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) OCTOBER 14, 2004
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FRANKLIN ELECTRIC CO., INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 0-362 35-0827455
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(STATE OR OTHER JURISDICTION OF (COMMISSION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) FILE NUMBER) IDENTIFICATION NO.)
400 EAST SPRING STREET
BLUFFTON, INDIANA 46714
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(260) 824-2900
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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Item 2.02. Results of Operations and Financial Condition
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The following information is furnished pursuant to Item 2.02, "Results of
Operations and Financial Condition."
On October 14, 2004, Franklin Electric Co., Inc. issued a press release
announcing its third-quarter 2004 earnings. A copy of the press release is
attached hereto as Exhibit (99) and hereby incorporated by reference.
Item 9.01. Financial Statements and Exhibits
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The following exhibit is furnished pursuant to Item 9.01 "Financial
Statements and Exhibits": (99) Press Release, dated October 14, 2004 issued
by Franklin Electric Co., Inc.
SIGNATURES
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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.
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(Registrant)
Date October 18, 2004 By /s/ Gregg C. Sengstack
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Gregg C. Sengstack, Senior Vice
President, Chief Financial
Officer and Secretary (Principal
Financial and Accounting Officer)
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Exhibit Index
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EXHIBIT NO. (99) Press release, dated October 14, 2004 issued by Franklin
Electric Co., Inc.
EXHIBIT 99
ADDITIONAL EXHIBITS
Press Release
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For Immediate Release For Further Information
Refer to: Gregg C. Sengstack
260-824-2900
FRANKLIN ELECTRIC COMPANY
REPORTS RECORD INCOME AND SALES
FOR THE THIRD QUARTER OF 2004
BLUFFTON, INDIANA - OCTOBER 14, 2004 -- Franklin Electric Co., Inc.
(NASDAQ:FELE) reported record third quarter 2004 net income of $11.1
million, an increase of 6 percent from $10.5 million for the same period a
year ago. Diluted earnings per share for the third quarter were $0.48, a 4
percent increase from $0.46 for the third quarter of 2003. For the first
three quarters of 2004 net income was $27.1 million, an increase of 13
percent from $23.9 million for the same period in 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 consolidating
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 third
quarter of 2004 are restructuring expenses of $1.7 million pre-tax ($1.1
million after tax). For the first three quarters of 2004 restructuring
expenses were $3.7 million ($2.4 million after tax).
Sales for 2004 were a third quarter record $110.3 million, an increase of
$10.6 million or 11 percent from $99.7 million for the same period a year
ago. Foreign currencies, particularly the euro, strengthened relative to the
U.S. dollar since the third quarter of 2003. The impact of this change in
exchange rates was a $2.2 million increase in the Company's reported third
quarter 2004 sales from its operations outside of North America compared to
the same period in 2003.
Operating earnings in the third quarter of 2004 were a record $17.5 million,
up $1.7 million or 11 percent compared to $15.8 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
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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 our record results, which were achieved even with the costs
associated with our manufacturing realignment program which remains on plan
and on budget. However, some of the strength in sales in North America Water
Systems came from our original equipment manufacturer (OEM) customers buying
ahead of a price increase precipitated by enormous increases in the cost of
our raw materials, particularly steel and copper, as well as the realignment
of our pricing as part of our previously announced plan to sell to Water
Systems Distributors as well as pump manufacturers."
"In response to our announced change in distribution strategy, our two
largest customers, Pentair and ITT have filed suit challenging our new
pricing and distribution programs. At the request of Pentair, the U.S.
District Court for the Northern District of Ohio has temporarily delayed the
implementation of our new pricing and distribution strategy until the court
has an opportunity to hear from the parties at a hearing currently scheduled
for October 18, 2004."
"While our underlying business remains strong, and we are pleased by the
initial favorable reaction from most distributors to our new sales strategy,
our fourth quarter sales will be hurt by the OEM buy-up mentioned above.
Also, the fourth quarter this year will include approximately $2 million pre-
tax restructuring expenses associated with our global manufacturing
realignment program."
Third quarter sales of submersible motors in the North America market were up
about 14 percent compared to the third quarter of 2003. Sales increased in
both residential and agricultural end markets. SubDrive(tm) family of
Electronic drives unit sales increased 43 percent from the same period for
2003. The ramp up of our new Linares, Mexico motor manufacturing plant
continues on schedule and on budget. Subsequent to the end of the third
quarter, the Company completed the previously announced acquisition of
certain assets of JBD, Inc., the former Jacuzzi brands pump company, based in
Little Rock, Arkansas, which will expand our product lines for water systems
to include pumps.
Submersible motor sales outside North America were up about 5 percent (when
comparing both quarters at the current year exchange rate). Sales were up in
significant end markets: Europa (Europe, the Middle East and North Africa),
and Asia/Pacific. The manufacturing realignment program in Europa continues
on schedule and on budget as expansion construction continues at the
manufacturing plant in Brno, Czech Republic and manufacturing equipment is
moved into place.
Fueling system product sales increased approximately 3 percent compared to
strong third quarter 2003 results. We are now testing our ISD System which we
expect to roll out in mid-2005 in the California market. We have completed
the consolidation of FE Petro, EBW and APT operations into our new state-of-
the-art manufacturing and distribution facility in Madison, Wisconsin.
The industrial motor market continues to be weak. Third quarter sales of
industrial motor products decreased 4 percent. This business has been
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particularly impacted by the commodity cost issues impacting all motor
manufacturers. On the other hand, HydroDuty(tm) sales efforts, focused on large
national food processors, continues to gain traction as the product is shown
to deliver significantly better longevity as compared to existing
alternatives.
Franklin Electric is a global leader in the production and marketing of
groundwater and fuel pumping systems and is a technical leader in submersible
motors, drives, controls, and monitoring devices.
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"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,
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. These risks and uncertainties may
cause actual results to differ materially from those indicated by the forward-
looking statements.
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FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Third Quarter Ended Nine Months Ended
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Oct. 2, Sept. 27, Oct. 2, Sept. 27,
2004 2003 2004 2003
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Net sales $110,336 $99,685 $296,687 $263,303
Cost of sales 74,280 68,827 202,499 183,687
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Gross profit 36,056 30,858 94,188 79,616
Selling and administrative
expenses 16,875 15,070 47,856 43,860
Restructuring expense 1,724 - 3,676 -
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Operating income 17,457 15,788 42,656 35,756
Interest expense (163) (313) (362) (975)
Other income 70 61 98 448
Foreign exchange gain / (loss) (109) (278) (333) 404
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Income before income taxes 17,255 15,258 42,059 35,633
Income taxes 6,125 4,745 14,930 11,724
Net income $ 11,130 $10,513 $ 27,129 $ 23,909
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Net income per share:
Basic $ 0.51 $ 0.49 $ 1.24 $ 1.11
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Diluted $ 0.48 $ 0.46 $ 1.18 $ 1.06
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Weighted average shares and equivalent
shares outstanding:
Basic 21,990 21,626 21,949 21,566
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Diluted 23,131 22,714 22,966 22,572
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FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) Oct. 2, Jan. 3,
2004 2004
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ASSETS:
Cash and equivalents $ 61,543 $ 29,962
Receivables 25,835 29,194
Inventories 60,201 54,653
Other current assets 13,996 14,232
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Total current assets 161,575 128,041
Property, plant and equipment, net 89,451 83,916
Goodwill and other assets 71,508 70,014
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Total assets $322,534 $281,971
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LIABILITIES AND SHAREOWNERS' EQUITY:
Current maturities of long-term
debt and short-term borrowings $ 1,386 $ 1,392
Accounts payable 20,390 15,958
Accrued liabilities 40,045 28,051
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Total current liabilities 61,821 45,401
Long-term debt 14,299 14,960
Deferred income taxes 4,352 4,354
Employee benefit plan obligations 18,918 18,697
Other long-term liabilities 5,870 5,621
Shareowners' equity 217,274 192,938
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Total liabilities and shareowners' equity $322,534 $281,971
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FRANKLIN ELECTRIC CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) Oct. 2, Sept. 27
2004 2003
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Cash flows from operating activities:
Net income $ 27,129 $ 23,909
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 11,654 10,329
Loss on disposals of plant and equipment 96 436
Changes in assets and liabilities:
Receivables 3,313 (1,083)
Inventories (5,634) (2,882)
Accounts payable and other accrued expenses 18,647 1,992
Employee benefit plans (3,494) (3,245)
Other, net (32) (915)
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Net cash flows from operating activities 51,679 28,541
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Cash flows from investing activities:
Additions to plant and equipment (15,724) (8,925)
Proceeds from sale of plant and equipment 8 243
Additions to deferred assets (9) (433)
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Net cash flows from investing activities (15,725) (9,115)
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Cash flows from financing activities:
Borrowing on long-term debt - 6,648
Repayment of long-term debt (478) (18,407)
Borrowing on line of credit and short-term borrowings - 11,000
Repayment of line of credit and short-term borrowings - (11,024)
Proceeds from issuance of common stock 3,739 3,282
Purchases of common stock (3,091) (9,782)
Reduction of loan to ESOP Trust 232 233
Dividends paid (5,054) (4,420)
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Net cash flows from financing activities (4,652) (22,470)
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Effect of exchange rate changes on cash 279 975
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Net change in cash and equivalents 31,581 (2,069)
Cash and equivalents at beginning of period 29,962 20,133
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Cash and equivalents at end of period $ 61,543 $ 18,064
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