Franklin Electric Co., Inc. (NASDAQ:FELE) Q4 2019 Earnings Conference Call - Final Transcript

Feb 18, 2020 • 09:00 am ET


Franklin Electric Co., Inc. (NASDAQ:FELE) Q4 2019 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by and welcome to the Franklin Electric Reports Fourth Quarter and Full Year 2019 Sales and Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. [Operator Instructions] I would now like to hand the conference to your speaker today, John Haines, Chief Financial Officer. Please go ahead, sir.

John J. Haines

Thank you, Jewel and welcome everyone to Franklin Electric's fourth quarter 2019 earnings conference call. With me today is Gregg Sengstack, our Chairman and Chief Executive Officer. On today's call, Gregg will review our fourth quarter business results and I will review our fourth quarter financial results. When I'm through, we'll have some time for questions and answers.

Before we begin, let me remind you that as we conduct this call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, many of which could cause actual results to differ materially from such forward-looking statements. A discussion of these factors may be found in the company's Annual Report on Form 10-K and in today's earnings release. All forward-looking statements made during this call are based on information currently available and, except as required by law, the company assumes no obligation to update any forward-looking statements. With that I will now turn the call over to our Chairman and CEO, Gregg Sengstack.

Gregg C. Sengstack

Thank you, John. As we expected, our revenue and operating income were essentially flat to the fourth quarter of last year. Organic growth in both Fueling Systems and Distribution offset negative organic growth in Water Systems. Fueling Systems led the way with another record quarter on strong volume in the U.S. and mix. Distribution sales were also a record, however, the segment's fourth quarter operating loss was similar to last year. Our Water Systems business saw modest top-line growth globally, but not enough to offset lower large dewatering pumps sales in the U.S. Recall that environmental regulations, the requirement to move to Tier 4 diesel engines in 2019 drove large Pioneer pump sales in Q4 of 2018, making for a very tough comp.

For the year, consolidated sales were up 1%, operating income was down 3% and earnings per share was down 9%. While 2019 earnings were below plan in last year, I am pleased to report that our focus on working capital resulted in free cash flow conversion of 163% of net income or about $3.35 per share, a record for any year in our history.

Returning to the fourth quarter, I will start with Distribution. The business continue to improve in Q4 with organic growth of about 6%. However, this came at a cost as our team moved out some more commodity type materials at lower margins, resulting in an operating loss in the quarter, similar to the loss in the fourth quarter of last year. In our Water Systems