Indiana | 35-0827455 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
400 East Spring Street | ||
Bluffton, Indiana | 46714 | |
(Address of principal executive offices) | (Zip Code) |
YES x | NO o |
YES x | NO o |
Large Accelerated Filer x | Accelerated Filer o | Non-Accelerated Filer o | Smaller Reporting Company o |
YES o | NO x |
Outstanding at | ||
Class of Common Stock | July 30, 2013 | |
$.10 par value | 47,547,853 shares |
Page | |||
PART I. | Number | ||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 4. | |||
Item 6. | |||
Exhibits |
(In thousands, except per share amounts) | Second Quarter Ended | Six Months Ended | |||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
Net sales | $ | 263,443 | $ | 246,696 | $ | 485,967 | $ | 448,619 | |||||||
Cost of sales | 168,852 | 162,358 | 317,435 | 298,006 | |||||||||||
Gross profit | 94,591 | 84,338 | 168,532 | 150,613 | |||||||||||
Selling, general, and administrative expenses | 53,188 | 46,769 | 103,253 | 92,121 | |||||||||||
Restructuring (income)/expense | 697 | 59 | 1,407 | (14 | ) | ||||||||||
Operating income | 40,706 | 37,510 | 63,872 | 58,506 | |||||||||||
Interest expense | (2,556 | ) | (2,362 | ) | (5,146 | ) | (4,951 | ) | |||||||
Other income | 364 | 452 | 811 | 13,987 | |||||||||||
Foreign exchange income/(expense) | (541 | ) | (357 | ) | (712 | ) | (655 | ) | |||||||
Income before income taxes | 37,973 | 35,243 | 58,825 | 66,887 | |||||||||||
Income taxes | 9,534 | 10,001 | 14,771 | 18,486 | |||||||||||
Net income | $ | 28,439 | $ | 25,242 | $ | 44,054 | $ | 48,401 | |||||||
Less: Net income attributable to noncontrolling interests | (304 | ) | (435 | ) | (463 | ) | (550 | ) | |||||||
Net income attributable to Franklin Electric Co., Inc. | $ | 28,135 | $ | 24,807 | $ | 43,591 | $ | 47,851 | |||||||
Income per share: | |||||||||||||||
Basic | $ | 0.59 | $ | 0.53 | $ | 0.91 | $ | 1.02 | |||||||
Diluted | $ | 0.58 | $ | 0.52 | $ | 0.90 | $ | 1.00 | |||||||
Dividends per common share | $ | 0.0775 | $ | 0.0725 | $ | 0.1500 | $ | 0.1400 |
(In thousands) | Second Quarter Ended | Six Months Ended | |||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
Net income | $ | 28,439 | $ | 25,242 | $ | 44,054 | $ | 48,401 | |||||||
Other comprehensive income/(loss), before tax: | |||||||||||||||
Foreign currency translation adjustments | (9,871 | ) | (20,729 | ) | (15,660 | ) | (9,515 | ) | |||||||
Employee benefit plan activity | 1,113 | 587 | 2,083 | 1,174 | |||||||||||
Other comprehensive loss | $ | (8,758 | ) | $ | (20,142 | ) | $ | (13,577 | ) | $ | (8,341 | ) | |||
Income tax related to items of other comprehensive income | (380 | ) | (230 | ) | (760 | ) | (460 | ) | |||||||
Other comprehensive loss, net of tax | $ | (9,138 | ) | $ | (20,372 | ) | $ | (14,337 | ) | $ | (8,801 | ) | |||
Comprehensive income | $ | 19,301 | $ | 4,870 | $ | 29,717 | $ | 39,600 | |||||||
Comprehensive (income)/loss attributable to noncontrolling interest | (223 | ) | (137 | ) | (502 | ) | 26 | ||||||||
Comprehensive income attributable to Franklin Electric Co., Inc. | $ | 19,078 | $ | 4,733 | $ | 29,215 | $ | 39,626 |
(In thousands) | June 29, 2013 | December 29, 2012 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 77,088 | $ | 103,338 | |||
Receivables, less allowances of $3,186 and $3,148, respectively | 147,945 | 102,918 | |||||
Inventories: | |||||||
Raw material | 78,831 | 72,536 | |||||
Work-in-process | 18,639 | 18,295 | |||||
Finished goods | 106,837 | 101,017 | |||||
204,307 | 191,848 | ||||||
Deferred income taxes | 8,838 | 7,912 | |||||
Other current assets | 19,109 | 22,901 | |||||
Total current assets | 457,287 | 428,917 | |||||
Property, plant and equipment, at cost: | |||||||
Land and buildings | 88,331 | 90,616 | |||||
Machinery and equipment | 211,808 | 204,408 | |||||
Furniture and fixtures | 29,044 | 26,887 | |||||
Other | 54,528 | 33,500 | |||||
383,711 | 355,411 | ||||||
Less: Allowance for depreciation | (190,433 | ) | (183,436 | ) | |||
193,278 | 171,975 | ||||||
Deferred income tax | 2,257 | 2,540 | |||||
Intangible assets, net | 151,756 | 158,117 | |||||
Goodwill | 205,845 | 208,141 | |||||
Other assets | 5,711 | 6,689 | |||||
Total assets | $ | 1,016,134 | $ | 976,379 |
June 29, 2013 | December 29, 2012 | ||||||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 60,322 | $ | 68,660 | |||
Deferred tax liability | 1,173 | 1,173 | |||||
Accrued expenses | 56,393 | 60,415 | |||||
Income taxes | 1,816 | 215 | |||||
Current maturities of long-term debt and short-term borrowings | 17,517 | 15,176 | |||||
Total current liabilities | 137,221 | 145,639 | |||||
Long-term debt | 174,772 | 150,729 | |||||
Deferred income taxes | 41,013 | 40,136 | |||||
Employee benefit plans | 73,657 | 78,967 | |||||
Other long-term liabilities | 37,302 | 38,659 | |||||
Commitments and contingencies (see Note 16) | — | — | |||||
Redeemable noncontrolling interest | 5,511 | 5,263 | |||||
Shareowners' equity: | |||||||
Common stock (65,000 shares authorized, $.10 par value) outstanding (47,537 and 47,132, respectively) | 4,754 | 4,712 | |||||
Additional capital | 187,521 | 170,890 | |||||
Retained earnings | 423,071 | 395,950 | |||||
Accumulated other comprehensive loss | (71,522 | ) | (57,146 | ) | |||
Total shareowners' equity | 543,824 | 514,406 | |||||
Noncontrolling interest | 2,834 | 2,580 | |||||
Total equity | 546,658 | 516,986 | |||||
Total liabilities and equity | $ | 1,016,134 | $ | 976,379 |
(In thousands) | Six Months Ended | ||||||
June 29, 2013 | June 30, 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 44,054 | $ | 48,401 | |||
Adjustments to reconcile net income to net cash flows from operating activities: | |||||||
Depreciation and amortization | 14,877 | 12,885 | |||||
Share-based compensation | 3,337 | 3,056 | |||||
Deferred income taxes | 43 | 6,538 | |||||
Gain on disposals of plant and equipment | (9 | ) | (408 | ) | |||
Gain on equity investment | — | (12,212 | ) | ||||
Asset impairment | — | 420 | |||||
Foreign exchange expense | 712 | 655 | |||||
Excess tax from share-based payment arrangements | (3,675 | ) | (1,645 | ) | |||
Changes in assets and liabilities, net of acquisitions: | |||||||
Receivables | (48,420 | ) | (40,269 | ) | |||
Inventory | (20,113 | ) | (30,155 | ) | |||
Accounts payable and accrued expenses | (872 | ) | (1,160 | ) | |||
Income taxes | 5,231 | (1,842 | ) | ||||
Employee benefit plans | (3,029 | ) | (2,487 | ) | |||
Other | 2,258 | (958 | ) | ||||
Net cash flows from operating activities | (5,606 | ) | (19,181 | ) | |||
Cash flows from investing activities: | |||||||
Additions to property, plant, and equipment | (37,017 | ) | (11,456 | ) | |||
Proceeds from sale of property, plant, and equipment | 64 | 1,149 | |||||
Additions to intangibles | 90 | — | |||||
Cash paid for acquisitions, net of cash acquired | — | (29,564 | ) | ||||
Proceeds from loan to customer | 236 | 219 | |||||
Net cash flows from investing activities | (36,627 | ) | (39,652 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of debt | 45,807 | 21,742 | |||||
Repayment of debt | (18,576 | ) | (18,182 | ) | |||
Proceeds from issuance of common stock | 9,782 | 4,582 | |||||
Excess tax from share-based payment arrangements | 3,675 | 1,645 | |||||
Purchases of common stock | (9,376 | ) | (8,687 | ) | |||
Dividends paid | (7,113 | ) | (6,549 | ) | |||
Payment of contingent consideration liability | (5,555 | ) | — | ||||
Net cash flows from financing activities | 18,644 | (5,449 | ) | ||||
Effect of exchange rate changes on cash | (2,661 | ) | (2,805 | ) | |||
Net change in cash and equivalents | (26,250 | ) | (67,087 | ) | |||
Cash and equivalents at beginning of period | 103,338 | 153,337 | |||||
Cash and equivalents at end of period | $ | 77,088 | $ | 86,250 |
Cash paid for income taxes | $ | 7,718 | $ | 12,920 | |||
Cash paid for interest, net of capitalized interest of $604 and $68, respectively | $ | 4,700 | $ | 4,539 | |||
Non-cash items: | |||||||
Pioneer Pump Holdings, Inc. liability for mandatory share purchase | $ | — | $ | 22,924 | |||
Payable to seller of Impo Motor Pompa Sanayi ve Ticaret A.S. | $ | — | $ | 290 | |||
Additions to property, plant, and equipment, not yet paid | $ | 861 | $ | 87 |
(In millions) | June 29, 2013 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Recognized Loss | |||||||||||||||
Cash equivalents | $ | 7.8 | $ | 7.8 | $ | — | $ | — | $ | — | ||||||||||
Impo contingent consideration | — | — | — | — | — | |||||||||||||||
December 29, 2012 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Recognized Loss | ||||||||||||||||
Cash equivalents | $ | 13.8 | $ | 13.8 | $ | — | $ | — | $ | — | ||||||||||
Impo contingent consideration | 5.6 | — | — | 5.6 | 0.8 |
(In millions) | June 29, 2013 | December 29, 2012 | ||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||||
Amortized intangibles: | ||||||||||||||||
Patents | $ | 7.8 | $ | (5.8 | ) | $ | 7.8 | $ | (5.7 | ) | ||||||
Supply agreements | 4.4 | (4.4 | ) | 4.4 | (4.4 | ) | ||||||||||
Technology | 7.5 | (3.5 | ) | 7.5 | (3.2 | ) | ||||||||||
Customer relationships | 124.2 | (26.3 | ) | 125.9 | (23.1 | ) | ||||||||||
Software | 1.7 | (0.1 | ) | 1.7 | (0.1 | ) | ||||||||||
Other | 1.2 | (1.2 | ) | 1.2 | (1.2 | ) | ||||||||||
Total | $ | 146.8 | $ | (41.3 | ) | $ | 148.5 | $ | (37.7 | ) | ||||||
Unamortized intangibles: | ||||||||||||||||
Trade names | 46.3 | — | 47.3 | — | ||||||||||||
Total intangibles | $ | 193.1 | $ | (41.3 | ) | $ | 195.8 | $ | (37.7 | ) |
(In millions) | 2013 | 2014 | 2015 | 2016 | 2017 | |||||||||||||||
$ | 8.3 | $ | 8.3 | $ | 8.3 | $ | 8.3 | $ | 8.0 |
(In millions) | Water Systems | Fueling Systems | Consolidated | |||||||||
Balance as of December 29, 2012 | $ | 144.9 | $ | 63.2 | $ | 208.1 | ||||||
Acquisitions | — | — | — | |||||||||
Adjustments to prior year acquisitions | — | — | — | |||||||||
Foreign currency translation | (2.0 | ) | (0.3 | ) | (2.3 | ) | ||||||
Balance as of June 29, 2013 | $ | 142.9 | $ | 62.9 | $ | 205.8 |
(In millions) | Pension Benefits | ||||||||||||||
Second Quarter Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
Service cost | $ | 0.6 | $ | 0.4 | $ | 1.0 | $ | 0.8 | |||||||
Interest cost | 1.9 | 2.1 | 3.8 | 4.2 | |||||||||||
Expected return on assets | (2.5 | ) | (2.6 | ) | (5.0 | ) | (5.2 | ) | |||||||
Amortization of transition obligation | — | — | — | — | |||||||||||
Prior service cost | — | — | — | — | |||||||||||
Loss | 0.8 | 0.5 | 1.7 | 1.0 | |||||||||||
Total net periodic benefit cost | $ | 0.8 | $ | 0.4 | $ | 1.5 | $ | 0.8 | |||||||
Other Benefits | |||||||||||||||
Second Quarter Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
Service cost | $ | 0.1 | $ | — | $ | 0.1 | $ | — | |||||||
Interest cost | 0.1 | 0.2 | 0.2 | 0.3 | |||||||||||
Expected return on assets | — | — | — | — | |||||||||||
Amortization of transition obligation | — | 0.1 | — | 0.1 | |||||||||||
Prior service cost | 0.1 | 0.1 | 0.2 | 0.2 | |||||||||||
Loss | — | — | 0.1 | — | |||||||||||
Total net periodic benefit cost | $ | 0.3 | $ | 0.4 | $ | 0.6 | $ | 0.6 | |||||||
(In millions) | June 29, 2013 | December 29, 2012 | ||||||
Prudential Agreement - 5.79 percent | $ | 150.0 | $ | 150.0 | ||||
Tax increment financing debt | 25.0 | — | ||||||
Capital leases | 0.9 | 1.0 | ||||||
Foreign subsidiary debt | 16.4 | 14.9 | ||||||
192.3 | 165.9 | |||||||
Less current maturities | (17.5 | ) | (15.2 | ) | ||||
Long-term debt | $ | 174.8 | $ | 150.7 |
(In millions) | Total | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | More than 5 years | |||||||||||||||||||||
Debt | $ | 191.4 | $ | 17.2 | $ | 1.0 | $ | 30.9 | $ | 31.0 | $ | 31.0 | $ | 80.3 | ||||||||||||||
Capital leases | 0.9 | 0.3 | 0.2 | 0.2 | 0.1 | 0.1 | — | |||||||||||||||||||||
$ | 192.3 | $ | 17.5 | $ | 1.2 | $ | 31.1 | $ | 31.1 | $ | 31.1 | $ | 80.3 |
(In millions, except per share amounts) | Second Quarter Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | |||||||||||||
Numerator: | ||||||||||||||||
Net income attributable to Franklin Electric Co., Inc. | $ | 28.1 | $ | 24.8 | $ | 43.6 | $ | 47.9 | ||||||||
Less: Undistributed earnings allocable to participating securities | 0.3 | — | 0.5 | — | ||||||||||||
$ | 27.8 | $ | 24.8 | $ | 43.1 | $ | 47.9 | |||||||||
Denominator: | ||||||||||||||||
Basic | ||||||||||||||||
Weighted average common shares | 47.5 | 46.8 | 47.4 | 46.8 | ||||||||||||
Diluted | ||||||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Non-participating employee and director incentive stock options and performance awards | 0.6 | 1.0 | 0.6 | 1.0 | ||||||||||||
Adjusted weighted average common shares | 48.1 | 47.8 | 48.0 | 47.8 | ||||||||||||
Basic earnings per share | $ | 0.59 | $ | 0.53 | $ | 0.91 | $ | 1.02 | ||||||||
Diluted earnings per share | $ | 0.58 | $ | 0.52 | $ | 0.90 | $ | 1.00 | ||||||||
Anti-dilutive stock options | 0.1 | 0.2 | 0.1 | 0.2 |
(In thousands) | Common Stock | Additional Paid in Capital | Retained Earnings | Minimum Pension Liability | Cumulative Translation Adjustment | Noncontrolling Interest | Total Equity | Redeemable Noncontrolling Interest | |||||||||||||||||||||||
Balance as of December 29, 2012 | $ | 4,712 | $ | 170,890 | $ | 395,950 | $ | (56,936 | ) | $ | (210 | ) | $ | 2,580 | $ | 516,986 | $ | 5,263 | |||||||||||||
Net income | 43,591 | 384 | 43,975 | 79 | |||||||||||||||||||||||||||
Dividends on common stock | (7,113 | ) | (7,113 | ) | |||||||||||||||||||||||||||
Common stock issued | 64 | 9,727 | (9 | ) | 9,782 | ||||||||||||||||||||||||||
Common stock repurchased or received for stock options exercised | (28 | ) | (9,348 | ) | (9,376 | ) | |||||||||||||||||||||||||
Share-based compensation | 6 | 3,331 | 3,337 | ||||||||||||||||||||||||||||
Tax benefit of stock options exercised | 3,573 | 3,573 | |||||||||||||||||||||||||||||
Currency translation adjustment | (15,699 | ) | (130 | ) | (15,829 | ) | 169 | ||||||||||||||||||||||||
Pension liability, net of taxes | 1,323 | 1,323 | |||||||||||||||||||||||||||||
Balance as of June 29, 2013 | $ | 4,754 | $ | 187,521 | $ | 423,071 | $ | (55,613 | ) | $ | (15,909 | ) | $ | 2,834 | $ | 546,658 | $ | 5,511 |
(In millions) | |||||||||||
For the Six Months Ended June 29, 2013: | Foreign Currency Translation Adjustments | Pension and Post-Retirement Plan Benefit Adjustments | Total | ||||||||
Balance, December 29, 2012 | $ | (0.2 | ) | $ | (56.9 | ) | $ | (57.1 | ) | ||
Other comprehensive income/(loss) before reclassifications: | |||||||||||
Pre-tax income/(loss) | (15.6 | ) | — | (15.6 | ) | ||||||
Income tax expense | — | — | — | ||||||||
Other comprehensive income/(loss) before reclassifications, net of income taxes | (15.6 | ) | — | (15.6 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income/(loss): | |||||||||||
Pre-tax income | — | 2.1 | (1) | 2.1 | |||||||
Income tax expense | — | (0.8 | ) | (0.8 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income/(loss), net of income taxes | — | 1.3 | 1.3 | ||||||||
Net current period other comprehensive income/(loss), net of income taxes | (15.6 | ) | 1.3 | (14.3 | ) | ||||||
Comprehensive (income)/loss attributable to noncontrolling interest | (0.1 | ) | — | (0.1 | ) | ||||||
Balance, June 29, 2013 | $ | (15.9 | ) | $ | (55.6 | ) | $ | (71.5 | ) | ||
For the Six Months Ended June 30, 2012: | |||||||||||
Balance, December 31, 2011 | $ | (2.1 | ) | $ | (47.2 | ) | $ | (49.3 | ) | ||
Other comprehensive income/(loss) before reclassifications: | |||||||||||
Pre-tax income/(loss) | (9.5 | ) | — | (9.5 | ) | ||||||
Income tax expense | — | — | — | ||||||||
Other comprehensive income/(loss) before reclassifications, net of income taxes | (9.5 | ) | — | (9.5 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income/(loss): | |||||||||||
Pre-tax income | — | 1.2 | (1) | 1.2 | |||||||
Income tax expense | — | (0.5 | ) | (0.5 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income/(loss), net of income taxes | — | 0.7 | 0.7 | ||||||||
Net current period other comprehensive income/(loss), net of income taxes | (9.5 | ) | 0.7 | (8.8 | ) | ||||||
Comprehensive (income)/loss attributable to noncontrolling interest | 0.6 | — | 0.6 | ||||||||
Balance, June 30, 2012 | $ | (11.0 | ) | $ | (46.5 | ) | $ | (57.5 | ) |
Second Quarter Ended | Six Months Ended | ||||||||||||||
(In millions) | June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | |||||||||||
Net sales to external customers | |||||||||||||||
Water Systems | $ | 213.7 | $ | 202.8 | $ | 390.2 | $ | 367.8 | |||||||
Fueling Systems | 49.7 | 43.9 | 95.8 | 80.8 | |||||||||||
Other | — | — | — | — | |||||||||||
Consolidated | $ | 263.4 | $ | 246.7 | $ | 486.0 | $ | 448.6 | |||||||
Second Quarter Ended | Six Months Ended | ||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | ||||||||||||
Operating income (loss) | |||||||||||||||
Water Systems | $ | 42.7 | $ | 40.1 | $ | 71.4 | $ | 66.8 | |||||||
Fueling Systems | 10.8 | 9.0 | 17.1 | 14.6 | |||||||||||
Other | (12.8 | ) | (11.6 | ) | (24.6 | ) | (22.9 | ) | |||||||
Consolidated | $ | 40.7 | $ | 37.5 | $ | 63.9 | $ | 58.5 | |||||||
June 29, 2013 | December 29, 2012 | ||||||||||||||
Total assets | |||||||||||||||
Water Systems | $ | 726.5 | $ | 692.0 | |||||||||||
Fueling Systems | 256.3 | 252.0 | |||||||||||||
Other | 33.3 | 32.4 | |||||||||||||
Consolidated | $ | 1,016.1 | $ | 976.4 | |||||||||||
(In millions) | ||||
Beginning balance, December 29, 2012 | $ | 9.7 | ||
Accruals related to product warranties | 4.4 | |||
Additions related to acquisitions | — | |||
Reductions for payments made | (4.3 | ) | ||
Ending balance, June 29, 2013 | $ | 9.8 |
2012 Stock Plan | Authorized Shares | |
Stock Options | 1,680,000 | |
Stock/Stock Unit Awards | 720,000 |
2009 Stock Plan | Authorized Shares | |
Stock Options | 3,200,000 | |
Stock Awards | 1,200,000 |
June 29, 2013 | June 30, 2012 | |||||
Risk-free interest rate | 1.03 | % | 1.01 | % | ||
Dividend yield | 0.89 | % | 1.12 | % | ||
Volatility factor | 0.394 | 0.388 | ||||
Expected term | 6.0 years | 6.0 years | ||||
Forfeiture rate | 4.52 | % | 3.99 | % |
(Shares in thousands) | June 29, 2013 | June 30, 2012 | ||||||||||||
Stock Options | Shares | Weighted-Average Exercise Price | Shares | Weighted-Average Exercise Price | ||||||||||
Outstanding at beginning of period | 2,184 | $ | 16.69 | 3,138 | $ | 14.83 | ||||||||
Granted | 176 | 32.53 | 250 | 24.10 | ||||||||||
Exercised | (632 | ) | 15.06 | (338 | ) | 12.80 | ||||||||
Forfeited | (3 | ) | 10.60 | (66 | ) | 14.53 | ||||||||
Outstanding at end of period | 1,725 | $ | 18.91 | 2,984 | $ | 15.86 | ||||||||
Expected to vest after applying forfeiture rate | 1,698 | $ | 18.77 | 2,956 | $ | 15.83 | ||||||||
Vested and exercisable at end of period | 1,191 | $ | 16.05 | 2,184 | $ | 15.42 |
Stock Options | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value (000's) | ||||
Outstanding end of period | 6.05 years | $ | 25,426 | |||
Expected to vest after applying forfeiture rate | 6.00 years | $ | 25,271 | |||
Vested and exercisable end of period | 4.89 years | $ | 20,966 |
(Shares in thousands) | June 29, 2013 | June 30, 2012 | ||||||||||||
Stock/Stock Unit Awards | Shares | Weighted-Average Grant- Date Fair Value | Shares | Weighted-Average Grant-Date Fair Value | ||||||||||
Non-vested at beginning of period | 458 | $ | 20.90 | 344 | $ | 17.24 | ||||||||
Awarded | 153 | 32.50 | 176 | 24.28 | ||||||||||
Vested | (60 | ) | 18.90 | (72 | ) | 15.87 | ||||||||
Forfeited | (2 | ) | 17.70 | (18 | ) | 18.48 | ||||||||
Non-vested at end of period | 549 | $ | 24.37 | 430 | $ | 20.32 |
(In millions) | Second Quarter Ended | |||||||||||||||
June 29, 2013 | ||||||||||||||||
Water Systems | Fueling Systems | Other | Consolidated | |||||||||||||
Employee severance | $ | — | $ | 0.2 | $ | — | $ | 0.2 | ||||||||
Other | 0.5 | — | — | 0.5 | ||||||||||||
Total | 0.5 | 0.2 | — | 0.7 | ||||||||||||
(In millions) | Six Months Ended | |||||||||||||||
June 29, 2013 | ||||||||||||||||
Water Systems | Fueling Systems | Other | Consolidated | |||||||||||||
Employee severance | $ | 0.5 | $ | 0.4 | $ | — | $ | 0.9 | ||||||||
Other | 0.5 | — | — | 0.5 | ||||||||||||
Total | 1.0 | 0.4 | — | 1.4 | ||||||||||||
(In millions) | Q2 2013 | Q2 2012 | 2013 v 2012 | ||||||||
Net Sales | |||||||||||
Water Systems | $ | 213.7 | $ | 202.8 | $ | 10.9 | |||||
Fueling Systems | 49.7 | 43.9 | 5.8 | ||||||||
Consolidated | $ | 263.4 | $ | 246.7 | $ | 16.7 |
(In millions) | Q2 2013 | Q2 2012 | 2013 v 2012 | |||||||||
Operating income (loss) | ||||||||||||
Water Systems | $ | 42.7 | $ | 40.1 | $ | 2.6 | ||||||
Fueling Systems | 10.8 | 9.0 | 1.8 | |||||||||
Other | (12.8 | ) | (11.6 | ) | (1.2 | ) | ||||||
Consolidated | $ | 40.7 | $ | 37.5 | $ | 3.2 |
• | In the second quarter of 2013, there was $0.7 restructuring charges; $0.5 million primarily related to relocation to the new Corporate headquarters and engineering center in Fort Wayne, Indiana and $0.2 million related to the Flexing acquisition in Franklin Fueling Systems |
• | The second quarter of 2013 included $0.1 million of legal fees incurred in Franklin Fueling Systems. |
• | The second quarter of 2013 included $0.1 million in other legal and advisory costs related to potential acquisition transactions. |
• | In the second quarter of 2012, there was $0.8 million of costs related to the Pioneer acquisition that was considered non-operational. |
• | The second quarter of 2012 included $0.1 million of restructuring charges. |
Operating Income and Margins | ||||||||||||
Before and After Non-GAAP Adjustments | ||||||||||||
(in millions) | For the Second Quarter 2013 | |||||||||||
Water | Fueling | Other | Consolidated | |||||||||
Reported Operating Income | $ | 42.7 | $ | 10.8 | $ | (12.8 | ) | $ | 40.7 | |||
% Operating Income To Net Sales | 20.0 | % | 21.7 | % | 15.5 | % | ||||||
Non-GAAP Adjustments: | ||||||||||||
Restructuring | $ | 0.5 | $ | 0.2 | $ | — | $ | 0.7 | ||||
Legal matters | $ | — | $ | 0.1 | $ | — | $ | 0.1 | ||||
Acquisition related items | $ | 0.1 | $ | — | $ | — | $ | 0.1 | ||||
Operating Income after Non-GAAP Adjustments | $ | 43.3 | $ | 11.1 | $ | (12.8 | ) | $ | 41.6 | |||
% Operating Income to Net Sales after Non-GAAP Adjustments (Operating Income Margin after Non-GAAP Adjustments) | 20.3 | % | 22.3 | % | 15.8 | % | ||||||
For the Second Quarter 2012 | ||||||||||||
Water | Fueling | Other | Consolidated | |||||||||
Reported Operating Income | $ | 40.1 | $ | 9.0 | $ | (11.6 | ) | $ | 37.5 | |||
% Operating Income To Net Sales | 19.8 | % | 20.5 | % | 15.2 | % | ||||||
Non-GAAP Adjustments: | ||||||||||||
Restructuring | $ | 0.1 | $ | — | $ | — | $ | 0.1 | ||||
Legal matters | $ | — | $ | — | $ | — | $ | — | ||||
Acquisition related items | $ | 0.8 | $ | — | $ | — | $ | 0.8 | ||||
Operating Income after Non-GAAP Adjustments | $ | 41.0 | $ | 9.0 | $ | (11.6 | ) | $ | 38.4 | |||
% Operating Income to Net Sales after Non-GAAP Adjustments (Operating Income Margin after Non-GAAP Adjustments) | 20.2 | % | 20.5 | % | 15.6 | % |
Earnings Before and After Non-GAAP Adjustments | For the Second Quarter | |||||||
(in millions) | 2013 | 2012 | Change | |||||
Net Income attributable to Franklin Electric Co., Inc. Reported | $ | 28.1 | $ | 24.8 | 13 | % | ||
Allocated Undistributed Earnings | $ | (0.3 | ) | $ | — | |||
Adjusted Earnings for EPS Calculation | $ | 27.8 | $ | 24.8 | 12 | % | ||
Non-GAAP adjustments (before tax): | ||||||||
Restructuring | $ | 0.7 | $ | 0.1 | ||||
Legal matters | $ | 0.1 | $ | — | ||||
Acquisition related items | $ | 0.1 | $ | 0.8 | ||||
Non-GAAP adjustments, net of tax: | ||||||||
Restructuring | $ | 0.4 | $ | 0.1 | ||||
Legal matters | $ | 0.1 | $ | — | ||||
Acquisition related items | $ | 0.1 | $ | 0.6 | ||||
Earnings after Non-GAAP Adjustments | $ | 28.4 | $ | 25.5 | 11 | % |
Earnings Per Share Before and After Non-GAAP Adjustments | For the Second Quarter | |||||||||
(in millions except Earnings Per Share) | 2013 | 2012 | Change | |||||||
Average Fully Diluted Shares Outstanding | 48.1 | 47.8 | 1 | % | ||||||
Fully Diluted Earnings Per Share ("EPS") Reported | $ | 0.58 | $ | 0.52 | 12 | % | ||||
Restructuring Per Share, net of tax | $ | 0.01 | $ | — | ||||||
Legal matters Per Share, net of tax | $ | — | $ | — | ||||||
Acquisition related items Per Share, net of tax | $ | — | $ | 0.01 | ||||||
Fully Diluted EPS after Non-GAAP Adjustments (Adjusted EPS) | $ | 0.59 | $ | 0.53 | 11 | % |
(In millions) | YTD June 29, 2013 | YTD June 30, 2012 | 2013 v 2012 | ||||||||
Net Sales | |||||||||||
Water Systems | $ | 390.2 | $ | 367.8 | $ | 22.4 | |||||
Fueling Systems | 95.8 | 80.8 | 15.0 | ||||||||
Consolidated | $ | 486.0 | $ | 448.6 | $ | 37.4 |
(In millions) | YTD June 29, 2013 | YTD June 30, 2012 | 2013 v 2012 | |||||||||
Operating income (loss) | ||||||||||||
Water Systems | $ | 71.4 | $ | 66.8 | $ | 4.6 | ||||||
Fueling Systems | 17.1 | 14.6 | 2.5 | |||||||||
Other | (24.6 | ) | (22.9 | ) | (1.7 | ) | ||||||
Consolidated | $ | 63.9 | $ | 58.5 | $ | 5.4 |
• | In the first half of 2013, there were $1.4 million of restructuring charges. Restructuring expenses were primarily severance expenses of $1.0 million, and other miscellaneous manufacturing realignment activities. As well as $0.4 million related to relocation to the new corporate headquarters and engineering center in Fort Wayne, Indiana. |
• | The first half of 2013 included $0.5 million of legal fees incurred in Franklin Fueling Systems. |
• | The second quarter of 2013 included $0.1 million in other legal and advisory costs related to potential acquisition transactions. |
• | In the first half of 2012, there was $1.1 million of costs related to the Pioneer acquisition that was considered non-operational. |
• | The first half of 2012 included $0.1 million of costs to complete the transaction. |
Operating Income and Margins | ||||||||||||
Before and After Non-GAAP Adjustments | ||||||||||||
(in millions) | For the First Half of 2013 | |||||||||||
Water | Fueling | Other | Consolidated | |||||||||
Reported Operating Income | $ | 71.4 | $ | 17.1 | $ | (24.6 | ) | $ | 63.9 | |||
% Operating Income To Net Sales | 18.3 | % | 17.8 | % | 13.1 | % | ||||||
Non-GAAP Adjustments: | ||||||||||||
Restructuring | $ | 1.0 | $ | 0.4 | $ | — | $ | 1.4 | ||||
Legal matters | $ | — | $ | 0.5 | $ | — | $ | 0.5 | ||||
Acquisition related items | $ | 0.1 | $ | — | $ | — | $ | 0.1 | ||||
Operating Income after Non-GAAP Adjustments | $ | 72.5 | $ | 18.0 | $ | (24.6 | ) | $ | 65.9 | |||
% Operating Income to Net Sales after Non-GAAP Adjustments (Operating Income Margin after Non-GAAP Adjustments) | 18.6 | % | 18.8 | % | 13.6 | % | ||||||
For the First Half of 2012 | ||||||||||||
Water | Fueling | Other | Consolidated | |||||||||
Reported Operating Income | $ | 66.8 | $ | 14.6 | $ | (22.9 | ) | $ | 58.5 | |||
% Operating Income To Net Sales | 18.2 | % | 18.1 | % | 13.0 | % | ||||||
Non-GAAP Adjustments: | ||||||||||||
Restructuring | $ | — | $ | — | $ | — | $ | — | ||||
Legal matters | $ | — | $ | — | $ | — | $ | — | ||||
Acquisition related items | $ | 1.2 | $ | — | $ | — | $ | 1.2 | ||||
Operating Income after Non-GAAP Adjustments | $ | 68.0 | $ | 14.6 | $ | (22.9 | ) | $ | 59.7 | |||
% Operating Income to Net Sales after Non-GAAP Adjustments (Operating Income Margin after Non-GAAP Adjustments) | 18.5 | % | 18.1 | % | 13.3 | % |
Earnings Before and After Non-GAAP Adjustments | For the First Half | |||||||
(in millions) | 2013 | 2012 | Change | |||||
Net Income attributable to Franklin Electric Co., Inc. Reported | $ | 43.6 | $ | 47.9 | (9 | )% | ||
Allocated Undistributed Earnings | $ | (0.5 | ) | $ | — | |||
Adjusted Earnings for EPS Calculation | $ | 43.1 | $ | 47.9 | (10 | )% | ||
Non-GAAP adjustments (before tax): | ||||||||
Restructuring | $ | 1.4 | $ | — | ||||
Legal matters | $ | 0.5 | $ | — | ||||
Acquisition related items | $ | 0.1 | $ | 1.2 | ||||
Gain on Pioneer Investment | $ | — | $ | (12.2 | ) | |||
Non-GAAP adjustments, net of tax: | ||||||||
Restructuring | $ | 0.8 | $ | — | ||||
Legal matters | $ | 0.3 | $ | — | ||||
Acquisition related items | $ | 0.1 | $ | 0.9 | ||||
Gain on Pioneer Investment | $ | — | $ | (8.9 | ) | |||
Earnings after Non-GAAP Adjustments | $ | 44.3 | $ | 39.9 | 11 | % |
Earnings Per Share Before and After Non-GAAP Adjustments | For the First Half | |||||||||
(in millions except Earnings Per Share) | 2013 | 2012 | Change | |||||||
Average Fully Diluted Shares Outstanding | 48.0 | 47.8 | — | % | ||||||
Fully Diluted Earnings Per Share ("EPS") Reported | $ | 0.90 | $ | 1.00 | (10 | )% | ||||
Restructuring Per Share, net of tax | $ | 0.02 | $ | — | ||||||
Legal matters Per Share, net of tax | $ | 0.01 | $ | — | ||||||
Acquisition related items Per Share, net of tax | $ | — | $ | 0.02 | ||||||
Gain on Pioneer Investment Per Share, net of tax | $ | — | $ | (0.19 | ) | |||||
Fully Diluted EPS after Non-GAAP Adjustments (Adjusted EPS) | $ | 0.93 | $ | 0.83 | 12 | % |
(c) | Issuer Repurchases of Equity Securities |
Period | Total Number of Shares Repurchased | Average Price Paid per Share | Total Number of Shares Repurchased as Part of Publicly Announced Plan | Maximum Number of Shares that May Yet be Repurchased | |||||||||
March 31 - May 4 | 48,038 | $ | 31.86 | 48,038 | 1,152,875 | ||||||||
May 5 - June 1 | 40,162 | $ | 32.47 | 40,162 | 1,112,713 | ||||||||
June 2 - June 29 | — | $ | — | — | 1,112,713 | ||||||||
Total | 88,200 | $ | 32.14 | 88,200 | 1,112,713 |
FRANKLIN ELECTRIC CO., INC. | |||
Registrant | |||
Date: August 8, 2013 | By | /s/ R. Scott Trumbull | |
R. Scott Trumbull | |||
Chairman and Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: August 8, 2013 | By | /s/ John J. Haines | |
John J. Haines | |||
Vice President and Chief Financial Officer and Secretary | |||
(Principal Financial and Accounting Officer) |
Number | Description | |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes–Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes–Oxley Act of 2002 | |
32.1 | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase |
1. | I have reviewed this quarterly report on Form 10-Q for the second quarter ending June 29, 2013 of Franklin Electric Co., Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Franklin Electric Co., Inc. as of, and for, the periods presented in this report; |
4. | Franklin Electric Co., Inc.'s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Franklin Electric Co., Inc. and we have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Franklin Electric Co., Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of Franklin Electric Co., Inc.'s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any changes in Franklin Electric Co., Inc.'s internal control over financial reporting that occurred during Franklin Electric Co., Inc.'s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | Franklin Electric Co., Inc.'s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Franklin Electric Co., Inc.'s auditors and the audit committee of Franklin Electric Co., Inc.'s board of directors: |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Franklin Electric Co., Inc.'s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in Franklin Electric Co., Inc.'s internal control over financial reporting. |
Date: | August 8, 2013 | |
/s/ R. Scott Trumbull | ||
R. Scott Trumbull | ||
Chairman and Chief Executive Officer | ||
Franklin Electric Co., Inc. |
1. | I have reviewed this quarterly report on Form 10-Q for the second quarter ending June 29, 2013 of Franklin Electric Co., Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Franklin Electric Co., Inc. as of, and for, the periods presented in this report; |
4. | Franklin Electric Co., Inc.'s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Franklin Electric Co., Inc. and we have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Franklin Electric Co., Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of Franklin Electric Co., Inc.'s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in Franklin Electric Co., Inc.'s internal control over financial reporting that occurred during Franklin Electric Co., Inc.'s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, Franklin Electric Co., Inc.'s internal control over financial reporting; and |
5. | Franklin Electric Co., Inc.'s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Franklin Electric Co., Inc.'s auditors and the audit committee of Franklin Electric Co., Inc.'s board of directors: |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Franklin Electric Co., Inc.'s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in Franklin Electric Co., Inc.'s internal control over financial reporting. |
Date: | August 8, 2013 | |
/s/ John J. Haines | ||
John J. Haines | ||
Vice President and Chief Financial Officer and Secretary | ||
Franklin Electric Co., Inc. |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 8, 2013 | |
/s/ R. Scott Trumbull | ||
R. Scott Trumbull | ||
Chairman and Chief Executive Officer | ||
Franklin Electric Co., Inc. |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 8, 2013 | |
/s/ John J. Haines | ||
John J. Haines | ||
Vice President and Chief Financial Officer and Secretary | ||
Franklin Electric Co., Inc. |
INCOME TAXES
|
6 Months Ended |
---|---|
Jun. 29, 2013
|
|
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The effective tax rate continues to be lower than the United States statutory rate of 35 percent primarily due to the indefinite reinvestment of foreign earnings taxed at rates below the U.S. statutory rate as well as recognition of foreign tax credits. The Company has the ability to indefinitely reinvest these foreign earnings based on the earnings and cash projections of its other operations as well as cash on hand and available credit. The Company's net unrecognized tax benefits decreased $2.6 million for federal and state income tax liabilities of prior years based on tax audits and the expiration of statue of limitations. If recognized, the effective tax rate would be affected by the net unrecognized tax benefits of $5.1 million as of June 29, 2013. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense, the impact of which is immaterial. The Company has accrued interest and penalties as of June 29, 2013, of $0.2 million. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months as a result of an audit or due to the expiration of a statute of limitation. Based on the current audits in process and pending statute expirations, the payment of taxes as a result could be up to $2.9 million. |
SEGMENT INFORMATION (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
Dec. 29, 2012
|
|
Segment Reporting Information | |||||
Net sales to external customers | $ 263,443 | $ 246,696 | $ 485,967 | $ 448,619 | |
Operating income (loss) | 40,706 | 37,510 | 63,872 | 58,506 | |
Total assets | 1,016,134 | 1,016,134 | 976,379 | ||
Water Systems
|
|||||
Segment Reporting Information | |||||
Net sales to external customers | 213,700 | 202,800 | 390,200 | 367,800 | |
Operating income (loss) | 42,700 | 40,100 | 71,400 | 66,800 | |
Total assets | 726,500 | 726,500 | 692,000 | ||
Fueling Systems
|
|||||
Segment Reporting Information | |||||
Net sales to external customers | 49,700 | 43,900 | 95,800 | 80,800 | |
Operating income (loss) | 10,800 | 9,000 | 17,100 | 14,600 | |
Total assets | 256,300 | 256,300 | 252,000 | ||
Other
|
|||||
Segment Reporting Information | |||||
Net sales to external customers | 0 | 0 | 0 | 0 | |
Operating income (loss) | (12,800) | (11,600) | (24,600) | (22,900) | |
Total assets | $ 33,300 | $ 33,300 | $ 32,400 |
ACQUISITIONS
|
6 Months Ended |
---|---|
Jun. 29, 2013
|
|
Business Combinations [Abstract] | |
ACQUISITIONS | ACQUISITIONS The fair values of the identifiable intangible assets and property, plant, and equipment for the 2012 Pioneer Pump Holdings, Inc. ("PPH") acquisition were final as of the first quarter ended March 30, 2013. The Company utilized management estimates and consultation with an independent third-party valuation firm to assist in the valuation. No adjustments were required as a result of the final valuation to the preliminary amounts previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2012. Transaction costs were expensed as incurred under the guidance of FASB ASC Topic 805, Business Combinations. There were no transaction costs included in selling, general, and administrative expense in the Company’s condensed consolidated statement of income for the six months ended June 29, 2013. |
SHARE-BASED COMPENSATION
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Jun. 29, 2013
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION The Franklin Electric Co., Inc. 2012 Stock Plan (the "2012 Stock Plan") is a stock-based compensation plan that provides for discretionary grants of stock options, stock awards, stock unit awards and performance awards to key employees and non-employee directors. Shares and per share data below have been adjusted for all periods presented to reflect the two-for-one stock split effective March 18, 2013. The 2012 Stock Plan authorizes 2,400,000 shares for issuance as follows:
The Company also maintains the Amended and Restated Franklin Electric Co., Inc. Stock Plan which, as amended in 2009, provided for discretionary grants of stock options and stock awards (the “2009 Stock Plan”) . The 2009 Stock Plan authorized 4,400,000 shares for issuance as follows:
All options in the 2009 Stock Plan have been awarded. The Company currently issues new shares from its common stock balance to satisfy option exercises and stock and stock unit awards under the 2009 Stock Plan. Stock Options: The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model with a single approach and amortized using a straight-line attribution method over the option’s vesting period. The assumptions used for the Black-Scholes model to determine the fair value of options granted during the six months ended June 29, 2013 and June 30, 2012, are as follows:
There were no stock options granted during the second quarter ended June 29, 2013, and 124,487 stock options granted during the second quarter ended June 30, 2012. A summary of the Company’s outstanding stock option activity and related information for the six months ended June 29, 2013 and June 30, 2012 is as follows:
A summary of the weighted average remaining contractual term and aggregate intrinsic value for the six months ended June 29, 2013 is as follows:
The total intrinsic value of options exercised during the second quarters ended June 29, 2013 and June 30, 2012, was $11.5 million and $4.2 million, respectively. As of June 29, 2013, there was $1.9 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2012 Stock Plan and the Stock Plan related to stock options. That cost is expected to be recognized over a weighted-average period of 2.77 years. Stock/Stock Unit Awards: A summary of the Company’s restricted stock/stock unit award activity and related information for the six months ended June 29, 2013 and June 30, 2012 is as follows:
As of June 29, 2013, there was $8.3 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2012 Stock Plan and Stock Plan related to stock awards. That cost is expected to be recognized over a weighted-average period of 2.93 years. |
DEBT
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT Debt consisted of the following:
On December 31, 2012, the Company, Allen County, Indiana and certain institutional investors entered into a Bond Purchase and Loan Agreement. Under the agreement, Allen County, Indiana issued a series of Project Bonds entitled “Taxable Economic Development Bonds, Series 2012 (Franklin Electric Co., Inc. Project).” The aggregate principal amount of the Project Bonds that were issued, authenticated, and are now outstanding thereunder was limited to $25.0 million. The Company then borrowed the proceeds under the Project Bonds through the issuance of Project Notes to finance the cost of acquisition, construction, installation and equipping of the new Global Corporate Headquarters and Engineering Center of Excellence. These Project Notes (tax increment financing debt) bear interest at 3.6 percent per annum. Interest and principal balance of the Project Notes are due and payable by the Company directly to the institutional investors in aggregate semi-annual installments commencing on July 10, 2013, and concluding on January 10, 2033. The use of the proceeds from the Project Notes is limited to assist the financing of the new Global Corporate Headquarters and Engineering Center of Excellence. The agreement contains customary affirmative and negative covenants. The affirmative covenants relate to financial statements, notices of material events, conduct of business, inspection of property, maintenance of insurance, compliance with laws and most favored lender obligations. The negative covenants include limitations on loans, advances and investments, and the granting of liens by the Company or its subsidiaries, as well as prohibitions on certain consolidations, mergers, sales and transfers of assets. The covenants also include financial requirements including a maximum leverage ratio and a minimum interest coverage ratio. The agreement also contains a cross default provision in the event the Company defaults on any obligation exceeding $10.0 million. Also, on December 31, 2012, the Company and Prudential Insurance Company of America entered into an amendment to the Second Amended and Restated Note Purchase and Private Shelf Agreement to extend the effective date to December 31, 2015. Foreign subsidiary debt denoted in the table above is predominately comprised of debt at Impo. The total estimated fair value of debt was $205.4 million and $179.8 million at June 29, 2013 and December 29, 2012, respectively. The fair value assumed floating rate debt was valued at par. In the absence of quoted prices in active markets considerable judgment is required in developing estimates of fair value. Estimates are not necessarily indicative of the amounts the Company could realize in a current market transaction. In determining the fair value of its long-term debt the Company uses estimates based on rates currently available to the Company for debt with similar terms and remaining maturities. Accordingly, the fair value of debt is classified as a Level 2 within the valuations hierarchy. The following debt payments are expected to be paid in accordance with the following schedule:
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INCOME TAXES Narrative (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended |
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Jun. 29, 2013
|
|
Income Tax Contingency | |
Unrecognized tax benefits that would impact effective tax rate if recognized | $ 5.1 |
Reserve for interest and penalties | 0.2 |
Significant change in unrecognized tax benefits is reasonably possible, estimated range of change, upper bound | 2.9 |
Federal
|
|
Income Tax Contingency | |
Unrecognized tax benefits, decreases resulting from current period tax positions | $ 2.6 |
ACQUISITIONS (Narrative) (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended |
---|---|
Jun. 29, 2013
|
|
Business Acquisition [Line Items] | |
Business combination, acquisition related costs | $ 0 |
INTANGIBLE ASSETS AND GOODWILL (TABLES)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Carrying Amounts of Intangible Assets | The carrying amounts of the Company’s intangible assets are as follows:
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Schedule of Amortization Expense | Amortization expense for each of the five succeeding years is projected as follows:
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Schedule of Change in the Carrying Amount of Goodwill by Reporting Segment | The change in the carrying amount of goodwill by reporting segment for the six months ended June 29, 2013, is as follows:
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FAIR VALUE MEASUREMENTS (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets Measured on Recurring Basis | As of June 29, 2013, and December 29, 2012, the assets and liabilities measured at fair value on a recurring basis were as set forth in the table below. The "Recognized Loss" amounts in the table are accumulated totals since inception.
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SEGMENT INFORMATION (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Information by Reportable Business Segment | Financial information by reportable business segment is included in the following summary:
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REDEEMABLE NONCONTROLLING INTERESTS (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jul. 02, 2011
|
Jun. 29, 2013
|
Jun. 30, 2012
|
May 02, 2011
Impo Motor Pompa Sanayi ve Ticaret A.S.
|
|
Redeemable Noncontrolling Interest | ||||||
Percentage of outstanding shares acquired | 80.00% | |||||
Ownership percentage by noncontrolling owners | 20.00% | |||||
Noncontrolling interest, description | three | |||||
Adjustment to recorded amount of redeemable noncontrolling interest | $ 0 | $ 0 | $ 0 | $ 0 |
DEBT (Details) (USD $)
|
Jun. 29, 2013
|
Dec. 29, 2012
|
Dec. 31, 2012
Tax Increment Financing [Member]
|
Jun. 29, 2013
Estimate of Fair Value, Fair Value Disclosure [Member]
|
Dec. 29, 2012
Estimate of Fair Value, Fair Value Disclosure [Member]
|
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Debt | |||||
Prudential Agreement, fixed interest rate | 5.79% | ||||
Principal borrowed | $ 25,000,000 | ||||
Interest rate | 3.60% | ||||
Cross default trigger | 10,000,000 | ||||
Prudential Agreement - 5.79 percent | 150,000,000 | 150,000,000 | |||
Tax increment financing debt | 25,000,000 | 0 | |||
Capital leases | 900,000 | 1,000,000 | |||
Foreign subsidiary debt | 16,400,000 | 14,900,000 | |||
Debt and capital lease obligations | 192,300,000 | 165,900,000 | |||
Less current maturities | (17,517,000) | (15,176,000) | |||
Long-term debt | 174,772,000 | 150,729,000 | |||
Estimated fair value of long-term debt | $ 205,400,000 | $ 179,800,000 |
EQUITY ROLL FORWARD (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stockholders' Equity | The schedule below sets forth equity changes in the six months ended June 29, 2013:
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OTHER ASSETS (Details) (USD $)
|
6 Months Ended | 3 Months Ended | 3 Months Ended | |||||
---|---|---|---|---|---|---|---|---|
Jun. 29, 2013
|
Jun. 30, 2012
|
Mar. 06, 2012
Pioneer Pump Inc [Member]
|
Sep. 20, 2005
Pioneer Pump Inc [Member]
|
Mar. 06, 2012
Pioneer Pump Holdings Inc [Member]
|
Mar. 31, 2012
Pioneer Pump Holdings Inc [Member]
|
Mar. 07, 2012
Pioneer Pump Holdings Inc [Member]
|
Mar. 31, 2012
Other Income Expense [Member]
Pioneer Pump Inc [Member]
|
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Schedule of Equity Method Investments | ||||||||
Percent equity interest | 35.00% | 31.00% | ||||||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Fair Value | $ 23,900,000 | |||||||
Carrying value of the investment | 11,700,000 | |||||||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain | 0 | 12,212,000 | 12,200,000 | |||||
Proportionate share of earnings | $ 400,000 | |||||||
Loans receivable, maturity term (in years) | 7 years | |||||||
Business Acquisition, Percentage of Total Ownership | 70.50% |
RESTRUCTURING
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESTRUCTURING | RESTRUCTURING Costs incurred in the second quarter and six months ended June 29, 2013, included in the “Restructuring expense” line of the Company's condensed consolidated statement of income, are as follows:
"Other" restructuring expenses represent costs incurred primarily related to the Fort Wayne facility relocation. Restructuring expenses of $0.1 million were incurred in the second quarter ended June 30, 2012 related to the Siloam Springs, Arkansas facility. Restructuring expenses of $0.0 million were incurred in the six months ended June 30, 2012. These expenses were comprised of $0.4 million which related primarily to Siloam Springs, Arkansas facility, and $(0.4) million which resulted from a gain on the sale of land the Company had previously held for development, but was subsequently sold in the first quarter of 2012. As of June 29, 2013, there was $0.3 million in restructuring reserves primarily for severance. As of June 30, 2012, there were no restructuring reserves. |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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6 Months Ended |
---|---|
Jun. 29, 2013
|
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying condensed consolidated balance sheet as of December 29, 2012, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements as of June 29, 2013, and for the second quarters and six months ended June 29, 2013 and June 30, 2012, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all accounting entries and adjustments (including normal, recurring adjustments) considered necessary for a fair presentation of the financial position and the results of operations for the interim period have been made. Operating results for the second quarters and six months ended June 29, 2013, are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 2013. For further information, including a description of the Company’s critical accounting policies, refer to the consolidated financial statements and notes thereto included in Franklin Electric Co., Inc.'s Annual Report on Form 10-K for the year ended December 29, 2012. |
STOCK SPLIT
|
6 Months Ended |
---|---|
Jun. 29, 2013
|
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Stock Split [Abstract] | |
STOCK SPLIT | STOCK SPLIT On February 22, 2013, the Company announced that its Board of Directors declared a two-for-one stock split of the Company's common stock in the form of a 100 percent stock distribution. The stock distribution was distributed or paid on March 18, 2013, to stockholders of record as of March 4, 2013. As a result of this action, approximately 23.7 million shares were issued to stockholders of record as of March 4, 2013. The par value of the common stock remains at $0.10 per share and, accordingly, approximately $2.37 million was transferred from retained earnings to common stock. Earnings and dividends declared per share and weighted average shares outstanding are presented in this Form 10-Q after the effect of the 100 percent stock distribution. The two-for-one stock split is reflected in the share and per share amounts in all periods presented in this Form 10-Q. |
ACCOUNTING PRONOUNCEMENTS
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6 Months Ended |
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Jun. 29, 2013
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New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
ACCOUNTING PRONOUCEMENTS | ACCOUNTING PRONOUNCEMENTS In March 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-02 Comprehensive Income. This guidance requires companies to disclose additional information about items reclassified out of accumulated other comprehensive income ("AOCI") either on the face of the income statement or as a separate footnote to the financial statements. In addition, changes in AOCI balance by component are to be presented. ASU 2013-02 is effective for both annual and interim periods for fiscal years beginning after December 15, 2012. The Company adopted ASU 2013-02 on a prospective basis, effective December 30, 2012. Refer to Note 14 for disclosures made. As the ASU addressed only disclosure requirements, adoption of ASU 2013-02 did not have a material impact on the Company's financial position, results of operations, or cash flows. |
FAIR VALUE MEASUREMENTS (Details) (Recurring Basis, USD $)
In Millions, unless otherwise specified |
Jun. 29, 2013
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Dec. 29, 2012
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Estimate of Fair Value, Fair Value Disclosure
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Fair Value, Assets Measured on Recurring and Nonrecurring Basis | ||
Cash equivalents | $ 7.8 | $ 13.8 |
Quoted Prices in Active Markets for Identical Assets (Level 1)
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Fair Value, Assets Measured on Recurring and Nonrecurring Basis | ||
Cash equivalents | 7.8 | 13.8 |
Significant Other Observable Inputs (Level 2)
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Fair Value, Assets Measured on Recurring and Nonrecurring Basis | ||
Cash equivalents | 0 | 0 |
Significant Unobservable Inputs (Level 3)
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Fair Value, Assets Measured on Recurring and Nonrecurring Basis | ||
Cash equivalents | $ 0 | $ 0 |
EMPLOYEE BENEFIT PLANS (Tables)
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Aggregated Net Periodic Benefit Cost and Other Benefit Cost | The following table sets forth the aggregated net periodic benefit cost for all pension plans for the second quarters and six months ended June 29, 2013 and June 30, 2012, respectively:
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RESTRUCTURING (Tables)
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring Cost Incurred, Included in Restructuring Expense | Costs incurred in the second quarter and six months ended June 29, 2013, included in the “Restructuring expense” line of the Company's condensed consolidated statement of income, are as follows:
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