FRANKLIN ELECTRIC REPORTS RECORD FOURTH QUARTER 2022 AND FULL YEAR 2022 RESULTS
Fourth Quarter 2022 Highlights
•Sales of $489.4 million, an increase of 13% over the prior year, was a fourth quarter record
•Strong sales growth in all three Segments; Distribution up 27%, Water Systems up 9%, and Fueling Systems up 8%
•Operating income was a fourth quarter record at $56.2 million, an increase of 19% over the prior year
•GAAP fully diluted earnings per share (EPS) was $0.84, a decrease of $0.01 to prior year
Full Year 2022 Highlights
•Full Year record sales of $2.0 billion, an increase of 23% over the prior year
•Strong sales growth in all three Segments; Distribution up 34%, Water Systems up 20%, and Fueling Systems up 16%
•Operating income for 2022 was a record at $257.2 million, an increase of 36% over the prior year
•GAAP fully diluted EPS was a record at $3.97, an increase of 22% over the prior year
Fort Wayne, IN – February 14, 2023 – Franklin Electric Co. Inc. today announced fourth quarter and full year financial results for fiscal year 2022.
Fourth quarter 2022 sales were $489.4 million, compared to fourth quarter 2021 sales of $432.5 million. Fourth quarter 2022 operating income was $56.2 million, compared to fourth quarter operating income in 2021 of $47.2 million. Fourth quarter 2022 GAAP fully diluted EPS was $0.84, versus GAAP fully diluted EPS in the fourth quarter 2021 of $0.85. Worth noting, the Company’s fourth quarter 2021 results included a $6.5 million one-time gain on a bargain purchase price transaction.
Full year 2022 sales were $2.0 billion, compared to full year 2021 sales of $1.7 billion. Full year 2022 operating income was $257.2 million, compared to operating income in 2021 of $189.2 million. Full year 2022 GAAP fully diluted EPS was $3.97, versus GAAP fully diluted EPS in 2021 of $3.25.
“Franklin Electric delivered a solid fourth quarter finish to 2022 with our eighth consecutive quarter of double-digit sales and operating income growth over the prior-year quarter, which capped another record full year for sales, operating income and earnings per share. Once again, our global team rose to the occasion and delivered in a challenging, but improving, operating environment,” commented Gregg Sengstack, Franklin Electric’s Chairperson and Chief Executive Officer.
“Demand remained strong across our business in the fourth quarter, demonstrated by sustained top-line growth and the elevated backlog at year-end which carries over into 2023. Looking forward, we are well positioned to continue our momentum based on the robust demand across our end markets, our diverse customer base, and the growing global need for clean water and safe, cost-effective fueling solutions.” Mr. Sengstack concluded.
Segment Summaries
Water Systems sales, a new fourth quarter record, were $281.3 million in the fourth quarter 2022, an increase of $23.3 million compared to the fourth quarter 2021. Sales increases were led by pricing actions and healthy end market demand across all major product lines in groundwater pumping, surface pumping and water treatment. Water Systems operating income in the fourth quarter was $44.6 million, a new fourth quarter record, driven by higher sales and operating leverage. Fourth quarter 2021 Water Systems operating income was $36.4 million.
Distribution sales, a new fourth quarter record, were $148.9 million in the fourth quarter 2022, an increase of $32.0 million compared to the fourth quarter 2021. The Distribution segment operating income was $2.9 million in the fourth quarter of 2022 compared to fourth quarter 2021 operating income of $5.6 million. Distribution segment sales and operating income were both negatively impacted by weather, seasonality and margin compression from unfavorable pricing of commodity-based products sold through the business.
Fueling Systems sales, a new fourth quarter record, were $85.5 million in the fourth quarter 2022, an increase of $6.5 million compared to the fourth quarter 2021. Fueling Systems sales increases in the U.S. and Canada were led by higher demand for Fuel Management Systems compared to the fourth quarter 2021. Outside the U.S. and Canada, Fueling Systems revenues were flat. Fueling Systems operating income, a new fourth quarter record, was $24.3 million in the fourth quarter of 2022, compared to $22.2 million in the fourth quarter 2021.
Cash Flow
Net cash flows from operating activities for 2022 were $101.7 million versus $129.8 million in the same period in 2021. The decrease was primarily due to higher working capital requirements in support of higher revenues.
2023 Guidance
The Company expects its full year 2023 sales to be in the range of $2.1 billion to $2.2 billion and full year 2023 EPS to be in the range of $4.10 to $4.30.
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 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/usehvppx
For those interested in participating in the question-and-answer portion of the call, please register for the call at the link below.
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 14, 2023, through 9AM ET on Tuesday, February 21, 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)
Fourth Quarter Ended
Fiscal Year End
December 31, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Net sales
$
489,431
$
432,520
$
2,043,711
$
1,661,865
Cost of sales
323,213
287,332
1,352,276
1,085,776
Gross profit
166,218
145,188
691,435
576,089
Selling, general, and administrative expenses
109,724
97,741
432,076
386,275
Restructuring expense
272
240
2,170
621
Operating income
56,222
47,207
257,189
189,193
Interest expense
(4,033)
(1,356)
(11,525)
(5,196)
Other income/(expense), net
(414)
6,447
(3,201)
7,978
Foreign exchange income/(expense)
(2,946)
(615)
(7,236)
(2,269)
Income before income taxes
48,829
51,683
235,227
189,706
Income tax expense
8,872
10,688
46,416
34,731
Net income
$
39,957
$
40,995
$
188,811
$
154,975
Less: Net (income)/loss attributable to noncontrolling interests
(378)
(328)
(1,479)
(1,115)
Net income attributable to Franklin Electric Co., Inc.
$
39,579
$
40,667
$
187,332
$
153,860
Earnings per share:
Basic
$
0.85
$
0.87
$
4.02
$
3.29
Diluted
$
0.84
$
0.85
$
3.97
$
3.25
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
December 31, 2022
December 31, 2021
ASSETS
Cash and equivalents
$
45,790
$
40,536
Receivables (net)
230,404
196,173
Inventories
544,980
449,975
Other current assets
36,916
37,963
Total current assets
858,090
724,647
Property, plant, and equipment, net
215,154
210,654
Lease right-of-use assets, net
48,948
48,379
Goodwill and other assets
572,009
591,485
Total assets
$
1,694,201
$
1,575,165
LIABILITIES AND EQUITY
Accounts payable
$
139,266
$
164,758
Accrued expenses and other current liabilities
123,788
117,955
Current lease liability
15,959
15,320
Current maturities of long-term debt and short-term borrowings
126,756
97,981
Total current liabilities
405,769
396,014
Long-term debt
89,271
90,535
Long-term lease liability
32,858
32,937
Income taxes payable non-current
8,707
11,610
Deferred income taxes
29,744
28,162
Employee benefit plans
31,889
40,696
Other long-term liabilities
25,209
26,568
Redeemable noncontrolling interest
620
(19)
Total equity
1,070,134
948,662
Total liabilities and equity
$
1,694,201
$
1,575,165
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
2022
2021
Cash flows from operating activities:
Net income
$
188,811
$
154,975
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization
50,374
44,572
Non-cash lease expense
17,406
13,808
Share-based compensation
10,973
11,731
Gain from bargain purchase of business
—
(6,482)
Other
7,291
2,126
Changes in assets and liabilities:
Receivables
(44,800)
(31,925)
Inventory
(101,080)
(123,076)
Accounts payable and accrued expenses
(12,283)
89,038
Operating leases
(17,406)
(13,808)
Income taxes-U.S. Tax Cuts and Jobs Act
(355)
—
Other
2,743
(11,196)
Net cash flows from operating activities
101,674
129,763
Cash flows from investing activities:
Additions to property, plant, and equipment
(41,903)
(30,116)
Proceeds from sale of property, plant, and equipment
6
979
Acquisitions and investments
(1,186)
(235,701)
Other investing activities
9
33
Net cash flows from investing activities
(43,074)
(264,805)
Cash flows from financing activities:
Net change in debt
28,936
94,716
Proceeds from issuance of common stock
3,859
15,524
Purchases of common stock
(40,490)
(25,949)
Dividends paid
(36,991)
(33,398)
Deferred payments for acquisitions
(3,786)
—
Net cash flows from financing activities
(48,472)
50,893
Effect of exchange rate changes on cash and equivalents
(4,874)
(6,102)
Net change in cash and equivalents
5,254
(90,251)
Cash and equivalents at beginning of period
40,536
130,787
Cash and equivalents at end of period
$
45,790
$
40,536
Key Performance Indicators: Earnings Per Share Calculations
Earnings Before and After Restructuring
For the Fourth Quarter
(in millions)
2022
2021
Change
Net Income attributable to FE Co., Inc. Reported
$
39.6
$
40.7
(3)
%
Allocated Earnings
$
(0.2)
$
(0.2)
Earnings for EPS Calculations
$
39.4
$
40.5
(3)
%
Restructuring (before tax):
$
0.3
$
0.2
Restructuring, net of tax:
$
0.2
$
0.2
Earnings Before Restructuring
$
39.6
$
40.7
(3)
%
Earnings Per Share
For the Fourth Quarter
Before and After Restructuring
2022
2021
Change
(in millions except Earnings Per Share)
Average Fully Diluted Shares Outstanding
47.0
47.0
—
%
Fully Diluted Earnings Per Share (“EPS”) Reported
$
0.84
$
0.85
(1)
%
Restructuring Per Share, net of tax
$
—
$
0.01
Fully Diluted EPS Before Restructuring
$
0.84
$
0.86
(2)
%
Earnings Before and After Restructuring
For the Full Year of
(in millions)
2022
2021
Change
Net Income attributable to FE Co., Inc. Reported
$
187.3
$
153.9
22
%
Allocated Earnings
$
(0.7)
$
(0.9)
Earnings for EPS Calculations
$
186.6
$
153.0
22
%
Restructuring (before tax):
$
2.2
$
0.6
Restructuring, net of tax:
$
1.8
$
0.5
Earnings Before Restructuring
$
188.4
$
153.5
23
%
Earnings Per Share
For the Full Year of
Before and After Restructuring
2022
2021
Change
(in millions except Earnings Per Share)
Average Fully Diluted Shares Outstanding
47.0
47.0
—
%
Fully Diluted Earnings Per Share (“EPS”) Reported
$
3.97
$
3.25
22
%
Restructuring Per Share, net of tax
$
0.03
$
0.01
Fully Diluted EPS Before Restructuring
$
4.00
$
3.26
23
%
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 2021
$
148.9
$
36.6
$
47.3
$
25.2
$
258.0
$
79.0
$
116.9
$
(21.4)
$
432.5
Q4 2022
$
171.0
$
38.4
$
46.0
$
25.9
$
281.3
$
85.5
$
148.9
$
(26.3)
$
489.4
Change
$
22.1
$
1.8
$
(1.3)
$
0.7
$
23.3
$
6.5
$
32.0
$
(4.9)
$
56.9
% Change
15
%
5
%
(3)
%
3
%
9
%
8
%
27
%
13
%
Foreign currency translation
$
(1.4)
$
(2.8)
$
(12.2)
$
(1.8)
$
(18.2)
$
(1.5)
$
—
% Change
(1)
%
(8)
%
(26)
%
(7)
%
(7)
%
(2)
%
—
%
Acquisitions
$
3.5
$
—
$
—
$
—
$
3.5
$
—
$
17.5
Volume/Price
$
20.0
$
4.6
$
10.9
$
2.5
$
38.0
$
8.0
$
14.5
% Change
13
%
13
%
23
%
10
%
15
%
10
%
12
%
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 2021
$
549.2
$
139.5
$
189.8
$
85.1
$
963.6
$
289.1
$
497.6
$
(88.4)
$
1,661.9
FY 2022
$
712.9
$
159.3
$
192.8
$
92.5
$
1,157.5
$
334.1
$
668.1
$
(116.0)
$
2,043.7
Change
$
163.7
$
19.8
$
3.0
$
7.4
$
193.9
$
45.0
$
170.5
$
(27.6)
$
381.8
% Change
30
%
14
%
2
%
9
%
20
%
16
%
34
%
23
%
Foreign currency translation
$
(3.0)
$
(5.7)
$
(58.3)
$
(4.7)
$
(71.7)
$
(5.4)
$
—
% Change
(1)
%
(4)
%
(31)
%
(6)
%
(7)
%
(2)
%
—
%
Acquisitions
$
54.1
$
—
$
—
$
4.7
$
58.8
$
—
$
73.1
Volume/Price
$
112.6
$
25.5
$
61.3
$
7.4
$
206.8
$
50.4
$
97.4
% Change
21
%
18
%
32
%
9
%
21
%
17
%
20
%
Key Performance Indicators: Operating Income and Margin Summary
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
%
Restructuring
$
0.2
$
0.1
$
—
$
—
$
0.3
Operating Income/(Loss) Before Restructuring
$
44.8
$
24.4
$
2.9
$
(15.6)
$
56.5
% Operating Income to Net Sales Before Restructuring
15.9
%
28.5
%
1.9
%
11.5
%
Operating Income and Margins
(in millions)
For the Fourth Quarter 2021
Water
Fueling
Distribution
Other/Elims
Consolidated
Operating Income/(Loss)
$
36.4
$
22.2
$
5.6
$
(17.0)
$
47.2
% Operating Income To Net Sales
14.1
%
28.1
%
4.8
%
10.9
%
Restructuring
$
0.2
$
—
$
—
$
—
$
0.2
Operating Income/(Loss) Before Restructuring
$
36.6
$
22.2
$
5.6
$
(17.0)
$
47.4
% Operating Income to Net Sales Before Restructuring
14.2
%
28.1
%
4.8
%
11.0
%
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
%
Restructuring
$
1.3
$
0.7
$
0.2
$
—
$
2.2
Operating Income/(Loss) Before Restructuring
$
173.6
$
97.5
$
54.7
$
(66.4)
$
259.4
% Operating Income to Net Sales Before Restructuring
15.0
%
29.2
%
8.2
%
12.7
%
Operating Income and Margins
(in millions)
For the Full Year 2021
Water
Fueling
Distribution
Other/Elims
Consolidated
Operating Income/(Loss)
$
139.1
$
79.5
$
35.9
$
(65.3)
$
189.2
% Operating Income To Net Sales
14.4
%
27.5
%
7.2
%
11.4
%
Restructuring
$
0.5
$
—
$
0.1
$
—
$
0.6
Operating Income/(Loss) Before Restructuring
$
139.6
$
79.5
$
36.0
$
(65.3)
$
189.8
% Operating Income to Net Sales Before Restructuring
