-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R7vXp+/VMa6SG0yoRgshSiRtc9M96cEqVDzbhhkiZeBz/q8h0NeW1F/V0IYzW864 oLiRz6c5uFG3r0mF0vPF2Q== 0000038725-97-000022.txt : 19971111 0000038725-97-000022.hdr.sgml : 19971111 ACCESSION NUMBER: 0000038725-97-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971110 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN ELECTRIC CO INC CENTRAL INDEX KEY: 0000038725 STANDARD INDUSTRIAL CLASSIFICATION: MOTORS & GENERATORS [3621] IRS NUMBER: 350827455 STATE OF INCORPORATION: IN FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00362 FILM NUMBER: 97711743 BUSINESS ADDRESS: STREET 1: 400 E SPRING ST CITY: BLUFFTON STATE: IN ZIP: 46714 BUSINESS PHONE: 2198242900 MAIL ADDRESS: STREET 1: 400 E SPRING STREET CITY: BLUFFTON STATE: IN ZIP: 46714 10-Q 1 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, 1997 ------------------ 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) (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 November 6, 1997 --------------------- ---------------- $.10 par value 5,957,833 shares FRANKLIN ELECTRIC CO., INC. Index PART I. FINANCIAL INFORMATION - --------------------------------- Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 27, 1997 (Unaudited) and December 28, 1996 Condensed Consolidated Statements of Income for the Third Quarter and Nine Months ended September 27, 1997 (Unaudited) and September 28, 1996 (Unaudited) Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 27, 1997 (Unaudited) and September 28, 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 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) Sept. 27, 1997 December 28, (Unaudited) 1996 ----------- ---- ASSETS Current assets: Cash and equivalents.................... $ 8,298 $ 22,968 Marketable securities................... 30,567 31,624 Receivables, less allowances of $1,490 and $1,435, respectively....... 21,601 25,134 Inventories (Note 2).................... 45,396 42,305 Other current assets (including deferred income taxes of $7,726 and $7,755, respectively)............. 9,422 9,485 -------- -------- Total current assets.................. 115,284 131,516 Property, plant and equipment, net (Note 3)............................ 38,789 40,097 Deferred and other assets................. 1,971 1,846 -------- -------- Total assets.............................. $156,044 $173,459 ======== ======== LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term borrowings................... $ 18 $ 21 Accounts payable........................ 8,944 14,049 Accrued expenses........................ 25,241 23,636 Income taxes............................ 2,009 4,339 -------- -------- Total current liabilities............. 36,212 42,045 Long-term debt............................ 20,160 20,276 Employee benefit plan obligations......... 7,401 6,904 Other long-term liabilities............... 3,911 4,228 Deferred income taxes..................... 184 183 Shareowners' equity: Common stock (Note 5)................... 593 638 Additional capital...................... 9,032 7,613 Retained earnings....................... 84,121 95,961 Stock subscriptions..................... (693) (997) Cumulative translation adjustment....... (2,342) (625) Loan to ESOP Trust...................... (2,292) (2,524) Minimum pension liability adjustment, net of taxes.......................... (243) (243) -------- -------- Total shareowners' equity............. 88,176 99,823 -------- -------- Total liabilities and shareowners' equity. $156,044 $173,459 ======== ======== See Notes to Condensed Consolidated Financial Statements. 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, 1997 1996 1997 1996 ---- ---- ---- ---- Net sales.............................. $85,610 $79,380 $225,745 $215,241 Costs and expenses: Cost of sales........................ 62,021 59,333 165,964 160,985 Selling and administrative expenses.. 13,858 11,431 36,826 32,476 Interest expense..................... 325 318 994 978 Other income, net.................... (263) (374) (1,225) (963) ------- ------- -------- -------- 75,941 70,708 202,559 193,476 Income before income taxes............. 9,669 8,672 23,186 21,765 Income taxes........................... 3,546 3,060 8,599 8,064 ------- ------- -------- -------- Net income............................. $ 6,123 $ 5,612 $ 14,587 $ 13,701 ======= ======= ======== ======== Per share data: Weighted average common shares....... 6,352 6,684 6,371 6,676 ======= ======= ======== ======== Net income per common share.......... $ .96 $ .84 $ 2.29 $ 2.05 ======= ======= ======== ======== Dividends per common share........... $ .15 $ .12 $ .42 $ .34 ======= ======= ======== ======== See Notes to Condensed Consolidated Financial Statements. FRANKLIN ELECTRIC CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended ----------------- Sept 27, Sept 28, 1997 1996 ---- ---- Cash flows from operating activities: Net income.................................. $14,587 $13,701 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization............. 5,781 6,487 Loss (Gain) on disposals of plant and equipment..................... 285 (53) Changes in assets and liabilities: Receivables............................. 4,770 2,374 Inventories............................. (5,051) (3,281) Other assets............................ (1,199) 454 Accounts payable and other accrued expenses...................... (4,963) (2,110) Employee benefit plan obligations....... 675 (1,397) Other long-term liabilities............. (270) (776) ------- ------- Net cash flows from operating activities................ 14,615 15,399 ------- ------- Cash flows from investing activities: Additions to plant and equipment............ (4,894) (2,220) Proceeds from sale of plant and equipment....................... 1,137 209 Purchase of marketable securities........... (33,270) - Proceeds from maturities of marketable securities................................ 34,327 - Other, net.................................. (88) (220) ------- ------- Net cash flows from investing activities.................... (2,788) (2,231) ------- ------- Cash flows from financing activities: Additions to long-term debt................. - 195 Repayment of long-term debt................. (78) (80) Repayment of short-term debt................ - (257) Purchase of common stock.................... (24,000) - Proceeds from issuance of common stock...... 893 592 Loan to ESOP Trust.......................... - (324) Repayment of loan to ESOP Trust............. 232 200 Proceeds from stock subscriptions........... 100 25 Dividends paid.............................. (2,477) (2,148) ------- ------- Net cash flows from financing activities.................... (25,330) (1,797) ------- ------- Effect of exchange rate changes on cash....... (1,167) 279 ------- ------- Net (decrease) increase in cash and equivalents..................... (14,670) 11,650 Cash and equivalents at beginning of period......................... 22,968 32,077 ------- ------- Cash and equivalents at end of period............................... $ 8,298 $43,727 ======= ======= 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 and nine months ended September 27, 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 - -------------------- Inventories consist of the following: (In thousands) Sept 27, December 28, 1997 1996 ---- ---- Raw Materials........................ $17,674 $15,958 Work in Process...................... 5,102 4,942 Finished Goods....................... 34,155 32,528 LIFO Reserve......................... (11,535) (11,123) ------- ------- Total Inventory...................... $45,396 $42,305 ======= ======= Note 3: Property, Plant and Equipment - -------------------------------------- Property, plant and equipment at cost consists of the following: (In thousands) Sept 27, December 28, 1997 1996 ---- ---- Land and Building.................... $ 27,003 $ 28,335 Machinery and Equipment.............. 97,297 95,457 -------- -------- 124,300 123,792 Allowance for Depreciation........... (85,511) (83,695) -------- -------- $ 38,789 $ 40,097 ======== ======== Note 4: Tax Rates - ------------------ 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 5,926,264 shares of common stock (10,000,000 shares authorized, $.10 par value) outstanding as of Sept 27, 1997. Note 6: Accounting Pronouncements - ---------------------------------- EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" which simplifies the method of computing earnings per share. Under the new requirements, primary earnings per share will be replaced with basic earnings per share and the dilutive effect of stock options will be excluded from the computation. This change in the computation is estimated to result in an approximately 6 percent higher earnings per share amount. 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. REPORTING COMPREHENSIVE INCOME In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements and is effective for fiscal years beginning after December 15, 1997. The adoption of this Statement is not expected to have a material impact on the presentation of the Company's financial statements. SEGMENT DISCLOSURES In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for reporting information about operating segments and for disclosures about products and services, geographic areas, and major customers. It is effective for fiscal years beginning after December 15, 1997. The adoption of this Statement is not expected to have a material impact on the presentation of the Company's financial statements. Note 7: Sale of Oil Dynamics, Inc. - ----------------------------------- On June 24, 1997, the Company announced the signing of a definitive agreement to sell its wholly-owned subsidiary, Oil Dynamics Inc. (ODI), to Baker Hughes Incorporated. At the end of the third quarter of 1997, the pending sale was awaiting the completion of an anti-trust review by the United States Justice Department. The sale was completed on October 24, 1997, at a selling price of $31.5 million, subject to post-closing adjustments. The Company estimates that it will recognize a gain, net of tax effect, of approximately $2 million from the sale of ODI. However, the final selling price is subject to post closing adjustments and the total amount of expenses resulting from the sale of ODI have not been finalized as of this time. Item 2. Management's Discussion And Analysis Of Financial Condition And - ------------------------------------------------------------------------ Results Of Operations - --------------------- Operations - ---------- Net sales for the third quarter of 1997 were $85.6 million, up 7.8 percent over 1996 third quarter net sales of $79.4 million. Year-to-date 1997 net sales were $225.8 million, up 4.9 percent from 1996 year-to-date net sales of $215.2 million. Both the quarter and year-to-date increase in sales was primarily from higher volume in the submersible water systems motors and from increased export sales by Oil Dynamics Inc. (ODI). ODI was a wholly owned subsidiary of the Company until its sale on October 24, 1997. Cost of sales as a percent of net sales for the third quarter of 1997 was 72.4 percent, a decrease from 74.7 percent for the same period in 1996. For the nine-month periods, cost of sales as a percent of net sales for 1997 was 73.5 percent compared to 74.8 percent for the same period in 1996. The decreases for both the quarter and year-to-date periods were the result of lower manufacturing costs. Net income for the third quarter of 1997 was $6.1 million, or $.96 per share, an increase of 9.1 percent compared to the third quarter of 1996 net income of $5.6 million, or $0.84 per share. Year-to-date 1997 net income was $14.6 million, or $2.29 per share, an increase of 6.5 percent compared to year-to- date 1996 net income of $13.7 million, or $2.05 per share. Selling and administrative expenses as a percent of net sales for the third quarter of 1997 was 16.2 percent compared to 14.4 percent for the same period in 1996. This was primarily attributed to commissions on the higher sales levels, employee medical costs, and to incentive compensation plans that derive the compensation amount from the price of the Company's stock. Selling and administrative expenses as a percent of net sales for the year-to-date 1997 was 16.3 percent, an increase from 15.1 percent for the same period of last year. The increase in year-to-date selling and administrative expenses was primarily a result of higher commissions paid due to the increase in export sales, employee medical costs, and employee compensation. Included in other income, net for the third quarter of 1997 was $.5 million of interest income and $.2 million of foreign currency transaction losses compared to $0.5 million of interest income and $.2 million of foreign currency transaction gains for the same period in 1996. Included in other income, net for the year-to-date 1997 and 1996 was $1.3 million of interest income and $.8 and $.2 million, respectively, of foreign currency transaction losses. Interest income was attributable to amounts invested principally in short-term US treasury bills and notes. Capital Resources and Liquidity - ------------------------------- Cash and marketable securities decreased $15.7 million during the first nine months 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. Working capital decreased $10.4 million during the first nine months of 1997, and the current ratio of the Company was 3.2 and 3.1 at September 27, 1997, and December 28, 1996, respectively. Subsequent to quarter end, the sale of ODI to Baker Hughes was completed at a selling price of $31.5 million subject to post-closing adjustments. PART II. OTHER INFORMATION 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 during the third quarter ended September 27, 1997. 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 November 6, 1997 By William H. Lawson --------------------- -------------------------------- William H. Lawson, Chairman and Chief Executive Officer (Principal Executive Officer) Date November 6, 1997 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) Third Quarter Ended Nine Months Ended ------------------- ----------------- Sept 27, Sept 28, Sept 27, Sept 28, 1997 1996 1997 1996 ---- ---- ---- ---- Net income available to common shares and common share equivalents.................. $6,123 $5,612 $14,587 $13,701 ====== ====== ======= ======= Common shares outstanding beginning of period................ 5,903 6,327 6,371 6,254 Weighted average of common shares issued during the period......................... 12 6 29 61 Weighted average of common shares repurchased during the period......................... - - (443) - Dilutive effect of options outstanding during the period......................... 437 351 414 361 ------ ------ ------- ------- Weighted average of common shares outstanding during the period......................... 6,352 6,684 6,371 6,676 ====== ====== ======= ======= Net income per weighted average common share............... $ .96 $ .84 $ 2.29 $ 2.05 ====== ====== ======= ======= EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR THE PERIOD ENDED SEPTEBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JAN-03-1998 SEP-27-1997 8,298 30,567 23,091 1,490 45,396 115,284 124,300 85,511 156,044 36,212 0 0 0 593 87,583 156,044 85,610 85,873 62,021 76,204 0 0 325 9,669 3,546 6,123 0 0 0 6,123 0.96 0.96
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