FRANKLIN ELECTRIC REPORTS RECORD THIRD QUARTER 2021 RESULTS
Third Quarter 2021 Highlights
•Record sales of $459.0 million, compared to third quarter 2020 sales of $351.2 million, an increase of 31%
•Strong organic sales growth in all three Segments; Distribution 30%, Fueling Systems 18%, and Water Systems 11%
•Operating income was $56.6 million, compared to third quarter operating income in 2020 of $48.4 million, an increase of 17%
•GAAP fully diluted earnings per share (EPS) was $0.98, a record for any quarter
•Working capital as a percent of trailing twelve months sales improved 150 basis points to 27.6%
Fort Wayne, IN – October 26, 2021 – Franklin Electric Co. Inc. today announced third quarter 2021 financial results.
Third quarter 2021 sales were $459.0 million, compared to third quarter 2020 sales of $351.2 million. Third quarter 2021 operating income was $56.6 million, compared to third quarter operating income in 2020 of $48.4 million, an increase of 17 percent.
Third quarter 2021 GAAP fully diluted earnings per share (EPS) was $0.98, versus GAAP fully diluted EPS in the third quarter 2020 of $0.82.
“We continued to break records in the third quarter of 2021, as we once again delivered the highest consolidated net sales, operating income, and EPS for any quarter in Franklin’s history. Demand remains strong across the business, with notably strong performance in our Distribution business, which posted impressive year-over-year sales growth of 43 percent. At the same time, our Water Systems and Fueling Systems segments maintained a remarkable pace with sales growing 28 and 18 percent, respectively,” commented Gregg Sengstack, Franklin Electric’s Chairperson and Chief Executive Officer.
“While supply chain challenges continue throughout the global economy, our team remains focused on managing these on-going challenges to meet our customers’ needs. The integration of recent acquisitions within Water Treatment continues to progress and offers a promising foundation to drive growth in our Global Water business. We look forward to capitalizing on sustained momentum in all of our business segments across the globe and drive value for our shareholders as we execute our strategic plan,” Mr. Sengstack concluded.
Segment Summaries
Water Systems sales, a new record for any quarter, were $260.7 million in the third quarter 2021, an increase of $57.8 million or 28 percent versus the third quarter 2020. Water Systems sales, excluding acquisitions and the impact of foreign currency translation, were up about 11 percent compared to the third quarter 2020. Sales of groundwater pumping equipment and sales of both surface pumping and dewatering equipment increased due to strong end market demand. Water Systems operating income in the third quarter was $36.8 million driven by higher sales. Third quarter 2020 Water Systems operating income was $36.6 million.
Distribution sales, a new third quarter record, were $140.2 million in the third quarter 2021. The Distribution segment organic sales increased 30 percent compared to the third quarter of 2020. Revenue growth was driven by broad-based demand in all regions and product categories. The Distribution segment operating income was $12.3 million in the third quarter of 2021 compared to third quarter 2020 operating income of $6.4 million.
Fueling Systems sales, a new record for any quarter, were $81.0 million in the third quarter 2021, an increase of $12.6 million versus the third quarter 2020. Fueling Systems sales in the U.S. and Canada increased by about 27 percent compared to the third quarter 2020. The increase was due to higher demand for Fuel Management and Pumping Systems and Piping. Outside the U.S. and Canada, Fueling Systems revenues decreased by about 1 percent, as sales increases of 11 percent in the rest of the world outside of China were offset by lower sales in China. Fueling Systems operating income in the third quarter was $23.9 million, compared to $18.9 million in the third quarter of 2020, driven by higher sales, as well as favorable geographic and product mix.
Cash Flow
Net cash flows from operating activities for the first nine months of 2021 were $93.9 million versus $133.7 million in the same period in 2020. The decrease was primarily due to higher working capital requirements in support of higher revenues.
2021 Guidance
The Company is raising our most recent full year 2021 earnings per share before restructuring expenses to be in the range from $2.99 to $3.07.
Earnings Conference Call
A conference call to review earnings and other developments in the business will commence at 9:00 am ET. The third quarter 2021 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/g2j853js
If you intend to ask questions during the call, please dial in using 877.643.7158 for domestic calls and 914.495.8565 for international calls. The conference ID is 6199466.
A replay of the conference call will be available Tuesday, October 26, 2021, at 12:00 noon ET through noon ET on Tuesday, November 2, 2021, by dialing 855.859.2056 for domestic calls and 404.537.3406 for international calls. The replay passcode is 6199466.
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, 2020, 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)
Third Quarter Ended
Nine Months Ended
September 30, 2021
September 30, 2020
September 30, 2021
September 30, 2020
Net sales
$
459,019
$
351,190
$
1,229,345
$
926,225
Cost of sales
295,903
226,893
798,444
604,489
Gross profit
163,116
124,297
430,901
321,736
Selling, general, and administrative expenses
106,446
75,472
288,534
223,409
Restructuring expense
76
441
381
2,189
Operating income
56,594
48,384
141,986
96,138
Interest expense
(1,384)
(1,130)
(3,840)
(3,496)
Other income/(expense), net
2,061
(463)
1,531
(1,062)
Foreign exchange income/(expense)
(408)
(140)
(1,654)
(84)
Income before income taxes
56,863
46,651
138,023
91,496
Income tax (benefit)/ expense
10,409
8,076
24,043
17,327
Net income
$
46,454
$
38,575
$
113,980
$
74,169
Less: Net (income)/loss attributable to noncontrolling interests
(282)
(203)
(787)
(503)
Net income attributable to Franklin Electric Co., Inc.
$
46,172
$
38,372
$
113,193
$
73,666
Income per share:
Basic
$
0.99
$
0.82
$
2.43
$
1.58
Diluted
$
0.98
$
0.82
$
2.40
$
1.57
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 30, 2021
December 31, 2020
ASSETS
Cash and equivalents
$
75,952
$
130,787
Receivables (net)
218,175
159,827
Inventories
395,531
300,932
Other current assets
38,472
27,708
Total current assets
728,130
619,254
Property, plant, and equipment, net
205,970
209,021
Right-of-use asset, net
36,181
31,954
Goodwill and other assets
575,700
412,078
Total assets
$
1,545,981
$
1,272,307
LIABILITIES AND EQUITY
Accounts payable
$
163,941
$
95,903
Accrued expenses and other current liabilities
118,999
94,160
Current lease liability
12,240
11,090
Current maturities of long-term debt and short-term borrowings
106,293
2,551
Total current liabilities
401,473
203,704
Long-term debt
90,527
91,966
Long-term lease liability
24,087
20,866
Income taxes payable non-current
11,610
11,965
Deferred income taxes
27,540
25,671
Employee benefit plans
39,899
44,443
Other long-term liabilities
25,267
23,988
Redeemable noncontrolling interest
(146)
(245)
Total equity
925,724
849,949
Total liabilities and equity
$
1,545,981
$
1,272,307
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
(In thousands)
September 30, 2021
September 30, 2020
Cash flows from operating activities:
Net income
$
113,980
$
74,169
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization
32,767
26,917
Non-cash lease expense
9,394
8,478
Share-based compensation
8,921
8,312
Other
1,978
(622)
Changes in assets and liabilities:
Receivables
(57,434)
(5,147)
Inventory
(85,873)
4,322
Accounts payable and accrued expenses
92,214
26,069
Operating leases
(9,394)
(8,478)
Income taxes-U.S. Tax Cuts and Jobs Act
(355)
—
Other
(12,296)
(312)
Net cash flows from operating activities
93,902
133,708
Cash flows from investing activities:
Additions to property, plant, and equipment
(20,274)
(15,239)
Proceeds from sale of property, plant, and equipment
839
28
Acquisitions and investments
(193,987)
(6,089)
Other investing activities
38
(74)
Net cash flows from investing activities
(213,384)
(21,374)
Cash flows from financing activities:
Change in debt
102,395
(20,748)
Proceeds from issuance of common stock
11,390
3,014
Purchases of common stock
(21,138)
(19,091)
Dividends paid
(24,499)
(21,641)
Net cash flows from financing activities
68,148
(58,466)
Effect of exchange rate changes on cash
(3,501)
(3,793)
Net change in cash and equivalents
(54,835)
50,075
Cash and equivalents at beginning of period
130,787
64,405
Cash and equivalents at end of period
$
75,952
$
114,480
Key Performance Indicators: Earnings Per Share Calculations
Earnings Before and After Restructuring
For the Third Quarter
(in millions)
2021
2020
Change
Net Income attributable to FE Co., Inc. Reported
$
46.2
$
38.4
20
%
Allocated Earnings
$
(0.3)
$
(0.3)
Earnings for EPS Calculations
$
45.9
$
38.1
20
%
Restructuring (before tax):
$
0.1
$
0.4
Restructuring, net of tax:
$
0.1
$
0.3
Earnings Before Restructuring
$
46.0
$
38.4
20
%
Earnings Per Share
For the Third Quarter
Before and After Restructuring
2021
2020
Change
(in millions except Earnings Per Share)
Average Fully Diluted Shares Outstanding
47.0
46.6
1
%
Fully Diluted Earnings Per Share (“EPS”) Reported
$
0.98
$
0.82
20
%
Restructuring Per Share, net of tax
$
—
$
0.01
Fully Diluted EPS Before Restructuring
$
0.98
$
0.83
18
%
Key Performance Indicators: Net Sales Summary
Net Sales
(in millions)
United States & Canada
Latin America
Europe, Middle East & Africa
Asia Pacific
Total Water
Fueling
Distribution
Other/Elims
Consolidated
Q3 2020
$
111.5
$
30.1
$
41.8
$
19.5
$
202.9
$
68.4
$
98.0
$
(18.1)
$
351.2
Q3 2021
$
157.7
$
36.5
$
46.9
$
19.6
$
260.7
$
81.0
$
140.2
$
(22.9)
$
459.0
Change
$
46.2
$
6.4
$
5.1
$
0.1
$
57.8
$
12.6
$
42.2
$
(4.8)
$
107.8
% Change
41
%
21
%
12
%
1
%
28
%
18
%
43
%
31
%
Foreign currency translation
$
0.9
$
(0.3)
$
(0.1)
$
0.2
$
0.7
$
0.4
$
—
% Change
1
%
(1)
%
—
%
1
%
—
%
1
%
—
%
Acquisitions
$
33.7
$
—
$
—
$
0.5
$
34.2
$
—
$
13.2
Volume/Price
$
11.6
$
6.7
$
5.2
$
(0.6)
$
22.9
$
12.2
$
29.0
% Change
10
%
22
%
12
%
(3)
%
11
%
18
%
30
%
Key Performance Indicators: Operating Income and Margin Summary
Operating Income and Margins
(in millions)
For the Third Quarter 2021
Water
Fueling
Distribution
Other/Elims
Consolidated
Operating Income/(Loss)
$
36.8
$
23.9
$
12.3
$
(16.4)
$
56.6
% Operating Income To Net Sales
14.1
%
29.5
%
8.8
%
12.3
%
Restructuring
$
0.1
$
—
$
—
$
—
$
0.1
Operating Income/(Loss) Before Restructuring
$
36.9
$
23.9
$
12.3
$
(16.4)
$
56.7
% Operating Income to Net Sales Before Restructuring
14.2
%
29.5
%
8.8
%
12.4
%
Operating Income and Margins
(in millions)
For the Third Quarter 2020
Water
Fueling
Distribution
Other/Elims
Consolidated
Operating Income/(Loss)
$
36.6
$
18.9
$
6.4
$
(13.5)
$
48.4
% Operating Income To Net Sales
18.0
%
27.6
%
6.5
%
13.8
%
Restructuring
$
0.4
$
—
$
—
$
—
$
0.4
Operating Income/(Loss) Before Restructuring
$
37.0
$
18.9
$
6.4
$
(13.5)
$
48.8
% Operating Income to Net Sales Before Restructuring
