• Franklin Electric Reports Third Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 24 Oct 2023 08:00:50   America/New_York

    Third Quarter 2023 Highlights

    • Consolidated net sales of $538.4 million, a decrease of 2% to the prior year
    • Water Systems sales increased by 1%, while Fueling Systems and Distribution’s net sales decreased 14% and 2%, respectively
    • Operating income was $78.1 million with solid operating margin of 14.5%
    • GAAP fully diluted earnings per share (EPS) was $1.23
    • Year-to-date cash flows from operating activities of $198.6 million increased $191.5 million over the prior year

    FORT WAYNE, Ind., Oct. 24, 2023 (GLOBE NEWSWIRE) -- 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.
    260-824-2900
    Email: 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 StatesLatinEurope, MiddleAsiaTotal    
    (in millions)& CanadaAmericaEast & AfricaPacificWaterFuelingDistributionOther/ElimsConsolidated
              
    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
     WaterFuelingDistributionOther/ElimsConsolidated
    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
     WaterFuelingDistributionOther/ElimsConsolidated
    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%

     


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