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CST: 12/11/2019 01:55:52   

Franklin Electric Reports Record Third Quarter 2019 Sales and Earnings

13 Days ago

FORT WAYNE, Ind., Oct. 29, 2019 (GLOBE NEWSWIRE) -- Franklin Electric Co., Inc. (NASDAQ: FELE) reported record third quarter 2019 GAAP fully diluted earnings per share (EPS) of $0.72, versus a GAAP fully diluted EPS in the third quarter 2018 of $0.63.  Third quarter 2019 sales were a record $348.4 million, compared to 2018 third quarter sales of $341.9 million. Third quarter EPS before the impact of restructuring expenses was also a record at $0.73 compared to 2018 third quarter EPS before restructuring of $0.64 (see table below for a reconciliation of GAAP EPS to EPS before restructuring). 

Gregg Sengstack, Franklin Electric’s Chairman and Chief Executive Officer, commented:

“Our third quarter earnings were a record for any third quarter in the Company’s history.  Our earnings per share grew by 14 percent from the third quarter 2018. Our improvement in earnings was led by our Distribution segment which grew operating income by over 70 percent as a result of more favorable weather conditions in much of the United States and acquisitions.  Our free cash flow after capital expenditures is about 65 percent higher through the first three quarters of the year versus the same period of 2018.  Despite these earnings and cash generation improvements, organic sales growth was below expectations in our Water and Fueling systems businesses.”

Key Performance Indicators:

    For the Third Quarter
Earnings Before and After Restructuring   2019 2018 Change
(in millions)        
Net Income attributable to FE Co., Inc. Reported   $ 33.9   $ 30.0   13 %
Allocated Earnings   $ (0.2 ) $ (0.2 )  
Earnings for EPS Calculations   $ 33.7   $ 29.8   13 %
         
Restructuring (before tax):   $ 0.4   $ 0.3    
         
Restructuring, net of tax:   $ 0.3   $ 0.2    
         
Earnings before Restructuring   $ 34.0   $ 30.0   13 %
         
    For the Third Quarter
Earnings Per Share   2019 2018 Change
Before and After Restructuring        
(in millions except Earnings Per Share)        
         
Average Fully Diluted Shares Outstanding     46.7     47.2   -1 %
         
Fully Diluted Earnings Per Share ("EPS") Reported   $ 0.72   $ 0.63   14 %
         
Restructuring Per Share, net of tax   $ 0.01   $ 0.01    
         
Fully Diluted EPS before Restructuring   $ 0.73   $ 0.64   14 %
         


                   
  Net Sales
  United States Latin Europe, Middle Asia Total        
(in millions) & Canada America East & Africa Pacific Water Fueling Distribution Other/Elims Consolidated
                   
Q3 2018 $110.2   $31.0   $40.8   $17.3   $199.3   $77.8   $78.0   ($13.2 ) $341.9  
Q3 2019 $111.4   $30.6   $40.8   $17.0   $199.8   $78.1   $87.0   ($16.5 ) $348.4  
Change $1.2   ($0.4 ) $0.0   ($0.3 ) $0.5   $0.3   $9.0   ($3.3 ) $6.5  
% Change 1 % -1 % 0 % -2 % 0 % 0 % 12 %   2 %
                   
Foreign currency translation ($0.4 ) ($2.3 ) ($2.0 ) ($0.2 ) ($4.9 ) ($0.9 ) $0.0      
% Change 0 % -7 % -5 % -1 % -2 % -1 % 0 %    
                   
Acquisitions $2.3   $0.0   $0.0   $0.0   $2.3   $0.0   $7.3      
                   
Volume/Price ($0.7 ) $1.9   $2.0   ($0.1 ) $3.1   $1.2   $1.7      
% Change -1 % 6 % 5 % -1 % 2 % 2 % 2 %    
                   


           
Operating Income and Margins          
(in millions) For the Third Quarter 2019
  Water Fueling Distribution Other/Elims Consolidated
Operating Income / (Loss) $ 28.4   $ 21.6   $ 5.9   $ (13.2 ) $ 42.7  
% Operating Income To Net Sales   14.2 %   27.7 %   6.8 %     12.3 %
           
Restructuring $ 0.4   $ -   $ -   $ -   $ 0.4  
           
Operating Income/(Loss) before Restructuring $ 28.8   $ 21.6   $ 5.9   $ (13.2 ) $ 43.1  
% Operating Income to Net Sales Before Restructuring   14.4 %   27.7 %   6.8 %     12.4 %
           
           
Operating Income and Margins          
(in millions) For the Third Quarter 2018
  Water Fueling Distribution Other/Elims Consolidated
Operating Income / (Loss) $ 28.4   $ 20.9   $ 3.1   $ (12.3 ) $ 40.1  
% Operating Income To Net Sales   14.2 %   26.9 %   4.0 %     11.7 %
           
Restructuring $ -   $ -   $ 0.3   $ -   $ 0.3  
           
Operating Income/(Loss) before Restructuring $ 28.4   $ 20.9   $ 3.4   $ (12.3 ) $ 40.4  
% Operating Income to Net Sales Before Restructuring   14.2 %   26.9 %   4.4 %     11.8 %
           

Water Systems

Water Systems sales were $199.8 million in the third quarter 2019, versus the third quarter 2018 sales of $199.3 million.  In the third quarter of 2019, sales from businesses acquired since the third quarter of 2018 were $2.3 million.  Water Systems sales decreased 2 percent in the quarter due to foreign currency translation. Water Systems organic sales were higher by 2 percent compared to the third quarter of 2018.

Water Systems sales in the U.S. and Canada increased by 1 percent overall compared to the third quarter 2018, primarily related to sales from acquisitions.  Sales of dewatering equipment increased by 2 percent on the continued diversification of product sales and channels.  Sales of groundwater pumping equipment increased by 1 percent versus the third quarter 2018.  The increase in groundwater pumping systems was primarily due to improved weather conditions in North America and increased sales to the Company’s Headwater Distribution segment. Sales of surface pumping equipment decreased by 4 percent on lower sales of both wastewater and condensation removal equipment.

Water Systems sales in markets outside the U.S. and Canada declined by 1 percent overall.  Foreign currency translation decreased sales by 5 percent.  Outside the U.S. and Canada, Water Systems organic sales increased by 4 percent, primarily driven by higher sales in Latin America and Europe, Middle East and Africa markets, partially offset by sales declines in Asia Pacific. 

Water Systems operating income was $28.4 million in the third quarter 2019, compared to $28.4 million in the third quarter 2018. 

Fueling Systems

Fueling Systems sales were $78.1 million in the third quarter 2019 compared to third quarter 2018 sales of $77.8 million and were a record for any third quarter.  Fueling Systems sales decreased 1 percent in the quarter due to foreign currency translation. Fueling Systems organic sales increased 2 percent compared to the third quarter of 2018.

Fueling Systems sales in the U.S. and Canada increased by 10 percent compared to the third quarter 2018.  The increase was principally in the fuel management systems and service station hardware product lines.  Outside the U.S. and Canada, Fueling Systems revenues declined by 6 percent, primarily due to lower sales in China.

Fueling Systems operating income was a record for any third quarter at $21.6 million compared to $20.9 million in the third quarter of 2018.  Fueling Systems operating income was higher in the quarter due to favorable product sales mix.

Distribution

Distribution sales were $87.0 million in the third quarter 2019, versus third quarter 2018 sales of $78.0 million.  In the third quarter of 2019, sales from businesses acquired since the third quarter of 2018 were $7.3 million.  The Distribution segment organic sales increased 2 percent compared to the third quarter of 2018. 

The Distribution segment operating income was $5.9 million in the third quarter of 2019, compared to $3.1 million in the third quarter of 2018.  Distribution’s operating income was higher in the third quarter due to higher sales volumes and acquisitions and leverage on operating expenses.

Overall

The Company’s consolidated gross profit was $117.6 million for the third quarter of 2019, an increase from the third quarter of 2018 gross profit of $113.0 million.  The gross profit increase was primarily due to higher Fueling Systems and Distribution sales.  The gross profit as a percent of net sales was 33.8 percent in the third quarter of 2019 versus 33.0 percent in the third quarter of 2018.

Selling, general, and administrative (SG&A) expenses were $74.5 million in the third quarter of 2019 compared to $72.5 million in the third quarter of 2018. SG&A expenses from acquired businesses was $1.5 million and excluding the acquired entities, the Company’s SG&A expenses in the third quarter of 2019 were $73.0 million, an increase of less than 1 percent from the third quarter 2018, partially due to the offsetting effect of foreign currency translation versus the prior year.

Commenting on the outlook for the remainder of 2019, Mr. Sengstack said:

“Based on our third quarter results and our current view of our end markets, we expect our fourth quarter to be similar to last year in both revenue and earnings.  This would result in full year 2019 earnings per share before restructuring at the low end of our current guidance.”

A conference call to review earnings and other developments in the business will commence at 9:00 am Eastern Time.  The third quarter 2019 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/rxbyt5hx

If you intend to ask questions during the call, please dial in using 877.643.7158 for domestic calls and 914.495.8565 for international calls.  The conference ID is: 5988134.

A replay of the conference call will be available Tuesday, October 29, 2019 at 12:00 noon Eastern Time through noon Eastern Time on Tuesday, November 5, 2019, by dialing 855.859.2056 for domestic calls and 404.537.3406 for international calls.  The replay passcode is: 5988134.

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 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,   September 30,   September 30,   September 30,
  2019   2018   2019   2018
               
Net sales $ 348,416     $ 341,866     $ 994,471     $ 981,466  
               
Cost of sales   230,793       228,900       667,624       653,442  
               
Gross profit   117,623       112,966       326,847       328,024  
               
Selling, general, and administrative expenses   74,500       72,483       226,581       223,723  
               
Restructuring expense   404       346       1,735       990  
               
Operating income   42,719       40,137       98,531       103,311  
   
Interest expense   (2,037 )     (2,443 )     (6,674 )     (7,477 )
Other income/(expense), net   (250 )     (422 )     (303 )     (581 )
Foreign exchange income/(expense)   2,082       (1,601 )     2,166       (3,151 )
               
Income before income taxes   42,514       35,671       93,720       92,102  
               
Income tax expense   8,439       5,739       17,706       10,916  
               
Net income $ 34,075     $ 29,932     $ 76,014     $ 81,186  
               
Less: Net (income)/loss attributable to noncontrolling interests   (168 )     74       (306 )     491  
               
Net income attributable to Franklin Electric Co., Inc. $ 33,907     $ 30,006     $ 75,708     $ 81,677  
               
Income per share:              
Basic $ 0.73     $ 0.64     $ 1.62     $ 1.74  
Diluted $ 0.72     $ 0.63     $ 1.61     $ 1.72  
               


   
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
           
(In thousands)          
           
  September 30   December 31,
  2019   2018
ASSETS          
           
Cash and equivalents $ 47,805     $ 59,173  
Receivables 198,052     172,899  
Inventories 333,810     314,049  
Other current assets 37,900     33,758  
Total current assets 617,567     579,879  
           
Property, plant, and equipment, net 197,712     207,064  
Right-of-Use Asset, net 24,822     -  
Goodwill and other assets 396,839     395,422  
Total assets $ 1,236,940     $ 1,182,365  
           
           
LIABILITIES AND EQUITY          
           
Accounts payable $ 94,531     $ 76,652  
Accrued expenses and other current liabilities 73,580     67,230  
Current lease liability 8,337     -  
Current maturities of long-term debt and          
short-term borrowings 80,797     111,975  
Total current liabilities 257,245     255,857  
           
Long-term debt 93,123     94,379  
Long-term lease liability 16,487     -  
Income taxes payable non-current 11,965     10,881  
Deferred income taxes 27,925     28,949  
Employee benefit plans 33,404     38,020  
Other long-term liabilities 19,964     17,934  
           
Redeemable noncontrolling interest (229 )   518  
           
Total equity 777,056     735,827  
Total liabilities and equity $ 1,236,940     $ 1,182,365  
           

 


 
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Nine Months Ended
(In thousands)      
  September 30,   September 30,
  2019   2018
Cash flows from operating activities:      
Net income $ 76,014     $ 81,186  
Adjustments to reconcile net income to net      
cash flows from operating activities:      
Depreciation and amortization   27,705       28,987  
Non-Cash Lease Expense   7,640       -  
Share-based compensation   7,459       6,627  
Other   (1,747 )     (1,234 )
Changes in assets and liabilities:      
Receivables   (27,170 )     (30,853 )
Inventory   (19,841 )     (15,571 )
Accounts payable and accrued expenses   27,391       (6,094 )
Operating Leases   (7,637 )     -  
Income taxes-U.S. Tax Cuts and Jobs Act   -       (7,026 )
Other   411       4,396  
       
Net cash flows from operating activities   90,225       60,418  
       
Cash flows from investing activities:      
Additions to property, plant, and equipment   (15,591 )     (15,108 )
Proceeds from sale of property, plant, and equipment   866       432  
Acquisitions and investments   (20,871 )     (42,085 )
Other investing activities   8       388  
       
Net cash flows from investing activities   (35,588 )     (56,373 )
       
Cash flows from financing activities:      
Change in debt   (31,659 )     (8,203 )
Proceeds from issuance of common stock   2,331       8,747  
Purchases of common stock   (10,301 )     (12,080 )
Dividends paid   (20,919 )     (16,960 )
Purchase of redeemable non-controlling shares   (487 )     -  
Net cash flows from financing activities   (61,035 )     (28,496 )
       
Effect of exchange rate changes on cash   (4,970 )     (1,609 )
Net change in cash and equivalents   (11,368 )     (26,060 )
Cash and equivalents at beginning of period   59,173       67,233  
Cash and equivalents at end of period $ 47,805     $ 41,173  
       

 

"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, 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, 2018, 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.

Contact:

John J. Haines
Franklin Electric Co., Inc.
260-824-2900

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