                                    FRANKLIN ELECTRIC CO., INC.
                              
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  
(Unaudited)
                              
                               
(In thousands, except per share amounts)
                          
                               
 
Second Quarter Ended
    
First Half Ended
      
 
June 28,
    
June 30,
    
June 28,
    
June 30,
  
 
 
  
2008
    
 
  
2007
      
2008
    
 
  
2007
  
                               
Net sales
$
201,696
    
$
152,529
    
$
377,706
    
$
283,025
  
                               
Cost of sales
  
136,979
      
109,216
      
261,530
      
200,783
  
                               
Gross profit
  
64,717
      
43,313
      
116,176
      
82,242
  
                               
Selling, general and administrative expenses
38,274
      
31,806
      
74,585
      
61,261
  
                               
Restructuring expense
  
           -
      
369
      
82
      
1,607
  
                               
Operating income
  
26,443
      
11,138
      
41,509
      
19,374
  
                               
Interest expense
  
(2,780)
      
(2,196)
      
(5,404)
      
(3,408)
  
Other income/(expense)
  
(314)
      
921
      
157
      
1,219
  
Foreign exchange gain/(loss)
  
(64)
      
399
      
(391)
      
646
  
                               
Income before income taxes
  
23,285
      
10,262
      
35,871
      
17,831
  
                               
Income taxes
  
8,004
      
3,622
      
12,442
      
6,294
  
                               
Net income
$
15,281
    
$
6,640
    
$
23,429
    
$
11,537
  
                               
Net income per share:
                              
   Basic
$
0.67
    
$
0.29
    
$
1.02
    
$
0.50
  
   Diluted
$
       0.66
    
$
       0.28
    
$
       1.01
    
$
       0.49
  
                               
Weighted average shares and equivalent
                          
   shares outstanding:
                              
   Basic
  
22,882
      
23,100
      
22,956
      
23,075
  
   Diluted
  
23,174
      
23,465
      
23,230
      
23,462
  
                               
 
 
 

             
             
                 FRANKLIN ELECTRIC CO., INC.
            
CONDENSED CONSOLIDATED BALANCE SHEETS
        
(Unaudited)
            
             
(In thousands)
June 28,
  
Dec. 29,
  
 
 
  
2008
  
 
  
2007
  
             
ASSETS:
            
             
Cash and equivalents
$
42,835
  
$
65,252
  
Receivables
  
116,515
    
64,972
  
Inventories
  
178,549
    
156,146
  
Other current assets
  
30,724
    
23,109
  
Total current assets
  
368,623
    
309,479
  
             
Property, plant and equipment, net
  
156,537
    
134,931
  
Goodwill and other assets
  
247,109
    
217,827
  
Total assets
$
772,269
  
$
662,237
  
             
             
LIABILITIES AND SHAREOWNERS' EQUITY:
            
             
Accounts payable
$
41,436
  
$
27,986
  
Accrued liabilities
  
64,519
    
52,265
  
Current maturities of long-term
            
   debt and short-term borrowings
  
70,453
    
10,398
  
Total current liabilities
  
176,408
    
90,649
  
             
Long-term debt
  
151,621
    
151,287
  
Deferred income taxes
  
13,190
    
11,686
  
Employee benefit plan obligations
  
23,530
    
24,713
  
Other long-term liabilities
  
5,234
    
5,358
  
             
Shareowners' equity
  
402,286
    
378,544
  
Total liabilities and shareowners' equity
$
772,269
  
$
662,237
  
             
             
             
             
             
             

 
 
 
           
FRANKLIN ELECTRIC CO., INC.
          
CONSOLIDATED STATEMENTS OF CASH FLOWS
          
(Unaudited)
          
           
           
(In thousands)
  
June 28,
    
June 30,
   
2008
    
2007
           
           
Cash flows from operating activities:
          
   Net income
$
23,429
  
$
11,537
   Adjustments to reconcile net income to net
          
      cash flows from operating activities:
          
      Depreciation and amortization
  
12,318
    
9,976
      Stock based compensation
  
2,196
    
2,400
      Deferred income taxes
  
782
    
1,095
      (Gain)/loss on disposals of plant and equipment
  
49
    
464
      Changes in assets and liabilities:
          
        Receivables
  
(46,106)
    
(23,112)
        Inventories
  
(17,013)
    
(30,411)
        Accounts payable and other accrued expenses
  
11,327
    
(1,583)
        Accrued income taxes
  
2,508
    
(4,258)
        Excess tax from share-based payment arrangements
  
(122)
    
(1,169)
        Employee benefit plans
  
(1,204)
    
1,125
        Other, net
  
(6,736)
    
(3,559)
Net cash flows from operating activities
  
(18,572)
    
(37,495)
Cash flows from investing activities:
          
  Additions to plant and equipment
  
(12,566)
    
(10,697)
  Proceeds from sale of plant and equipment
  
10
    
303
  Additions to other assets
  
(700)
    
(3)
  Purchases of securities
  
(9,000)
    
(146,700)
  Proceeds from sale of securities
  
9,000
    
124,607
  Cash paid for acquisitions
  
(38,331)
    
(13,331)
  Proceeds from sale of business
  
              -
    
1,310
Net cash flows from investing activities
  
(51,587)
    
(44,511)
Cash flows from financing activities:
          
  Proceeds from short-term debt
  
70,000
    
             -
  Repayment of short-term debt
  
(10,019)
    
             -
  Proceeds from long-term debt
  
83
    
160,000
  Repayment of long-term debt
  
(950)
    
(60,161)
  Proceeds from issuance of common stock
  
353
    
2,165
  Excess tax from share-based payment arrangements
  
122
    
1,169
  Purchases of common stock
  
(7,813)
    
(8,118)
  Reduction of loan to ESOP Trust
  
              -
    
200
  Dividends paid
  
(5,632)
    
(5,308)
Net cash flows from financing activities
  
46,144
    
89,947
Effect of exchange rate changes on cash
  
1,598
    
(212)
Net change in cash and equivalents
  
(22,417)
    
7,729
Cash and equivalents at beginning of period
  
65,252
    
33,956
Cash and equivalents at end of period
$
42,835
  
$
41,685