Franklin Electric Reports Record Second Quarter 2023 Results

Rhea-AI Summary

Franklin Electric Co., Inc. (FELE) reports Q2 2023 net sales of $569.1 million, a 3% increase over the prior year. Operating income was $80.9 million with a healthy operating margin of 14.2%. GAAP fully diluted EPS was $1.27, a new record. The company's Water Systems and Distribution sales saw increases, while Fueling Systems sales decreased. Franklin Electric is maintaining 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.

Positive

• Consolidated net sales of $569.1 million, a new all-time quarterly record
• Healthy operating margin of 14.2%
• Guidance for full year 2023 sales and EPS maintained

Negative

• Fueling Systems sales decreased by 7%
• Distribution segment operating income negatively impacted by wet weather and margin compression

Second Quarter 2023 Highlights

• Consolidated net sales of $569.1 million, a new all-time quarterly record, was an increase of 3% over the prior year
• Water Systems and Distribution sales increased by 4% and 1%, respectively, while Fueling Systems sales decreased 7%
• Operating income was $80.9 million with healthy operating margin of 14.2%
• GAAP fully diluted earnings per share (EPS) was $1.27, a new record for any quarter

FORT WAYNE, Ind., July 25, 2023 (GLOBE NEWSWIRE) -- Franklin Electric Co., Inc. today announced its second quarter financial results for fiscal year 2023.

Second quarter 2023 net sales were $569.1 million, compared to second quarter 2022 net sales of $551.1 million.   Second quarter 2023 operating income was $80.9 million, compared to second quarter 2022 operating income of $81.0 million.   Second quarter 2023 EPS was $1.27, versus EPS in the second quarter 2022 of $1.26.

“We delivered another quarter of record sales and EPS performance for Franklin Electric. Results were driven by a solid demand environment that continued into the busy season for our core markets. Strong execution by our global teams enabled backlog and inventory levels to continue trending towards normalized levels, significantly improving our cash flow generation,” commented Gregg Sengstack, Franklin Electric’s Chairperson and Chief Executive Officer.

“Even though our second quarter sales were adversely impacted by weather and distributors right-sizing inventory levels, our end-market demand remains healthy. As we enter the third quarter, we have an elevated backlog which gives us momentum and confidence in our outlook for the remainder of 2023,” concluded Mr. Sengstack.

Segment Summaries

Water Systems net sales, a new all-time quarterly record, were $321.7 million in the second quarter 2023, an increase of $11.2 million compared to the second quarter 2022. Sales increases were led by pricing actions and continued strong end market demand for large pumps. Water Systems operating income in the second quarter 2023 was $50.8 million, a new quarterly record, driven by higher sales. Second quarter 2022 Water Systems operating income was $49.0 million.

Distribution net sales, a new second quarter record, were $193.1 million in the second quarter 2023, an increase of $2.0 million compared to the second quarter 2022. Sales increases were led by end market demand. The Distribution segment operating income was $17.8 million in the second quarter 2023 compared to second quarter 2022 operating income of $23.3 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 $80.4 million in the second quarter 2023, a decrease of $5.6 million compared to the second quarter 2022. Sales decreased in the U.S. and Canada by 6 percent and outside the U.S. and Canada by 8 percent. Fueling Systems operating income in the second quarter 2023 was $26.7 million, a new second quarter record, driven by a favorable product and geographic mix of sales. Second quarter 2022 Fueling Systems operating income was $26.1 million.

2023 Guidance

The Company is maintaining 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 second 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/ykifmgrn

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/BId7ec20b8d1f5442687a9b4f54a3e54a8

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 25, 2023, through 9 am ET on Tuesday, August 1, 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)
	Second Quarter Ended								Six Months Ended
	June 30, 2023				June 30, 2022				June 30, 2023				June 30, 2022
Net sales	$	569,181			$	551,138			$	1,053,732			$	1,002,608
Cost of sales		380,700				361,850				702,986				667,986
Gross profit		188,481				189,288				350,746				334,622
Selling, general, and administrative expenses		107,429				108,313				216,964				212,986
Restructuring (income)/expense		149				(7	)			273				713
Operating income		80,903				80,982				133,509				120,923
Interest expense		(4,178	)			(2,932	)			(7,325	)			(4,426	)
Other income/(expense), net		1,179				(1,159	)			1,588				(1,537	)
Foreign exchange expense		(3,571	)			(329	)			(5,615	)			(914	)
Income before income taxes		74,333				76,562				122,157				114,046
Income tax expense		14,173				16,799				24,421				24,164
Net income	$	60,160			$	59,763			$	97,736			$	89,882
Less: Net income attributable to noncontrolling interests		(560	)			(399	)			(811	)			(753	)
Net income attributable to Franklin Electric Co., Inc.	$	59,600			$	59,364			$	96,925			$	89,129
Earnings per share:
Basic	$	1.29			$	1.27			$	2.09			$	1.91
Diluted	$	1.27			$	1.26			$	2.06			$	1.89

FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
	June 30, 2023			December 31, 2022
ASSETS
Cash and equivalents	$	53,227		$	45,790
Receivables (net)	299,485			230,404
Inventories	574,642			544,980
Other current assets	39,036			36,916
Total current assets	966,390			858,090
Property, plant, and equipment, net	224,464			215,154
Right-of-Use Asset, net	44,160			48,948
Goodwill and other assets	568,067			572,009
Total assets	$	1,803,081		$	1,694,201
LIABILITIES AND EQUITY
Accounts payable	$	161,266		$	139,266
Accrued expenses and other current liabilities	97,946			123,788
Current lease liability	13,624			15,959
Current maturities of long-term debt and short-term borrowings	159,841			126,756
Total current liabilities	432,677			405,769
Long-term debt	88,680			89,271
Long-term lease liability	29,513			32,858
Income taxes payable non-current	4,837			8,707
Deferred income taxes	32,434			29,744
Employee benefit plans	32,628			31,889
Other long-term liabilities	31,910			25,209
Redeemable noncontrolling interest	901			620
Total equity	1,149,501			1,070,134
Total liabilities and equity	$	1,803,081		$	1,694,201

FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended
(In thousands)
	June 30,			June 30,
	2023			2022
Cash flows from operating activities:
Net income	$	97,736		$	89,882
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	26,259			24,521
Non-cash lease expense	8,523			8,526
Share-based compensation	6,410			6,322
Other	7,896			3,639
Changes in assets and liabilities:
Receivables	(70,725)			(93,063)
Inventory	(24,125)			(123,817)
Accounts payable and accrued expenses	(3,880)			29,969
Operating leases	(8,706)			(8,526)
Income taxes-U.S. Tax Cuts and Jobs Act	(2,902)			(355)
Other	6,540			361
Net cash flows from operating activities	43,026			(62,541)
Cash flows from investing activities:
Additions to property, plant, and equipment	(20,241)			(20,084)
Proceeds from sale of property, plant, and equipment	-			6
Acquisitions and investments	(6,641)			(1,365)
Other investing activities	2			(8)
Net cash flows from investing activities	(26,880)			(21,451)
Cash flows from financing activities:
Net change in debt	32,171			126,272
Proceeds from issuance of common stock	9,010			1,916
Purchases of common stock	(25,541)			(30,644)
Dividends paid	(20,872)			(18,205)
Deferred payments for acquisitions	(186)			-
Net cash flows from financing activities	(5,418)			79,339
Effect of exchange rate changes on cash	(3,291)			(2,658)
Net change in cash and equivalents	7,437			(7,311)
Cash and equivalents at beginning of period	45,790			40,536
Cash and equivalents at end of period	$	53,227		$	33,225

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 2022	$194.9			$41.7			$49.7			$24.2			$310.5			$86.0			$191.1			($36.5)			$551.1
Q2 2023	$202.9			$42.0			$54.6			$22.2			$321.7			$80.4			$193.1			($26.1)			$569.1
Change	$8.0			$0.3			$4.9			($2.0)			$11.2			($5.6)			$2.0			$10.4			$18.0
% Change	4%			1%			10%			-8%			4%			-7%			1%						3%
Foreign currency translation	($1.2)			($4.9)			($5.3)			($1.2)			($12.6)			($0.1)			$0.0						($12.7)
% Change	-1%			-12%			-11%			-5%			-4%			0%			0%						-2%
Volume/Price	$9.2			$5.2			$10.2			($0.8)			$23.8			($5.5)			$2.0			$10.4			$30.7
% Change	5%			12%			21%			-3%			8%			-6%			1%			-28%			6%

Key Performance Indicators: Operating Income and Margin Summary
Operating Income and Margins
(in millions)	For the Second Quarter 2023
	Water		Fueling			Distribution			Other/Elims			Consolidated
Operating Income / (Loss)	$	50.8		$	26.7		$	17.8		$	(14.4)		$	80.9
% Operating Income To Net Sales	15.8%		33.2%			9.2%						14.2%
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%

FAQ

What are Franklin Electric Co., Inc.'s Q2 2023 net sales?

Franklin Electric Co., Inc. reports Q2 2023 net sales of $569.1 million.

What is Franklin Electric Co., Inc.'s guidance for full year 2023 sales?

Franklin Electric Co., Inc. is maintaining its guidance for full year 2023 sales to be in the range of $2.15 billion to $2.25 billion.

What is Franklin Electric Co., Inc.'s guidance for full year 2023 EPS?

Franklin Electric Co., Inc. is maintaining its guidance for full year 2023 EPS to be in the range of $4.25 to $4.45.