FRANKLIN ELECTRIC CO INC

Previous wording

Net sales in the second quarter and first six months of 2024 were $543.3 million and $1.0 billion, respectively, and decreased 5 percent from the prior-year periods. The sales decreases were primarily due to lower volumes and the negative impact of foreign currency translation, partially offset by the incremental sales impact from recent acquisitions. The Company's consolidated gross profit was $199.8 million and $363.4 million, respectively, for the second quarter and first six months of 2024, increases of 6 percent and 4 percent, respectively, from the prior-year periods. Diluted earnings per share was $1.26 and $1.97, respectively, for the second quarter and first six months of 2024, decreases of $0.01 and $0.09, respectively, from the prior-year periods.

Current wording

Net sales in the third quarter and first nine months of 2024 decreased 1 percent and 4 percent, respectively, from the prior-year periods. The sales decreases in the third quarter and first nine months of 2024 were primarily due to lower volumes and the negative impact of foreign currency translation, partially offset by price realization and the incremental sales impact from recent acquisitions. The Company's consolidated gross profit was $189.7 million and $553.0 million, respectively, for the third quarter and first nine months of 2024, increases of $3.4 million and $16.0 million, respectively, from the prior-year periods. Diluted earnings per share was $1.17 and $3.14, respectively, for the third quarter and first nine months of 2024, decreases of $0.06 and $0.15, respectively, from the prior-year periods.

Previous wording

Net sales in the second quarter and first six months of 2024 were $543.3 million and $1.0 billion, respectively, and decreased 5 percent as compared to the prior-year periods. Sales were negatively impacted by changes in foreign exchange rates, principally due to the strengthening of the U.S. Dollar relative to the Argentine Peso and Turkish Lira. However, the Company increases prices in the local currency to offset the impact of currency devaluation in the Argentina and Turkey hyperinflationary economies. As a result, the net negative impact of foreign currency exchange rates on net sales was 1 percent in the second quarter and first six months of 2024 compared to the same periods in the prior year.

Current wording

Net sales in the third quarter and first nine months of 2024 were $531.4 million and $1.5 billion, respectively, and decreased 1 percent and 4 percent as compared to the prior-year periods. Sales were negatively impacted by changes in foreign exchange rates, principally due to the strengthening of the U.S. Dollar relative to the Argentine Peso and Turkish Lira. However, the Company increases prices in the local currency to offset the impact of currency devaluation in the Argentina and Turkey hyperinflationary economies. As a result, the net negative impact of foreign currency exchange rates on net sales was 1 percent in the third quarter and first nine months of 2024 compared to the same periods in the prior year.

Previous wording

Water Systems net sales decreased 2 percent in the second quarter and 4 percent in the first six months of 2024, as compared to the prior-year periods. This sales decline was primarily due to lower volumes, which decreased due to weaker end market demand for large dewatering equipment. Sales decreased 2 percent in the second quarter and 1 percent in the first six months of 2024 due to the negative impact from foreign exchange rates, as compared to prior-year periods. The incremental sales impact from recent acquisitions favorably impacted sales 2 percent in the second quarter and first six months of 2024.

Current wording

Water Systems net sales increased 2 percent in the third quarter but decreased 2 percent in the first nine months of 2024, as compared to the prior-year periods. The sales growth in the third quarter was primarily due to higher volumes and price realization. The sales decline in the first nine months of 2024 was primarily due to lower volumes, which decreased due to weaker end market demand for large dewatering equipment. Sales decreased 2 percent in the third quarter and 1 percent in the first nine months of 2024 due to the negative impact from foreign exchange rates, as compared to prior-year periods. The incremental sales impact from a recent acquisition favorably impacted sales 2 percent in the third quarter and first nine months of 2024.

Previous wording

Water Systems net sales in the U.S. and Canada decreased 5 percent in the second quarter and 8 percent in the first six months of 2024, as compared to the prior-year periods. In the second quarter of 2024, sales of large dewatering equipment decreased 44 percent, sales of water treatment products increased 13 percent, sales of all other surface pumping equipment increased 11 percent and sales of groundwater pumping equipment increased 6 percent compared to 2023. In the first half of 2024, sales of large dewatering equipment decreased 47 percent, sales of groundwater pumping equipment decreased 1 percent, sales of water treatment products increased 13 percent and sales of all other surface pumping equipment increased 6 percent compared to 2023.

Current wording

Water Systems net sales in the U.S. and Canada increased 1 percent in the third quarter but decreased 5 percent in the first nine months of 2024, as compared to the prior-year periods. In the third quarter of 2024, sales of groundwater pumping equipment increased 13 percent, sales of water treatment products increased 9 percent, and the sales of all other surface pumping equipment increased 5 percent compared to 2023. Partially offsetting the increase, sales of large dewatering equipment decreased 31 percent compared to 2023. In the first nine months of 2024, sales of large dewatering equipment decreased 43 percent, sales of water treatment products increased 12 percent, sales of all other surface pumping equipment increased 5 percent and sales of groundwater pumping equipment increased 3 percent compared to 2023.

Previous wording

Water Systems net sales in markets outside the U.S. and Canada increased 3 percent in the second quarter and first six months of 2024, as compared to the prior-year periods. Sales decreased 4 percent in the second quarter and 3 percent in the first six months of 2024 due to the negative impact from foreign exchange rates, as compared to prior-year periods. In both the second quarter and first half of 2024, outside the U.S. and Canada, excluding the impact of foreign currency translation, sales increased in all three major regions: EMEA, Latin America and Asia Pacific.

Current wording

Water Systems net sales in markets outside the U.S. and Canada increased 4 percent in both the third quarter and the first nine months of 2024, as compared to the prior-year periods. Sales decreased 4 percent in the third quarter and 3 percent in the first nine months of 2024 due to the negative impact from foreign exchange rates, as compared to prior-year periods. In both the third quarter and first nine months of 2024, excluding the impact of foreign currency translation, sales increased in all three major regions: EMEA, Latin America and Asia Pacific.

Previous wording

Fueling Systems net sales in the U.S. and Canada decreased 4 percent in the second quarter and 6 percent in the first six months of 2024, as compared to the prior-year periods. The decrease was primarily in fuel management systems and pumping systems. Outside the U.S. and Canada, Fueling Systems sales decreased 7 percent in the second quarter and 6 percent in the first six months of 2024, as compared to the prior-year periods, due primarily to lower sales in European and Asia Pacific markets.

Current wording

Fueling Systems net sales in the U.S. and Canada decreased 4 percent in the third quarter and 6 percent in the first nine months of 2024, as compared to the prior-year periods. Outside the U.S. and Canada, Fueling Systems net sales decreased 22 percent in both the third quarter and first nine months of 2024, as compared to the prior-year periods. The decreases were across all product lines.

Previous wording

Distribution net sales decreased 1 percent in the second quarter and were flat in the first six months of 2024, as compared to the prior-year periods. The Distribution segment sales were negatively impacted by unfavorable weather conditions and commodity pricing declines, partially offset by the incremental sales impact from a recent acquisition which favorably impacted net sales by 2 percent in the second quarter and first six months of 2024.

Current wording

Distribution net sales increased 1 percent in both the third quarter and first nine months of 2024, as compared to the prior-year periods. The Distribution segment sales increased due to the incremental sales impact from a recent acquisition which favorably impacted net sales by 2 percent in the third quarter and first nine months of 2024, partially offset by the negative impact of commodity pricing declines and unfavorable weather.

Previous wording

The gross profit margin ratio was 36.8 percent and 36.2 percent in the second quarter and first six months of 2024, respectively, and 33.1 percent and 33.3 percent in the second quarter and first six months of 2023, respectively. The gross profit margin was impacted in the second quarter and first six months of 2024 by cost management, including lower freight costs in Water Systems and Fueling Systems, and a favorable product and geographic sales mix shift.

Current wording

The gross profit margin ratio was 35.7 percent and 36.0 percent in the third quarter and first nine months of 2024, respectively, and 34.6 percent and 33.7 percent in the third quarter and first nine months of 2023, respectively. The gross profit margin was favorably impacted in the third quarter and first nine months of 2024 by cost management, including lower freight costs in Water Systems and Fueling Systems, and a favorable product and geographic sales mix shift.

Previous wording

SG&A expenses were $120.6 million in the second quarter and $236.3 million in the first half of 2024 compared to $107.4 million in the second quarter and $217.0 million in the first half of 2023. SG&A expenses increased in the second quarter and first half of 2024 primarily due to higher compensation costs and advertising and marketing expenses. The SG&A expenses ratio was 22.2 percent and 23.5 percent in the second quarter and first six months of 2024, respectively, and 18.9 percent and 20.6 percent in the second quarter and first six months of 2023, respectively.

Current wording

SG&A expenses were $116.0 million in the third quarter and $352.3 million in the first nine months of 2024 compared to $107.7 million in the third quarter and $324.7 million in the first nine months of 2023. SG&A expenses increased in the third quarter and first nine months of 2024 primarily due to higher employee compensation costs, including incremental expenses associated with the Company’s CEO transition, and the incremental expense impact of recent acquisitions. The SG&A expenses ratio was 21.8 percent and 22.9 percent in the third quarter and first nine months of 2024, respectively, and 20.0 percent and 20.4 percent in the third quarter and first nine months of 2023, respectively.

Previous wording

There were no restructuring expenses in the second quarter and first six months of 2024, and $0.1 million and $0.3 million in the second quarter and first six months of 2023, respectively. Restructuring expenses were primarily from continued miscellaneous manufacturing realignment activities, branch closings and consolidations.

Current wording

Restructuring expenses were $0.1 million in the third quarter and first nine months of 2024, respectively, and $0.5 million and $0.7 million in the third quarter and first nine months of 2023, respectively. Restructuring expenses were primarily from continued miscellaneous manufacturing realignment activities, branch closings and consolidations.

Previous wording

Operating income in the second quarter and first half of 2024 was $79.1 million and $127.1 million, respectively, decreases of 2 percent and 5 percent, respectively, as compared to the prior-year periods.

Current wording

Operating income decreased 6 percent and 5 percent in the third quarter and first nine months of 2024, as compared to the prior-year periods.

Previous wording

Water Systems operating income in the second quarter and first six months of 2024 was $62.3 million and $109.5 million, respectively, increases of $11.5 million and $9.7 million, respectively, as compared to the prior-year periods. The increases were primarily due to cost management and a favorable product and geographic sales mix shift. The second quarter operating income margin was 19.7 percent, an increase of 390 basis points from 15.8 percent in the second quarter of 2023. The first six months of 2024 operating income margin was 18.2 percent, an increase of 230 basis points from 15.9 percent in the first six months of 2023. Operating income margin increased primarily due to cost management and a favorable product and geographic sales mix shift.

Current wording

Water Systems operating income in the third quarter and first nine months of 2024 was $52.8 million and $162.3 million, respectively, increases of $0.1 million and $9.8 million, respectively, as compared to the prior-year periods. The increases were primarily due to price realization, cost management and a favorable product and geographic sales mix shift. The third quarter operating income margin was 17.5 percent, a decrease of 30 basis points from 17.8 percent in the third quarter of 2023. The first nine months of 2024 operating income margin was 17.9 percent, an increase of 140 basis points from 16.5 percent in the first nine months of 2023. Operating income margin increased in the first nine months of 2024 primarily due to cost management and a favorable product and geographic sales mix shift.

Previous wording

Fueling Systems operating income in the second quarter and first six months of 2024 was $26.0 million and $44.8 million, respectively, decreases of $0.7 million and $2.7 million, respectively, as compared to the prior-year periods. The decreases were primarily due to lower sales. The second quarter operating income margin was 35.6 percent, an increase of 240 basis points from 33.2 percent in the second quarter of 2023. The first six months of 2024 operating income margin was 33.1 percent, an increase of 210 basis points from 31.0 percent in the first six months of 2023. Operating income margin increased primarily due to price realization and cost management.

Current wording

Fueling Systems operating income in the third quarter and first nine months of 2024 was $24.1 million and $68.9 million, respectively, decreases of $1.7 million and $4.4 million, respectively, as compared to the prior-year periods. The decreases were primarily due to lower sales. The third quarter operating income margin was 34.6 percent, an increase of 140 basis points from 33.2 percent in the third quarter of 2023. The first nine months of 2024 operating income margin was 33.6 percent, an increase of 180 basis points from 31.8 percent in the first nine months of 2023. Operating income margin increased primarily due to price realization and cost management.

Previous wording

Distribution operating income in the second quarter and first six months of 2024 was $9.8 million and $11.7 million, respectively, decreases of $8.0 million and $10.8 million, respectively, as compared to the prior-year periods. The second quarter operating income margin was 5.1 percent, a decrease of 410 basis points from 9.2 percent in the second quarter of 2023. The first six months of 2024 operating income margin was 3.5 percent, a decrease of 320 basis points from 6.7 percent in the first six months of 2023. Operating income and operating income margin decreased primarily due to the negative impact on sales from wet weather across much of the United States, decreases in pricing of commodity-based products sold through the business and increased SG&A costs.

Current wording

Distribution operating income in the third quarter and first nine months of 2024 was $12.2 million and $23.8 million, respectively, an increase of $1.5 million and a decrease of $9.4 million, respectively, as compared to the prior-year periods. The third quarter operating income margin was 6.4 percent, an increase of 70 basis points from 5.7 percent in the third quarter of 2023. The first nine months of 2024 operating income margin was 4.5 percent, a decrease of 180 basis points from 6.3 percent in the first nine months of 2023. Operating income and operating income margin increased in the third quarter of 2024 primarily due to the incremental impact from a recent acquisition. Operating income and operating income margin decreased in the first nine months of 2024 primarily due to the negative impact on sales from wet weather across much of the United States, decreases in pricing of commodity-based products sold through the business and increased SG&A costs.

Previous wording

Operating income-Eliminations/Other is composed primarily of intersegment sales and profit eliminations and unallocated general and administrative expenses. The intersegment profit elimination impact in the second quarter and first six months of 2024 compared to the prior-year periods of 2023 was an unfavorable $2.9 million and $1.4 million, respectively. The intersegment elimination of operating income effectively defers the operating income on sales from Water Systems to Distribution in the consolidated financial results until such time as the transferred product is sold from the Distribution segment to its end third party customer. General and administrative expenses increased $1.7 million and $1.2 million, respectively, compared to the prior-year periods, primarily due to higher compensation and professional fees.

Current wording

Operating income-Eliminations/Other is composed primarily of intersegment sales and profit eliminations and unallocated general and administrative expenses. The intersegment profit elimination impact in the third quarter and first nine months of 2024 compared to the prior-year periods of 2023 was an unfavorable $0.7 million and $2.2 million, respectively. The intersegment elimination of operating income effectively defers the operating income on sales from Water Systems to Distribution in the consolidated financial results until such time as the transferred product is sold from the Distribution segment to its end third party customer. General and administrative expenses increased $3.8 million and $4.8 million, respectively, compared to the prior-year periods. The increase was primarily driven by to higher employee compensation costs, including incremental expenses associated with the Company’s CEO transition.

Previous wording

Interest expense was $2.0 million and $3.4 million in the second quarter and first six months of 2024, respectively, and $4.2 million and $7.3 million in the second quarter and first six months of 2023, respectively. The decreases in the second quarter and first six months of 2024 were primarily driven by lower debt.

Current wording

Interest expense was $1.6 million and $5.0 million in the third quarter and first nine months of 2024, respectively, and $3.0 million and $10.3 million in the third quarter and first nine months of 2023, respectively. The decreases in the third quarter and first nine months of 2024 was primarily driven by lower debt.

Previous wording

Foreign currency-based transactions produced an expense of $0.4 million and $5.3 million in the second quarter and first six months of 2024, respectively, and an expense of $3.6 million and $5.6 million in the second quarter and first six months of 2023, respectively. The expense in 2024 was primarily due to transaction losses associated with the Argentine Peso and Turkish Lira relative to the U.S. dollar. The expense in 2023 was primarily due to transaction losses associated with the Turkish Lira, Argentine and Mexican Peso relative to the U.S. dollar. The Company reports the results of its subsidiaries in Argentina and Turkey using highly inflationary accounting, which requires that the functional currency of the entity be changed to the reporting currency of its parent.

Current wording

Foreign currency-based transactions produced a gain of $0.1 million and an expense $5.2 million in the third quarter and first nine months of 2024, respectively, and an expense of $2.5 million and $8.1 million in the third quarter and first nine months of 2023, respectively. The results in the first nine months of 2024 and the third quarter and first nine months of 2023 are primarily due to transaction losses associated with the Turkish Lira and Argentine Peso relative to the U.S. dollar. The Company reports the results of its subsidiaries in Argentina and Turkey using highly inflationary accounting, which requires that the functional currency of the entity be changed to the reporting currency of its parent.

Previous wording

The provision for income taxes in the second quarter and first six months of 2024 was $17.6 million and $26.8 million, respectively, and $14.2 million and $24.4 million in the second quarter and first six months of 2023, respectively. The effective tax rate for the second quarter and first six months of 2024 was 22.9 percent and 22.5 percent, respectively, and 19.1 percent and 20.0 percent in the second quarter and the first six months of 2023, respectively. The increase in the effective tax rates for the second quarter and first six months of 2024 compared to the comparable periods in the prior year was a result of less favorable discrete events in 2024, primarily related to excess tax benefits from share-based compensation, in addition to an increase in the rate on foreign earnings with the implementation of European Union’s Pillar Two Directive.

Current wording

The provision for income taxes in the third quarter and first nine months of 2024 was $17.0 million and $43.8 million, respectively, and $14.7 million and $39.2 million in the third quarter and first nine months of 2023, respectively. The effective tax rate for the third quarter and first nine months of 2024 was 23.6 percent and 22.9 percent, respectively, and 20.2 percent and 20.1 percent in the third quarter and first nine months of 2023, respectively. The increase in the effective tax rates for the third quarter and first nine months of 2024 compared to the comparable periods in the prior year was a result of less favorable discrete events in 2024, primarily related to excess tax benefits from share-based compensation, in addition to an increase in the rate on foreign earnings with the implementation of the European Union’s Pillar Two Directive in 2024.

Previous wording

Net income in the second quarter and first six months of 2024 was $59.3 million and $92.4 million, respectively, and $60.2 million and $97.7 million in the second quarter and first six months of 2023, respectively. Net income attributable to Franklin Electric Co., Inc. in the second quarter and first six months of 2024 was $59.1 million and $92.1 million, respectively, or $1.26 and $1.97 per diluted share. Net income attributable to Franklin Electric Co., Inc. in the second quarter and first six months of 2023 was $59.6 million and $96.9 million, respectively, or $1.27 and $2.06 per diluted share.

Current wording

Net income in the third quarter and first nine months of 2024 was $54.9 million and $147.3 million, respectively, and $58.2 million and $155.9 million in the third quarter and first nine months of 2023, respectively. Net income attributable to Franklin Electric Co., Inc. in the third quarter and first nine months of 2024 was $54.6 million and $146.7 million, respectively, or $1.17 and $3.14 per diluted share. Net income attributable to Franklin Electric Co., Inc. in the third quarter and first nine months of 2023 was $57.8 million and $154.7 million, respectively, or $1.23 and $3.29 per diluted share.

Previous wording

As of June 30, 2024, the Company had a $350.0 million revolving credit facility. The facility is scheduled to mature on May 13, 2026. As of June 30, 2024, the Company had $305.5 million borrowing capacity under its credit agreement as $3.5 million in letters of commercial and standby letters of credit were outstanding and undrawn and $41.0 million in revolver borrowings were drawn and outstanding, which were primarily used for funding working capital requirements.

Current wording

As of September 30, 2024, the Company had a $350.0 million revolving credit facility. The facility is scheduled to mature on May 13, 2026. As of September 30, 2024, the Company had $345.4 million borrowing capacity under its credit agreement as $4.6 million in letters of commercial and standby letters of credit were outstanding and undrawn and no revolver borrowings were drawn or outstanding.

Previous wording

At June 30, 2024, the Company had $53.0 million of cash and cash equivalents held in foreign jurisdictions, which is intended to be used to fund foreign operations. There is currently no need or intent to repatriate the majority of these funds in order to meet domestic funding obligations or scheduled cash distributions.

Current wording

At September 30, 2024, the Company had $68.6 million of cash and cash equivalents held in foreign jurisdictions, which is intended to be used to fund foreign operations. There is currently no need or intent to repatriate the majority of these funds in order to meet domestic funding obligations or scheduled cash distributions.

Previous wording

The following table summarizes significant sources and uses of cash and cash equivalents for the first six months of 2024 and 2023.

Current wording

The following table summarizes significant sources and uses of cash and cash equivalents for the first nine months of 2024 and 2023.

Previous wording

Net cash provided by operating activities was $35.0 million for the six months ended June 30, 2024 compared to $43.0 million provided by operating activities for the six months ended June 30, 2023. The change in operating cash flow was primarily due to lower earnings, partially offset by continued actions to improve working capital.

Current wording

Net cash provided by operating activities was $151.1 million for the nine months ended September 30, 2024 compared to $198.6 million provided by operating activities for the nine months ended September 30, 2023. The change in operating cash flow was primarily attributable to changes in working capital and lower earnings.

Previous wording

Net cash used in investing activities was $20.2 million for the six months ended June 30, 2024 compared to $26.9 million used in investing activities for the six months ended June 30, 2023. The change in investing cash flow was primarily attributable to decreased acquisition activity in the first six months of 2024.

Current wording

Net cash used in investing activities was $29.3 million for the nine months ended September 30, 2024 compared to $36.8 million used in investing activities for the nine months ended September 30, 2023. The change in investing cash flow was primarily attributable to decreased acquisition activity in the first nine months of 2024.

Previous wording

Net cash used in financing activities was $38.7 million for the six months ended June 30, 2024 compared to $5.4 million used in financing activities for the six months ended June 30, 2023. The change in financing cash flow was primarily due to increased share repurchase activity and higher dividends in 2024 compared to 2023, partially offset by lower proceeds from option exercises and lower net borrowings under the Company's credit facility.

Current wording

Net cash used in financing activities was $100.0 million for the nine months ended September 30, 2024 compared to $140.3 million used in financing activities for the nine months ended September 30, 2023. The change in financing cash flow was primarily due to lower net repayments under the Company's credit facility in 2024 compared to 2023, partially offset by lower proceeds from option exercises, increased share repurchase activity and higher dividends.