Franklin Electric Co., Inc. today announced its second quarter
financial results for fiscal year 2023.
Second quarter 2023 net sales were $569.1
million, compared to second quarter 2022 net sales of $551.1
million. Second quarter 2023 operating income was $80.9
million, compared to second quarter 2022 operating income of $81.0
million. Second quarter 2023 EPS was $1.27, versus EPS
in the second quarter 2022 of $1.26.
“We delivered another quarter of record sales
and EPS performance for Franklin Electric. Results were driven by a
solid demand environment that continued into the busy season for
our core markets. Strong execution by our global teams enabled
backlog and inventory levels to continue trending towards
normalized levels, significantly improving our cash flow
generation,” commented Gregg Sengstack, Franklin Electric’s
Chairperson and Chief Executive Officer.
“Even though our second quarter sales were
adversely impacted by weather and distributors right-sizing
inventory levels, our end-market demand remains healthy. As we
enter the third quarter, we have an elevated backlog which gives us
momentum and confidence in our outlook for the remainder of 2023,”
concluded Mr. Sengstack.
Segment Summaries
Water Systems net sales, a new
all-time quarterly record, were $321.7 million in the second
quarter 2023, an increase of $11.2 million compared to the second
quarter 2022. Sales increases were led by pricing actions and
continued strong end market demand for large pumps. Water Systems
operating income in the second quarter 2023 was $50.8 million, a
new quarterly record, driven by higher sales. Second quarter 2022
Water Systems operating income was $49.0 million.
Distribution net sales, a new
second quarter record, were $193.1 million in the second quarter
2023, an increase of $2.0 million compared to the second quarter
2022. Sales increases were led by end market demand. The
Distribution segment operating income was $17.8 million in the
second quarter 2023 compared to second quarter 2022 operating
income of $23.3 million. Distribution segment sales and operating
income were negatively impacted by wet weather across much of the
US, margin compression from declining pricing of commodity-based
products sold through the business, and some channel inventory
destocking as supply chains normalize.
Fueling Systems net sales were
$80.4 million in the second quarter 2023, a decrease of $5.6
million compared to the second quarter 2022. Sales decreased in the
U.S. and Canada by 6 percent and outside the U.S. and Canada by 8
percent. Fueling Systems operating income in the second quarter
2023 was $26.7 million, a new second quarter record, driven by a
favorable product and geographic mix of sales. Second quarter 2022
Fueling Systems operating income was $26.1 million.
2023 Guidance
The Company is maintaining its guidance for full
year 2023 sales to be in the range of $2.15 billion to $2.25
billion and full year 2023 EPS to be in the range of $4.25 to
$4.45.
Earnings Conference Call
A conference call to review earnings and other
developments in the business will commence at 9:00 am ET. The
second quarter 2023 earnings call will be available via a live
webcast. The webcast will be available in a listen-only mode by
going to:
https://edge.media-server.com/mmc/p/ykifmgrn
For those interested in participating in the
question-and-answer portion of the call, please register for the
call at the link below.
https://register.vevent.com/register/BId7ec20b8d1f5442687a9b4f54a3e54a8
All registrants will receive dial-in information
and a PIN allowing them to access the live call. It is recommended
that you join 10 minutes prior to the event start (although you may
register and dial in at any time during the call).
A replay of the conference call will be
available from Tuesday, July 25, 2023, through 9 am ET on Tuesday,
August 1, 2023, by visiting the listen-only webcast link above.
Forward Looking Statements
"Safe Harbor” Statement under the Private
Securities Litigation Reform Act of 1995. Any forward-looking
statements contained herein, including those relating to market
conditions or the Company’s financial results, costs, expenses or
expense reductions, profit margins, inventory levels, foreign
currency translation rates, liquidity expectations, business goals
and sales growth, involve risks and uncertainties, including but
not limited to, risks and uncertainties with respect to general
economic and currency conditions, various conditions specific to
the Company’s business and industry, weather conditions, new
housing starts, market demand, competitive factors, changes in
distribution channels, supply constraints, effect of price
increases, raw material costs, technology factors,
integration of acquisitions, litigation, government and regulatory
actions, the Company’s accounting policies, future trends,
epidemics and pandemics, 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 31, 2022, 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.
About Franklin Electric
Franklin Electric is a global leader in the
production and marketing of systems and components for the movement
of water and fuel. Recognized as a technical leader in its products
and services, Franklin Electric serves customers around the world
in residential, commercial, agricultural, industrial, municipal,
and fueling applications.
Franklin Electric Contact:
Jeffery L. Taylor Franklin Electric Co.,
Inc.260-824-2900Email: jeffery.taylor@fele.com
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
(Unaudited) |
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter Ended |
|
Six Months Ended |
|
|
June 30, 2023 |
|
June 30, 2022 |
|
June 30, 2023 |
|
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
569,181 |
|
|
$ |
551,138 |
|
|
$ |
1,053,732 |
|
|
$ |
1,002,608 |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
380,700 |
|
|
|
361,850 |
|
|
|
702,986 |
|
|
|
667,986 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
188,481 |
|
|
|
189,288 |
|
|
|
350,746 |
|
|
|
334,622 |
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative expenses |
|
107,429 |
|
|
|
108,313 |
|
|
|
216,964 |
|
|
|
212,986 |
|
|
|
|
|
|
|
|
|
|
|
Restructuring (income)/expense |
|
149 |
|
|
|
(7 |
) |
|
|
273 |
|
|
|
713 |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
80,903 |
|
|
|
80,982 |
|
|
|
133,509 |
|
|
|
120,923 |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(4,178 |
) |
|
|
(2,932 |
) |
|
|
(7,325 |
) |
|
|
(4,426 |
) |
|
Other income/(expense), net |
|
1,179 |
|
|
|
(1,159 |
) |
|
|
1,588 |
|
|
|
(1,537 |
) |
|
Foreign exchange expense |
|
(3,571 |
) |
|
|
(329 |
) |
|
|
(5,615 |
) |
|
|
(914 |
) |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
74,333 |
|
|
|
76,562 |
|
|
|
122,157 |
|
|
|
114,046 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
14,173 |
|
|
|
16,799 |
|
|
|
24,421 |
|
|
|
24,164 |
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
60,160 |
|
|
$ |
59,763 |
|
|
$ |
97,736 |
|
|
$ |
89,882 |
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interests |
|
(560 |
) |
|
|
(399 |
) |
|
|
(811 |
) |
|
|
(753 |
) |
|
|
|
|
|
|
|
|
|
|
Net income attributable to Franklin Electric Co., Inc. |
$ |
59,600 |
|
|
$ |
59,364 |
|
|
$ |
96,925 |
|
|
$ |
89,129 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
1.29 |
|
|
$ |
1.27 |
|
|
$ |
2.09 |
|
|
$ |
1.91 |
|
|
Diluted |
$ |
1.27 |
|
|
$ |
1.26 |
|
|
$ |
2.06 |
|
|
$ |
1.89 |
|
|
|
|
|
|
|
|
|
|
|
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
June 30, 2023 |
|
December 31, 2022 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
Cash and equivalents |
$ |
53,227 |
|
$ |
45,790 |
|
Receivables (net) |
299,485 |
|
230,404 |
|
Inventories |
574,642 |
|
544,980 |
|
Other current assets |
39,036 |
|
36,916 |
|
Total current assets |
966,390 |
|
858,090 |
|
|
|
|
|
|
Property, plant, and equipment, net |
224,464 |
|
215,154 |
|
Right-of-Use Asset, net |
44,160 |
|
48,948 |
|
Goodwill and other assets |
568,067 |
|
572,009 |
|
Total assets |
$ |
1,803,081 |
|
$ |
1,694,201 |
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
Accounts payable |
$ |
161,266 |
|
$ |
139,266 |
|
Accrued expenses and other current liabilities |
97,946 |
|
123,788 |
|
Current lease liability |
13,624 |
|
15,959 |
|
Current maturities of long-term debt and short-term borrowings |
159,841 |
|
126,756 |
|
Total current liabilities |
432,677 |
|
405,769 |
|
|
|
|
|
|
Long-term debt |
88,680 |
|
89,271 |
|
Long-term lease liability |
29,513 |
|
32,858 |
|
Income taxes payable non-current |
4,837 |
|
8,707 |
|
Deferred income taxes |
32,434 |
|
29,744 |
|
Employee benefit plans |
32,628 |
|
31,889 |
|
Other long-term liabilities |
31,910 |
|
25,209 |
|
|
Redeemable noncontrolling interest |
901 |
|
620 |
|
|
|
|
|
|
Total equity |
1,149,501 |
|
1,070,134 |
|
Total liabilities and equity |
$ |
1,803,081 |
|
$ |
1,694,201 |
|
|
|
|
|
|
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
|
Six Months Ended |
|
(In thousands) |
|
|
|
|
|
June 30, |
|
June 30, |
|
|
2023 |
|
2022 |
|
Cash flows from operating activities: |
|
|
|
|
Net income |
$ |
97,736 |
|
$ |
89,882 |
|
Adjustments to reconcile net income to net cash flows from
operating activities: |
|
|
|
|
Depreciation and amortization |
26,259 |
|
24,521 |
|
Non-cash lease expense |
8,523 |
|
8,526 |
|
Share-based compensation |
6,410 |
|
6,322 |
|
Other |
7,896 |
|
3,639 |
|
Changes in assets and liabilities: |
|
|
|
|
Receivables |
(70,725) |
|
(93,063) |
|
Inventory |
(24,125) |
|
(123,817) |
|
Accounts payable and accrued expenses |
(3,880) |
|
29,969 |
|
Operating leases |
(8,706) |
|
(8,526) |
|
Income taxes-U.S. Tax Cuts and Jobs Act |
(2,902) |
|
(355) |
|
Other |
6,540 |
|
361 |
|
|
|
|
|
|
Net cash flows from operating activities |
43,026 |
|
(62,541) |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
Additions to property, plant, and equipment |
(20,241) |
|
(20,084) |
|
Proceeds from sale of property, plant, and equipment |
- |
|
6 |
|
Acquisitions and investments |
(6,641) |
|
(1,365) |
|
Other investing activities |
2 |
|
(8) |
|
|
|
|
|
|
Net cash flows from investing activities |
(26,880) |
|
(21,451) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Net change in debt |
32,171 |
|
126,272 |
|
Proceeds from issuance of common stock |
9,010 |
|
1,916 |
|
Purchases of common stock |
(25,541) |
|
(30,644) |
|
Dividends paid |
(20,872) |
|
(18,205) |
|
Deferred payments for acquisitions |
(186) |
|
- |
|
Net cash flows from financing activities |
(5,418) |
|
79,339 |
|
|
|
|
|
|
Effect of exchange rate changes on cash |
(3,291) |
|
(2,658) |
|
Net change in cash and equivalents |
7,437 |
|
(7,311) |
|
Cash and equivalents at beginning of period |
45,790 |
|
40,536 |
|
Cash and equivalents at end of period |
$ |
53,227 |
|
$ |
33,225 |
|
|
|
|
|
|
Key
Performance Indicators: Net Sales
Summary |
|
|
|
Net
Sales |
|
United States |
Latin |
Europe, Middle |
Asia |
Total |
|
|
|
|
(in
millions) |
& Canada |
America |
East &
Africa |
Pacific |
Water |
Fueling |
Distribution |
Other/Elims |
Consolidated |
|
|
|
|
|
|
|
|
|
|
Q2 2022 |
$194.9 |
$41.7 |
$49.7 |
$24.2 |
$310.5 |
$86.0 |
$191.1 |
($36.5) |
$551.1 |
Q2 2023 |
$202.9 |
$42.0 |
$54.6 |
$22.2 |
$321.7 |
$80.4 |
$193.1 |
($26.1) |
$569.1 |
Change |
$8.0 |
$0.3 |
$4.9 |
($2.0) |
$11.2 |
($5.6) |
$2.0 |
$10.4 |
$18.0 |
%
Change |
4% |
1% |
10% |
-8% |
4% |
-7% |
1% |
|
3% |
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation |
($1.2) |
($4.9) |
($5.3) |
($1.2) |
($12.6) |
($0.1) |
$0.0 |
|
($12.7) |
%
Change |
-1% |
-12% |
-11% |
-5% |
-4% |
0% |
0% |
|
-2% |
|
|
|
|
|
|
|
|
|
|
Volume/Price |
$9.2 |
$5.2 |
$10.2 |
($0.8) |
$23.8 |
($5.5) |
$2.0 |
$10.4 |
$30.7 |
%
Change |
5% |
12% |
21% |
-3% |
8% |
-6% |
1% |
-28% |
6% |
Key Performance Indicators: Operating
Income and Margin Summary |
|
Operating Income and Margins |
|
|
|
|
|
(in millions) |
For the Second Quarter 2023 |
|
|
Water |
Fueling |
Distribution |
Other/Elims |
Consolidated |
Operating Income / (Loss) |
$ |
50.8 |
|
$ |
26.7 |
|
$ |
17.8 |
|
$ |
(14.4) |
|
$ |
80.9 |
% Operating Income To Net Sales |
15.8% |
33.2% |
9.2% |
|
14.2% |
|
|
|
|
|
|
Operating Income and Margins |
|
|
|
|
|
(in millions) |
For the Second Quarter 2022 |
|
|
Water |
Fueling |
Distribution |
Other/Elims |
Consolidated |
Operating Income / (Loss) |
$ |
49.0 |
|
$ |
26.1 |
|
$ |
23.3 |
|
$ |
(17.4) |
|
$ |
81.0 |
% Operating Income To Net Sales |
15.8% |
30.3% |
12.2% |
|
14.7% |
Franklin Electric (NASDAQ:FELE)
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Franklin Electric (NASDAQ:FELE)
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