FELE - Earnings call transcript Q1 2018 | Franklin Electric Co., Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Franklin Electric Reports First Quarter 2018 Sales and Earnings Conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to John Haines, Chief Financial Officer. begin. may you Sir,

John Haines

Systems today's will results. Stone, and conference financial answers. to International questions are call. and and quarter our Ashley through, President will President quarter we first of some Gregg Electric's call, XXXX Chairman Robert Officer; Executive earnings With Chief When review Senior time welcome you, Vice and and Water Franklin and our everyone first Sengstack, the Thank me results, first and quarter Gregg our have for business I'll Unit. On review the we're today

are me Form differ All Before to With Securities be these to we may Private A with materially uncertainties, and begin, to we you which various let forward-looking discussion and statements. Chairman based meaning of will found the in remind Litigation company we XX-K statements. and except Reform call currently statements during on will to this earnings forward-looking as Sengstack. cause the today's risks information are be turn law, statements obligation subject making actual of conduct results Gregg statements any available, many from call, Act update the in as could this the factors assumes by I over the company's and forward-looking of forward-looking made Annual Report of that, required call on no such that These CEO, release. our XXXX.

Gregg Sengstack

Water first gains. XXXX. Thank systems more the and year's and water driving the continued income internationally XXXX revenue. to business, Canada versus revenue up Southeast about other equipment Outside Systems organically which dewatering demands not operating you, pumping Pioneer Asia. strong and doubling the growth Middle with we U.S. X%, in continued The is domestically East, quarter both last In Water Europe, double-digits Water and that grew and we pumping Canada markets. saw Fueling and enough pleased the first U.S. businesses, the strong we John. margin of started experienced challenges improved Water we similar leverage are to international way, operating and surface muted than yielded Brazil our but international Ground the operating segment the growth lead branded weak growth grew organic pumps Even U.S. strong by in quarter margin in our Africa XX% offset was this with business in saw in compression year-over-year. the the somewhat

offset talk you that addition, see to about In John inflation. margins Systems taken in moment. a actions recall in additional will may pricing further QX. pricing anticipated actions in should we have Water improvement We

business record another Systems Fueling delivered Our quarter.

grow product in well in systems and continue sales the China to stations. of about the we the systems showing major with market is grew gas as underground growth resonates stages Our in multiyear key mandated to categories the is early with domestic upgrade approach retail piping country engine. Internationally every and the U.S. to The and a by XX% growth. revenue Canada marketers

the and growth are upgrade business piping beyond slow our years. of throughout Outside this in modest systems to of significant expect China, to we Fueling As income and the seeing America In systems leak more we and mentioned Europe, I add had well. in detection Africa. as well. business results pumping recovery as to extend East Systems strong Asia Latin Fueling upgrades next Middle partners quarter, some our over to choosing last revenue are Further, several

quarter results. impacted XX%. was year the down last Turning companies. In may recall revenue to distribution, you fourth of Headwater three pump decisions Headwater's selling suppliers significant year elected discontinue pro to that last to short-term forma These

sequentially. improved focus on of with addition major new lines pump However, distributions and business service, a the our customer

multiple was First of compared multiple the address our lines pro less Headwater expectations. pumping first and from requirements. range XXXX quarter to sells X% ahead pump forma down quarter XXXX revenue manufacturers of with the than of

Headwater product, earns margins and permits and earns groundwater business margin as distributor a quarter the Franklin in with Sales first of a pumping well. key Headwater in when Water supplier's were Headwater Electric Franklin a pump a replaces However, of growth manufacturing former in driver Systems U.S. to the Canada.

the into expect we to second move continue quarter strengthen. we will Headwater sales As

means of noted the second Headwater earnings last is will quarter, its be hemisphere third almost we highly which and quarters have entirety northern a seasonal each As year. business in the of

excludes of in Fueling detail. our we our $X.XX earnings Fueling an guidance. $X.XX the in are start Systems guidance. numbers and growth in growth earnings, translations over to segments, range these revenue We are based for in to share now to raising believe X% $X.XX now to year the sequential previous better our year to growth the Water impact Water Distribution will increase for John full per XXXX. our provided I'll resultant revenue estimate expected guidance be previous X% range our in more higher This discuss Given currency XXXX Further, range and is for John? a call X% in to $X.XX, our and foreign X% on likely we more than assumptions both provided increase which organic an the to to turn raising the from strong the our distribution the range. X% of to from the in for X%

John Haines

Gregg. you, Thank

share over of for XXXX impact $X.XX Our expenses XXXX. or earnings did the XXXX, $X.XX share per Restructuring or fully not increase the share quarter first of the year. of were $X.XX diluted the first quarter versus in for earnings last of quarter first XX% an per per XXXX,

the was $XXX.X that sales increased in organic XX%, of million you XXXX translations. with million, quarter in entities X% XX%. about sales compared for from $XXX.X translations. and quarter sales $XXX.X the foreign was major strengthening more Systems due First dewatering of acquired pumping Headwater versus about in quarter quarter foreign first broad million we sales on companies quarter agricultural Water increase XX% U.S. first sales performance. in The each oil have first Canada increase sales have branded first product Sales improved $XXX.X currency to by in Systems who in quarter increases water million, impact were increase Water and gas residential end the and of due improvements Pioneer of world's XXXX were of the of XX% XX%. sales Systems The quarter for sales and sequential to XXXX equipment Systems XXXX quarter sales strengthened the sales was markets. of both doubled exclude product the when an Fueling said organic about to both currency in were equipment of by the increased the increased as increase about the lines. by of increased Water of with than the which Water organically ground XX% an product grouping. by Systems distribution sales driven based

Franklin. other the the from the selling products products Franklin from to pump of Electric anticipation have XXXX their of the early significantly discontinued amount that quarter Company OEMs Additionally, Headwater, FE. of by of reduced been first in Headwater purchases many quarter as acquisitions Recall in second replaced with

for million to million improved numerous announced the building Canada XXXX. specifically in a the increase excluding Fueling $XX.X deterioration the are United from by in in broad of first Middle quarter sales XXXX XXXX. the organic offsetting about translations to company by we sales during gross versus the U.S. first about markets of first the the prices to of sales up of Water first outside was or expect decline and acquired from inventory inflation X% effective $XX material based had Finally in of June quarter quarter general, due material Headwater. $XX.X an XXXX Europe shifts $XX.X income The the The year. already pumping, product Distribution gross overall. fuel of and with higher the income were were to but India. operating the increase of imports. offset were as X% raw sales purpose sales. impact quarter Fueling was Distribution expenses increase XXXX. was first million by increase with The of the XXXX the profit foreign in with and of The first quarter to mix declined inflation million to increased the was the in sales gross first increase the increase profit XXXX percent due Water and aluminum led led sales sales SG&A through not was first were China States first first million the sales quarter million quarter XXX loss raw quarter Fueling and foreign Canada the first Asia a XXXX quarter The consolidated to about when the $XX East sales segment The XXXX. sales The from grew XXXX on by million Systems of by in the will quarter the Systems were sales. Water tariff the by the company's as X, a of compared $XX.X Selling, is material Distribution higher partially higher and the and net Water quarter related in quarter. of increase million for percentage primarily sales from The realized and sales. higher. sales million in XXXX XXXX. sales first currency tariffs. X% XX% and at margin related the sales Water end $X.X steel sales The XXXX. Section million. first profit first systems Europe, first Systems businesses X%. offset operating inflation. primarily piping. margin compared and first geographic Systems Systems sales price XXXX the Management product by segment is administrative the $XX.X is Canada, an product in of in announce stronger quarter Systems the in about U.S. profit income XXXX the The increase in $XX International for income The of quarter of quarter the of XX% $XX.X and and X% XX% prior U.S. gross Systems at Africa, versus to estimates in when about Systems Brazil operating management categories Headwater to of not were first including quarter Today the primarily of in cost the about million. million offset U.S. flowing currency operating increased in second the believe in Fueling We $XX.X X% customers Fueling do quarter $X.X in $XX.X of quarter in quarter increased revenues XX.X% gross primarily in in of versus in the impact in of Outside included compared were XXXX. Systems lower of translations. $XX.X% was XXXX. offset of expenses first due recorded segment we by has operating lower by profit million compared in global

was XXXX. from the the the related income tax first tax million certain provisions included expenses This SG&A benefit. the of entities, and $XX.X in company in deferred lowered which of for first XXXX our the planned benefit an X% tax earnings rate of were in effective first Excluding first quarter in million a to of quarter increase recognized discrete quarter guidance the benefits $X tax to quarter acquired about about The first X% XXXX. the original quarter Company's

earnings. quarter believes the effective rate be Consistent XXXX to rate We first X%, XXXX the XX% discrete tax on with attention expense also will was year our only realized that guidance, of the of in the full again call fact about pretax because tax company quarter. tax benefits previous that

$X.XX. for said law a announcing of entirely of The XXXX cash end results $XX the operating for first we increase driven the with improvement of today tax quarter seasonal the revolving had at company borrowings has primarily million new flat due our XXXX impact we first The This inventory working current capital The earnings at net million the changed share million company the market facilities Inventory the the estimate the in guidance increase conference quarter are an $XXX XXXX. was stock of at in improvement the quarter fourth and in of of company of XXXX by of of of were of needs. $X.X million. earnings is the our is XXXX. is purchased per not in States on working XXXX for XXX,XXX As about open end $XX call the common XXXX in year during These primarily and for in versus borrowing shares the quarter the approximately needs. to which of capital ended quarter end the $XXX XXXX its earnings United the fund company. share the were in end XXXX. of its balance XXXX acquisitions levels to end $XXX debt first million borrowings million of on first and about The per

XX% may from now questions. repurchased will quarter amount. previous X. of of on remaining XX, dividend company to the payable of dividend over just turn prepared the the of This like call our announced May is authorized about to quarterly a be April that the be the dividend we shareholders $X.XX would and May increase The On remarks million. for shares record end concludes the quarterly XX, As of an cash total $X under first

Operator

of [Operator Sidoti. first comes Instructions] Marshall question Our Edward from

You line is open.

Edward Marshall

Good morning gentlemen. guys. morning Good

Gregg Sengstack

morning, Good Ed.

John Haines

Hi, Ed.

Edward Marshall

required? just piece sense as quarter in from contribution the just a sense a revenue acquired as to I was on [indiscernible] acquired the the get wanted and quarter, just that distribution, what the Valley get was, I to was Farms it trying know during So, try

Gregg Sengstack

we very in are based Yes, Indiana not performance Northern in they quarter, Farms weather strong contributed larger income from is and what in Ed quarter modeled significant. is they are branches them positively a can was was operating have perspective. is period and revenue it almost the But good They very for say Michigan the a meaningful. not the distributor. branches Valley a that but first strong it to they particularly perspective, entirely not really from first but it has a

John Haines

estimated just the this pro-forma from of that’s where the as XXXX, under revenue first And being of comparison. XXXX an that the quarter both and them first apples-and-apples so gave we X% quarter included down

Edward Marshall

that’s Got fine. I discrete the it. trying to was for items but additional look year? Any guidance the sequentially in tax

John Haines

so saw the in nothing but the first what any like material are, $X There million of or quarter. significance Ed we in

are of if other tax kind see, items raised look the out somewhat So somewhat the issue with ones year. and discrete throughout new compliance, you

real balance right now So tax there discrete year. is no the of significant items the planned for

Edward Marshall

pricing think we there Got I’m XXX it decision the it if the increases June, might and talked move and curious, last how [ph] outliers you think we looks price delays it do on does your that? then you some delay how like were the that on affect should forward, about after night you as taxes. to about

John Haines

the relates metals tariffs it night us, imports tariffs European Chinese significant and most, and from we're China. the that and most are less ones to the far last on many has impact decision are countries on of the products focused Union as Well, of we

We change know we're So that the focused that would on and really are the announcing imports the China. XXXX future let say price. of we best in June to go margins look to that not stay the our impact price certainly and should has States. tariffs The is tariffs as Water going X will is reported typical Systems committed month we be a price of it not The spring that situation just on business do or back [indiscernible] for to really our related not to X% we’re fact that balance we to are additional increases. can. delay fluid on relates for increases effective as top that today something in you What from to United customers. stay to try Ed wouldn’t in the trying trying we We our is

the just June behind the trying react of lot customers and It's that. to really X. to that's prepare May So thinking to a X really

Edward Marshall

the Got comments. Thanks it. for

Operator

next Summerville Our D.A. Matt of question from Davidson. comes

open. Your line is

Matt Summerville

Good guys. Thanks. morning,

Gregg Sengstack

Matt. Good morning,

Matt Summerville

if of your May heading think on I to sort situation into respect inventories inventory bit conference the felt a high Gregg be you the you're with inventories about XXXX you're only own of last side. the how had to industry. comment can comment just feeling were seeing call not on in So you broadly kind what more but John's that your reconcile to distribution the on speaking

bit? So just about talk a inventories maybe

Gregg Sengstack

Matt. Sure

side. are Our inventories on high the

we a we to acquisition did as our we're to U.S. and expect say on quarter balance of year inventory a But we level that I’d basis adds impact also with quarter. A with in will picks we are this see the our so whole generally the And say and normal that time in the a would through, couple the moving small flow season focus place are here. we’re in as that strong markets Northern improving quarter-over-quarter those we inventory. that inventory We Fortunately, Hemisphere of it’s the and first would be. comparisons well. year-over-year here currency say bit certainly also the having good from company bad now channel that’s to across This help up we've the and that in the inventories. would that us coming because being throughout address inventory directionally generally is a have little we’d seen our in good demand company factors that a not that expect on year the greater that,

Matt Summerville

numbers if getting on year-over-year you back gross you I’m may net, compression then spread margin sort if between to to can missed where in net realized still terms saw? apologize, the understand favorable the just again in QX I [indiscernible] are John trying round you if you and you still where I it and it Got of be price of

John Haines

quarter I'm just Yes, sure, and that our Headwater. prices looking we’re choose in Fueling basis about so at calculation not Water is of with points, Matt Systems the excludes Systems XXX combined. kind

so in inflation raw material but believe but and we not that’s that we first to believe front offset quarter we’re inflation it raw in in we keep did lot a saw for say okay we with the And to staying in of were what see so first quarter, as the committed the increases, do material what this that is coming offset us that’s XXXX, while did at the price it we stratify of quarter. XXXX

Matt Summerville

talk geography? be bit you’re up detail a bounce a what bit the comp. then negative EMEA against may And They in pretty Latin end in broadly to your you well sort be get year able of tougher believe if by bit you. I you can market fees in comps little little a a for about balance seeing more of throw if around as speaking just are the little meaningfully internationally more are But Thank and in may they Asia. you color America

Gregg Sengstack

Sure, going those then can the here Robert, you want Water to more in about talk turning question recent talk he the and to see I'm months the how to are to QX APAC region you the and [indiscernible] Robert in about Brazil. we business. turn over do that winter

Robert Stone

to I Pacific now turning where said from year and around the quarter situation inventory Matt the that’s forward expectation that should there. to Sure, expect difficult improve we be we a our there comp had some in also we to very last this relative in really have and Asia channel start

We We'll everybody market versus to in had. much years as all is America, Market get have cost there increases America but – probably challenging. more, to to they that particular be Latin driven South severe we've of other to just by price. driven tariffs, by not prior as price do gotten smaller tries as continues competition need the are can. grab off conditions some

is good America but take As a Gregg into a part increases, September, to it’s seeing as increased pickup very in see this weaker season to Middle mean the up be anyway foreseen looking situation again I as while that East indications with is year the point activity coming time. Africa we’re Zimbabwe, South this here leadership mentioned, us and at some out. develop that thanks favorable in some we're Africa, to and oil price have good should in are Europe so change weak well. well. this very of And October, spite going but for Southern we picking is nicely strong South we the Probably of versus get the actually activity continues not economic going that news year social year. but in Africa to pretty of and to especially is prior way is and back and there. bit there far political

Matt Summerville

one want up that then can in you it business with and may in sub be may be may point XXXX final to bottoms was us just be a And the respect but help million, to kind how just in where question, revenue, from of and business $XX that say revenue remind pioneer I bumped stand XXXX? me recollect that be to you expect where

Gregg Sengstack

nice XXXX the in was Matt recall in were was you there, line declined it’s US$XXX in sorry top the I’m watermark for million come It consolidated and many year. diversification some. went saw XXXX XXXX XXXX. and of then in too And then high are will million, all declined $XX meaningfully channel That million. $XX kind this right Pioneer mark, fives right Yes, a very customer million. it approach lower $XX strong XXXX Pioneer water They've into very on. the XXXX got going of having year in some to they tread back the we start

I don’t dramatically. specifically but grow to So XXXX they’re going a back going get last dramatically that to they to say year’s around Pioneer, to put out million turn $XXX and to going they’re number but for in we are grow very they’re over going level. be, haven’t mark,

Matt Summerville

Got it. guys. Thanks

Operator

like for we have [Operator I’d And questions closing further Gregg queue. Sengstack remarks. Instructions] turn back the in to no to call

Gregg Sengstack

forward in the We results look Thanks to quarter joining well. at you you you, to our to July for Ashley. us speaking conference as appreciate second call. quarter We

Operator

conference. Ladies Everyone may day. great This participating today’s you program disconnect. conclude in for a and the does gentlemen, and all have thank you

Franklin Electric (FELE) 1 May 182018 Q1 Earnings call transcript