BLUFFTON, Ind., April 28 /PRNewswire-FirstCall/ -- Franklin Electric Co., Inc. (NASDAQ:FELE) reported diluted earnings per share of $0.35 for the first quarter of 2008, an increase of 67 percent compared to 2007 first quarter earnings per share of $0.21, and first quarter income of $8.1 million in 2008, an increase of 66 percent compared to $4.9 million for the same period a year ago.
(Logo: http://www.newscom.com/cgi-bin/prnh/20000223/FRANKLOGO ) First quarter sales were a record $176.0 million, up $45.5 million or 35 percent compared to $130.5 million in 2007. First quarter sales attributed to acquisitions were $28.7 million. The Company's total organic growth was about 17 percent for the quarter including organic growth achieved by acquired companies and $7.0 million of growth from foreign exchange rate changes.
Water Systems sales worldwide were $136.7 million, up $36.1 million or 36 percent for the first quarter of 2008 compared to the same period for 2007. Water Systems' total organic growth was about 12 percent for the quarter. The growth was primarily attributable to increased sales in the United States, Canada, Latin America and the Middle East.
Fueling Systems sales worldwide were $39.3 million, an increase of approximately 31 percent for the first quarter of 2008 compared to the same period for 2007. Fueling Systems' sales growth was organic and driven by increased sales of vapor recovery and electronic fuel management systems.
R. Scott Trumbull, Chairman and Chief Executive Officer of the Company, stated: "First quarter 2008 sales of $176.0 million were on track with our expectations. Our sales and operating income were records for any first quarter in the Company's history, and net income was the second best first quarter on record. Growth in the Water Systems segment occurred in spite of the dramatic drop in housing starts in the United States as our pump product lines continued to gain market share. Our Fueling Systems business is benefiting from high demand for vapor recovery systems in California as gas stations upgrade their emissions control systems to be in compliance with clean air regulatory standards." Gross profit margin, at 29.2 percent of sales, declined in the first quarter of 2008 approximately 60 basis points from the comparable quarter of 2007. The primary cause for the 2008 margin decline was reduced facility utilization consistent with management's plan to reduce finished goods inventory and so increase turns over the course of the year. In response to rising commodity costs (e.g., aluminum, copper and steel), the Company announced market price increases for most of its product lines effective during the first and second quarters of 2008.
Selling, general, and administrative expenses increased by $6.9 million in the first quarter of 2008 compared to first quarter last year. The acquisitions of Pump Brands (South Africa), the pump division of Monarch Industries (Canada) and Schneider Motobombas (Brazil) added approximately $6.1 million to selling, general and administrative expenses for the first quarter of 2008. Selling, general, and administrative expenses as a percentage of sales declined by about 195 basis points versus the first quarter prior year.
For the first quarter 2008, the Company's operating income was a record $15.1 million, up $6.8 million or about 80 percent compared to $8.2 million for the same period a year ago. Operating margins for the quarter were 8.6 percent compared to 6.3 percent last year.
Interest expense increased by $1.4 million due to the debt incurred to fund acquisitions coupled with the first quarter seasonal build-up of working capital to serve the Water Systems and Fueling Systems markets in the second and third quarters.
The effective tax rate for 2008 increased to 36.3 percent (before the impact of one-time benefits) from the prior year's rate of 35.0 percent. The increase was primarily due to the loss of the research and development tax credit which has not been renewed by the Congress at this time.
During the first quarter of 2007, the Company initiated Phase 2 of its Global Manufacturing Realignment Program. Phase 2 of the Realignment Program included expanding facilities in low-cost regions and shifting production out of higher cost manufacturing facilities. During the first quarter 2008, having finished construction of the new pump plant in Linares, Mexico, the Company completed Phase 2 of the Global Manufacturing Realignment Program. In total, this phase included severance and equipment relocation costs of $4.0 million pre-tax with $3.9 million occurring in 2007 and $0.1 million occurring in the first quarter 2008. As previously disclosed, Phase 1 of the Realignment Program, which was completed in December 2005, resulted in $7.5 million of pre-tax restructuring expenses.
Mr. Trumbull commented on the Company's continued emphasis on earnings growth in 2008 and beyond: "For several quarters I have assured our shareowners that while earnings declined in 2007 for the first time in six years, the impact of the competitive factors that caused the decline would diminish in 2008 and we would return to the path of growing earnings. I am pleased that our first quarter performance begins to validate this forecast.
-- Our improvement during the quarter was driven by a combination of
organic sales growth, fixed cost leverage, and accretion from recent
acquisitions. Globally, the Water Systems segment achieved organic
growth of 12 percent during the quarter led by solid sales increases to
distributors in the United States; and to both distributors and OEMs in
Latin America and the Middle East.
-- Our Fueling Systems segment achieved organic growth of 31 percent as
vapor recovery system sales grew rapidly in both California and in
international markets.
-- For several years we have focused on expanding our sales base in
developing regions where we foresee growing demand for our Water
Systems products. During the first quarter, sales in developing regions
represented about 35 percent of our total Water Systems revenues and
grew organically by about 14 percent.
-- Fixed Costs (which we define as fixed manufacturing costs,
restructuring costs and SG&A less commissions,) as a percentage of
sales during the first quarter of 2008 are on track to improve on a
full year basis from the prior year. Fixed cost spending reductions
contributed to offset higher material and freight costs and achieve a
225 basis point improvement in operating income as a percent of sales
versus the first quarter of the prior year.
-- Our recently acquired companies, Pump Brands (South Africa), the pump
division of Monarch Industries (Canada), and Schneider Motobombas
(Brazil) all performed well during the quarter and the integrations
are on track. As we look forward we anticipate organic sales growth in excess of 12 percent and total sales growth in the range of 25 percent. This growth combined with spending controls should allow us to achieve Fixed Costs improvements of about 220 basis points for the full year 2008. While these factors will have a significant impact on earnings growth, we are carefully monitoring signs of increased material cost inflation in copper, steel, and freight to determine our pricing and cost reduction plans for the second half of the year. We also anticipate opportunities to complete additional "bolt-on" acquisitions that will enhance our product offering and expand our global distribution footprint." 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 serves customers around the world in residential, commercial, agricultural, industrial, municipal, and fueling applications.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including those relating to the Company's financial results, 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 December 29, 2007, 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. CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts) First Quarter Ended March 29, March 31,
2008 2007 Net sales $176,010 $130,496 Cost of sales 124,551 91,567 Gross profit 51,459 38,929 Selling and administrative expenses 36,311 29,455 Restructuring expense 82 1,238 Operating income 15,066 8,236 Interest expense (2,624) (1,212)
Other income 471 298
Foreign exchange gain (loss) (327) 247 Income before income taxes 12,586 7,569 Income taxes 4,438 2,672 Net income $8,148 $4,897
Net income per share:
Basic $0.35 $0.21
Diluted $0.35 $0.21
Weighted average shares and equivalent
shares outstanding:
Basic 23,030 23,088
Diluted 23,293 23,499
FRANKLIN ELECTRIC CO., INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) Mar. 29, Dec. 29,
2008 2007
ASSETS: Cash and equivalents $33,623 $65,252
Receivables 99,513 64,972
Inventories 164,593 156,146
Other current assets 26,225 23,109
Total current assets 323,954 309,479 Property, plant and equipment, net 143,576 134,931
Goodwill and other assets 251,221 217,827
Total assets $718,751 $662,237
LIABILITIES AND SHAREOWNERS' EQUITY: Accounts payable $32,221 $27,986
Accrued liabilities 54,979 52,265
Current maturities of long-term
debt and short-term borrowings 55,577 10,398
Total current liabilities 142,777 90,649 Long-term debt 152,202 151,287
Deferred income taxes 12,135 11,686
Employee benefit plan obligations 24,473 24,713
Other long-term liabilities 5,134 5,358 Shareowners' equity 382,030 378,544
Total liabilities and shareowners'
equity $718,751 $662,237 FRANKLIN ELECTRIC CO., INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) March 29, March 31,
2008 2007 Cash flows from operating activities:
Net income $8,148 $4,897
Adjustments to reconcile net
income to net cash flows from
operating activities:
Depreciation and amortization 6,229 4,730
Stock based compensation 1,106 1,363
Deferred income taxes (126) 365
Loss/(gain) on disposals of
plant and equipment 42 20
Changes in assets and liabilities:
Receivables (30,047) (17,984)
Inventories (4,141) (20,716)
Accounts payable and other
accrued expenses (5,222) (10,604)
Accrued income taxes 1,351 (7,415)
Excess tax from share-based
payment arrangements (64) (1,158)
Employee benefit plans (639) 574
Other, net (1,921) (1,150)
Net cash flows from operating activities (25,284) (47,078)
Cash flows from investing activities:
Additions to plant and equipment (6,758) (4,584)
Proceeds from sale of plant and
equipment 10 16
Additions to other assets (500) -
Purchases of securities (9,000) -
Proceeds from sale of securities 9,000 -
Cash paid for acquisitions, net of cash (35,465) -
Proceeds from sale of business - 1,310
Net cash flows from investing activities (42,713) (3,258)
Cash flows from financing activities:
Additions to short-term debt 45,000 -
Repayment of short-term debt (19) -
Additions to long-term debt - 50,000
Repayment of long-term debt (107) (79)
Proceeds from issuance of common stock 176 2,266
Excess tax from share-based payment
arrangements 64 1,158
Purchases of common stock (7,813) -
Reduction of loan to ESOP Trust - 200
Dividends paid (2,771) (2,536)
Net cash flows from financing activities 34,530 51,009
Effect of exchange rate changes on cash 1,838 (133)
Net change in cash and equivalents (31,629) 540
Cash and equivalents at beginning of
period 65,252 33,956
Cash and equivalents at end of period $33,623 $34,496
http://www.newscom.com/cgi-bin/prnh/20000223/FRANKLOGO http://photoarchive.ap.org/ DATASOURCE: Franklin Electric Co., Inc.
CONTACT: John J. Haines, +1-260-824-2900, for Franklin Electric Co., Inc.
Web site: http://www.fele.com/
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