Franklin Electric Co. Inc. has a market cap of $746 million; its shares were traded at around $32.25 with a P/E ratio of 22 and P/S ratio of 1.2. The dividend yield of Franklin Electric Co. Inc. stocks is 1.5%. Franklin Electric Co. Inc. had an annual average earning growth of 1.2% over the past 10 years.FELE is in the portfolios of First Pacific Advisors of First Pacific Advisors, LLC, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Net sales for the first quarter of 2010 were $160.0 million, an increase of $10.2 million or 7 percent compared to 2009 first quarter sales of $149.8 million. Consolidated sales improved from the prior year due to Water Systems revenue growth which included broad based volume improvements in both the U.S. and international Water Systems businesses offset by reduced Fueling Systems sales in California. During the first quarter last year the Company experienced surging sales of Fueling Systems equipment in California due to an environmental mandate. The California sales surge started to abate in the 2nd quarter last year, so going forward year-on-year sales comparisons will exclude the sales surge. Additionally, first quarter 2010 sales were higher by $10.3 million versus the first quarter 2009 due to foreign currency translations as a result of a stronger U.S. dollar.
Restructuring expenses for the first quarter of 2010 were $2.2 million and reduced diluted earnings per share by approximately $0.06. Restructuring expenses include pension charges, severance expenses and manufacturing equipment relocation costs and primarily relate to the closure of the Siloam Springs, Arkansas manufacturing facility that had been previously announced. Approximately $1.0 million of these expenses were non-cash. The Company estimates that additional pre-tax closing costs of $1.8 million to $2.6 million will be incurred mostly in the second quarter of 2010 for the closure of the Siloam Springs facility.
Interest expense for the first quarter of 2010 was $2.2 million, a decrease of $0.2 million, compared to 2009 first quarter interest expense of $2.4 million.
Other income or expense was a loss of $2.2 million of the first quarter in 2010 and a gain of $0.3 million in the first quarter 2009. Included in other income for the first quarter of 2010 and 2009 was interest income of $0.3 million, primarily derived from the investment of cash balances in short-term U.S. treasury and agency securities. Also included in other income for the first quarter of 2010 was income from equity investments of $0.2 million. Other income or expense in the first quarter 2010 also included the impact of the reversal of an indemnification receivable related to an uncertain tax position for $2.7 million related to an acquisition in a prior year. The adjustment for the reversal of the uncertain tax position did not have an impact on net income. The uncertain tax position was originally recorded as a receivable from the sellers per the terms of the purchase agreement. The receivable and the tax liability related to the uncertain tax position were reversed in the first quarter of 2010 as the statutory limit for audit of the tax return expired. Excluding the reversal of the uncertain tax position, “other income or expense” in the first quarter income statement would have resulted in about $0.5 million of income.
The provision for income taxes in the first quarter of 2010 and 2009 was $0.7 million and $1.8 million, respectively. The effective tax rate for the first quarter of 2010 was 31.5 percent excluding the impact of the reversal of an uncertain tax position. The “Other income/(expense)” and “Income tax” lines on the income statement as reported include the impact of the reversal of a pre-acquisition uncertain tax position for $2.7 million related to an acquisition in a prior year. Excluding the reversal of the uncertain tax position, “Other income/(expense)” would have resulted in about $0.5 million of income, and “Income taxes” would have resulted in about $3.4 million of expense. The Company projects its full year effective tax rate, excluding discrete events, to be about 32.5 percent. The effective tax rate differs from the United States statutory rate of 35 percent, generally due to foreign income exclusion and due to the effects of state and foreign income taxes, net of federal tax benefits.
Net income for the first quarter of 2010 was $7.4 million compared to 2009 first quarter net income of $4.1 million. Net income attributable to Franklin Electric Co., Inc. for the first quarter of 2010 was $7.2 million, or $0.31 per diluted share, compared to 2009 first quarter net income attributable to Franklin Electric Co., Inc. of $3.8 million or $0.17 per diluted share.
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