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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1996
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 46714-3798
Bluffton, Indiana (Zip Code)
(Address of principal executive offices)
(219) 824-2900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None None
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of each class)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant at February 14, 1997 was $247,108,457. The stock price used in the
computation was the closing price on that date.
Number of shares of common stock outstanding at February 14, 1997:
5,890,929 shares
----------------
DOCUMENTS INCORPORATED BY REFERENCE
A portion of the Proxy Statement for the Annual Meeting of Shareholders to be
held on April 11, 1997 (Part III).
The exhibits filed with this Form 10-K are listed in the exhibit index.
TABLE OF CONTENTS
Part I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of
Security Holders
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers
of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Item 13. Certain Relationships and Related
Transactions
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
Signatures
Exhibit Index
PART I
------
ITEM 1. BUSINESS
- -----------------
Franklin Electric Co., Inc. is an Indiana corporation founded in 1944 and
incorporated in 1946, and together with its subsidiaries (hereinafter referred
to as the "Company" unless the context requires otherwise), conducts business
in a single business segment: the design, manufacture and distribution of
electric motors, electronic controls and related equipment.
Products and Markets Served
- ---------------------------
The Company manufactures and distributes electric motors, electronic controls
and related equipment. These motors are sold principally by a single company
sales force in the United States, Canada, Europe, Australia, South Africa,
Mexico and other world markets.
The market for electric motors is highly competitive and includes both large
and small suppliers. The Company's motor sales are to original equipment
manufacturers of pumps, petroleum pumping equipment, compressors, fans,
heating and air conditioning equipment, swimming pool equipment, medical
furniture and business machines. Motors are also sold in the replacement
market through independent distributors and repair shops.
Goulds Pumps, Inc., a customer of the Company, accounted for 12.5 percent,
12.9 percent and 14.1 percent of the Company's consolidated sales in 1996,
1995 and 1994, respectively.
The Company offers normal and customary trade terms to its customers, no
significant part of which is of an extended nature. Special inventory
requirements are not necessary, and customer merchandise return rights do not
extend beyond normal warranty provisions.
The principal raw materials used in the manufacture of the Company's products
are steel in coils and bars, copper wire, and aluminum ingot. Major
components are capacitors, motor protectors, forgings, gray iron castings and
bearings. Most materials are available from many sources in the United States
and in many world markets. In the opinion of management, no single source of
supply is critical to the Company's business. Availability of fuel and energy
is adequate to satisfy current and projected overall operations unless
interrupted by government direction or allocation.
The Company employed 2,601 persons at the end of 1996.
Financial Information by Geographic Area
- ----------------------------------------
Financial information by geographic area is included within this Form 10-K.
Research and Development
- ------------------------
The Company spent approximately $4.8 million in 1996, $4.7 million in 1995 and
$4.2 million in 1994 on activities related to the development of new products,
on improvements of existing products and manufacturing methods, and on other
applied research and development.
In 1996, work continued on the development of submersible wet winding motors,
a new line of "severe duty" motors, and a new line of surface mount motor
protection systems. Research continued on new materials and processes which
wil1 result in more cost effective manufacture of high volume products.
The Company owns several patents. In the aggregate, these patents are of
material importance to the business; however, the Company believes that its
operations are not dependent on any single patent or group of patents.
Backlog
- -------
The dollar amount of backlog at the end of 1996 and 1995 was as follows:
(In thousands)
Fiscal Year Ending
---------------------
1996 1995
---- ----
Backlog....................... $21,324 $22,331
The backlog is composed of written orders at prices adjustable on a price-at-
the-time-of-shipment basis for products, some of which are specifically
designed for the customer, but most of which are standard catalog items. Both
add-ons and cancellations of catalog items are made without charge to the
customer, but charges are generally made on any cancellation of a specifically
designed product. All backlog orders are expected to be filled in fiscal
1997.
The Company's sales and earnings are not substantially seasonal in nature.
There is no seasonal pattern to the backlog and the backlog has not proven to
be a significant indicator of future sales.
Environmental Matters
- ---------------------
Compliance with federal, state and local provisions regulating the discharge
of material into the environment, or otherwise relating to the protection of
the environment, is not expected to have any material adverse effect upon the
financial position, capital expenditures, earnings or competitive position of
the Company. Refer to Item 3 of this Form 10-K for additional information
regarding legal proceedings related to environmental matters.
ITEM 2. PROPERTIES
- -------------------
The Company maintains its principal executive offices in Bluffton, Indiana;
manufacturing plants are located in the United States and abroad. Location
and approximate square footage for the Company's principal facilities are
described below. All principal properties are owned or held under operating
lease.
The Company's principal properties are as follows:
Acres Approximate
Location of Land Square Feet
-------- ------- -----------
Bluffton, Indiana 35.8 405,660
Siloam Springs, Arkansas 32.6 240,400
Wilburton, Oklahoma 40.0 321,350
Tulsa, Oklahoma 10.3 154,193
Jonesboro, Indiana (1) - 34,570
Wittlich, Rhineland, Germany 6.8 76,365
Fourteen facilities with less
than 30,000 square feet each (2) 5.3 162,338
----- ---------
Total 130.8 1,394,876
===== ==========
In the Company's opinion, its facilities are suitable for their intended use
and are in good condition.
(1) Leased facility, which expires on April 30, 1998.
(2) Twelve of the facilities are leased with approximately 119,000
square feet.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
The Company is defending various claims and legal actions which have arisen in
the ordinary course of business. The Company has attempted, where possible,
to assess the likelihood of an unfavorable outcome as a result of these
actions. Legal counsel has been retained to assist the Company in making
these determinations, and costs are accrued when an unfavorable outcome is
determined to be probable and a reasonable estimate can be made. As a result,
the Company has an accrual balance of approximately $1.6 million and $1.4
million at December 28, 1996 and December 30, 1995, respectively, to provide
for such actions.
Included in such matters are two pending governmental actions associated with
hazardous waste sites falling under the Comprehensive Environmental Response
Compensation and Liability Act in which the Company has been designated, in
conjunction with other parties, as a "potentially responsible party" (PRP).
The range of the Company's potential liability for the first site is unknown
as the total cost for the site remediation and allocation among the PRPs has
not been determined; however, the Company believes such matters are
substantially covered by the Company's insurance. The current estimate for
remediation at the second site is $15.0 million, for which the Company has
agreed under consent decree to pay 1.341 percent (approximately $201,000) over
the next five to fifteen years. The Company has paid approximately $103,000 of
this amount through December 28, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The names, ages and all positions and offices held by the executive officers
of the Company are:
In this
Name Age Positions and Offices office since
---- --- --------------------- ------------
William H. Lawson 60 Chairman of the Board and
Chief Executive Officer 1985
John B. Lindsay (1) 54 President 1995
Jess B. Ford (2) 45 Vice President and
Chief Financial Officer 1995
William J. Foreman(3) 60 Vice President 1995
Kirk M. Nevins(4) 53 Vice President, Sales 1995
Donald R. Hobbs (5) 55 Vice President, Submersible
Motor Marketing 1996
The term of office of each officer is one year and until his successor shall
have been elected and qualified at the meeting of the Board of Directors
following the Annual Meeting of Shareholders.
(1) In 1995, Mr. Lindsay was elected President of the Company. Mr. Lindsay
served as Vice President from 1986 until 1993 and as Executive Vice President
from 1993 until 1995.
(2) Prior to joining the Company in October 1995, Mr. Ford was employed by
Tokheim Corporation (a manufacturer of petroleum dispensing marketing systems)
from 1992 until 1995 as Vice President-Finance, Secretary and Chief Financial
Officer and prior to 1992 as Vice President-Corporate Finance and Corporate
Controller.
(3) For the five-year period preceding July 1995, Mr. Foreman was Plant
Manager for certain divisions of the Company.
(4) For the five-year period preceding July 1995, Mr. Nevins was North
American Sales Manager of the Company.
(5) For the five-year period preceding April 1996, Mr. Hobbs was Marketing
Manager for the submersible motor division of the Company.
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- --------------------------------------------------------------------------
MATTERS
- -------
The number of stockholders of record as of February 14, 1997 was
1,240. The Company's stock is traded on NASDAQ National Market: Symbol FELE.
Dividends paid and the price range per common share as quoted in The Wall
Street Journal for 1996 and 1995 were as follows:
DIVIDENDS PER SHARE PRICE PER SHARE
1996 1995 1996 1995
---- ---- ---- ----
Low High Low High
--- ---- --- ----
1st Quarter... $.10 $.08 $31 1/4 $38 1/4 $31 $34 1/2
2nd Quarter... $.12 $.10 $35 $37 $30 $34 1/2
3rd Quarter... $.12 $.10 $30 3/4 $35 5/8 $29 1/2 $32 1/2
4th Quarter... $.12 $.10 $33 3/4 $45 1/4 $28 1/4 $33 1/4
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
FIVE YEAR FINANCIAL SUMMARY
- ----------------------------
FRANKLIN ELECTRIC CO., INC.
(In thousands, except per share amounts)
1996 1995 1994 1993 1992
(c)
OPERATIONS:
Net Sales................. $300,689 $276,440 $241,440 $206,406 $198,618
Gross Profit.............. 79,053 65,371 63,134 53,131 50,260
Income before
extraordinary credit and
change in accounting
principle............... 21,510 15,502 18,709 16,103 13,665
Interest Expense.......... 1,308 2,128 2,172 2,949 2,595
Income Taxes (a).......... 11,827 8,777 11,504 5,796 8,882
Net Income................ 21,510 15,502 18,709 17,096 13,811
Net Income Available to
Common Shares........... 21,510 15,502 18,556 16,485 12,218
Depreciation and
Amortization............ 8,389 8,890 6,961 6,185 4,525
Capital Expenditures...... 6,235 6,111 7,612 6,359 5,833
BALANCE SHEET:
Working Capital........... 88,224 68,024 50,092 44,819 26,943
Property, Plant and
Equipment, Net.......... 40,097 41,670 41,896 25,591 24,003
Total Assets.............. 173,459 153,357 151,581 122,703 99,868
Long-term Debt............ 20,276 20,171 20,000 30,016 22,819
Shareowners' Equity....... $ 99,823 $ 80,557 $ 64,865 $ 50,127 $ 39,667
OTHER DATA:
% Net Income to Sales..... 7.2% 5.6% 7.8% 8.3% 7.0%
% Net Income to Total
Average Assets.......... 13.2% 10.2% 13.6% 15.4% 13.7%
Current Ratio............. 3.0 2.6 1.9 2.3 1.9
PER SHARE:
Market Price Range
High...................... $ 45.25 $ 34.50 $ 36.50 $ 37.25 $ 25.00
Low....................... 30.75 28.25 24.50 22.00 17.50
Income before
extraordinary credit and
change in accounting
principle............... 3.22 2.35 2.84 2.37 1.85
Net Income per Weighted
Average Common Share(b). 3.22 2.35 2.84 2.52 1.88
Book Value................ 14.95 12.21 9.92 7.65 5.20
Cash Dividends on Common
Stock................... $ 0.46 $ 0.38 $ 0.29 $ 0.15 $ -
(a) Includes credit for cumulative effect of change in accounting principle-
SFAS No. 109 "Accounting for Income Taxes" of $993 in 1993; extraordinary
credit for tax benefit of loss carryforward of $156 in 1992.
(b) Fully diluted earnings per share for each year presented was as follows:
1996, $3.18; 1995, $2.34; 1994, $2.83; 1993, $2.50; 1992, $1.88.
(c) Includes only one month of results of operations of Oil Dynamics, Inc.,
but total assets and liabilities of Oil Dynamics, Inc. at December 31, 1994.
If the effect of including Oil Dynamics, Inc. on a fully consolidated basis
beginning November 29, 1994 was excluded, net income as a percent of total
average assets would have been 15.8 percent and the current ratio would have
been 2.3. Previously, the Company maintained an investment in affiliate
account approximately equal to 50 percent of the net assets of Oil Dynamics,
Inc.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- --------------------------------------------------------------------
AND RESULTS OF OPERATIONS
- -------------------------
RESULTS OF OPERATIONS
- ---------------------
Net sales for 1996 were $300.7 million, a 9 percent increase over 1995 net
sales of $276.4 million. This increase is primarily due to higher unit volume
at the Company's wholly owned subsidiaries, Oil Dynamics, Inc. (ODI) and FE
Petro, Inc., and due to higher average selling prices throughout the Company.
In 1994, net sales were $241.4 million. The increase in 1995 net sales over
1994 was principally due to the inclusion of ODI on a fully consolidated basis
for 1995 and, to a lesser degree, increases in selling prices and unit volume.
Net income for 1996 was $21.5 million, or $3.22 per share, compared to 1995
net income of $15.5 million, or $2.35 per share. This increase was primarily
due to higher net sales and improvements in the operations of ODI and in the
Company's European operations. Net income for 1994 was $18.6 million, or
$2.84 per share. The decrease from 1994 to 1995 was principally due to an
increase in cost of sales as a percent of net sales primarily attributable to
ODI and the Company's German subsidiary, a decrease in North American
residential submersible motor unit shipment volume, and foreign currency
transaction losses.
Cost of sales as a percent of net sales for 1996, 1995 and 1994 was 73.7
percent, 76.4 percent and 73.9 percent, respectively. The decrease in 1996
was primarily due to increased sales and decreases in both fixed and variable
manufacturing costs at ODI and the Company's European operations. The 1995
increase was due to increases in fixed manufacturing expenses as a percent of
net sales resulting from the full year inclusion of ODI on a consolidated
basis which was impacted by a decline in unit volume contributing to lower
overhead absorption, as well as increases in expenses supporting the Company's
international operations.
Selling and administration expenses as a percent of net sales for 1996, 1995
and 1994 was 15.3 percent, 14.7 percent and 13.8 percent, respectively. The
increase in 1996 was primarily due to sales commissions on ODI's sales to
Russian oil companies, performance incentives and expenses associated with
employee stock awards and stock appreciation rights granted prior to 1996. The
1995 increase was due to the full year inclusion of ODI on a consolidated
basis and due to investments in systems and personnel in support of the
Company's international operations.
Included in other income, net for 1996, 1995 and 1994 was interest income of
$2.1 million, $1.9 million and $1.7 million, respectively, primarily derived
from the investment of cash balances in short-term U.S. treasury bills.
Interest expense for 1996, 1995 and 1994 was $1.3 million, $2.1 million and
$2.2 million, respectively.
Foreign currency based transactions produced a $0.3 million loss in 1996, a
$0.7 million loss in 1995, and a $0.4 million gain in 1994. The foreign
currency transaction loss in 1996 was primarily due to unfavorable movements
in the South African rand and German mark relative to the U.S. dollar. This
loss was partially offset by the movement of the Italian lira relative to the
German mark. The foreign currency transaction loss in 1995 was primarily due
to the movement of the Italian lira relative to the German mark and the
movement of the U.S. dollar relative to the Australian dollar and Mexican
peso. The currency transaction gain in 1994 was primarily due to the movement
of the U.S. dollar relative to the German mark and the Australian dollar.
The provision for income taxes in 1996, 1995 and 1994 was $11.8 million, $8.8
million and $11.5 million, respectively. The effective tax rate for each year
differs from the United States statutory rate of 35 percent principally due to
the effects of state and foreign income taxes, net of federal tax benefits.
Equity in the earnings of affiliate was $0.2 million in 1994. Previously a 50
percent owned joint venture, ODI became a 97 percent owned, fully consolidated
subsidiary effective November 29, 1994, with the payment by ODI of a cash
dividend to the Company's investment partner and a stock dividend to the
Company. ODI changed its year-end in 1994 to conform to the Company's year-
end. The change did not materially affect the Company's results of
operations. In April 1996, the Company purchased the remaining 3 percent of
ODI.
Inflation has not had a significant effect on the Company's operations or
financial condition.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
Cash flows from operations provide the principal source of current liquidity.
Net cash flows provided by operating activities were $30.9 million, $15.5
million and $28.3 million in 1996, 1995 and 1994, respectively. The 1996
increase was due primarily to the increase in net income and decrease in
inventories. The decrease in cash flows provided by operating activities in
1995 was due primarily to the decrease in net income, the increase in
inventories and the decrease in accrued expenses relative to 1994.
Net cash flows used in investing activities of $38.1 million during 1996
primarily consisted of purchases of short-term marketable securities which
were partially offset by proceeds from the maturity of these securities.
During 1996, the Company changed its excess cash investment practice to take
advantage of higher yields on treasury bills with maturities extending beyond
three months. Cash flows used in investing activities in 1996 also included
$6.2 million of additions to plant and equipment. Net cash flows used in
investing activities of $6.6 million and $6.3 million in 1995 and 1994,
respectively, primarily consisted of additions to plant and equipment.
Net cash flows used in financing activities were $2.5 million, $15.5 million
and $21.3 million in 1996, 1995 and 1994, respectively. The primary use of
cash for financing activities in 1996 was for the payment of dividends on the
Company's common stock. In 1995, the Company borrowed $3.5 million on a
short-term basis to finance current working capital requirements, of which
$3.1 million was repaid by year-end. The Company also repaid $15.2 million of
short-term borrowings originating in 1994. During 1994, the Company paid off
a $10.0 million note to the estate of Edward J. Schaefer, redeemed all
outstanding shares of Class C preferred stock for $5.8 million and purchased
109,979 shares of common stock for $3.8 million. Of the 109,979 shares
repurchased, 17,310 shares were issued to Company-sponsored benefit plans to
satisfy the Company's obligation to these plans and the remaining shares were
retired.
Cash and cash equivalents at the end of 1996 were $23.0 million compared to
$32.1 million at the end of 1995. The decrease was due to the investment of
excess cash in short-term marketable securities. Working capital increased
$20.2 million in 1996 and the current ratio of the Company was 3.0 and 2.6 at
the end of 1996 and 1995, respectively.
As further described in Note 12 to the Company's Financial Statements, in
January 1997, the Company completed the repurchase of 500,000 shares of its
common stock at an aggregate purchase price of $24.0 million. The shares were
subsequently retired.
Principal payments on the Company's $20 million of unsecured long-term debt
begin in 1998 and continue until 2008 when a balloon payment of $10.0 million
will fully retire the debt. In January 1996, the Company entered into an
unsecured, five-year $40 million revolving credit agreement (the "Agreement").
The Agreement provides for various borrowing rate options and includes a
facility fee on the committed amount. Both of the Company's loan agreements
contain certain financial covenants with respect to borrowings, fixed charge
coverage, working capital, loans or advances, and investments. The Company
was in compliance with all debt covenants in 1996 and 1995.
At December 28, 1996, the Company had $3.7 million of commitments for the
purchase of machinery and equipment. During 1997, the Company intends to
continue to seek acquisition candidates that are both compatible with and can
leverage growth off of existing businesses.
Management believes that internally generated funds and existing credit
arrangements provide sufficient liquidity to meet current and future
commitments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
- ---------------------------------------------------------------------
1996 1995 1994
(In thousands, except per share amounts)
- ---------------------------------------------------------------------
Net sales............................. $300,689 $276,440 $241,440
Cost of sales (including research
and development expenses of
$4,846, $4,742 and $4,244,
respectively)....................... 221,636 211,069 178,306
-------- -------- --------
Gross profit.......................... 79,053 65,371 63,134
Selling and administrative expenses... 45,854 40,688 33,313
-------- -------- --------
Operating income...................... 33,199 24,683 29,821
Interest expense...................... (1,308) (2,128) (2,172)
Other income, net..................... 1,698 2,441 1,955
Foreign exchange gain (loss).......... (252) (717) 392
Equity in earnings of affiliate....... - - 217
-------- -------- --------
Income before income taxes............ 33,337 24,279 30,213
Income taxes (Note 5)................. 11,827 8,777 11,504
-------- -------- --------
Net income............................ 21,510 15,502 18,709
Dividends on preferred stock.......... - - 153
-------- -------- --------
Net income available to common shares. $ 21,510 $ 15,502 $ 18,556
======== ======== ========
Per share data:
Weighted average common shares........ 6,676 6,598 6,537
======== ======== ========
Net income available per common share. $ 3.22 $ 2.35 $ 2.84
======== ======== ========
Dividends per common share............ $ .46 $ .38 $ .29
Dividends per preferred share
Class C............................. $ - $ - $ 2.63
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
- ---------------------------------------------------------------------
ASSETS
1996 1995
(In thousands)
- ---------------------------------------------------------------------
Current assets:
Cash and equivalents........................ $ 22,968 $ 32,077
Marketable securities....................... 31,624 -
Receivables (less allowances of $1,435
and $1,351, respectively)................. 25,134 22,526
Inventories:
Raw materials............................. 15,958 17,080
Work-in-process........................... 4,942 5,899
Finished goods............................ 32,528 34,614
LIFO reserve.............................. (11,123) (11,754)
-------- --------
42,305 45,839
Other current assets (including deferred
income taxes of $7,755 and $7,823,
respectively)............................. 9,485 8,879
-------- --------
Total current assets.................... 131,516 109,321
Property, plant and equipment, at cost:
Land and buildings.......................... 28,335 29,173
Machinery and equipment..................... 95,457 92,523
-------- --------
123,792 121,696
Less allowance for depreciation........... 83,695 80,026
-------- --------
40,097 41,670
Deferred and other assets..................... 1,846 2,366
-------- --------
Total Assets $173,459 $153,357
======== ========
See Notes to Consolidated Financial Statements.
- ---------------------------------------------------------------------
LIABILITIES AND SHAREOWNERS' EQUITY
1996 1995
(In thousands)
- ---------------------------------------------------------------------
Current liabilities:
Short-term borrowings (Note 6).............. $ 21 $ 461
Accounts payable............................ 14,049 15,882
Accrued expenses (Note 4)................... 24,883 23,228
Income taxes (Note 5)....................... 4,339 1,726
-------- --------
Total current liabilities................. 43,292 41,297
Long-term debt (Note 6)....................... 20,276 20,171
Employee benefit plan obligations (Note 3).... 5,741 6,069
Other long-term liabilities................... 4,144 4,956
Deferred income taxes (Note 5)................ 183 307
Shareowners' equity (Note 7):
Common shares outstanding
6,371 and 6,254, respectively............. 638 626
Additional capital.......................... 7,613 5,683
Retained earnings........................... 95,961 77,363
Stock subscriptions......................... (997) (1,315)
Cumulative translation adjustment........... (625) 600
Loan to ESOP Trust (Note 3)................. (2,524) (2,400)
Minimum pension liability
adjustment, net of taxes (Note 3)......... (243) -
-------- --------
Total shareowners' equity................. 99,823 80,557
-------- --------
Total Liabilities and Shareowners' Equity $173,459 $153,357
======== ========
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
- ---------------------------------------------------------------------------
1996 1995 1994
(In thousands)
- ---------------------------------------------------------------------------
Cash flows from operating activities:
Net income............................... $21,510 $15,502 $18,709
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and amortization.......... 8,389 8,890 6,961
Equity in earnings of affiliate,
less dividends....................... - - (217)
Deferred income taxes.................. (56) (2,091) (311)
Gain on disposals of plant
and equipment........................ (20) (43) (132)
Changes in assets and liabilities:
Receivables.......................... (3,190) 29 (1,516)
Inventories.......................... 2,164 (7,628) (2,355)
Other assets......................... (291) 417 (572)
Accounts payable and other
accrued expenses................... 3,834 (679) 7,168
Employee benefit plan obligations.... (571) 1,166 2,122
Other long-term liabilities.......... (827) (69) (1,604)
------- ------- -------
Net cash flows from operating activities. 30,942 15,494 28,253
------- ------- -------
Cash flows from investing activities:
Additions to plant and equipment....... (6,235) (6,111) (7,612)
Proceeds from sale of plant
and equipment........................ 257 70 278
Acquired cash of subsidiary (Note 2)... - - 1,020
Additions to deferred assets........... (445) (630) -
Purchases of marketable securities..... (52,866) - -
Proceeds from maturities of marketable
securities........................... 21,242 - -
Other, net............................. (69) 78 -
------- ------- -------
Net cash flows from investing activities. (38,116) (6,593) (6,314)
------- ------- -------
Cash flows from financing activities:
Borrowing on long-term debt............ 199 - -
Repayment of long-term debt (Note 6)... (97) - (10,016)
Borrowing on line of credit............ - 3,549 -
Repayment of line of credit............ (393) (18,300) (68)
Redemption of preferred stock (Note 7). - - (5,818)
Proceeds from issuance of common stock. 811 530 130
Purchase of treasury stock (Note 7).... - - (3,757)
Proceeds from stock subscriptions...... 25 866 -
Loan to ESOP Trust..................... (324) - -
Reduction of loan to ESOP Trust........ 200 200 200
Dividends paid......................... (2,912) (2,370) (1,942)
------- ------- -------
Net cash flows from financing activities. (2,491) (15,525) (21,271)
------- ------- -------
Effect of exchange rate changes on cash.. 556 (189) (865)
------- ------- -------
Net decrease in cash and equivalents..... (9,109) (6,813) (197)
Cash and equivalents at
beginning of year...................... 32,077 38,890 39,087
------- ------- -------
Cash and equivalents at end of year...... $22,968 $32,077 $38,890
======= ======= =======
Cash paid during 1996, 1995 and 1994 for interest was $1.3 million, $2.4
million and $2.1 million, respectively. Also, cash paid during 1996, 1995 and
1994 for income taxes was $9.3 million, $12.0 million and $10.0 million,
respectively.
Non-cash transactions:
- ----------------------
During the first quarter of 1995, the Company issued 20,000 common shares
valued at $0.6 million under the 1988 Executive Stock Purchase Plan.
During the first quarter of 1994, the Company issued 17,310 common shares
valued at $0.6 million to Company-sponsored benefit plans.
During the second quarter of 1994, the Company issued 48,000 common shares
valued at $1.3 million under the 1988 Incentive Stock Award Plan.
During the fourth quarter of 1994, previously 50 percent owned joint venture,
Oil Dynamics, Inc., became a 97 percent owned consolidated subsidiary (see
Note 2).
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands, except share amounts)
Common Cumulative Loan to Minimum
Shares Common Additional Retained Stock Treasury Translation ESOP Pension
Outstanding Stock Capital Earnings Subscrip. Stock Adjustment Trust Liability
----------- ----- ------- -------- --------- ----- ---------- ----- ---------
Balance year end 1993............. 6,230,668 $623 $3,052 $50,621 $ (902) $ - $ (467) $(2,800) $ -
--------- ---- ------ ------- ------- ------ ------ ------- -----
Net income........................ 18,709
Dividends on preferred stock...... (153)
Dividends on common stock......... (1,789)
Common stock issued............... 61,450 6 1,575
Increase in stock subscriptions... (1,210)
Currency translation adjustment... 526
Loan payment from ESOP............ 200
Treasury stock purchases.......... (109,979) (3,757)
Treasury stock issued............. 17,310 40 591
Treasury stock retired............ (9) (3,157) 3,166
--------- ---- ------ ------- ------- ------ ------ ------- -----
Balance year end 1994............. 6,199,449 $620 $4,667 $64,231 $(2,112) $ - $ 59 $(2,600) -
--------- ---- ------ ------- ------- ------ ------ ------- -----
Net income........................ 15,502
Dividends on common stock......... (2,370)
Common stock issued............... 54,553 6 1,084 (530)
Proceeds from stock subscriptions. 866
Stock subscription amortization
and adjustment.................. (68) 461
Currency translation adjustment... 541
Loan payment from ESOP............ 200
--------- ---- ------ ------- ------- ------ ------ ------- -----
Balance year end 1995............. 6,254,002 $626 $5,683 $77,363 $(1,315) $ - $ 600 $(2,400) -
--------- ---- ------ ------- ------- ------ ------ ------- -----
Net income........................ 21,510
Dividends on common stock......... (2,912)
Common stock issued............... 117,027 12 1,470
Proceeds from stock subscriptions. 25
Stock subscription amortization
and adjustment.................. 460 293
Currency translation adjustment... (1,225)
Loan payment from ESOP............ 200
Loan to ESOP Trust................ (324)
Minimum pension liability
adjustment, net of tax benefit.. (243)
--------- ---- ------ ------- ------- ------ ------ ------- -----
Balance year end 1996............. 6,371,029 $638 $7,613 $95,961 $ (997) $ - $ (625) $(2,524) $(243)
========= ==== ====== ======= ======= ====== ====== ======= =====
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
- ------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR--The Company's fiscal year ends on the Saturday nearest December
31. The financial statements and accompanying notes are as of and for the
years ended December 28, 1996 (52 weeks), December 30, 1995 (52 weeks) and
December 31, 1994 (52 weeks) and are referred to as 1996, 1995 and 1994,
respectively.
PRINCIPLES OF CONSOLIDATION--The financial statements include the accounts of
the Company and all majority-owned subsidiaries. The accounts of certain
foreign subsidiaries are included in the financial statements on their fiscal
years ended November 30. Beginning November 29, 1994, the results of
operations of Oil Dynamics, Inc. were included on a fully consolidated basis
(see Note 2).
CASH EQUIVALENTS--Cash equivalents consist of highly liquid investments which
are readily convertible to cash, present insignificant risk of changes in
value due to interest rate fluctuations and generally have original maturities
of three months or less.
MARKETABLE SECURITIES--Marketable securities consist of short-term U.S.
Treasury Bills with original maturities generally greater than three months.
All securities are expected to be held to maturity and, as such, are stated at
amortized cost. Due to the nature of these securities, the difference between
the amortized cost and fair value is immaterial.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts for cash and
equivalents, long-term debt and short-term debt approximate fair value. The
fair value of long-term debt is estimated based on current borrowing rates for
similar issues. The Company's off-balance sheet instruments are not
significant.
INVENTORIES--Inventories are stated at the lower of cost or market. The
majority of the cost of domestic inventories is determined using the last-in,
first-out (LIFO) method; all remaining inventory costs are determined using
the first-in, first-out (FIFO) method. Inventories stated on the LIFO method
approximated 64 percent of total inventories in 1996 and 1995. In 1996, due
to the liquidation of LIFO inventories, net income increased by $0.5 million.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost. Depreciation of plant and equipment is provided principally on a
straight line basis over the estimated useful lives of 5 to 50 years for land
improvements and buildings, 2 to 10 years for machinery, equipment, furniture,
and fixtures and 3 to 5 years for automobiles and trucks. Accelerated methods
are used for income tax purposes.
STOCK-BASED COMPENSATION--Management of the Company has elected to adopt the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS No. 123). Employee
stock-based compensation will continue to be accounted for under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense is recognized in the financial statements
as the exercise price of the Company's stock options equals the market price
of the underlying stock on the dates of the grants.
EARNINGS PER COMMON SHARE--Primary and fully diluted earnings per common share
are computed based upon earnings applicable to common shares, divided by the
sum of the average number of common shares outstanding during the period plus
dilutive common stock equivalents. Separate presentation of primary and fully
diluted earnings per common share has not been made because the difference is
immaterial.
TRANSLATION OF FOREIGN CURRENCIES--All assets and liabilities of foreign
subsidiaries whose functional currency is other than the U.S. dollar are
translated at year-end exchange rates. All revenue and expense accounts are
translated at average rates in effect during the period.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
reporting period.
RECLASSIFICATIONS--Certain prior year amounts have been reclassified to
conform to the current year presentation.
2. INVESTMENT IN AFFILIATE
Summarized below is selected 1994 financial information for the Company's
investment in its previously unconsolidated affiliate, Oil Dynamics,
Inc.(ODI). Beginning November 29, 1994, ODI was included in the Company's
financial statements on a fully consolidated basis.
(In thousands)
- ------------------------------------------------------
1994
Net sales................ $44,043
Gross profit............. 10,735
Net income............... 773
On November 29, 1994, control of the previously 50 percent owned ODI was
effectively transferred to the Company. The change in control resulted from
receipt of a stock dividend (in lieu of a cash dividend received by the
investment partner) which increased the Company's ownership interest to
approximately 97 percent. The change in control has been accounted for under
the purchase method. On April 4, 1996, the Company purchased the remaining 3
percent.
Equity in the earnings of ODI is included in the results of operations using
the equity method of accounting for the thirteen months ended November 28,
1994. Beginning November 29, 1994, the results of operations and financial
position of ODI have been included on a fully consolidated basis. In 1994,
the fiscal year end of ODI was changed to conform with the Company's fiscal
year end. This change did not materially affect the Company's financial
statements.
Summarized below are the unaudited pro forma consolidated results of
operations of the Company and ODI as though control of ODI had been
transferred to the Company as of the beginning of 1994. These results include
certain pro forma adjustments, primarily increased interest expense, and are
not necessarily indicative of the results that would have been obtained had
the Company controlled ODI during the respective periods.
(In thousands, except per share amounts)
- -------------------------------------------------------------------
1994
Net sales............................... $285,483
Net income.............................. 18,967
Per share data:
Net income.......................... $ 2.88
3. EMPLOYEE BENEFIT PLANS
PENSION PLANS--The Company's domestic operations maintain four separate
pension plans covering substantially all of its U.S. employees. A non-
contributory defined benefit pension plan covering substantially all U.S.
employees provides benefits based upon years of credited service. A
contributory defined benefit pension plan covering substantially all U.S.
salaried employees provides benefits based upon the highest average thirty-six
consecutive monthly earnings before retirement. A non-contributory defined
benefit pension plan covering certain management employees provides benefits
in excess of those provided under other plans. A non-contributory defined
benefit pension plan covering substantially all other employees of the Company
not covered under other plans provides benefits based upon a percentage of
monthly earnings for each year of credited service. The Company's funding
policy is to make the minimum annual contribution required by applicable
regulations.
Net domestic pension cost for 1996, 1995 and 1994 was as follows:
(In thousands)
- ----------------------------------------------------------------
1996 1995 1994
---- ---- ----
Service cost.................... $ 2,295 $ 1,846 $ 1,726
Interest on projected
benefit obligation............ 5,291 4,952 4,310
Actual return on plan assets.... (16,769) (13,082) 1,356
Net amortization and deferral... 11,331 7,559 (6,367)
------- ------- -------
Net domestic pension cost....... $ 2,148 $ 1,275 $ 1,025
======= ======= =======
The following table sets forth the funded status of the Company's domestic
plans and accrued pension costs reflected in the Company's balance sheet at
year end. The Company's international subsidiaries' pension liabilities have
been excluded from the following presentation because the amounts are
immaterial.
(In thousands)
- ----------------------------------------------------------------------
ABO Exceeds Assets Assets Exceed ABO
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
Actuarial present value of
benefit obligations:
Vested employees........... $ 1,120 $41,886 $66,271 $19,662
Nonvested employees........ 38 2,071 2,787 802
------- ------- ------- -------
Accumulated benefit
obligation (ABO)............. 1,158 43,957 69,058 20,464
Additional amount related to
projected benefit
or pay increases............. 307 386 5,624 4,853
------- ------- ------- -------
Projected benefit obligation... 1,465 44,343 74,682 25,317
Fair value of plan assets,
primarily common stocks and
bonds, including $23,306
and $16,500 of the Company's
common stock in 1996 and
1995, respectively........... - 41,013 86,030 29,871
------- ------- ------- -------
Funded status.................. (1,465) (3,330) 11,348 4,554
Unrecognized net (gain) loss... 712 (4,037) (18,698) (4,000)
Unrecognized net obligation
(asset) at date of initial
application of SFAS No. 87... - 273 (242) (558)
Unrecognized prior service
cost......................... 32 2,556 4,674 (221)
Adjustment required to
recognize minimum liability.. (437) (134) - -
------- ------- ------- -------
Accrued pension liability...... $(1,158) $(4,672) $(2,918) $ (225)
======= ======= ======= =======
Actuarial Assumptions:
1996 1995 1994
---- ---- ----
Discount rate.................. 7.50% 7.50% 8.0-8.25%
Rate of increase in future
compensation................. 0-5.0% 0-5.0% 0-5.0%
Expected long-term rate of
return on plan assets........ 8.25-9.0% 8.25-9.0% 8.25-9.0%
Pursuant to the provisions of Statement of Financial Accounting Standards No.
87 "Employers' Accounting for Pensions," the Company recorded in other
noncurrent liabilities an additional minimum pension liability adjustment of
$437,000 as of December 28, 1996, to recognize the amount of the accumulated
plan benefits which exceeds the fair value of the plan assets and the accrued
pension liability. At December 28, 1996, the liability exceeded the
unrecognized prior service cost resulting in a minimum pension liability, net
of taxes, of $243,000 recorded as a reduction of the Company's equity.
401(k)PLAN--Prior to January 1, 1995, the Company maintained a 401(k) Directed
Investment Salary Plan (DISP) covering substantially all employees and a
Savings Plan (Savings Plan) covering substantially all hourly employees at its
Bluffton facility. Effective January 1, 1995, the Company merged the Savings
Plan into the DISP.
EMPLOYEE STOCK OWNERSHIP PLAN--The Company maintains an Employee Stock
Ownership Plan (ESOP) for substantially all of the its domestic employees
excluding hourly employees at its Bluffton and Jonesboro, Indiana; Siloam
Springs, Arkansas; and McFarland, Wisconsin, locations.
In June 1996 and in July 1992, the ESOP Trustee acquired additional shares of
Company common stock on the open market using the proceeds of a ten-year, $0.3
million loan and a fifteen-year, $3.0 million loan, respectively, from the
Company. Under the terms of the variable rate loans (6.31 percent at December
28, 1996), principal plus interest is payable in equal annual installments.
The shares of stock purchased with the loan proceeds are collateral for the
loan and are considered outstanding for purposes of calculating earnings per
share.
At December 28, 1996, 87,186 shares were allocated to the accounts of
participants, 10,968 shares were committed to be released and allocated to the
accounts of participants for service rendered during 1996, and 87,503 shares
were held by the ESOP Trust in suspense.
The Company contributes a portion of its 401(k) matching contribution as well
as an additional annual contribution, both subject to the Company's annual
financial results, to the ESOP Trust. The ESOP Trustee uses a portion of the
Company's contributions to make principal and interest payments on the loan.
As loan payments are made, shares of common stock are released as collateral
and are allocated to participants' accounts. The balance of the Company's
contributions in cash or common stock is made to the 401(k) and ESOP Trusts,
and allocated to participants' accounts to satisfy the balance of the
Company's 401(k) matching contribution.
The following table sets forth the interest expense and Company contributions
to the ESOP and 401(k) Plan (dividends on the Company's common stock held by
the ESOP are not used for debt service):
(In thousands)
- --------------------------------------------------------------------
1996 1995 1994
---- ---- ----
Interest expense incurred by the Plan
on ESOP debt............................. $ 153 $ 155 $167
Company contributions to ESOP and 401(k)... 1,217 1,292 992
POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS--The Company's postretirement
plan covers domestic employees hired prior to 1992. The Company effectively
capped its cost for such benefits through plan amendments made in 1992
freezing Company contributions for health and life insurance benefits at 1991
levels for current and future beneficiaries with actuarially reduced benefits
for employees who retire before age 65.
Net postretirement benefit cost for 1996, 1995 and 1994 was as follows:
(In thousands)
- --------------------------------------------------------------------
1996 1995 1994
---- ---- ----
Service cost............................... $ 244 $ 219 $ 246
Interest cost.............................. 803 837 806
Amortization of transition obligation...... 489 489 489
Net amortization and deferral.............. 59 7 83
------ ------ ------
Net postretirement benefit cost............ $1,595 $1,552 $1,624
====== ====== ======
The following table sets forth the funded status of the Company's
postretirement benefit plans and accrued postretirement benefit cost reflected
in the Company's balance sheet at year end:
(In thousands)
- -------------------------------------------------------------------
1996 1995
---- ----
Accumulated postretirement benefit obligation
Retirees................................ $(7,640) $(7,939)
Active employees........................ (3,562) (3,318)
------- -------
(11,202) (11,257)
Unrecognized net obligation at date
of adoption of SFAS No. 106........... 7,823 8,312
Unrecognized net loss................... 1,714 1,773
------- -------
Accrued postretirement benefit cost..... $(1,665) $(1,172)
======= =======
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.50, 7.50 and 8.25 percent in 1996, 1995 and 1994,
respectively.
4. ACCRUED EXPENSES
Accrued expenses consisted of:
(In thousands)
- ------------------------------------------------------------------
1996 1995
---- ----
Salaries, wages and commissions....... $ 7,178 $ 6,100
Product warranty costs................ 4,719 4,745
Insurance............................. 4,896 4,843
Employee benefits..................... 2,818 2,971
Other................................. 5,272 4,569
------- -------
$24,883 $23,228
======= =======
5. INCOME TAXES
Income before income taxes consisted of:
(In thousands)
- -------------------------------------------------------------------
1996 1995 1994
---- ---- ----
Domestic.................... $27,664 $23,647 $28,202
Foreign..................... 5,673 632 2,011
------- ------- -------
$33,337 $24,279 $30,213
======= ======= =======
The income tax provision consisted of:
(In thousands)
- -------------------------------------------------------------------
1996 1995 1994
---- ---- ----
Currently payable:
Federal................... $ 8,110 $8,714 $ 7,966
Foreign................... 1,611 113 1,277
State..................... 2,162 2,041 2,572
Deferred:
Federal................... (44) (2,293) 169
Foreign................... 50 343 (408)
State..................... (62) (141) (72)
------- ------ -------
$11,827 $8,777 $11,504
======= ====== =======
Significant components of the Company's deferred tax assets and liabilities
were as follows:
(In thousands)
- -------------------------------------------------------------------
1996 1995
---- ----
Deferred tax assets:
Accrued expenses and reserves.............. $ 6,835 $ 6,033
Compensation and employee benefits......... 4,380 4,516
Foreign tax credits........................ - 385
Other items................................ 670 744
------- -------
Total deferred tax assets................ 11,885 11,678
------- -------
Deferred tax liabilities:
Accelerated depreciation on fixed assets... 4,132 4,055
Other items................................ 181 107
------- -------
Total deferred tax liabilities........... 4,313 4,162
------- -------
Net deferred tax assets...................... $ 7,572 $ 7,516
======= =======
The portions of current and non-current deferred tax assets and liabilities
were as follows:
(In thousands)
- -----------------------------------------------------------------
1996 1995
--------------------- ---------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
Current........ $ 7,840 $ 85 $ 7,908 $ 85
Non-current.... 4,045 4,228 3,770 4,077
------- ------ ------- ------
Total.......... $11,885 $4,313 $11,678 $4,162
======= ====== ======= ======
There was no valuation allowance for deferred tax assets required in 1996 or
1995.
The differences between the statutory and effective tax rates were as follows:
- ------------------------------------------------------------------
1996 1995 1994
---- ---- ----
U.S. Federal statutory rate...... 35.0% 35.0% 35.0%
State income taxes, net of
federal benefit................ 4.1 5.1 5.4
Effect of higher foreign
tax rates...................... (.5) 1.0 .5
Earnings of foreign sales
corporation ................... (3.1) (.4) (.3)
Utilization of foreign
tax credits.................... - (5.2) (3.9)
Other items...................... - .7 1.7
----- ----- -----
35.5% 36.2% 38.4%
===== ===== =====
Accumulated undistributed earnings of foreign subsidiaries expected to be
permanently invested approximated $5.2 million at December 28, 1996. The
Company does not anticipate incurring any tax should these earnings be
repatriated in the future.
6. DEBT
Short-term debt consisted of:
(In thousands)
- ---------------------------------------------------------------
1996 1995
---- ----
Bank--other............................. $ - $452
==== ====
Long-term debt consisted of:
(In thousands)
- ---------------------------------------------------------------
1996 1995
---- ----
Insurance Company--6.31%, principal
payments of $1.0 million due in
annual installments, starting in
1998 with a balloon payment of
$10,000 in 2008....................... $20,000 $20,000
Bank--other............................. 297 180
------- -------
20,297 20,180
Less current maturities................. 21 9
------- -------
$20,276 $20,171
======= =======
Both the Company's short-term borrowings and long-term debt are unsecured.
The Company's long-term debt agreement provides for certain financial
covenants relative to working capital, additional borrowings, loans or
advances, and investments. The Company was in compliance with all financial
covenants in 1996 and 1995.
On January 5, 1996, the Company entered into an unsecured, five-year $40
million revolving credit agreement (the "Agreement"). The Agreement, which
includes a facility fee of one-tenth of one percent on the committed amount,
provides for various borrowing rate options including interest rates based on
the London Interbank Offered Rates (LIBOR) plus interest spreads keyed to the
Company's ratio of debt to consolidated tangible net worth. The Agreement
contains certain financial covenants with respect to borrowings, fixed charge
coverage, working capital, loans or advances, and investments.
7. SHAREOWNERS' EQUITY
The Company had 6,371,029 shares of common stock (10,000,000 shares
authorized, $.10 par value) outstanding at the end of 1996. On January 26,
1994, the Company purchased 109,979 common shares for $3.8 million under the
terms of a stock redemption agreement entered into in 1988 with Edward J.
Schaefer, co-founder of the Company. Under the terms of the agreement, the
Company had the right, but not the obligation, to purchase any and all shares
that the estate elected to sell. Of the 109,979 shares repurchased, 17,310
were re-issued to Company-sponsored employee benefit plans and the remaining
shares were retired.
Stock subscriptions are principally deferred costs recognized in connection
with the issuance of common stock under the 1988 Incentive Award Plan and
loans to officers under the 1988 Purchase Plan.
During the first quarter of 1994, the Company redeemed all outstanding shares
of Class C Cumulative Preferred Stock for its stated value of $5.8 million.
8. STOCK BASED COMPENSATION
At December 28, 1996, the Company had seven stock-based compensation plans
which are described as follows.
FIXED STOCK OPTION PLANS--The Company has authorized the grant of options to
purchase common stock of the Company to employees and non-employee directors
of the Company and its subsidiaries under five fixed stock option plans. The
plans and the number of authorized shares available for grants are as follows:
Shares
------
1981 Incentive Stock Option Plan (1981 Plan) 555,000
1986 Non-Qualified Stock Option Plan (1986 Plan) 555,000
1996 Employee Stock Option Plan (1996 Plan) 600,000
1990 Non-Employee Director Stock Option Plan (1990 Director Plan) 60,000
1996 Non-Employee Director Stock Option Plan (1996 Director Plan) 90,000
Under each of the above plans, the exercise price of each option equals the
market price of the Company's common stock on the date of grant and the
options expire ten years after the date of the grant. Generally, options
granted under the 1981 Plan, the 1986 Plan, and the 1996 Plan vest 20 percent
a year and become fully vested and exercisable after five years. Options
granted under the 1990 and 1996 Director Plans vest 33 percent a year and
become fully vested and exercisable after three years.
A summary of the Company's fixed stock option plans activity and related
information for 1996, 1995 and 1994 follows:
1996 1995 1994
------------------------- ------------------------- -------------------------
Weighted-Average Weighted-Average Weighted-Average
Fixed Options Shares Exercise Price Shares Exercise Price Shares Exercise Price
- ------------- ------- ---------------- ------- ---------------- ------- ----------------
Outstanding at
beginning of year 861,092 $18.69 753,645 $15.90 513,095 $10.34
Granted 116,500 41.74 192,000 31.82 254,000 26.71
Exercised (121,467) 6.90 (34,553) 15.36 (13,450) 8.39
Forfeited (6,000) 22.13 (50,000) 29.25 - -
------- ------- -------
Outstanding at
end of year 850,125 $23.51 861,092 $18.69 753,645 $15.90
======= ======= =======
The following summarizes information about fixed stock options outstanding at
December 28, 1996:
Options Outstanding Options Exercisable
-------------------------------------------------- ------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 12/28/96 Contractual Life Exercise Price at 12/28/96 Exercise Price
- --------------- ----------- ---------------- ---------------- ----------- ----------------
$ 3.38 to 10.00 265,025 2.60 years $ 7.66 265,025 $ 7.66
10.01 to 30.00 270,000 7.02 25.08 129,000 23.53
30.01 to 42.00 315,100 8.96 35.49 43,800 31.80
------- -------
$ 3.38 to 42.00 850,125 6.36 $23.51 437,825 $14.75
======= =======
For pro forma information regarding net income and earnings per share, the
fair value for the options awarded in 1996 and 1995 for all fixed stock option
plans was estimated as of the date of the grant using a Black-Scholes option
valuation model with the following weighted average assumptions for 1996 and
1995, respectively: risk-free interest rates of 6.18 percent and 6.42 percent;
dividend yields of 1.4 percent; volatility factors of the expected market
price of the Company's common stock of .257 and .260; and a weighted-average
expected life of the option of six years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized over the options' vesting period. Therefore, in the year of
adoption and subsequently affected years, the effects of applying SFAS No. 123
for providing pro forma net income and earnings per share are not likely to be
representative of the effects on reported income in future years. The
Company's pro forma information follows:
(In thousands, except per share amounts)
- ----------------------------------------------------------------------
1996 1995
---- ----
Reported net income $21,510 $15,502
Pro forma net income $21,245 $15,362
Reported net income available per common share $3.22 $2.35
Pro forma net income available per common share $3.18 $2.33
The Black-Scholes option valuation model used by the Company was developed for
use in estimating the fair value of fully tradable options which have no
vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions including
the expected stock price volatility. It is management's opinion that the
Company's stock options have characteristics significantly different from
those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, the existing models
do not necessarily provide a reliable single measure of the fair value of its
stock options.
ADDITIONAL AWARD PLANS--The Company has authorized the grant of up to 888,000
restricted shares of its common stock to employees of the Company and its
subsidiaries under the 1988 Stock Incentive Award Plan (1988 Award Plan).
Vesting of shares awarded under the 1988 Award Plan is contingent upon
increases in the Company's actual Return on Equity (ROE) during the
restriction period relative to an established threshold ROE. No shares were
awarded under the 1988 Award Plan during 1996 or 1995. At December 28, 1996,
671,936 shares were reserved for future awards.
The Company has allocated 888,000 shares of its common stock for the 1988
Executive Stock Purchase Plan (1988 Purchase Plan). Under this plan
executives of the Company and its subsidiaries are awarded the right to
purchase shares of its common stock through a Company loan. The purchase price
per share is the closing price of a share on the day prior to the date of
purchase. During 1995, 20,000 shares were awarded under the 1988 Purchase
Plan. No shares were awarded in 1996. At December 28, 1996, 512,800 shares
were reserved for future awards.
9. SEGMENT AND GEOGRAPHIC INFORMATION
The Company's single business segment is the design, manufacture and sale of
electric motors, electronic controls and related equipment. These products
are sold to original equipment manufacturers in the United States, Canada,
Europe, Australia, South Africa, Mexico and other world markets.
Manufacturing plants are located in the United States, Germany, Czech
Republic, Italy and South Africa.
GEOGRAPHICAL AREAS (In thousands)
- ---------------------------------------------------------------------
1996 1995 1994
---- ---- ----
NET SALES
North America.............. $252,007 $225,958 $200,216
Foreign.................... 48,682 50,482 41,224
-------- -------- --------
$300,689 $276,440 $241,440
======== ======== ========
OPERATING MARGIN
North America.............. $44,011 $38,885 $43,030
Foreign.................... 7,425 2,148 3,342
Equity in earnings of
affiliate................ - - 217
Interest expense........... (1,308) (2,128) (2,172)
Interest income............ 2,052 1,866 1,678
Corporate expenses......... (18,843) (16,492) (15,882)
------- ------- -------
Income before taxes........ $33,337 $24,279 $30,213
======= ======= =======
IDENTIFIABLE ASSETS
North America.............. $ 81,570 $ 84,013 $ 82,247
Foreign.................... 29,966 29,697 24,188
Corporate ................. 61,923 39,647 45,146
-------- -------- --------
$173,459 $153,357 $151,581
======== ======== ========
The Company has no single geographic area within its foreign operations whose
revenues or assets exceed 10 percent of such amounts on a consolidated basis.
The Company had $49.4 million, $32.7 million and $23.2 million of export sales
(from domestic sources) in 1996, 1995 and 1994, respectively, to various
geographic areas, of which no single geographic area was significant.
One customer accounted for 12.5 percent, 12.9 percent and 14.1 percent of the
consolidated sales in 1996, 1995 and 1994, respectively.
10. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited quarterly financial information for the years 1996 and 1995 is as
follows:
(In thousands, except per share amounts)
- --------------------------------------------------------------------
Net Income
Per Weighted
Net Gross Net Average
Sales Profit Income Common Share
- --------------------------------------------------------------------
1996
1st Quarter $ 62,754 $14,910 $ 3,008 $ .45
2nd Quarter 73,107 19,212 5,081 .76
3rd Quarter 79,380 20,000 5,612 .84
4th Quarter 85,448 24,931 7,809 1.17
-------- ------- ------- -----
$300,689 $79,053 $21,510 $3.22
======== ======= ======= =====
- --------------------------------------------------------------------
1995
1st Quarter $ 59,788 $13,297 $ 1,644 $ .25
2nd Quarter 76,442 17,573 4,542 .69
3rd Quarter 66,188 14,954 3,301 .50
4th Quarter 74,022 19,547 6,015 .91
-------- ------- ------- -----
$276,440 $65,371 $15,502 $2.35
======== ======= ======= =====
11. CONTINGENT LIABILITIES AND COMMITMENTS
The Company is defending various claims and legal actions which have arisen in
the ordinary course of business. The Company has attempted, where possible,
to assess the likelihood of an unfavorable outcome as a result of these
actions. Legal counsel has been retained to assist the Company in making
these determinations, and costs are accrued when an unfavorable outcome is
determined to be probable and a reasonable estimate can be made. As a result,
the Company has an accrual balance of approximately $1.6 million and $1.4
million at December 28, 1996 and December 30, 1995, respectively, to provide
for such actions.
Included in such matters are two pending governmental actions associated with
hazardous waste sites falling under the Comprehensive Environmental Response
Compensation and Liability Act in which the Company has been designated, in
conjunction with other parties, as a "potentially responsible party" (PRP).
The range of the Company's potential liability for the first site is unknown
as the total cost for the site remediation and allocation among the PRPs has
not been determined; however, the Company believes such matters are
substantially covered by the Company's insurance. The current estimate for
remediation at the second site is $15.0 million, for which the Company has
agreed under consent decree to pay 1.341 percent (approximately $201,000) over
the next five to fifteen years. The Company has paid approximately $103,000 of
this amount through December 28, 1996.
Total rent expense charged to operations for operating leases including
contingent rentals was $2.4 million, $2.0 million and $1.3 million for 1996,
1995 and 1994, respectively. The future minimum rental payments for
noncancellable operating leases as of December 28, 1996, are as follows:
1997, $.7 million; 1998, $.3 million and 1999, $.2 million. Rental
commitments subsequent to 1999 are not material.
12. SUBSEQUENT EVENTS
In January 1997, pursuant to the stock repurchase plan authorized by the
Company's Board of Directors in October 1996, the Company completed three
separate, privately negotiated transactions to repurchase 500,000 shares of
the Company's common stock for a total purchase price of $24.0 million. Of
these shares, 175,000 were repurchased from a director of the Company. The
shares were subsequently retired.
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Shareowners and Directors,
Franklin Electric Co., Inc.
We have audited the accompanying consolidated balance sheets of Franklin
Electric Co., Inc. and consolidated subsidiaries as of December 28, 1996 and
December 30, 1995 and the related consolidated statements of income,
shareowners' equity and cash flows for each of the three years in the period
ended December 28, 1996. Our audits also included the financial statement
schedule listed in the index at Item 14. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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 financial position of Franklin Electric Co., Inc. and
consolidated subsidiaries as of December 28, 1996 and December 30, 1995, and
the results of its operations and its cash flows for each of the three years
in the period ended December 28, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Chicago, Illinois
January 30, 1997
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The information concerning directors required by this Item 10 is set forth in
the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held on April 11, 1997, under the headings of "ELECTION OF DIRECTORS" and
"INFORMATION CONCERNING NOMINEES AND DIRECTORS," and is incorporated herein by
reference.
The information concerning executive officers required by this Item 10 is
contained in Part I of this Form 10-K under the heading of "EXECUTIVE OFFICERS
OF THE REGISTRANT."
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The information required by Item 11 is set forth in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 11, 1997,
under the headings of "INFORMATION ABOUT THE BOARD AND ITS COMMITTEES,"
"SUMMARY COMPENSATION TABLE," "OPTION GRANTS IN 1996 FISCAL YEAR" AND "1996
FISCAL YEAR-END OPTION VALUES," "COMPENSATION PURSUANT TO PLANS" and
"AGREEMENTS," and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information required by Item 12 is set forth in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 11, 1997,
under the heading of "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT," and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information required by Item 13 is set forth in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 11, 1997,
under the headings of "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" and "AGREEMENTS," and is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
Form 10-K
Annual Report
(page)
-------------
(a) 1. Financial Statements - Franklin Electric
----------------------------------------
Independent Auditors' Report
Consolidated Statements of Income for the
three years ended December 28, 1996
Consolidated Balance Sheets, as of
December 28, 1996 and December 30, 1995
Consolidated Statements of Cash Flows
for the three years ended December 28, 1996
Consolidated Statements of Shareowners' Equity
for the three years ended December 28, 1996
Notes to Consolidated Financial Statements
(including quarterly financial data)
2. Financial Statement Schedules - Franklin Electric
-------------------------------------------------
II Valuation and Qualifying Accounts
Schedules other than those listed above are omitted for
the reason that they are not required or are not
applicable, or the required information is disclosed
elsewhere in the financial statements and related notes.
3. Exhibits
--------
See the Exhibit Index.
Management Contract or Compensatory Plan or
Arrangement is denoted by an asterisk (*).
(b) Reports on Form 8-K filed during the fourth quarter
ended December 28, 1996: None.
(c) See the Exhibit Index.
(d) Individual financial statements and all other schedules
of the Registrant are omitted as they are not required.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WILLIAM H. LAWSON
---------------------------
William H. Lawson
Chairman of the Board
Chief Executive Officer
(Date) February 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
WILLIAM H. LAWSON Chairman of the Board
- -------------------------------------- Chief Executive Officer
William H. Lawson February 14, 1997 (Principal Executive Officer)
JOHN B. LINDSAY
- --------------------------------------
John B. Lindsay February 14, 1997 President and Director
JESS B. FORD Vice President and Chief
- -------------------------------------- Financial Officer (Principal
Jess B. Ford February 14, 1997 Financial and Accounting
Officer)
ROBERT H. LITTLE
- --------------------------------------
Robert H. Little February 14, 1997 Director
PATRICIA SCHAEFER
- --------------------------------------
Patricia Schaefer February 14, 1997 Director
DONALD J. SCHNEIDER
- --------------------------------------
Donald J. Schneider February 14, 1997 Director
GERARD E. VENEMAN
- --------------------------------------
Gerard E. Veneman February 14, 1997 Director
JURIS VIKMANIS
- --------------------------------------
Juris Vikmanis February 14, 1997 Director
HOWARD B. WITT
- --------------------------------------
Howard B. Witt February 14, 1997 Director
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years 1996, 1995 and 1994
(In thousands)
--------------
Additions
Balance at charged to Balance
beginning costs and at end
Description of period expenses Deductions of period
----------- --------- -------- ---------- ---------
(A)
Allowance for doubtful accounts:
1996 $1,351 $227 $143 $1,435
====== ==== ==== ======
1995 $1,271 $190 $110 $1,351
====== ==== ==== ======
1994 $1,269 $201 $199 $1,271
====== ==== ==== ======
NOTES:
- ------
(A) Uncollectible accounts written off, net of recoveries
FRANKLIN ELECTRIC CO., INC.
EXHIBIT INDEX FOR THE FISCAL YEAR
ENDED DECEMBER 28, 1996
Sequentially
Numbered
Item Description Pages
---- ----------- -----
3(i) Restated Articles of Incorporation of Franklin
Electric Co., Inc. (incorporated herein by
reference to Exhibit 3 of the Company's Form 10-K
for the fiscal year ended December 30, 1989)
Articles of Amendment of the Restated Articles of
Incorporation of Franklin Electric Co., Inc.
effective February 26, 1991 (incorporated herein
by reference to the Company's current report on
Form 8-K dated February 26, 1991)
3(ii) By-Laws of Franklin Electric Co., Inc. as amended,
effective July 15, 1994 (incorporated herein by
reference to the Company's Form 10-K for the fiscal
year ended December 31, 1994)
4 Rights Agreement dated as of February 11, 1991
between Franklin Electric Co., Inc. and Lincoln
National Bank & Trust Co. of Fort Wayne (incorporated
herein by reference to the Company's registration
statement on Form 8-A dated February 26, 1991)
10.1 Stock Redemption Agreement dated October 28,
1988, as amended on December 12, 1988, between
the Company and Edward J. Schaefer (incorporated
herein by reference to Exhibit 10.1 of the
Company's Form 10-K for the fiscal year ended
December 31, 1988)
10.2 1988 Executive Stock Purchase Plan (incorporated
herein by reference to the Company's 1988 Proxy
Statement for the Annual Meeting held on April 15,
1988, and included as Exhibit E to the Proxy
Statement)*
10.3 1988 Stock Incentive Award Plan (incorporated
herein by reference to the Company's 1988 Proxy
Statement for the Annual Meeting held on April
15, 1988, and included as Exhibit D to the Proxy
Statement)*
10.4 Amended 1981 Incentive Stock Option Plan
(incorporated herein by reference to the
Company's 1988 Proxy Statement for the Annual
Meeting held on April 15, 1988, and included as
Exhibit B to the Proxy Statement)*
10.5 Amended 1986 Stock Option Plan (incorporated
herein by reference to the Company's 1988 Proxy
Statement for the Annual Meeting held on
April 15, 1988, and included as Exhibit C to the
Proxy Statement)*
10.6 Franklin Electric Nonemployee Director Stock
Option Plan (incorporated herein by reference to
the Company's 1991 Proxy Statement for the Annual
Meeting on April 19, 1991)*
10.7 Employment Agreement dated October 23, 1995 between
the Company and Jess B. Ford (incorporated herein by
reference to Exhibit 10.7 of the Company's form 10-K
for the fiscal year ended December 30, 1995)
10.8 Employment Agreement dated December 5, 1986 between
the Company and William H. Lawson (incorporated
herein by reference to Exhibit 10.7 of the
Company's Form 10-K for the fiscal year ended
December 28, 1991)*
10.9 Credit Agreement dated as of January 5, 1996 between
the Company and various commercial banks(incorporated
herein by reference to Exhibit 10.9 of the Company's
Form 10-K for the fiscal year ended December 30, 1995)
10.10 1996 Franklin Electric Co., Inc., Employee Stock
Option Plan (incorporated herein by reference to the
Company's 1996 Proxy Statement for the Annual
Meeting held on April 12, 1996, and included as
Exhibit A to the Proxy Statement)*
10.11 1996 Franklin Electric Co., Inc., Non-Employee
Director Stock Option Plan (incorporated herein by
reference to the Company's 1996 Proxy Statement for
the Annual Meeting held on April 12, 1996, and
included as Exhibit B to the Proxy Statement)*
11 Primary Earnings per Share and Fully Diluted
Earnings per Share
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule
* Management contract or compensatory plan or arrangement
EXHIBIT 11
----------
FRANKLIN ELECTRIC CO., INC.
PRIMARY EARNINGS PER SHARE AND FULLY DILUTED EARNINGS PER SHARE
------------
(In thousands, except per share amounts)
Year Ended
-------------------------------------
December 28, December 30, December 31,
1996 1995 1994
--------- --------- --------
Net income available
to common shares and
common share equivalents..... $21,510 $15,502 $18,556
======= ======= =======
Shares outstanding,
beginning of period.......... 6,254 6,199 6,231
Weighted average of options
issued during the period..... - - 19
Dilutive effect of options
outstanding during the
period....................... 349 364 337
Weighted average of common
shares issued during
the period................... 73 35 53
Weighted average common
shares repurchased during
the period................... - - (103)
------- ------- -------
Weighted average primary
shares outstanding during
the period................... 6,676 6,598 6,537
Additional dilutive effect
of options outstanding
during the period............ 87 16 27
------- ------- -------
Weighted average fully
diluted shares outstanding
during the period............ 6,763 6,614 6,564
======= ======= =======
Earnings per share
Primary...................... $ 3.22 $ 2.35 $ 2.84
======= ======= =======
Fully diluted................ $ 3.18 $ 2.34 $ 2.83
======= ======= =======
EXHIBIT 21
----------
FRANKLIN ELECTRIC CO., INC.
SUBSIDIARIES OF THE REGISTRANT
------------
Percent of
State or country voting
of incorporation stock owned
---------------- -----------
Subsidiaries consolidated:
FE Petro, Inc. Indiana 100
Oil Dynamics, Inc. Oklahoma 100
Franklin Electric Subsidiaries, Inc.
[inactive] Indiana 100
Franklin Electric International, Inc. Delaware 100
Franklin Electric AG Switzerland 100
Franklin Electric B.V. Netherlands 100
Franklin Electric Europa, GmbH Germany 100
Franklin Electric spol s.r.o. Czech Republic 100
Franklin Electric S.r.l. Italy 100
Franklin Electric (Australia) Pty. Ltd. Australia 100
Franklin Electric (South Africa)
Pty. Limited South Africa 100
Franklin Electric of Canada, Limited
[inactive] Canada 100
Franklin Electric Foreign Sales
Corporation U.S. Virgin Islands 100
Motores Franklin S.A. de C.V. Mexico 100
EXHIBIT 23
----------
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements of
Franklin Electric Co., Inc. on Form S-8 (file numbers 33-35958, 33-35960, 33-
35962 and 33-38200) of our report dated January 30, 1997 appearing in the
Annual Report on Form 10-K of Franklin Electric Co., Inc. for the year ended
December 28, 1996.
DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Chicago, Illinois
February 20, 1997