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8-K - PRESS RELEASE COVER PAGE - FRANKLIN ELECTRIC CO INC | pressreleasecover.htm |
Exhibit
Index
EXHIBIT
NO. (99) Press release, dated April 29, 2010 issued by Franklin Electric Co.,
Inc.
EXHIBIT
99
ADDITIONAL
EXHIBITS
Press
Release
For Immediate
Release For Further Information
Refer
to: John J. Haines
260-824-2900
FRANKLIN
ELECTRIC ANNOUNCES 95 PERCENT INCREASE IN FIRST QUARTER EARNINGS PER SHARE
BEFORE RESTRUCTURING CHARGES
Bluffton, Indiana – April 29,
2010 - Franklin Electric Co., Inc. (NASDAQ:FELE) reported first quarter
2010 diluted earnings per share of $0.31, an increase of 82 percent compared to
2009 first quarter earnings per share of $0.17. Earnings per share before
restructuring charges were $0.37, an increase of 95 percent compared to the
prior year. First quarter 2010 sales were $160.0 million, an increase of 7
percent compared to 2009 first quarter sales of $149.8 million.
Scott
Trumbull, Franklin Chairman and Chief Executive commented:
“We are
pleased with our first quarter sales and earnings improvement. Water
Systems revenues grew by about 17 percent versus the first quarter of 2009 with
broad based volume improvements across our global business
units. Water Systems sales in Latin America, Asia Pacific and
Southern Africa represented about 35 percent of our total Water Systems sales
and grew by 34 percent versus the first quarter of 2009. Along
with these revenue increases we also had an 80 percent improvement in the Water
Systems operating income before restructuring charges in the first quarter 2010
versus 2009. Our Water Systems operating income margin before
restructuring increased by 500 basis points to 14.1 percent in the first quarter
2010. Fueling Systems revenue declined by about 25 percent in the
first quarter 2010 to $26.4 million versus $35.4 million in the first quarter
2009. As we had previously communicated to our investors, the first
quarter 2009 revenues continued to have a significant contribution from
California’s mandate to install vapor recovery systems. Despite the
decline in California sales we are encouraged that sales outside of California
increased by 19 percent, led by a 62 percent increase in international Fueling
Systems revenues during the first quarter 2010.”
UKey
Performance Indicators:
Earnings
and Earnings Per Share
|
||||||||||||
Before
and After Restructuring Expense
|
For
the First Quarter
|
|||||||||||
(in
millions except Earnings Per Share)
|
2009
|
2010
|
Change
|
|||||||||
Net
Income attributable to FE Co.,Inc.
|
$ | 3.8 | $ | 7.2 | 87 | % | ||||||
Restructuring
Expense (Before Tax)
|
$ | 0.9 | $ | 2.2 | ||||||||
Income
tax rate
|
35.0 | % | 35.0 | % | ||||||||
Restructuring
Charges, net of tax
|
$ | 0.6 | $ | 1.4 | ||||||||
Average
Fully Diluted Shares Outstanding
|
23.1 | 23.4 | 1 | % | ||||||||
Fully
Diluted Earnings Per Share Reported
|
$ | 0.17 | $ | 0.31 | 82 | % | ||||||
Restructuring
Expense Per Share, net of tax
|
$ | 0.02 | $ | 0.06 | ||||||||
Fully
Diluted Earnings Per Share Before Restructuring Expense
|
$ | 0.19 | $ | 0.37 | 95 | % |
Net
Sales
|
For
the First Quarter
|
|||||||||||
(in
Million US$)
|
UWater
|
UFueling
|
UConsolidated
|
|||||||||
Sales
for 2009
|
$ | 114.4 | $ | 35.4 | $ | 149.8 | ||||||
Acquisitions
|
$ | - | $ | - | $ | - | ||||||
Foreign
Exchange
|
$ | 10.0 | $ | 0.3 | $ | 10.3 | ||||||
Organic
Change
|
$ | U 9.2 | $ | U | (9.3) | $ | U | (0.1) | ||||
Sales
for 2010
|
$ | 133.6 | $ | 26.4 | $ | 160.0 |
Operating
Income and Margins
|
||||||||||||||||
Before
and After Restructuring Expense
|
||||||||||||||||
(in
Million US$)
|
For
the First Quarter 2010
|
|||||||||||||||
UWater
|
UFueling
|
UCorporate
|
UConsolidated
|
|||||||||||||
Reported
Operating Income
|
$ | 17.3 | $ | 4.3 | $ | (9.2 | ) | $ | 12.4 | |||||||
Restructuring
Expense
|
$ | 1.6 | $ | - | $ | 0.6 | $ | 2.2 | ||||||||
Operating
Income before Restructuring Expense
|
$ | 18.9 | $ | 4.3 | $ | (8.6 | ) | $ | 14.6 | |||||||
%
Operating Income To Net Sales
|
12.9 | % | 16.3 | % | 7.8 | % | ||||||||||
%
Operating Income Before Restructuring Expense To Net Sales
|
14.1 | % | 16.3 | % | 9.1 | % | ||||||||||
For
the First Quarter 2009
|
||||||||||||||||
UWater
|
UFueling
|
UCorporate
|
UConsolidated
|
|||||||||||||
Reported
Operating Income
|
$ | 9.7 | $ | 7.0 | $ | (8.8 | ) | $ | 7.9 | |||||||
Restructuring
Expense
|
$ | 0.8 | $ | - | $ | 0.1 | $ | 0.9 | ||||||||
Operating
Income before Restructuring Expense
|
$ | 10.5 | $ | 7.0 | $ | (8.7 | ) | $ | 8.8 | |||||||
%
Operating Income To Net Sales
|
8.5 | % | 19.8 | % | 5.3 | % | ||||||||||
%
Operating Income Before Restructuring Expense To Net Sales
|
9.1 | % | 19.8 | % | 5.9 | % |
UWater
Systems
Water
Systems revenues were $133.6 million in the first quarter 2010, an increase of
17 percent versus the first quarter 2009. Excluding foreign currency
translation, sales increased $9.2 million or about 8 percent. Water
Systems sales in the U.S. and Canada benefitted from slowly improving market
conditions and less price discounting in the first quarter 2010 versus the first
quarter of 2009. International Water Systems sales volume increased
in most of the Company’s key markets with the most year-over-year improvement
coming in Brazil and Asia Pacific. Sales price increases also
contributed to an increase in sales revenues from the prior year.
Water
Systems operating income before restructuring expenses was $18.9 million in the
first quarter 2010, an increase of 80 percent versus the first quarter 2009
primarily as a result of higher revenues and leverage on flat year-over-year
fixed costs. The first quarter 2010 Water Systems operating income
margin before restructuring was 14.1 percent and improved by 500 basis points
compared to the prior year first quarter. The Water Systems operating
income in the first quarter 2010 includes a $1.2 million gain on the sale of
land and building in South Africa. This gain was partially offset by
increased costs for slow moving inventory versus the first quarter of
2009.
UFueling
Systems
Fueling
Systems revenue of $26.4 million in the first quarter 2010 declined $9.0 million
or about 25 percent from the first quarter 2009. This decline was due entirely
to a decline of vapor recovery equipment sales in California. First
quarter 2010 Fueling Systems sales outside of California grew by about 19
percent, with international Fueling Systems sales increasing by 62
percent.
Fueling
Systems operating income before restructuring expense was $4.3 million compared
to $7.0 million in the first quarter 2009; and operating margins were 16.3
percent of sales in the first quarter 2010 compared to 19.8 percent of sales in
the first quarter 2009. The decline is primarily attributable to lower operating
leverage.
UOverall
The
Company’s consolidated gross profit was $50.4 million for the first quarter of
2010, up $7.2 million from the first quarter of 2009. The gross profit as a
percent of net sales increased to 31.5 percent for the first quarter of 2010
from 28.8 percent for the first quarter of 2009. The gross profit margin
improvement was primarily due to lower material and fixed manufacturing
costs.
During
the first quarter 2010, SG&A expenses increased by $1.4 million or about 4
percent compared to the first quarter 2009 primarily as a result of compensation
related charges, commissions, and professional fees. SG&A
expenditures were reduced in the first quarter 2010 by $1.2 million for the gain
on the sale of land and building.
Restructuring
expenses for the first quarter of 2010 were $2.2 million and reduced diluted
earnings per share by approximately $0.06. Restructuring expenses include
pension charges, severance expenses and manufacturing equipment relocation costs
and primarily relate to the closure of the Siloam Springs, Arkansas
manufacturing facility that had been previously
announced. Approximately $1.0 million of these expenses were
non-cash. The Company estimates that additional pre-tax closing costs of $1.8
million to $2.6 million will be incurred mostly in the second quarter of 2010
for the closure of the Siloam Springs facility.
The
Company used $12.6 million in cash for operations during the first quarter of
2010 versus a use of $1.0 million of cash in the first quarter
2009. Accounts receivable increased in the first quarter 2010
consistent with higher sales versus the first quarter 2009. The increase
in inventory for first quarter 2010 was due to anticipated seasonal sales volume
increases. The Company had no outstanding balance on its revolving
debt agreement at the end of the first quarter 2010 compared to $58.0 million
outstanding at the end of the first quarter 2009 and no outstanding balances at
the end of the fourth quarter 2009.
Commenting
on the Company’s outlook, Mr. Trumbull added:
“We
anticipate Water Systems sales will increase by about 10 percent in the second
quarter 2010 versus the second quarter of 2009 and that operating income margins
before restructuring charges should improve by 100 to 200 basis points compared
to the second quarter 2009. We are optimistic about the early signs
of an economic recovery and the success of our recent new product
launches.
In
Fueling Systems, we expect second quarter 2010 sales to be flat versus the
second quarter of 2009 as international Fueling Systems growth should be
sufficient to offset a more modest year-on-year sales reduction in
California. Operating income margins should improve 50 to 100 basis
points versus the second quarter 2009.
We
anticipate consolidated sales will grow in the high single digits and
consolidated operating income margins before restructuring expenses will
increase by 100 to 200 basis points compared to second quarter prior
year.
In
summary, we are encouraged that we are seeing a slow but steady recovery of our
Water Systems markets in the U.S. and Canada and stronger sales growth in our
international markets. This sales growth combined with our lower cost
structure coming out of the recession are allowing us to enjoy the benefits of
operating leverage. While we believe this formula will be operable during
the first half of this year, we are mindful that rising commodity costs—such as
copper, steel, and resin materials—may start to pressure margins in the back
half of the year. We are watching our material costs carefully to
determine if additional pricing actions may be necessary later in the
year.”
A
conference call to review earnings and other developments in the business will
commence at 9:00 am EDT.
The first
quarter 2010 earnings call will be available via a live webcast. The webcast
will be available in a listen only mode by going to:
HUhttp://investor.shareholder.com/media/eventdetail.cfm?mediaid=41895&c=FELE&mediakey=DBC7AF011B98C3596DE94B5575970DC4&e=0U
You can
add this webcast into your MS-Outlook calendar by clicking on the following
link:
HUhttp://apps.shareholder.com/PNWOutlook/t.aspx?m=41895&k=3685A0CFU
If you
intend to ask questions during the call, please dial in using 877-643-7158 for
domestic calls and 914-495-8565 for international calls.
A replay
of the conference call will be available Thursday April 29, 2010 at 12pm EDT
through midnight EDT on Thursday May 13, 2010, by dialing 800-642-1687 for
domestic calls and 706-645-9291 for international calls. The replay passcode is
69319029.
Franklin
Electric is a global leader in the production and marketing of systems and
components for the movement of water and automotive fuels. Recognized as a
technical leader in its specialties, Franklin Electric serves customers around
the world in residential, commercial, agricultural, industrial, municipal, and
fueling applications.
The
Company presents the non-GAAP financial measures of net income before
restructuring expense, net income per share before restructuring expense,
operating income before restructuring expense and percent operating income
before restructuring expense to net sales because the Company believes the
information helps investors understand underlying trends in the Company's
business more easily. The differences between these measures and the most
comparable GAAP measures are reconciled in the tables above.
“Safe Harbor” Statement under
the Private Securities Litigation Reform Act of 1995. Any
forward-looking statements contained herein, including those relating to
market conditions or the Company’s financial results, costs, expenses or
expense reductions, profit margins, inventory levels, foreign currency
translation rates, liquidity expectations, business goals and sales
growth, involve risks and uncertainties, including but not limited to,
risks and uncertainties with respect to general economic and currency
conditions, various conditions specific to the Company’s business and
industry, weather conditions, new housing starts, market demand,
competitive factors, changes in distribution channels, 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,
included in Item 1A of Part I of the Company’s Annual Report on Form 10-K
for the fiscal year ending January 2, 2010 , Exhibit 99.1 attached thereto
and in Item 1A of Part II of the Company’s Quarterly Reports on Form 10-Q.
These risks and uncertainties may cause actual results to differ
materially from those indicated by the forward-looking statements. All
forward-looking statements made herein are based on information currently
available, and the Company assumes no obligation to update any
forward-looking statements.
|
FRANKLIN
ELECTRIC CO., INC.
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except per share amounts)
|
||||||||
First
Quarter Ended
|
||||||||
April 3,
|
April
4,
|
|||||||
2010
|
2009
|
|||||||
Net
sales
|
$
|
159,992
|
$
|
149,797
|
||||
Cost
of sales
|
109,556
|
106,601
|
||||||
Gross
profit
|
50,436
|
43,196
|
||||||
Selling,
general and administrative expenses
|
35,885
|
34,449
|
||||||
Restructuring
expense
|
2,166
|
891
|
||||||
Operating
income
|
12,385
|
7,856
|
||||||
Interest
expense
|
(2,213)
|
(2,373)
|
||||||
Other
income/(expense)
|
(2,231)
|
260
|
||||||
Foreign
exchange gain/(loss)
|
198
|
108
|
||||||
|
|
|||||||
Income
before income taxes
|
8,139
|
5,851
|
||||||
Income
taxes
|
702
|
1,800
|
||||||
Net
income
|
$
|
7,437
|
$
|
4,051
|
||||
Less:
Net income attributable to noncontrolling interest
|
(224)
|
(204)
|
||||||
Net
income attributable to Franklin Electric Co., Inc.
|
$
|
7,213
|
$
|
3,847
|
||||
|
||||||||
Net
income per share:
|
|
|
||||||
Basic
|
$
|
0.31
|
$
|
0.17
|
||||
Diluted
|
$
|
0.31
|
$
|
0.17
|
||||
|
||||||||
Weighted
average shares and equivalent
|
||||||||
shares
outstanding:
|
||||||||
Basic
|
23,156
|
23,014
|
||||||
Diluted
|
23,435
|
23,139
|
||||||
FRANKLIN
ELECTRIC CO., INC.
|
||||||||
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||||||||
(Unaudited)
|
||||||||
|
||||||||
(In
thousands)
|
Apr.
3,
|
Jan.
2,
|
||||||
2010
|
2010
|
|||||||
ASSETS:
|
||||||||
|
||||||||
Cash
and equivalents
|
$
|
69,700
|
$
|
86,875
|
||||
Receivables
|
91,056
|
62,847
|
||||||
Inventories
|
141,309
|
134,404
|
||||||
Other
current assets
|
27,227
|
|
27,467
|
|||||
Total
current assets
|
329,292
|
311,593
|
||||||
|
||||||||
Property,
plant and equipment, net
|
142,842
|
147,171
|
||||||
Goodwill
and other assets
|
256,195
|
259,534
|
||||||
Total
assets
|
$
|
728,329
|
$
|
718,298
|
||||
LIABILITIES
AND EQUITY:
|
||||||||
|
||||||||
Accounts
payable
|
$
|
42,386
|
$
|
31,699
|
||||
Accrued
liabilities
|
53,718
|
50,709
|
||||||
Current
maturities of long-term
|
||||||||
debt
and short-term borrowings
|
681
|
735
|
||||||
Total
current liabilities
|
96,785
|
83,143
|
||||||
Long-term
debt
|
151,111
|
151,242
|
||||||
Deferred
income taxes
|
4,489
|
3,266
|
||||||
Employee
benefit plan obligations
|
67,675
|
74,179
|
||||||
Other
long-term liabilities
|
8,616
|
8,865
|
||||||
Redeemable
noncontrolling interest
|
7,067
|
7,393
|
||||||
Equity
|
392,586
|
390,210
|
||||||
Total
liabilities and equity
|
$
|
728,329
|
$
|
718,298
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
YEAR
TO DATE
|
||||||||
(Unaudited)
|
||||||||
|
||||||||
(In
thousands)
|
April
3,
|
April
4,
|
||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 7,437 | $ | 4,051 | ||||
Adjustments
to reconcile net income to net
|
||||||||
cash
flows from operating activities:
|
||||||||
Depreciation
and amortization
|
6,379 | 6,149 | ||||||
Stock
based compensation
|
1,139 | 2,155 | ||||||
Deferred
income taxes
|
1,610 | (311 | ) | |||||
(Gain)/loss
on disposals of plant and equipment
|
(1,204 | ) | 14 | |||||
Excess
tax from share-based payment arrangements
|
(226 | ) | - | |||||
Changes
in assets and liabilities:
|
||||||||
Receivables
|
(29,119 | ) | (14,678 | ) | ||||
Inventories
|
(7,852 | ) | 3,719 | |||||
Accounts
payable and other accrued expenses
|
17,178 | (2,490 | ) | |||||
Income
taxes, net
|
(2,385 | ) | 963 | |||||
Employee
benefit plans
|
(5,597 | ) | 543 | |||||
Other,
net
|
7 | (1,104 | ) | |||||
Net
cash flows from operating activities
|
(12,633 | ) | (989 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Additions
to plant and equipment
|
(1,746 | ) | (3,108 | ) | ||||
Proceeds
from sale of plant and equipment
|
1,338 | - | ||||||
Cash
paid for acquisitions, net of cash acquired
|
- | (16,767 | ) | |||||
Net
cash flows from investing activities
|
(408 | ) | (19,875 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from short-term debt
|
- | 23,000 | ||||||
Repayment
of long-term debt
|
(96 | ) | (251 | ) | ||||
Proceeds
from issuance of common stock
|
214 | - | ||||||
Excess
tax from share-based payment arrangements
|
226 | - | ||||||
Dividends
paid
|
(2,892 | ) | (2,877 | ) | ||||
Net
cash flows from financing activities
|
(2,548 | ) | 19,872 | |||||
Effect
of exchange rate changes on cash
|
(1,586 | ) | (741 | ) | ||||
Net
change in cash and equivalents
|
(17,175 | ) | (1,733 | ) | ||||
Cash
and equivalents at beginning of period
|
86,875 | 46,934 | ||||||
Cash
and equivalents at end of period
|
$ | 69,700 | $ | 45,201 |