Franklin Electric Co., Inc. today announced its third quarter
financial results for fiscal year 2023.
Third quarter 2023 net sales were $538.4
million, compared to third quarter 2022 net sales of $551.7
million. Third quarter 2023 operating income was $78.1 million,
compared to third quarter 2022 operating income of $80.0 million.
Third quarter 2023 EPS was $1.23, versus EPS in the third quarter
2022 of $1.24.
“The third quarter, which is seasonally one of
our stronger periods, was a solid quarter but more challenging than
anticipated and our results were below our expectations as
additional commodity price pressure in our Distribution business
and further destocking impacted sales. Nevertheless, Water Systems
set a third-quarter record for revenue and operating income on
strong global execution. While underlying demand in our core
markets remains solid, we continued to see customers extend project
timelines and right-size inventory levels in response to improved
supplier lead times. In addition, unfavorable weather lasted longer
than expected during our busiest months, negatively impacting what
is historically a strong quarter,” commented Gregg Sengstack,
Franklin Electric’s Chairperson and Chief Executive Officer.
“Our team executed well and remained nimble as
we delivered strong margins and robust cash flow generation with a
focus on disciplined cost management. Year-to-date cash flows from
operating activities increased about $190 million over the
prior year as we progressed on our inventory reduction goals.
Looking ahead, we remain focused on delivering for our customers
while continuing to manage our costs and driving value for our
shareholders.” concluded Mr. Sengstack.
Segment Summaries
Water Systems net sales were
$295.8 million, a new third quarter record, an increase of
$2.7 million compared to the third quarter 2022. Sales increases
were led by continued strong end market demand for large pumps.
Water Systems operating income in the third quarter 2023 was $52.7
million, a new quarterly record, driven by higher sales and
disciplined cost management. Third quarter 2022 Water Systems
operating income was $45.5 million.
Distribution net sales were $189.2 million in
the third quarter 2023, a decrease of $4.0 million compared to the
third quarter 2022. The Distribution segment operating income was
$10.7 million in the third quarter 2023 compared to third quarter
2022 operating income of $19.0 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 $77.7 million in
the third quarter 2023, a decrease of $12.5 million compared to the
third quarter 2022 when the Company realized an all-time quarterly
sales record and reduced its backlog significantly. Sales decreased
in the U.S. and Canada by 14 percent and outside the U.S. and
Canada by 20 percent. Fueling Systems operating income in the third
quarter 2023 was $25.8 million. Third quarter 2022 Fueling Systems
operating income was $28.6 million.
2023 Guidance
The Company is updating its guidance for full
year 2023 sales to be in the range of $2.05 billion to $2.15
billion and full year 2023 EPS to be in the range of $4.07 to
$4.17.
Earnings Conference Call
A conference call to review earnings and other developments in
the business will commence at 9:00 am ET. The third 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/r99z8p6f
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/BIa2d593e01bb14f88810bce354d7ace04
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,
October 24, 2023, through 9:00 am ET on Tuesday, October 31, 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) |
|
|
|
|
|
|
|
|
Third Quarter Ended |
|
Nine Months Ended |
|
September 30, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
|
|
|
|
|
|
|
|
Net sales |
$ |
538,431 |
|
|
$ |
551,672 |
|
|
$ |
1,592,163 |
|
|
$ |
1,554,280 |
|
|
|
|
|
|
|
|
|
Cost of
sales |
|
352,178 |
|
|
|
361,077 |
|
|
|
1,055,164 |
|
|
|
1,029,063 |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
186,253 |
|
|
|
190,595 |
|
|
|
536,999 |
|
|
|
525,217 |
|
|
|
|
|
|
|
|
|
Selling,
general, and administrative expenses |
|
107,687 |
|
|
|
109,366 |
|
|
|
324,651 |
|
|
|
322,352 |
|
|
|
|
|
|
|
|
|
Restructuring expense |
|
462 |
|
|
|
1,185 |
|
|
|
735 |
|
|
|
1,898 |
|
|
|
|
|
|
|
|
|
Operating
income |
|
78,104 |
|
|
|
80,044 |
|
|
|
211,613 |
|
|
|
200,967 |
|
|
|
|
|
|
|
|
|
Interest
expense |
|
(2,984 |
) |
|
|
(3,066 |
) |
|
|
(10,309 |
) |
|
|
(7,492 |
) |
Other
income/(expense), net |
|
277 |
|
|
|
(1,250 |
) |
|
|
1,865 |
|
|
|
(2,787 |
) |
Foreign
exchange expense |
|
(2,483 |
) |
|
|
(3,376 |
) |
|
|
(8,098 |
) |
|
|
(4,290 |
) |
|
|
|
|
|
|
|
|
Income
before income taxes |
|
72,914 |
|
|
|
72,352 |
|
|
|
195,071 |
|
|
|
186,398 |
|
|
|
|
|
|
|
|
|
Income tax
expense |
|
14,746 |
|
|
|
13,380 |
|
|
|
39,167 |
|
|
|
37,544 |
|
|
|
|
|
|
|
|
|
Net
income |
|
58,168 |
|
|
|
58,972 |
|
|
|
155,904 |
|
|
|
148,854 |
|
|
|
|
|
|
|
|
|
Less: Net
income attributable to noncontrolling interests |
|
(370 |
) |
|
|
(348 |
) |
|
|
(1,181 |
) |
|
|
(1,101 |
) |
|
|
|
|
|
|
|
|
Net income
attributable to Franklin Electric Co., Inc. |
$ |
57,798 |
|
|
$ |
58,624 |
|
|
$ |
154,723 |
|
|
$ |
147,753 |
|
|
|
|
|
|
|
|
|
Earnings per
share: |
|
|
|
|
|
|
|
Basic |
$ |
1.25 |
|
|
$ |
1.26 |
|
|
$ |
3.34 |
|
|
$ |
3.17 |
|
Diluted |
$ |
1.23 |
|
|
$ |
1.24 |
|
|
$ |
3.29 |
|
|
$ |
3.13 |
|
|
|
|
|
|
|
|
|
FRANKLIN ELECTRIC
CO., INC. AND CONSOLIDATED SUBSIDIARIES |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
|
|
|
|
(In
thousands) |
|
|
|
|
September 30, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
|
|
|
|
Cash and equivalents |
$ |
62,507 |
|
|
$ |
45,790 |
|
Receivables
(net) |
|
252,315 |
|
|
|
230,404 |
|
Inventories |
|
543,540 |
|
|
|
544,980 |
|
Other
current assets |
|
41,136 |
|
|
|
36,916 |
|
Total current assets |
|
899,498 |
|
|
|
858,090 |
|
|
|
|
|
Property,
plant, and equipment, net |
|
222,395 |
|
|
|
215,154 |
|
Lease
right-of-use assets, net |
|
42,307 |
|
|
|
48,948 |
|
Goodwill and
other assets |
|
561,096 |
|
|
|
572,009 |
|
Total assets |
$ |
1,725,296 |
|
|
$ |
1,694,201 |
|
|
|
|
|
LIABILITIES
AND EQUITY |
|
|
|
|
|
|
|
Accounts
payable |
$ |
170,862 |
|
|
$ |
139,266 |
|
Accrued
expenses and other current liabilities |
|
103,396 |
|
|
|
123,788 |
|
Current
lease liability |
|
13,311 |
|
|
|
15,959 |
|
Current
maturities of long-term debt and short-term borrowings |
|
40,351 |
|
|
|
126,756 |
|
Total current liabilities |
|
327,920 |
|
|
|
405,769 |
|
|
|
|
|
Long-term
debt |
|
88,036 |
|
|
|
89,271 |
|
Long-term
lease liability |
|
27,877 |
|
|
|
32,858 |
|
Income taxes
payable non-current |
|
4,837 |
|
|
|
8,707 |
|
Deferred
income taxes |
|
32,252 |
|
|
|
29,744 |
|
Employee
benefit plans |
|
31,897 |
|
|
|
31,889 |
|
Other
long-term liabilities |
|
28,835 |
|
|
|
25,209 |
|
|
|
|
|
Redeemable
noncontrolling interest |
|
1,035 |
|
|
|
620 |
|
|
|
|
|
Total
equity |
|
1,182,607 |
|
|
|
1,070,134 |
|
Total liabilities and equity |
$ |
1,725,296 |
|
|
$ |
1,694,201 |
|
|
|
|
|
FRANKLIN ELECTRIC
CO., INC. AND CONSOLIDATED SUBSIDIARIES |
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
|
Nine Months Ended |
(In
thousands) |
|
|
|
|
September 30,
2023 |
|
September 30,
2022 |
Cash flows
from operating activities: |
|
|
|
Net income |
$ |
155,904 |
|
|
$ |
148,854 |
|
Adjustments
to reconcile net income to net cash flows from operating
activities: |
|
|
|
Depreciation and amortization |
|
39,582 |
|
|
|
37,067 |
|
Non-cash lease expense |
|
12,664 |
|
|
|
12,939 |
|
Share-based compensation |
|
8,449 |
|
|
|
8,940 |
|
Other |
|
10,894 |
|
|
|
9,160 |
|
Changes in assets and liabilities: |
|
|
|
Receivables |
|
(20,427 |
) |
|
|
(73,995 |
) |
Inventory |
|
2,537 |
|
|
|
(122,150 |
) |
Accounts payable and accrued expenses |
|
4,376 |
|
|
|
1,881 |
|
Operating leases |
|
(12,847 |
) |
|
|
(12,939 |
) |
Income taxes-U.S. Tax Cuts and Jobs Act |
|
(2,902 |
) |
|
|
(355 |
) |
Other |
|
399 |
|
|
|
(2,242 |
) |
|
|
|
|
Net cash
flows from operating activities |
|
198,629 |
|
|
|
7,160 |
|
|
|
|
|
Cash flows
from investing activities: |
|
|
|
Additions to property, plant, and equipment |
|
(30,155 |
) |
|
|
(29,327 |
) |
Proceeds from sale of property, plant, and equipment |
|
— |
|
|
|
6 |
|
Acquisitions and investments |
|
(6,641 |
) |
|
|
(1,576 |
) |
Other investing activities |
|
26 |
|
|
|
9 |
|
|
|
|
|
Net cash
flows from investing activities |
|
(36,770 |
) |
|
|
(30,888 |
) |
|
|
|
|
Cash flows
from financing activities: |
|
|
|
Net change in debt |
|
(87,653 |
) |
|
|
83,679 |
|
Proceeds from issuance of common stock |
|
9,010 |
|
|
|
3,584 |
|
Purchases of common stock |
|
(29,888 |
) |
|
|
(30,731 |
) |
Dividends paid |
|
(31,315 |
) |
|
|
(27,293 |
) |
Deferred payments for acquisitions |
|
(448 |
) |
|
|
— |
|
|
|
|
|
Net cash
flows from financing activities |
|
(140,294 |
) |
|
|
29,239 |
|
|
|
|
|
Effect of
exchange rate changes on cash and cash equivalents |
|
(4,848 |
) |
|
|
(6,524 |
) |
Net change
in cash and cash equivalents |
|
16,717 |
|
|
|
(1,013 |
) |
Cash and
cash equivalents at beginning of period |
|
45,790 |
|
|
|
40,536 |
|
Cash and
cash equivalents at end of period |
$ |
62,507 |
|
|
$ |
39,523 |
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
Q3 2022 |
$183.7 |
|
$41.3 |
|
$46.0 |
|
$22.1 |
|
$293.1 |
|
$90.2 |
|
$193.2 |
|
($24.8) |
|
$551.7 |
|
Q3 2023 |
$182.0 |
|
$45.5 |
|
$48.7 |
|
$19.6 |
|
$295.8 |
|
$77.7 |
|
$189.2 |
|
($24.3) |
|
$538.4 |
|
Change |
($1.7) |
|
$4.2 |
|
$2.7 |
|
($2.5) |
|
$2.7 |
|
($12.5) |
|
($4.0) |
|
$0.5 |
|
($13.3) |
|
%
Change |
|
-1% |
|
|
10% |
|
|
6% |
|
|
-11% |
|
|
1% |
|
|
-14% |
|
|
-2% |
|
|
|
-2% |
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation |
($0.6) |
|
($6.1) |
|
($5.4) |
|
($0.5) |
|
($12.6) |
|
$0.0 |
|
$0.0 |
|
|
($12.6) |
|
%
Change |
|
0% |
|
|
-15% |
|
|
-12% |
|
|
-2% |
|
|
-4% |
|
|
0% |
|
|
0% |
|
|
|
-2% |
|
|
|
|
|
|
|
|
|
|
|
Volume/Price |
($1.1) |
|
$10.3 |
|
$8.1 |
|
($2.0) |
|
$15.3 |
|
($12.5) |
|
($4.0) |
|
$0.5 |
|
($0.7) |
|
% Change |
|
-1% |
|
|
25% |
|
|
18% |
|
|
-9 |
% |
|
5% |
|
|
-14% |
|
|
-2% |
|
|
-2% |
|
|
0% |
|
Key
Performance Indicators: Operating Income and Margin
Summary |
|
|
|
|
|
|
Operating Income and Margins |
|
|
|
|
|
(in
millions) |
For the
Third Quarter 2023 |
|
Water |
Fueling |
Distribution |
Other/Elims |
Consolidated |
Operating Income / (Loss) |
$ |
52.7 |
|
$ |
25.8 |
|
$ |
10.7 |
|
$ |
(11.1 |
) |
$ |
78.1 |
|
% Operating
Income To Net Sales |
|
17.8 |
% |
|
33.2 |
% |
|
5.7 |
% |
|
|
14.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income and Margins |
|
|
|
|
|
(in
millions) |
For the
Third Quarter 2022 |
|
Water |
Fueling |
Distribution |
Other/Elims |
Consolidated |
Operating
Income / (Loss) |
$ |
45.5 |
|
$ |
28.6 |
|
$ |
19.0 |
|
$ |
(13.1 |
) |
$ |
80.0 |
|
% Operating
Income To Net Sales |
|
15.5 |
% |
|
31.7 |
% |
|
9.8 |
% |
|
|
14.5 |
% |
Franklin Electric (NASDAQ:FELE)
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