UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
---------
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
COMMISSION FILE NUMBER 0-362
FRANKLIN ELECTRIC DIRECTED INVESTMENT SALARY PLAN
(FULL TITLE OF THE PLAN)
FRANKLIN ELECTRIC CO., INC.
(EXACT NAME OF ISSUER 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 46714-3798
BLUFFTON, INDIANA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(260) 824-2900
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
2
FRANKLIN ELECTRIC DIRECTED INVESTMENT SALARY PLAN
TABLE OF CONTENTS
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Page
Number
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Report of Independent Registered Public Accounting Firm 3
Financial Statements:
Statements of Net Assets Available for
Benefits as of December 31, 2003 and 2002 4
Statement of Changes in Net Assets Available
for Benefits for the Year Ended December 31, 2003 5
Notes to Financial Statements 6-9
Supplemental Schedule at December 31, 2003:
Form 5500, Schedule H, Part IV, Item 4(i), Schedule of
Assets (Held at End of Year) 10
Signatures 11
Exhibit 23 - Independent Auditors' Consent 12
Exhibit 99 - Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 14
Supplemental Schedules not listed are omitted due to the absence of conditions
under which they are required.
3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE EMPLOYEE BENEFITS COMMITTEE OF FRANKLIN ELECTRIC CO., INC.:
We have audited the accompanying statements of net assets available for
benefits of the Franklin Electric Directed Investment Salary Plan as of
December 31, 2003 and 2002, and the related statement of changes in net
assets available for benefits for the year ended December 31, 2003. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and in accordance with generally
accepted auditing standards as established by the Auditing Standards Board
(United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at December 31,
2003 and 2002, and the changes in net assets available for benefits for the
year ended December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in
the table of contents is presented for the purpose of additional analysis and
is not a required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This schedule is the responsibility of the Plan's management. Such
schedule has been subjected to the auditing procedures applied in our audit of
the basic 2003 financial statements and, in our opinion, is fairly stated in
all material respects when considered in relation to the basic financial
statements taken as a whole.
/s/ DELOITTE & TOUCHE LLP
-------------------------
Deloitte & Touche LLP
May 27, 2004
4
FRANKLIN ELECTRIC DIRECTED INVESTMENT SALARY PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31, 2003 and 2002
----------------
2003 2002
---- ----
ASSETS
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Participant-directed investments, at
fair value (Note 3):
Short-term investments $ 1,070,900 $ 133,000
Franklin Electric Common Stock 30,239,400 27,213,100
U.S. Government and Government Agencies 3,794,300 4,263,600
Shares of Registered Investment Companies:
MFS Strategic Value Equity Fund 24,449,600 18,387,800
Invesco Structured Core Equity Fund 12,006,100 8,708,100
Bank One Intermediate Bond Fund 4,454,800 3,916,600
Wells Fargo Stable Return Fund 24,567,600 19,870,900
Participant loans 2,497,800 2,232,200
------------ -----------
Total investments 103,080,500 84,725,300
Receivables:
Employer contribution 248,000 192,000
Accrued investment income 3,900 200
------------ -----------
Total receivables 251,900 192,200
------------ -----------
TOTAL ASSETS 103,332,400 84,917,500
LIABILITIES
-----------
Fees payable - 3,600
------------ -----------
TOTAL LIABILITIES - 3,600
------------ -----------
NET ASSETS AVAILABLE FOR BENEFITS $103,332,400 $84,913,900
============ ===========
See notes to the financial statements.
5
FRANKLIN ELECTRIC DIRECTED INVESTMENT SALARY PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Year Ended December 31, 2003
----------------
Additions:
Interest and dividends $ 738,000
Net appreciation(depreciation) in fair
value of investments:
Franklin Electric Common Stock 6,743,500
MFS Strategic Value Equity Fund 5,055,500
Invesco Structured Core Equity Fund 2,442,800
Bank One Intermediate Bond Fund (58,300)
Wells Fargo Stable Return Fund 1,015,000
------------
Net Investment Gain 15,936,500
Contributions:
Employer 248,000
Employee 3,678,500
Rollover 2,262,800
Merger of Intelligent Controls, Inc.
defined contribution plan assets (Note 1) 908,900
Transfer from ESOP Diversification 173,400
------------
Total additions 23,208,100
Deductions:
Benefits paid to participants 4,684,700
Administrative expenses 91,400
Loan fees 13,500
------------
Total deductions 4,789,600
------------
Net increase 18,418,500
Net assets available for benefits,
beginning of year 84,913,900
------------
Net assets available for benefits,
end of year $103,332,400
============
See notes to the financial statements.
6
FRANKLIN ELECTRIC DIRECTED INVESTMENT SALARY PLAN
NOTES TO FINANCIAL STATEMENTS
As of December 31, 2003 and 2002 and
for the Year Ended December 31, 2003
-----------------
1. PLAN DESCRIPTION
--------------------
GENERAL - The Franklin Electric Directed Investment Salary Plan (the "Plan")
is a defined contribution employee benefit plan covering substantially all
eligible employees who elect to participate. Company matching contributions
for Bluffton hourly and non-exempt employees are made to the Plan. Company
matching contributions for all other eligible employees are made to the
Company-sponsored Employee Stock Ownership Plan ("ESOP").
The Plan is administered by the Franklin Electric Co., Inc. (the "Company")
Employee Benefits Committee ("Plan Administrator"), which is appointed by the
Company, and Wells Fargo Bank of Minnesota, N.A. ("Plan Trustee). The Plan is
subject to the provisions of the Employee Retirement Income Security Act
("ERISA") of 1974. Participants should refer to the Plan Document and Summary
Plan Description for more complete information.
CONTRIBUTIONS - Participating employees may elect to contribute from 1 percent
to 50 percent of their eligible compensation to the Plan, subject to IRS
limitations. The Company will contribute to the Plan or the ESOP an amount
equal to 100 percent of the first 1 percent and 50 percent of the next 4
percent of the participant's contribution, or up to 3 percent of each
employee's eligible compensation for the year, provided the Company's pre-tax
profits for the year exceed 6 percent of the Company's net worth at the
beginning of each year. Company contributions to the participant accounts are
funded in the first quarter following the plan year. Participating employees
50 years of age or older may also elect to contribute additional funds that
are not eligible for a company match, subject to IRS limitations.
On June 2, 2003, the defined contribution plan of Intelligent Controls Inc., a
wholly owned subsidiary of Franklin Electric Co., Inc., was merged into the
Plan. The fair value of assets associated with this plan was approximately
$908,900 at the time of the merger.
PARTICIPANT ACCOUNTS - Individual accounts are maintained for each Plan
participant. Each participant's account is credited with: (a) the
participant's contributions and withdrawals; (b) Company matching
contributions made to the Plan; and (c) Plan earnings and losses, less
expenses. Allocation of earnings and expenses are based on participants'
account balances.
VESTING - Participants are fully vested in their accounts at all times.
INVESTMENT OPTIONS - Participating employees direct the investment of their
contributions and account balances into various investment options offered by
the Plan. The Plan currently offers a Franklin Electric Common Stock Fund, a
strategic value equity fund, a structured core equity fund, a U.S. Government
and Government Agencies fund, an intermediate bond fund, and a stable return
collective investment fund as investment options for participants.
7
DIVERSIFICATION ELECTION for ESOP - Participants who have attained the age of
55 and have at least 10 years of participation in the ESOP are given the
opportunity to diversify up to 25% of their ESOP account balance into the Plan
during the first 90 days after the close of any Plan year.
PARTICIPANT LOANS - Participants may borrow from their accounts up to the
lesser of $50,000 or 50 percent of the Participant's account. Loans are
secured by the balance in the participant's account. Loan transactions are
treated as a transfer between the investment fund and the loan fund. Loan
terms range from 1 to 4 1/2 years for general purpose loans or up to 10 years
for the purchase of a primary residence and are repaid through payroll
deductions. Interest is charged at the prime rate plus one percent and is
credited to the participant's account.
All loan fees are paid by the participant and are deducted directly from the
assets of the participant's account.
BENEFITS - Participants may elect to receive a lump-sum distribution equal to
the value of their account or receive equal monthly or annual installments
over a specified period as defined by the Plan.
ADMINISTRATIVE EXPENSES - Administrative expenses are paid by the Plan as
provided in the plan document.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------
BASIS OF ACCOUNTING - The financial statements of the Plan are prepared under
the accrual method of accounting.
USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from these estimates. Investment securities, in general, are exposed
to various risks, such as interest rate, credit, and overall market
volatility. Due to the level of risk associated with certain investment
securities, it is reasonably possible that changes in the values of investment
securities will occur in the near term and that such changes could materially
affect the amounts reported in the statements of net assets available for plan
benefits.
INVESTMENT VALUATION - Investments in the Franklin Electric Co., Inc. Common
Stock, the Bank One Intermediate Bond Fund, the Federated U.S. Government and
Government Agencies fund, and the MFS Strategic Value Equity Fund are valued
at the last quoted sale or bid prices as reported on a recognized security
exchange. Shares of mutual funds are valued at quoted market prices, which
represent the net asset value of shares held by the Plan at year end.
Investments in the Wells Fargo Stable Return Fund and the Invesco Structured
Core Equity Fund are valued at the last reported sale or bid price.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the ex-
dividend date.
PARTICIPANT LOANS - Participant loans are valued at cost, which approximates
fair value.
8
PAYMENT OF BENEFITS - Benefit payments to participants are recorded upon
distribution. Amounts allocated to accounts of persons who have elected to
withdraw from the plan but have not yet been paid were not significant at
December 31, 2003 and 2002.
EXCESS CONTRIBUTIONS PAYABLE - The Plan is required to return contributions
received during the plan year in excess of the IRC limits.
3. INVESTMENTS
---------------
The following investments exceeded 5 percent of net assets at December 31,
2003 and 2002:
2003 2002
---- ----
Franklin Electric Common Stock (499,908
and 566,822 shares, respectively) $30,239,400 $27,213,100
Wells Fargo Stable Return Fund 24,567,600 19,870,900
Invesco Structured Core Equity Fund 12,006,100 8,708,100
MFS Strategic Value Fund $24,449,600 $18,387,800
4. TAX STATUS
--------------
The Internal Revenue Service has stated in a determination letter dated May 6,
1996, that the Plan, as then designed, met the requirements of Section 401(a)
of the Internal Revenue Code ("IRC"). On May 30, 2001, the Internal Revenue
Service stated in a determination letter that the Plan, as designed, continues
to meet the requirements of the IRC. The Plan Administrator believes the Plan
is currently operated in compliance with applicable IRC requirements and
therefore, the Plan's trust is exempt from federal income tax under section
501(a), and no provision for income taxes has been included in the Plan's
financial statements.
5. RELATED-PARTY TRANSACTIONS
------------------------------
Certain Plan investments are shares of funds managed by the Plan Trustee.
Fees paid by the Plan for investment management services were included as a
reduction of the return earned on each fund.
At December 31, 2003 and 2002, the plan held 499,908 and 566,822 units,
respectively, of common stock of Franklin Electric Co., Inc., the sponsoring
employer, with a cost basis of $9,945,677 and $10,950,126, respectively.
6. PLAN TERMINATION
--------------------
The Company has not expressed any intent to terminate the Plan. If the Plan
was terminated, the termination would be subject to provisions set forth by
ERISA, and the net assets of the Plan would be allocated among the
participants and the beneficiaries of the Plan in the order provided for in
ERISA.
9
7. NET ASSETS AVAILABLE BY FUND
---------------------------------
The net assets available for the Plan by fund as of December 31, 2003 and
2002, respectively, were as follows:
2003 2002
---- ----
Franklin Electric Common Stock Fund $ 31,559,400 $27,538,300
MFS Strategic Value Equity Fund 24,449,600 18,387,800
Wells Fargo Stable Return Fund 24,567,600 19,870,900
U.S Government and Government Agencies Fund 3,797,100 4,263,600
Invesco Structured Core Equity Fund 12,006,100 8,704,500
Bank One Intermediate Bond Fund 4,454,800 3,916,600
Participant Loans 2,497,800 2,232,200
------------ -----------
TOTAL NET ASSETS AVAILABLE $103,332,400 $84,913,900
============ ===========
8. NET APPRECIATION BY FUND
----------------------------
During 2003, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$15,198,500 as follows:
Franklin Electric Common Stock Fund $ 6,743,500
MFS Strategic Value Equity Fund 5,055,500
Wells Fargo Stable Return Fund 1,015,000
Invesco Structured Core Equity Fund 2,442,800
Bank One Intermediate Bond Fund (58,300)
-----------
NET APPRECIATION $15,198,500
===========
10
FRANKLIN ELECTRIC DIRECTED INVESTMENT SALARY PLAN
FORM 5500, SCHEDULE H, PART IV, ITEM 4(i), SCHEDULE OF ASSETS
(HELD AT END OF YEAR)
DECEMBER 31, 2003
-----------------
Description of Investment
Identity of Issue, Including Maturity Date,
Borrower, Lessor Interest Rate, Collateral
or Similar Party and Par or Maturity Value Fair Value
---------------- ------------------------- ----------
* U.S. Government Federated Government $ 3,794,300
Obligations Fund
* Wells Fargo Bank Short Term Investment Fund 1,070,900
of Minnesota
* Franklin Electric
Co., Inc. Common Stock 30,239,400
* Wells Fargo Bank
of Minnesota Stable Return Fund 24,567,600
MFS Strategic Value Equity Fund 24,449,600
Invesco Structured Core Equity Fund 12,006,100
Bank One Intermediate Bond Fund 4,454,800
Participant loans
(Interest rates
ranging from 4.75 to
10.50 percent and
maturities ranging
from 2003 to 2012 2,497,800
------------
$103,080,500
============
* Represents a party-in-interest as defined by ERISA.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Employee Benefits Committee has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
Franklin Electric Co., Inc.
Directed Investment Salary Plan
Date June 23, 2004 By /s/ GREGG C. SENGSTACK
------------- ----------------------
Gregg C. Sengstack
Chairman
Employee Benefits Committee
12
EXHIBIT 23
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statements of
Franklin Electric Co., Inc. on Form S-8 (file numbers 2-90330, 33-35958 and
333-59771) of our report dated May 27, 2004, appearing in the Annual Report on
Form 11-K of the Franklin Electric Directed Investment Salary Plan for the
year ended December 31, 2003.
/s/ DELOITTE & TOUCHE LLP
-------------------------
Deloitte & Touche LLP
June 23, 2004
13
EXHIBIT 99 - 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 Annual Report of the Franklin Electric Directed
Investment Salary Plan (the "Plan") on Form 11-K for the year ended December
31, 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 Franklin Electric Co., Inc., (the
"Company"), and Chairman of the Company's Employee Benefits Committee (the
"Plan Administrator"), 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 net assets available for benefits and changes in net
assets available for benefits of the Plan.
Date: June 23, 2004
-------------------------
/s/ Gregg C. Sengstack
-------------------------
Gregg C. Sengstack
Senior Vice President, Chief Financial Officer and Secretary,
Franklin Electric Co., Inc.
Chairman,
Employee Benefits Committee