SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JULY 15, 2004
-------------
FRANKLIN ELECTRIC CO., INC.
---------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 0-362 35-0827455
------- ----- ----------
(STATE OR OTHER JURISDICTION OF (COMMISSION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) FILE NUMBER) IDENTIFICATION NO.)
400 EAST SPRING STREET
BLUFFTON, INDIANA 46714
------------------ -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(260) 824-2900
-------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
2
Item 7. Financial Statements, Pro Forma Financial Information and
------------------------------------------------------------------
Exhibits
--------
The following exhibit is furnished pursuant to Item 12: (99) Press Release,
dated July 15, 2004 issued by Franklin Electric Co., Inc.
Item 12. Disclosure of Results of Operations and Financial Condition
---------------------------------------------------------------------
The following information is furnished pursuant to Item 12, "Disclosure of
Results of Operations and Financial Condition."
On July 15, 2004, Franklin Electric Co., Inc. issued a press release
announcing its second-quarter 2004 earnings. A copy of the press release is
attached hereto as Exhibit (99) and hereby incorporated by reference.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FRANKLIN ELECTRIC CO., INC.
---------------------------
(Registrant)
Date July 16, 2004 By /s/ Gregg C. Sengstack
--------------- -------------------------------
Gregg C. Sengstack, Senior Vice
President, Chief Financial
Officer and Secretary (Principal
Financial and Accounting Officer)
3
Exhibit Index
-------------
EXHIBIT NO. (99) Press release, dated July 15, 2004 issued by Franklin
Electric Co., Inc.
EXHIBIT 99
ADDITIONAL EXHIBITS
Press Release
-------------
For Immediate Release For Further Information
Refer to: Gregg C. Sengstack
260-824-2900
FRANKLIN ELECTRIC COMPANY
REPORTS RECORD INCOME AND SALES
FOR THE SECOND QUARTER OF 2004
BLUFFTON, INDIANA - JULY 15, 2004 -- Franklin Electric Co., Inc.
(NASDAQ:FELE) reported record second quarter 2004 net income of $10.9
million, an increase of 16 percent from $9.4 million for the same period a
year ago. Diluted earnings per share for the second quarter were $0.48, a 14
percent increase from $0.42 for the second quarter of 2003.
In the third quarter of 2003, the Company announced its global manufacturing
realignment program. A program that - when substantially complete by the
third quarter of 2005 - will result in moving a significant amount of
production to lower cost regions of the world as well as a consolidation of
certain manufacturing operations. As previously disclosed, the Company
projected it will incur approximately $10 million of pre-tax restructuring
expenses as this program is implemented between the first quarter of 2004 and
the fourth quarter of 2005. Included in the above results for the second
quarter of 2004 are restructuring expenses of $1.4 million pre-tax ($0.9
million after tax).
Sales for 2004 were a second quarter record $106.1 million, an increase of
$12.3 million or 13 percent from $93.8 million for the same period a year
ago. Foreign currencies, particularly the euro, strengthened relative to the
U.S. dollar since the second quarter of 2003. The impact of this change in
exchange rates was $1.9 million increase in the Company's reported second
quarter 2004 sales from its operations outside of North America compared to
the same period in 2003.
Operating earnings in the second quarter of 2004 were a record $17.1 million,
up $3.0 million or 21 percent compared to $14.2 million a year ago. The
improvement in operating earnings was primarily driven by the record sales
and was partially offset by the restructuring expenses discussed above and
increased costs of certain commodities used in the manufacture of electric
motors.
R. Scott Trumbull, Chairman and Chief Executive Officer, stated, "We are
pleased with the continued broad based strength of our operations. Sales have
4
continued to increase across all markets, in particular, sales of our
electronic drives and controls have accelerated."
"Our manufacturing realignment continues on schedule and on budget. Last week
we notified personnel in Italy that we will be consolidating the operations
of our Motta di Livenza, Italy factory into our existing Wittlich, Germany
and expanding Brno, Czech Republic factories. Approximately 70 employees will
be affected. This is the final part of our previously announced manufacturing
realignment."
Severance and other costs of our consolidation in Europe as well as the costs
of completion of the previously announced Fueling Systems consolidation and
the ramp-up of our Linares facility are anticipated to be approximately $4
million (pre-tax) in the last half of 2004, with the majority of those costs
to be incurred in the third quarter. With the $2 million of pre-tax costs
already incurred in the first half of 2004, the total cost of the
manufacturing realignment program for 2004 is anticipated to be $6 million
pre-tax. Further, as previously disclosed, we continue to anticipate $4
million of pre-tax costs, to be incurred principally in 2005, to complete the
manufacturing realignment in North America and Europe.
Sales of submersible motors in the North America market were up about 11
percent compared to the second quarter of 2003. Sales increased in both
residential and agricultural end markets. SubDrive(tm) family of electronic
drives unit sales increased 53 percent from the same period for 2003. We are
adding additional production capacity to keep up with this growing demand. We
have started the eighteen month ramp up of our new 150,000 sq. ft. Linares,
Mexico motor manufacturing plant as well.
Submersible motor sales outside North America were up about 10 percent (when
comparing both quarters at the current year exchange rate). Sales were up in
all significant end markets: Europa (Europe, the Middle East and North
Africa), South Africa and Asia/Pacific. The new warehouse at our Wittlich
facility is complete; the expansion of our major manufacturing plant in Brno,
Czech Republic, is under roof and the facility is producing a newly designed
six inch water systems motor.
Fueling system product sales increased approximately 15 percent compared to
the second quarter of 2003 driven, in particular, by the 37 percent increase
in sales of INCON brand electronic monitoring equipment. We have completed
the move of the EBW and APT operations from Muskegon, Michigan to our new
state-of-the-art manufacturing and distribution facility in Madison,
Wisconsin. FE Petro manufacturing will be moved next month, completing the
consolidation of these three operations.
Second quarter sales of industrial motor products continued to increase
modestly. At the end of the quarter, we were pleased to learn that two major
food processors had advised plant personnel across the country to use
HydroDuty(tm) washdown motors in their toughest applications. The Company will
expand the HydroDuty(tm) product line offering later this year.
Franklin Electric, a technical leader in electric motors, drives and
controls, is the world's largest manufacturer of submersible water and
fueling systems motors, a manufacturer of underground fueling systems
5
hardware and flexible piping systems and a leader in engineered industrial
motor products.
########
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. Any forward looking statements contained herein involve risks and
uncertainties, including but not limited to, general economic and currency
conditions, various conditions specific to the Company's business and industry,
market demand, competitive factors, supply constraints, technology factors,
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. These risks and uncertainties may cause actual
results to differ materially from those indicated by the forward-looking
statements.
6
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Second Quarter Ended First Half Ended
-------------------- ----------------
July 3, June 28, July 3, June 28,
2004 2003 2004 2003
---- ---- ---- ----
Net sales $106,144 $93,840 $186,351 $163,618
Cost of sales 71,632 64,757 128,219 114,860
-------- ------- -------- --------
Gross profit 34,512 29,083 58,132 48,758
Selling and administrative
expenses 16,003 14,913 30,981 28,790
Restructuring expense 1,387 - 1,952 -
-------- ------- -------- --------
Operating income 17,122 14,170 25,199 19,968
Interest expense (93) (325) (199) (662)
Other income 10 101 28 387
Foreign exchange gain/(loss) (174) 231 (224) 682
-------- ------- -------- --------
Income before income taxes 16,865 14,177 24,804 20,375
Income taxes 5,987 4,809 8,805 6,979
-------- ------- -------- --------
Net income $ 10,878 $ 9,368 $ 15,999 $ 13,396
======== ======= ======== ========
Net income per share:
Basic $ 0.50 $ 0.44 $ 0.73 $ 0.62
======== ======= ======== ========
Diluted $ 0.48 $ 0.42 $ 0.70 $ 0.60
======== ======= ======== ========
Weighted average shares and
equivalent shares outstanding:
Basic 21,952 21,544 21,928 21,536
======== ======= ======== =======
Diluted 22,897 22,480 22,864 22,480
======== ======= ======== =======
7
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) July 3, Jan. 3,
2004 2004
---- ----
ASSETS:
Cash and equivalents $ 28,848 $ 29,962
Receivables 37,286 29,194
Inventories 67,314 54,653
Other current assets 13,003 14,232
-------- --------
Total current assets 146,451 128,041
Property, plant and equipment, net 86,672 83,916
Goodwill and other assets 72,112 70,014
-------- --------
Total assets $305,235 $281,971
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY:
Current maturities of long-term
debt and short-term borrowings $ 1,383 $ 1,392
Accounts payable 18,133 15,958
Accrued liabilities 36,287 28,051
-------- --------
Total current liabilities 55,803 45,401
Long-term debt 14,532 14,960
Deferred income taxes 4,354 4,354
Employee benefit plan obligations 18,474 18,697
Other long-term liabilities 5,762 5,621
Shareowners' equity 206,310 192,938
-------- --------
Total liabilities and shareowners' equity $305,235 $281,971
======== ========
8
FRANKLIN ELECTRIC CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) July 3, June 28,
2004 2003
---- ----
Cash flows from operating activities:
Net income $ 15,999 $ 13,396
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 7,758 6,750
Loss on disposals of plant and equipment 7 368
Changes in assets and liabilities:
Receivables (8,163) (6,203)
Inventories (12,904) (12,401)
Accounts payable and other accrued expenses 12,258 (253)
Employee benefit plans (3,713) (3,709)
Other, net 1,173 (357)
-------- --------
Net cash flows from operating activities 12,415 (2,409)
-------- --------
Cash flows from investing activities:
Additions to plant and equipment (10,110) (3,932)
Proceeds from sale of plant and equipment - 216
Additions to deferred assets (5) (421)
-------- --------
Net cash flows from investing activities (10,115) (4,137)
-------- --------
Cash flows from financing activities:
Borrowing on long-term debt - 6,648
Repayment of long-term debt (414) (224)
Borrowing on line of credit and short-term borrowings - 8,000
Repayment of line of credit and short-term borrowings - (8,006)
Proceeds from issuance of common stock 3,034 2,390
Purchases of common stock (3,091) (9,782)
Reduction of loan to ESOP Trust 232 233
Dividends paid (3,296) (2,905)
-------- --------
Net cash flows from financing activities (3,535) (3,646)
-------- --------
Effect of exchange rate changes on cash 121 771
-------- --------
Net change in cash and equivalents (1,114) (9,421)
Cash and equivalents at beginning of period 29,962 20,133
-------- --------
Cash and equivalents at end of period $ 28,848 $ 10,712
======== ========