-----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, MctjIQW+IV4YwbuTuIAs7IzjnqHV2q5kkSZ2gzbcEbBZCG2dkFyVfXKc5xBAzYQ5 lSFTR1WABwijgoclTfmAVw== 0000038725-98-000008.txt : 19980515 0000038725-98-000008.hdr.sgml : 19980515 ACCESSION NUMBER: 0000038725-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980514 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: 98620383 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 April 4, 1998 ------------- 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 May 14, 1998 --------------------- --------------- $.10 par value 5,881,409 shares Page 1 of 11 2 FRANKLIN ELECTRIC CO., INC. Index Page PART I. FINANCIAL INFORMATION Number - --------------------------------- ------ Item 1. Financial Statements Condensed Consolidated Balance Sheets as of April 4, 1998 (Unaudited) and January 3, 1998........................... 3 Condensed Consolidated Statements of Income for the Three Months Ended April 4, 1998 and March 29, 1997 (Unaudited).. 4 Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 4, 1998 and March 29, 1997 (Unaudited).. 5 Notes to Condensed Consolidated Financial Statements (Unaudited).............. 6- 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 9 PART II. OTHER INFORMATION - ----------------------------- Item 4. Submission of Matters to a Vote of Security Holders............................ 10 Item 6. Exhibits and Reports on Form 8-K.............. 10 Signatures................................................ 11 - ---------- 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements - ----------------------------- FRANKLIN ELECTRIC CO., INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) April 4, January 3, 1998 1998 (Unaudited) (Audited) --------- ------- ASSETS Current assets: Cash and equivalents.................... $ 28,009 $ 23,191 Marketable securities................... 31,731 48,497 Receivables, less allowances of $1,330 and $1,349, respectively....... 18,318 16,978 Inventories (Note 2).................... 40,253 31,259 Other current assets (including deferred income taxes of $8,396 and $7,490, respectively)............. 9,407 8,575 -------- -------- Total current assets.................. 127,718 128,500 Property, plant and equipment, net (Note 3)............................ 32,549 32,357 Deferred and other assets (including deferred income taxes of $1,010 and $1,001, respectively)............... 2,086 2,253 -------- -------- Total assets.............................. $162,353 $163,110 ======== ======== LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Current maturities of long-term debt and short-term borrowings........ $ 1,018 $ 1,196 Accounts payable........................ 8,006 10,472 Accrued expenses........................ 22,919 24,346 Income taxes............................ 4,264 4,513 -------- -------- Total current liabilities............. 36,207 40,527 Long-term debt............................ 19,149 19,163 Employee benefit plan obligations......... 7,801 7,237 Other long-term liabilities............... 3,328 3,342 Shareowners' equity: Common stock (Note 5)................... 588 585 Additional capital...................... 12,022 10,295 Retained earnings....................... 88,563 87,508 Stock subscriptions..................... (205) (625) Loan to ESOP Trust...................... (2,059) (2,292) Accumulated other comprehensive loss (Note 7)......................... (3,041) (2,630) -------- -------- Total shareowners' equity............. 95,868 92,841 -------- -------- Total liabilities and shareowners' equity. $162,353 $163,110 ======== ======== See Notes to Condensed Consolidated Financial Statements. 4 FRANKLIN ELECTRIC CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Three Months Ended ------------------ April 4, March 29, 1998 1997 ---- ---- Net sales................................. $56,014 $64,200 Costs and expenses: Cost of sales........................... 40,834 47,709 Selling and administrative expenses..... 9,727 11,464 Interest expense........................ 314 345 Other income, net....................... (875) (497) ------- ------- 50,000 59,021 Income before income taxes................ 6,014 5,179 Income taxes.............................. 2,354 1,984 ------- ------- Net income................................ $ 3,660 $ 3,195 ======= ======= Per share data (Note 6): Net income per common share............. $ .63 $ .53 ======= ======= Net income per common share, assuming dilution.................... $ .58 $ .49 ======= ======= Dividends per common share.............. $ .15 $ .12 ======= ======= See Notes to Condensed Consolidated Financial Statements. 5 FRANKLIN ELECTRIC CO., INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended ------------------ April 4, March 29, 1998 1997 ---- ---- Cash flows from operating activities: Net income................................ $ 3,660 $ 3,195 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization........... 1,786 1,816 (Gain)/loss on disposals of plant and equipment......................... (9) 38 Changes in assets and liabilities: Receivables........................... (1,505) (2,083) Inventories........................... (9,383) (10,688) Other assets.......................... (864) 241 Accounts payable and other accrued expenses............................ (3,946) (6,236) Employee benefit plan obligations..... 602 777 Other long-term liabilities........... (5) (3) ------- ------- Net cash flows from operating activities.............. (9,664) (12,943) ------- ------- Cash flows from investing activities: Additions to plant and equipment.......... (1,679) (354) Proceeds from sale of plant and equipment............................... 10 964 Proceeds from maturities of marketable securities ............................. 16,766 16,704 ------- ------- Net cash flows from investing activities.................. 15,097 17,314 ------- ------- Cash flows from financing activities: Repayment of long-term debt............... (7) - Repayment of line of credit............... (174) - Proceeds from issuance of common stock.... 1,484 399 Purchase of common stock.................. (1,728) (24,000) Proceeds from stock subscriptions......... 352 100 Reduction of loan from ESOP Trust......... 233 232 Dividends paid............................ (881) (707) ------- ------- Net cash flows from financing activities.................. (721) (23,976) ------- ------- Effect of exchange rate changes on cash..... 106 144 ------- ------- Net change in cash and equivalents.......... 4,818 (19,461) Cash and equivalents at beginning of period....................... 23,191 22,968 ------- ------- Cash and equivalents at end of period....... $28,009 $ 3,507 ======= ======= 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 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 April 4, 1998 are not necessarily indicative of the results that may be expected for the year ending January 2, 1999. 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 January 3, 1998. Note 2: Inventories - -------------------- Inventories consist of the following: (In thousands) April 4, January 3, 1998 1998 ---- ---- Raw Materials........................ $10,850 $11,119 Work in Process...................... 5,004 5,157 Finished Goods....................... 34,451 24,911 LIFO Reserve......................... (10,052) (9,928) ------- ------- Total Inventory...................... $40,253 $31,259 ======= ======= Note 3: Property, Plant and Equipment - -------------------------------------- Property, plant and equipment, at cost, consists of the following: (In thousands) April 4, January 3, 1998 1998 ---- ---- Land and Building.................... $20,367 $20,018 Machinery and Equipment.............. 82,989 82,134 ------- ------- 103,356 102,152 Allowance for Depreciation........... 70,807 69,795 ------- ------- $32,549 $32,357 ======= ======= Note 4: Tax Rates - ------------------ The effective tax rate on income before income taxes in 1998 and 1997 varies from the United States statutory rate of 35 percent principally due to the effect of state and foreign income taxes. 7 Note 5: Shareowners' Equity - ---------------------------- The Company had 5,880,409 shares of common stock (10,000,000 shares authorized, $.10 par value) outstanding as of April 4, 1998. During the first quarter of 1998, pursuant to the stock repurchase program authorized by the Company's Board of Directors, the Company repurchased a total of 17,293 shares for $1.1 million. All repurchased shares were retired. Note 6: Earnings Per Share - --------------------------- Following is the computation of basic and diluted earnings per share: (In thousands, Three Months Ended except per share amounts) ------------------ April 4, March 29, 1998 1997 ---- ---- Numerator: Net Income.......................... $3,660 $3,195 ====== ====== Denominator: Basic Weighted average common shares..... 5,818 6,010 Diluted Effect of dilutive securities: Employee and director incentive stock options and awards........ 491 458 ------ ------ Adjusted weighted average common shares.......................... 6,309 6,468 ====== ====== Basic earnings per share.............. $ .63 $ .53 ====== ====== Diluted earnings per share............ $ .58 $ .49 ====== ====== 8 Note 7: Other Comprehensive Income - ----------------------------------- The Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" in the first quarter of 1998. Comprehensive income for the three months ended April 4, 1998 and March 29, 1997 is as follows: (In thousands) Three Months Ended ------------------ April 4, March 29, 1998 1997 ---- ---- Net income.................................. $ 3,660 $ 3,195 Other comprehensive loss: Foreign currency translation adjustments.. (411) (740) ------- ------- Comprehensive income, net of tax............ $ 3,249 $ 2,455 ======= ======= Accumulated other comprehensive loss consists of the following: (In thousands) April 4, January 3, 1998 1998 ---- ---- Cumulative translation adjustment........... $(2,805) $(2,394) Minimum pension liability adjustment, net of tax................................ (236) (236) ------- ------- $(3,041) $(2,630) ======= ======= Note 8: Accounting Pronouncements - ---------------------------------- Disclosures about Pensions and Other Postretirement Benefits - ------------------------------------------------------------ In February 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" (SFAS No. 132). This statement revises employers' disclosures about pension and other postretirement benefits. It does not change the measurement or recognition of these plans. SFAS No. 132 requires additional information on changes in the benefit obligations and fair values of plan assets and eliminates certain disclosures that are no longer considered useful. The Company will include the new disclosures in the notes to its financial statements beginning with the 1998 fiscal year end financial reports. 9 Item 2. Management's Discussion And Analysis Of Financial Condition And - ------------------------------------------------------------------------ Results Of Operations - --------------------- Operations - ---------- Net sales for the first quarter of 1998 were $56.0 million, a 12.7 percent decrease from 1997 first quarter net sales of $64.2 million. Prior year net sales included the sales of Oil Dynamics Inc. (ODI). ODI was a previously wholly owned subsidiary that was sold in October 1997. Net sales for the Company's ongoing operations increased due to higher volume in the submersible water systems motors and changes in the mix of products sold. Net income for the first quarter of 1998 was $3.7 million, or $.58 per diluted share, compared to net income of $3.2 million, or $.49 per diluted share, for the same period a year ago. Since the beginning of 1997, the Company has repurchased approximately 632,000 of its outstanding common shares. Cost of sales as a percentage of net sales for the first quarter of 1998 was 72.9 percent compared to 74.3 percent for the same period in 1997. The improvement is primarily a result of selling ODI and productivity improvements. Selling and administrative expenses as a percent of net sales for the first quarter of 1998 was 17.4 percent compared to 17.9 percent for the same period in 1997. Interest expense was $0.3 million for both the first quarter of 1998 and 1997. Included in other income, net, for the first quarter of 1998 was $1.0 million of interest income and $0.1 million of foreign currency losses. Interest income was $0.5 million and foreign currency losses were $0.5 million for the same period in 1997. Interest income was attributable to amounts invested principally in short-term US treasury and agency securities. Capital Resources and Liquidity - ------------------------------- Cash, cash equivalents and marketable securities decreased $11.9 million during the first quarter of 1998. The principal use of cash for operating activities was the typical seasonal increase in inventories. Working capital increased $3.5 million during the first quarter of 1998 and the current ratio was 3.5 and 3.1 at the end of the first quarter of 1998 and 1997, respectively. 10 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ The 1998 Annual Meeting of Shareholders of the Company was held on April 17, 1998 for the following purposes: 1) To elect two directors for terms expiring at the 2001 Annual Meeting of Shareholders; 2) To approve an amendment to the Franklin Electric Co., Inc. Amended 1988 Executive Stock Purchase Plan; 3) To approve an amendment to the Restated Certificate of Incorporation to increase the number of shares of authorized common stock; and 4) To ratify the appointment of Deloitte & Touche LLP as independent auditors for the 1998 fiscal year. The results were: 1) Nominees for Director For Withhold Authority --------------------- --- ------------------ William H. Lawson 5,513,275 68,206 Donald J. Schneider 5,513,265 68,216 For Against Abstain --- ------- ------- 2) Amendment to the Amended 1988 Executive Stock Purchase Plan 4,871,618 115,914 17,116 3) Amendment to increase the number of shares of authorized common stock 5,175,339 400,376 5,766 4) Ratification of Deloitte & Touche LLP 5,574,032 4,615 2,834 Total shares represented at the Annual Meeting in person or by proxy were 5,581,481 of a total of 5,870,960 shares outstanding. This represented 95.1 percent of Company common stock and constituted a quorum. Total broker non- votes related to the proposal to amend the Amended 1988 Executive Stock Purchase Plan were 576,833 shares. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits None. (b) Reports on Form 8-K None. 11 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 May 14, 1998 By /s/ William H. Lawson ------------------------- ---------------------------------- William H. Lawson, Chairman and Chief Executive Officer (Principal Executive Officer) Date May 14, 1998 By /s/ Jess B. Ford ------------------------- ---------------------------------- Jess B. Ford, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR THE PERIOD ENDED APRIL 4, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JAN-02-1999 APR-04-1998 28,009 31,731 19,648 1,330 40,253 127,718 103,356 70,807 162,353 36,207 0 0 0 588 95,280 162,353 56,014 56,889 40,834 50,875 0 0 314 6,014 2,354 3,660 0 0 0 3,660 .63 .58
-----END PRIVACY-ENHANCED MESSAGE-----