8-K
FRANKLIN ELECTRIC CO INC (FELE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 2, 2023
FRANKLIN ELECTRIC CO., INC.
(Exact name of registrant as specified in its charter)
| Indiana | 0-362 | 35-0827455 |
|---|---|---|
| (State of incorporation) | (Commission File Number) | (IRS employer identification no.) |
| 9255 Coverdale Road | ||
| --- | --- | --- |
| Fort Wayne, | Indiana | 46809 |
| (Address of principal executive offices) | (Zip code) |
(260) 824-2900
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Common Stock, $0.10 par value | FELE | NASDAQ | Global Select Market |
|---|---|---|---|
| (Title of each class) | (Trading symbol) | (Name of each exchange on which registered) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On May 2, 2023, Franklin Electric Co., Inc. issued a press release announcing its earnings for the first quarter of 2023. A copy of the release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference. This Current Report on Form 8-K and the press release attached hereto are being furnished pursuant to Item 2.02 of Form 8-K.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits:
| Exhibit Number | Description |
|---|---|
| 99.1 | Press release - "Franklin Electric Reports Record First Quarter 2023 Results" |
| 101 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
| 104 | The cover page from this Current Report on Form 8-K, formatted as Inline XBRL |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FRANKLIN ELECTRIC CO., INC.
(Registrant)
| Date: May 2, 2023 | By | /s/ Jeffery L. Taylor |
|---|---|---|
| Jeffery L. Taylor | ||
| Vice President, Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
Document
Exhibit 99.1
NEWS RELEASE FOR IMMEDIATE DISTRIBUTION
FRANKLIN ELECTRIC REPORTS RECORD FIRST QUARTER 2023 RESULTS
First Quarter 2023 Highlights
•Sales of $484.6 million, an increase of 7% over the prior year, a first quarter record
•Record first quarter sales in all three segments; Water Systems increased 12%, Distribution increased 6%, and Fueling Systems increased less than 1%
•Operating income was a first quarter record at $52.6 million, an increase of 32% over the prior year
•GAAP fully diluted earnings per share (EPS) was $0.79, an increase of $0.16 over the prior year
Fort Wayne, IN – May 2, 2023 – Franklin Electric Co. Inc. today announced first quarter financial results for fiscal year 2023.
First quarter 2023 sales were $484.6 million, compared to first quarter 2022 sales of $451.5 million. First quarter 2023 operating income was $52.6 million, compared to first quarter operating income in 2022 of $39.9 million. First quarter 2023 GAAP fully diluted EPS was $0.79, versus GAAP fully diluted EPS in the first quarter 2022 of $0.63.
“The Franklin Electric team delivered a strong start to 2023 with records for first quarter sales, operating income and earnings per share. Overall, demand remains seasonally robust, and we continue to make progress with managing and improving our supply chain. Strong shipments during the quarter drove top-line sales and operating leverage resulting in year-over-year operating margin expansion and a more normal backlog which decreased sequentially by $30 million.” commented Gregg Sengstack, Franklin Electric’s Chairperson and Chief Executive Officer.
“While the demand environment remains healthy across each of our businesses, we are mindful of the ongoing macroeconomic and geopolitical pressures that are expected to persist throughout 2023. Our strong first quarter results give us confidence as we move to the busy season for our business.” concluded Mr. Sengstack.
Segment Summaries
Water Systems sales, a new first quarter record, were $306.6 million in the first quarter 2023, an increase of $34.0 million compared to the first quarter 2022. Sales increases were led by pricing actions and strong end market demand across most major product lines led by surface pumping, especially in large dewatering pumps, and groundwater. Water Systems operating income in the first quarter was $49.0 million, a new first quarter record, driven by higher sales and operating leverage. First quarter 2022 Water Systems operating income was $33.2 million.
Distribution sales, a new first quarter record, were $143.0 million in the first quarter 2023, an increase of $8.1 million compared to the first quarter 2022. The Distribution segment operating income was $4.7 million in the first quarter of 2023 compared to first quarter 2022 operating income of $9.4 million.
Distribution segment sales and operating income were negatively impacted by weather, seasonality, and margin compression from unfavorable pricing of commodity-based products sold through the business.
Fueling Systems sales, a new first quarter record, were $72.7 million in the first quarter 2023, an increase of $0.2 million compared to the first quarter 2022. Sales increases in the U.S. and Canada of 4 percent were offset by sales declines outside the U.S. and Canada. Fueling Systems operating income in the first quarter was $20.8 million, a new first quarter record, driven by a favorable product and geographic mix of sales. First quarter 2022 Fueling Systems operating income was $17.7 million.
2023 Guidance
The Company is updating and raising 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 first 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/p6ddvija
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/BI23ed60aedc6f4b01aabdd0f5a51dbaba
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 start of the event (although you may register and dial in at any time during the call).
A replay of the conference call will be available from Tuesday, May 2, 2023, through 9AM ET on Tuesday, May 9, 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) | ||||
| First Quarter Ended | ||||
| March 31, 2023 | March 31, 2022 | |||
| Net sales | $ | 484,551 | $ | 451,470 |
| Cost of sales | 322,286 | 306,136 | ||
| Gross profit | 162,265 | 145,334 | ||
| Selling, general, and administrative expenses | 109,535 | 104,673 | ||
| Restructuring expense | 124 | 720 | ||
| Operating income | 52,606 | 39,941 | ||
| Interest expense | (3,147) | (1,494) | ||
| Other income/(expense), net | 409 | (378) | ||
| Foreign exchange income/(expense) | (2,044) | (585) | ||
| Income before income taxes | 47,824 | 37,484 | ||
| Income tax expense | 10,248 | 7,365 | ||
| Net income | $ | 37,576 | $ | 30,119 |
| Less: Net (income)/loss attributable to noncontrolling interests | (251) | (354) | ||
| Net income attributable to Franklin Electric Co., Inc. | $ | 37,325 | $ | 29,765 |
| Earnings per share: | ||||
| Basic | $ | 0.81 | $ | 0.64 |
| Diluted | $ | 0.79 | $ | 0.63 |
| FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES | ||||
| --- | --- | --- | --- | --- |
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
| (Unaudited) | ||||
| (In thousands) | ||||
| March 31, 2023 | December 31, 2022 | |||
| ASSETS | ||||
| Cash and equivalents | $ | 51,873 | $ | 45,790 |
| Receivables (net) | 276,503 | 230,404 | ||
| Inventories | 600,651 | 544,980 | ||
| Other current assets | 39,018 | 36,916 | ||
| Total current assets | 968,045 | 858,090 | ||
| Property, plant, and equipment, net | 220,592 | 215,154 | ||
| Lease right-of-use assets, net | 45,622 | 48,948 | ||
| Goodwill and other assets | 569,187 | 572,009 | ||
| Total assets | $ | 1,803,446 | $ | 1,694,201 |
| LIABILITIES AND EQUITY | ||||
| Accounts payable | $ | 187,985 | $ | 139,266 |
| Accrued expenses and other current liabilities | 98,452 | 123,788 | ||
| Current lease liability | 15,144 | 15,959 | ||
| Current maturities of long-term debt and short-term borrowings | 185,280 | 126,756 | ||
| Total current liabilities | 486,861 | 405,769 | ||
| Long-term debt | 88,766 | 89,271 | ||
| Long-term lease liability | 30,346 | 32,858 | ||
| Income taxes payable non-current | 8,707 | 8,707 | ||
| Deferred income taxes | 30,893 | 29,744 | ||
| Employee benefit plans | 32,303 | 31,889 | ||
| Other long-term liabilities | 29,969 | 25,209 | ||
| Redeemable noncontrolling interest | 633 | 620 | ||
| Total equity | 1,094,968 | 1,070,134 | ||
| Total liabilities and equity | $ | 1,803,446 | $ | 1,694,201 |
| FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES | ||||
| --- | --- | --- | --- | --- |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| (Unaudited) | ||||
| Three Months Ended | ||||
| (In thousands) | ||||
| March 31, 2023 | March 31, 2022 | |||
| Cash flows from operating activities: | ||||
| Net income | $ | 37,576 | $ | 30,119 |
| Adjustments to reconcile net income to net cash flows from operating activities: | ||||
| Depreciation and amortization | 12,837 | 12,078 | ||
| Non-cash lease expense | 4,239 | 4,181 | ||
| Share-based compensation | 3,912 | 3,985 | ||
| Other | 3,250 | 2,473 | ||
| Changes in assets and liabilities: | ||||
| Receivables | (43,408) | (34,119) | ||
| Inventory | (50,725) | (74,690) | ||
| Accounts payable and accrued expenses | 13,163 | (2,753) | ||
| Operating leases | (4,239) | (4,181) | ||
| Other | 11,376 | 1,596 | ||
| Net cash flows from operating activities | (12,019) | (61,311) | ||
| Cash flows from investing activities: | ||||
| Additions to property, plant, and equipment | (9,563) | (9,456) | ||
| Acquisitions and investments | (4,990) | 553 | ||
| Net cash flows from investing activities | (14,553) | (8,903) | ||
| Cash flows from financing activities: | ||||
| Net change in debt | 57,733 | 96,851 | ||
| Proceeds from issuance of common stock | 2,938 | 343 | ||
| Purchases of common stock | (17,133) | (19,319) | ||
| Dividends paid | (10,440) | (9,130) | ||
| Net cash flows from financing activities | 33,098 | 68,745 | ||
| Effect of exchange rate changes on cash and cash equivalents | (443) | (486) | ||
| Net change in cash and cash equivalents | 6,083 | (1,955) | ||
| Cash and cash equivalents at beginning of period | 45,790 | 40,536 | ||
| Cash and cash equivalents at end of period | $ | 51,873 | $ | 38,581 |
Key Performance Indicators: Net Sales Summary
| Net Sales | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) | United States & Canada | Latin America | Europe, Middle East & Africa | Asia Pacific | Total Water | Fueling | Distribution | Other/Elims | Consolidated | ||||||||||||||||||
| Q1 2022 | $ | 163.2 | $ | 37.9 | $ | 51.0 | $ | 20.5 | $ | 272.6 | $ | 72.5 | $ | 134.9 | $ | (28.5) | $ | 451.5 | |||||||||
| Q1 2023 | $ | 197.1 | $ | 40.3 | $ | 50.4 | $ | 18.8 | $ | 306.6 | $ | 72.7 | $ | 143.0 | $ | (37.7) | $ | 484.6 | |||||||||
| Change | $ | 33.9 | $ | 2.4 | $ | (0.6) | $ | (1.7) | $ | 34.0 | $ | 0.2 | $ | 8.1 | $ | (9.2) | $ | 33.1 | |||||||||
| % Change | 21 | % | 6 | % | (1) | % | (8) | % | 12 | % | — | % | 6 | % | 7 | % | |||||||||||
| Foreign currency translation | $ | (1.4) | $ | (4.2) | $ | (7.1) | $ | (1.5) | $ | (14.2) | $ | (0.8) | $ | — | $ | (15.0) | |||||||||||
| % Change | (1) | % | (11) | % | (14) | % | (7) | % | (5) | % | (1) | % | — | % | (3) | % | |||||||||||
| Volume/Price | $ | 35.3 | $ | 6.6 | $ | 6.5 | $ | (0.2) | $ | 48.2 | $ | 1.0 | $ | 8.1 | $ | (9.2) | 48.1 | ||||||||||
| % Change | 22 | % | 17 | % | 13 | % | (1) | % | 18 | % | 1 | % | 6 | % | 32 | % | 11 | % |
Key Performance Indicators: Operating Income and Margin Summary
| Operating Income and Margins | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) | For the First Quarter 2023 | |||||||||||||
| Water | Fueling | Distribution | Other/Elims | Consolidated | ||||||||||
| Operating Income/(Loss) | $ | 49.0 | $ | 20.8 | $ | 4.7 | $ | (21.9) | $ | 52.6 | ||||
| % Operating Income To Net Sales | 16.0 | % | 28.6 | % | 3.3 | % | 10.9 | % | ||||||
| Operating Income and Margins | ||||||||||||||
| (in millions) | For the First Quarter 2022 | |||||||||||||
| Water | Fueling | Distribution | Other/Elims | Consolidated | ||||||||||
| Operating Income/(Loss) | $ | 33.2 | $ | 17.7 | $ | 9.4 | $ | (20.4) | $ | 39.9 | ||||
| % Operating Income To Net Sales | 12.2 | % | 24.4 | % | 7.0 | % | 8.8 | % |