Franklin Electric Reports Record Second Quarter 2022 Results

Rhea-AI Summary

Franklin Electric Co., Inc. announced record second quarter 2022 results, with sales reaching $551.1 million, a 26% increase from the previous year. Operating income also hit a record at $81.0 million, up 57% year-over-year. GAAP fully diluted EPS reached $1.26, surpassing $0.83 from Q2 2021. The company updated its FY 2022 net sales guidance to between $2.00 billion and $2.15 billion and EPS expectations to $4.00 - $4.20.

The Water Systems, Distribution, and Fueling Systems segments all demonstrated strong organic sales growth.

Positive

• Record Q2 2022 sales of $551.1 million, up 26% from 2021.
• Operating income reached a record $81.0 million, a 57% increase.
• GAAP EPS of $1.26 set a new quarterly record.
• Revised FY 2022 net sales guidance raised to $2.00 billion to $2.15 billion.
• All segments reported strong organic growth: Water Systems 27%, Fueling Systems 21%, Distribution 18%.

Negative

• Fueling Systems sales outside the U.S. and Canada decreased by about 6%.

Second Quarter 2022 Highlights

• Record sales of $551.1 million, compared to second quarter 2021 sales of $437.3 million, an increase of 26%
• Strong organic sales growth in all three Segments; Water Systems 27%, Fueling Systems 21%, and Distribution 18%
• Operating income was a record at $81.0 million, compared to second quarter operating income in 2021 of $51.6 million, an increase of 57%
• GAAP fully diluted earnings per share (EPS) was $1.26, a new record for any quarter
• 2022 FY net sales guidance is updated to $2.00 billion to $2.15 billion and 2022 FY earnings per share excluding restructuring to $4.00 to $4.20
  

FORT WAYNE, Ind., July 26, 2022 (GLOBE NEWSWIRE) -- Franklin Electric Co. Inc. today announced second quarter financial results for fiscal year 2022.

Second quarter 2022 sales were $551.1 million, compared to second quarter 2021 sales of $437.3 million.   Second quarter 2022 operating income was $81.0 million, compared to second quarter operating income in 2021 of $51.6 million. Second quarter 2022 GAAP fully diluted earnings per share was $1.26, versus GAAP fully diluted EPS in the second quarter 2021 of $0.83.  

“We are pleased to report another quarter of record performance for the Company. Our second quarter performance was strong with year over year double digit top-line growth overall and by all three business segments. Sequential margin improvement was driven by robust demand in our core markets, continuing price realization to offset inflationary cost pressures and solid execution by our team to manage costs all while navigating in an uncertain environment,” commented Gregg Sengstack, Franklin Electric’s Chairperson and Chief Executive Officer.

“We remain focused on executing in the short-term while delivering long-term growth and value creation for our stakeholders. While it remains a challenging business environment with inflation persisting and supply issues continuing in the near-term, I am confident in our ability to continue to manage these challenges. Based on our second quarter performance and current outlook for the second half of the year, we are revising our full-year 2022 guidance, increasing consolidated net sales to between $2.00 billion and $2.15 billion. Furthermore, we are revising and increasing our 2022 full-year earnings per share excluding restructuring to between $4.00 and $4.20,” concluded Mr. Sengstack.

Segment Summaries

Water Systems sales, a new record for any quarter, were $310.5 million in the second quarter 2022, an increase of $63.3 million or 26 percent versus the second quarter 2021. Water Systems sales, excluding acquisitions and the impact of foreign currency translation, were up about 27 percent compared to the second quarter 2021. Sales increases were led by pricing actions and strong end market demand across all major product lines in groundwater pumping, surface pumping, dewatering equipment, and water treatment. Water Systems operating income in the second quarter was $49.0 million, a new record, driven by higher sales. Second quarter 2021 Water Systems operating income was $34.6 million.

Distribution sales, a new record for any quarter, were $191.1 million in the second quarter 2022. The Distribution segment organic sales increased 18 percent compared to the second quarter of 2021. Revenue growth was driven by solid demand primarily in the U.S. groundwater market due to strong price realization in addition to the growth from acquisition. The Distribution segment operating income, a new record, was $23.3 million in the second quarter of 2022 compared to second quarter 2021 operating income of $16.0 million.

Fueling Systems sales, a new record for any quarter, were $86.0 million in the second quarter 2022, an increase of $13.8 million versus the second quarter 2021. Fueling Systems sales in the U.S. and Canada increased by about 20 percent compared to the second quarter 2021. Outside the U.S. and Canada, Fueling Systems revenues decreased by about 6 percent, as sales increases of 3 percent in the rest of the world outside of China were not enough to offset lower sales in China. Fueling Systems operating income, a new record, in the second quarter was $26.1 million, compared to $18.5 million in the second quarter of 2021.

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 2022 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/c7wvmk7z

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/BId45560b9b02245829b416ac32b4847ae

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 26, 2022 through Tuesday, July 25, 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, 2021, 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)
	Second Quarter Ended								Six Months Ended
	June 30, 2022				June 30, 2021				June 30, 2022				June 30, 2021
Net sales	$	551,138			$	437,280			$	1,002,608			$	770,326
Cost of sales	$	361,850			$	285,041			$	667,986			$	502,541
Gross profit	$	189,288			$	152,239			$	334,622			$	267,785
Selling, general, and administrative expenses	$	108,313			$	100,485			$	212,986			$	182,088
Restructuring (income)/expense	$	(7	)		$	153			$	713			$	305
Operating income	$	80,982			$	51,601			$	120,923			$	85,392
Interest expense	$	(2,932	)		$	(1,366	)		$	(4,426	)		$	(2,456	)
Other income/(expense), net	$	(1,159	)		$	(430	)		$	(1,537	)		$	(530	)
Foreign exchange income/(expense)	$	(329	)		$	(1,189	)		$	(914	)		$	(1,246	)
Income before income taxes	$	76,562			$	48,616			$	114,046			$	81,160
Income tax expense	$	16,799			$	9,253			$	24,164			$	13,634
Net income	$	59,763			$	39,363			$	89,882			$	67,526
Less: Net (income)/loss attributable to Franklin Electric Co., Inc.	$	(399	)		$	(222	)		$	(753	)		$	(505	)
Net income attributable to Franklin Electric Co., Inc.	$	59,364			$	39,141			$	89,129			$	67,021
Earnings per share:
Basic	$	1.27			$	0.84			$	1.91			$	1.44
Diluted	$	1.26			$	0.83			$	1.89			$	1.42

FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
	June 30,			December 31,
	2022			2021
ASSETS
Cash and equivalents	$	33,225		$	40,536
Receivables (net)	278,924			196,173
Inventories	567,143			449,975
Other current assets	33,891			37,963
Total current assets	913,183			724,647
Property, plant, and equipment, net	210,639			210,654
Right-of-use asset, net	47,683			48,379
Goodwill and other assets	580,035			591,485
Total assets	$	1,751,540		$	1,575,165
LIABILITIES AND EQUITY
Accounts payable	$	195,614		$	164,758
Accrued expenses and other current liabilities	105,546			117,955
Current lease liability	15,313			15,320
Current maturities of long-term debt and short-term borrowings	223,054			97,981
Total current liabilities	539,527			396,014
Long-term debt	89,846			90,535
Long-term lease liability	32,240			32,937
Income taxes payable non-current	8,707			11,610
Deferred income taxes	30,139			28,162
Employee benefit plans	38,817			40,696
Other long-term liabilities	23,407			26,568
Redeemable noncontrolling interest	284			(19)
Total equity	988,573			948,662
Total liabilities and equity	$	1,751,540		$	1,575,165

FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended
(In thousands)
	June 30			June 30
	2022			2021
Cash flows from operating activities:
Net income	$	89,882		$	67,526
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization	24,521			20,535
Non-cash lease expense	8,526			6,471
Share-based compensation	6,322			6,573
Other	3,639			1,753
Changes in assets and liabilities:
Receivables	(93,063)			(62,860)
Inventory	(123,817)			(41,848)
Accounts payable and accrued expenses	29,969			50,262
Operating leases	(8,526)			(6,471)
Income taxes-U.S. Tax Cuts and Jobs Act	(355)			(355)
Other	361			(6,056)
Net cash flows from operating activities	(62,541)			35,530
Cash flows from investing activities:
Additions to property, plant, and equipment	(20,084)			(12,777)
Proceeds from sale of property, plant, and equipment	6			8
Acquisitions and investments	(1,365)			(180,917)
Other investing activities	(8)			27
Net cash flows from investing activities	(21,451)			(193,659)
Cash flows from financing activities:
Net change in debt	126,272			129,264
Proceeds from issuance of common stock	1,916			8,989
Purchases of common stock	(30,644)			(11,231)
Dividends paid	(18,205)			(16,320)
Net cash flows from financing activities	79,339			110,702
Effect of exchange rate changes on cash	(2,658)			(1,763)
Net change in cash and equivalents	(7,311)			(49,190)
Cash and equivalents at beginning of period	40,536			130,787
Cash and equivalents at end of period	$	33,225		$	81,597

Key Performance Indicators: Earnings Per Share Calculations

		For the Second Quarter
Earnings Before and After Restructuring			2022			2021		Change
(in millions)
Net Income attributable to FE Co., Inc. Reported		$	59.4		$	39.1		52	%
Allocated Earnings		$	(0.2	)	$	(0.2	)
Earnings for EPS Calculations		$	59.2		$	38.9		52	%
Restructuring (before tax):		$	-		$	0.2
Restructuring, net of tax:		$	-		$	0.2
Earnings before Restructuring		$	59.2		$	39.1		51	%
		For the Second Quarter
Earnings Per Share			2022			2021		Change
Before and After Restructuring
(in millions except Earnings Per Share)
Average Fully Diluted Shares Outstanding			46.9			47.1		0	%
Fully Diluted Earnings Per Share ("EPS") Reported		$	1.26		$	0.83		52	%
Restructuring Per Share, net of tax		$	-		$	-
Fully Diluted EPS before Restructuring		$	1.26		$	0.83		52	%

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 2021	$	141.0		$	34.7		$	51.4		$	20.1		$	247.2		$	72.2		$	144.8		$	(26.9	)	$	437.3
Q2 2022	$	194.9		$	41.7		$	49.7		$	24.2		$	310.5		$	86.0		$	191.1		$	(36.5	)	$	551.1
Change	$	53.9		$	7.0		$	(1.7	)	$	4.1		$	63.3		$	13.8		$	46.3		$	(9.6	)	$	113.8
% Change		38	%		20	%		-3	%		20	%		26	%		19	%		32	%					26	%
Foreign currency translation	$	(0.8	)	$	0.1		$	(16.2	)	$	(1.0	)	$	(17.9	)	$	(1.5	)	$	0.0
% Change		-1	%		0	%		-32	%		-5	%		-7	%		-2	%		0	%
Acquisitions	$	12.9		$	0.0		$	0.0		$	1.9		$	14.8		$	0.0		$	19.6
Volume/Price	$	41.8		$	6.9		$	14.5		$	3.2		$	66.4		$	15.3		$	26.7
% Change		30	%		20	%		28	%		16	%		27	%		21	%		18	%

Key Performance Indicators: Operating Income and Margin Summary

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%
Restructuring		$	-	$	-	$	-	$	-	$	-
Operating Income/(Loss) before Restructuring		$	49.0	$	26.1	$	23.3	$	(17.4)	$	81.0
% Operating Income to Net Sales Before Restructuring		15.8%		30.3%		12.2%				14.7%
Operating Income and Margins
(in millions)		For the Second Quarter 2021
		Water		Fueling		Distribution		Other/Elims		Consolidated
Operating Income / (Loss)		$	34.6	$	18.5	$	16.0	$	(17.5)	$	51.6
% Operating Income To Net Sales		14.0%		25.6%		11.0%				11.8%
Restructuring		$	0.1	$	-	$	-	$	-	$	0.1
Operating Income/(Loss) before Restructuring		$	34.7	$	18.5	$	16.0	$	(17.5)	$	51.7
% Operating Income to Net Sales Before Restructuring		14.0%		25.6%		11.0%				11.8%

FAQ

What are Franklin Electric's Q2 2022 sales figures?

Franklin Electric reported Q2 2022 sales of $551.1 million, a 26% increase compared to Q2 2021.

What was the operating income for Franklin Electric in Q2 2022?

The operating income for Q2 2022 was a record $81.0 million, up 57% from the previous year.

What is the updated earnings per share guidance for Franklin Electric for FY 2022?

Franklin Electric updated its FY 2022 earnings per share guidance to between $4.00 and $4.20.

What are the sales growth percentages for the segments in Q2 2022?

Water Systems grew 27%, Fueling Systems grew 21%, and Distribution grew 18% in Q2 2022.

What was the GAAP EPS for Franklin Electric in Q2 2022?

The GAAP fully diluted EPS for Q2 2022 was $1.26.