Form 8-K - Current report

0000038725false00000387252024-02-132024-02-13

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): February 13, 2024

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)

[phone]

(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. ☐

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Item 2.02. Results of Operations and Financial Condition

On February 13, 2024, Franklin Electric Co., Inc. issued a press release announcing its earnings for the fourth quarter and full year 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 Fourth Quarter 2023 and Full Year 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

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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: February 13, 2024						By			/s/ Jeffery L. Taylor
									Jeffery L. Taylor
									Vice President, Chief Financial Officer
									(Principal Financial and Accounting Officer)

Exhibit 99.1

NEWS RELEASE FOR IMMEDIATE DISTRIBUTION

FRANKLIN ELECTRIC REPORTS FOURTH QUARTER 2023 AND FULL YEAR 2023 RESULTS

Fourth Quarter 2023 Highlights

•Consolidated net sales of $473.0 million, a decrease of 3% to the prior year

•Water Systems and Distribution net sales decreased by 1% each, while Fueling Systems net sales decreased 23%

•Operating income was $50.8 million with operating margin of 10.7%

•GAAP fully diluted earnings per share (EPS) was $0.82

Full Year 2023 Highlights

•Full Year record net sales of $2.1 billion, an increase of 1% over the prior year

•Water Systems and Distribution both set new net sales records with increases of 4% and 1%, respectively, while Fueling Systems net sales decreased 11%

•Operating income for 2023 was a record at $262.4 million with operating margin of 12.7%

•GAAP fully diluted EPS was a record at $4.11, an increase of 4% over the prior year

•Record cash flows from operating activities of $315.7 million increased $214.0 million over the prior year

Fort Wayne, IN – February 13, 2024 – Franklin Electric Co., Inc. today announced its fourth quarter and full year financial results for fiscal year 2023.

Fourth quarter 2023 net sales were $473.0 million, compared to fourth quarter 2022 net sales of $489.4 million. Fourth quarter 2023 operating income was $50.8 million, compared to fourth quarter 2022 operating income of $56.2 million. Fourth quarter 2023 EPS was $0.82, versus EPS in the fourth quarter 2022 of $0.84.

Full Year 2023 net sales were $2.1 billion, compared to full year 2022 net sales of $2.0 billion. Full year 2023 operating income was $262.4 million, compared to full year 2022 operating income of $257.2 million. Full year 2023 EPS was $4.11, versus EPS in 2022 of $3.97.

“The Franklin Electric team delivered another solid quarter to end a record year overall for the Company with new full year records for net sales, operating income, earnings per share, and operating cash flows. Strong execution drove healthy margins for both the quarter and year, led by record full-year operating income in our Water Systems segment while commodity price headwinds in our Distribution business and destocking activity in Fueling continued to weigh on our results,” commented Gregg Sengstack, Franklin Electric’s Chairperson and Chief Executive Officer.

“The breadth and durability of our global portfolio has proven resilient and positions us well entering 2024 where we expect demand to gain momentum as we move further into the year. I’m confident our healthy financial position and commitment to remain focused on meeting our customers’ growing requirements for water and energy solutions provides a solid foundation to enhance shareholder value”, concluded Mr. Sengstack.

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Segment Summaries

Water Systems net sales were $279.6 million in the fourth quarter, a decrease of $1.7 million or 1 percent compared to the fourth quarter 2022. Sales decreases were driven by lower sales of groundwater pumping and water treatment products, partially offset by strong end market demand for large pumps. Water Systems operating income in the fourth quarter 2023 was $44.1 million. Fourth quarter 2022 Water Systems operating income was $44.6 million.

Distribution net sales were $148.0 million in the fourth quarter 2023, a decrease of $0.9 million or 1 percent compared to the fourth quarter 2022. The Distribution segment operating income was $1.0 million in the fourth quarter 2023 compared to fourth quarter 2022 operating income of $2.9 million. Distribution segment sales and operating income were negatively impacted by adverse weather and margin compression from declining pricing of commodity-based products sold through the business.

Fueling Systems net sales were $65.7 million in the fourth quarter 2023, a decrease of $19.8 million or 23 percent compared to the fourth quarter 2022. Sales decreases were driven by customer inventory destocking driving lower volumes and higher interest rates, labor constraints, and permitting delays causing some new station build plans to move into 2024. Fueling Systems operating income in the fourth quarter 2023 was $19.4 million. Fourth quarter 2022 Fueling Systems operating income was $24.3 million.

Cash Flow

Net cash flows from operating activities for 2023 were $315.7 million versus $101.7 million in the same period in 2022. The increase was primarily due to actions the Company took to improve working capital including inventory reductions as its supply chain resiliency and lead times improved during the back half of the year.

2024 Guidance

The Company expects its full year 2024 sales to be in the range of $2.10 billion to $2.17 billion and full year 2024 EPS to be in the range of $4.22 to $4.40.

Earnings Conference Call

A conference call to review earnings and other developments in the business will commence at 9:00 am ET. The fourth quarter and fiscal year 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/y88zfrpv

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/BI7028d9118f904de0860c8fee5c50244a

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, February 13, 2024, through 9:00 am ET on Tuesday, February 20, 2024, by visiting the listen-only webcast link above.

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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 energy. 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 is proud to be named in Newsweek’s lists of America’s Most Responsible Companies and Most Trustworthy Companies for 2023 and America’s Climate Leaders 2023 by USA Today.

Franklin Electric Contact:

Sandy Statzer

Franklin Electric Co., Inc.

[e-mail]

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FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
			Fourth Quarter Ended												Fiscal Year End
			December 31, 2023						December 31, 2022						December 31, 2023						December 31, 2022
Net sales			$	472,970					$	489,431					$	2,065,133					$	2,043,711
Cost of sales			312,961						323,213						1,368,125						1,352,276
Gross profit			160,009						166,218						697,008						691,435
Selling, general, and administrative expenses			108,825						109,724						433,476						432,076
Restructuring expense			356						272						1,091						2,170
Operating income			50,828						56,222						262,441						257,189
Interest expense			(1,481)						(4,033)						(11,790)						(11,525)
Other income/(expense), net			1,831						(414)						3,696						(3,201)
Foreign exchange expense			(4,026)						(2,946)						(12,124)						(7,236)
Income before income taxes			47,152						48,829						242,223						235,227
Income tax expense			8,322						8,872						47,489						46,416
Net income			$	38,830					$	39,957					$	194,734					$	188,811
Less: Net income attributable to noncontrolling interests			(281)						(378)						(1,462)						(1,479)
Net income attributable to Franklin Electric Co., Inc.			$	38,549					$	39,579					$	193,272					$	187,332
Earnings per share:
Basic			$	0.83					$	0.85					$	4.17					$	4.02
Diluted			$	0.82					$	0.84					$	4.11					$	3.97

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FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
			December 31, 2023						December 31, 2022
ASSETS
Cash and equivalents			$	84,963					$	45,790
Receivables (net)			222,418						230,404
Inventories			508,696						544,980
Other current assets			37,718						36,916
Total current assets			853,795						858,090
Property, plant, and equipment, net			229,739						215,154
Lease right-of-use assets, net			57,014						48,948
Goodwill and other assets			587,574						572,009
Total assets			$	1,728,122					$	1,694,201
LIABILITIES AND EQUITY
Accounts payable			$	152,419					$	139,266
Accrued expenses and other current liabilities			104,949						123,788
Current lease liability			17,316						15,959
Current maturities of long-term debt and short-term borrowings			12,355						126,756
Total current liabilities			287,039						405,769
Long-term debt			88,056						89,271
Long-term lease liability			38,549						32,858
Income taxes payable non-current			4,837						8,707
Deferred income taxes			29,461						29,744
Employee benefit plans			35,973						31,889
Other long-term liabilities			33,914						25,209
Redeemable noncontrolling interest			1,145						620
Total equity			1,209,148						1,070,134
Total liabilities and equity			$	1,728,122					$	1,694,201

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FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
			December 31, 2023						December 31, 2022
Cash flows from operating activities:
Net income			$	194,734					$	188,811
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization			52,260						50,374
Non-cash lease expense			18,852						17,406
Share-based compensation			10,133						10,973
Other			10,259						7,291
Changes in assets and liabilities:
Receivables			19,150						(44,800)
Inventory			48,176						(101,080)
Accounts payable and accrued expenses			(23,085)						(12,283)
Operating leases			(18,874)						(17,406)
Income taxes-U.S. Tax Cuts and Jobs Act			(2,902)						(355)
Other			7,007						2,743
Net cash flows from operating activities			315,710						101,674
Cash flows from investing activities:
Additions to property, plant, and equipment			(41,415)						(41,903)
Proceeds from sale of property, plant, and equipment			1,494						6
Acquisitions and investments			(34,831)						(1,186)
Other investing activities			463						9
Net cash flows from investing activities			(74,289)						(43,074)
Cash flows from financing activities:
Net change in debt			(115,529)						28,936
Proceeds from issuance of common stock			9,193						3,859
Purchases of common stock			(43,332)						(40,490)
Dividends paid			(41,723)						(36,991)
Deferred payments for acquisitions			(802)						(3,786)
Net cash flows from financing activities			(192,193)						(48,472)
Effect of exchange rate changes on cash and cash equivalents			(10,055)						(4,874)
Net change in cash and cash equivalents			39,173						5,254
Cash and cash equivalents at beginning of period			45,790						40,536
Cash and cash equivalents at end of period			$	84,963					$	45,790

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Key Performance Indicators: Net Sales Summary

			Net Sales For the Fourth Quarter
(in millions)			United States & Canada			Latin America			Europe, Middle East & Africa			Asia Pacific			Total Water			Fueling			Distribution			Other/Elims			Consolidated
Q4 2022			$	171.0		$	38.4		$	46.0		$	25.9		$	281.3		$	85.5		$	148.9		$	(26.3)		$	489.4
Q4 2023			$	161.2		$	46.6		$	45.5		$	26.3		$	279.6		$	65.7		$	148.0		$	(20.3)		$	473.0
Change			$	(9.8)		$	8.2		$	(0.5)		$	0.4		$	(1.7)		$	(19.8)		$	(0.9)		$	6.0		$	(16.4)
% Change			(6)		%	21		%	(1)		%	2		%	(1)		%	(23)		%	(1)		%				(3)		%
Foreign currency translation			$	(0.1)		$	(6.9)		$	(5.8)		$	(0.1)		$	(12.9)		$	0.1		$	—					$	(12.8)
% Change			—		%	(18)		%	(13)		%	—		%	(5)		%	—		%	—		%				(3)		%
Volume/Price			$	(9.7)		$	15.1		$	5.3		$	0.5		$	11.2		$	(19.9)		$	(0.9)		$	6.0		$	(3.6)
% Change			(6)		%	39		%	12		%	2		%	4		%	(23)		%	(1)		%	(23)		%	(1)		%

			Net Sales For the Full Year
(in millions)			United States & Canada			Latin America			Europe, Middle East & Africa			Asia Pacific			Total Water			Fueling			Distribution			Other/Elims			Consolidated
FY 2022			$	712.9		$	159.3		$	192.8		$	92.5		$	1,157.5		$	334.1		$	668.1		$	(116.0)		$	2,043.7
FY 2023			$	744.4		$	174.2		$	198.3		$	86.8		$	1,203.7		$	296.5		$	673.3		$	(108.4)		$	2,065.1
Change			$	31.5		$	14.9		$	5.5		$	(5.7)		$	46.2		$	(37.6)		$	5.2		$	7.6		$	21.4
% Change			4		%	9		%	3		%	(6)		%	4		%	(11)		%	1		%				1		%
Foreign currency translation			$	(3.3)		$	(22.1)		$	(23.6)		$	(3.3)		$	(52.3)		$	(0.8)		$	—					$	(53.1)
% Change			—		%	(14)		%	(12)		%	(4)		%	(5)		%	—		%	—		%				(3)		%
Volume/Price			$	34.8		$	37.0		$	29.1		$	(2.4)		$	98.5		$	(36.8)		$	5.2		$	7.6		$	74.5
% Change			5		%	23		%	15		%	(3)		%	9		%	(11)		%	1		%	(7)		%	4		%

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Key Performance Indicators: Operating Income and Margin Summary

Operating Income and Margins
(in millions)			For the Fourth Quarter 2023
			Water			Fueling			Distribution			Other/Elims			Consolidated
Operating Income/(Loss)			$	44.1		$	19.4		$	1.0		$	(13.7)		$	50.8
% Operating Income To Net Sales			15.8		%	29.5		%	0.7		%				10.7		%
Operating Income and Margins
(in millions)			For the Fourth Quarter 2022
			Water			Fueling			Distribution			Other/Elims			Consolidated
Operating Income/(Loss)			$	44.6		$	24.3		$	2.9		$	(15.6)		$	56.2
% Operating Income To Net Sales			15.9		%	28.4		%	1.9		%				11.5		%

Operating Income and Margins
(in millions)			For the Full Year 2023
			Water			Fueling			Distribution			Other/Elims			Consolidated
Operating Income/(Loss)			$	196.6		$	92.7		$	34.3		$	(61.2)		$	262.4
% Operating Income To Net Sales			16.3		%	31.3		%	5.1		%				12.7		%
Operating Income and Margins
(in millions)			For the Full Year 2022
			Water			Fueling			Distribution			Other/Elims			Consolidated
Operating Income/(Loss)			$	172.3		$	96.8		$	54.5		$	(66.4)		$	257.2
% Operating Income To Net Sales			14.9		%	29.0		%	8.2		%				12.6		%

Cover	Feb. 13, 2024
Cover [Abstract]
Document Type	8-K
Document Period End Date	Feb. 13, 2024
Entity Registrant Name	FRANKLIN ELECTRIC CO., INC.
Entity Incorporation, State or Country Code	IN
Entity File Number	0-362
Entity Tax Identification Number	35-0827455
Entity Address, Address Line One	9255 Coverdale Road
Entity Address, City or Town	Fort Wayne,
Entity Address, State or Province	IN
Entity Address, Postal Zip Code	46809
City Area Code	260
Local Phone Number	824-2900
Entity Information, Former Legal or Registered Name	Not Applicable
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.10 par value
Trading Symbol	FELE
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Central Index Key	0000038725
Amendment Flag	false

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