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

Feb 18, 2020 • 09:00 am ET

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

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Q & A
Operator
Operator

Thank you. [Operator Instructions] Our first question comes from Edward Marshall with Sidoti & Company. Your line is now open.

Analyst
Edward Marshall

Gregg and John, Good morning.

Executive
Gregg C. Sengstack

Good morning, Ed.

Executive
John J. Haines

Good morning, Ed.

Analyst
Edward Marshall

So I wanted to ask about the ISD impact as it relates to China and I'm curious what your -- what the guidance is baking into from the negative effects of that -- of that situation.

Executive
Gregg C. Sengstack

Sure, Ed. So as we look at -- we had our ISD system approved late in 2019. We had a handful of installations in late 2019. We expected several million dollars, less than $10 million in 2020 of ISD installations and that's effectively kind of what we've pushed out or taken out. This is a -- the opportunity of long-term price, these, though is going to be, as we see it, more significant than the double wall piping initiative. Our revenue per station, we expect, would be about double and we think that it will be a longer term than the couple of three years we saw for the double wall pipes. So we think it's going to be a more systemic growth in the business in China, over time.

Analyst
Edward Marshall

Got it. And previously you've talked about buy local, is that a theme that ISD will affect ISD or is that just on the underground piping systems?

Executive
Gregg C. Sengstack

I think my view is that if you go back to the time when that specification for double wall pipe was reopened, it was when there was a pretty contentious trade environment with the U.S. and it seems the trade tensions are at least directionally trending down and given that the electronic sophistication or the sophistication of the product rise, I suspect that there is going to be a -- and this is also again a government mandate and the whole idea is for government connection and oversight of fueling station operations, we would expect that that's going to be a pretty good situation for western technology in general.

Analyst
Edward Marshall

Got it. And as I look into 2020 and we talk about -- you've given us some good margin, rather top-line guidance, I'm curious if you talk about the margin in Fueling, John, I think you've said in the past that you anticipate that the high-20s, which is where it's been trending is likely too high. Just any clarity you could provide on that.

Executive
John J. Haines

Yeah. Our guidance assumes mid-20s Fueling margin for 2020.

Analyst
Edward Marshall

Okay. And then, John, do you have the -- you said Latin America was up 20% in Water. Do you have the constant currency impact in Latin America? Have you done that math?

Executive
John J. Haines

Well, the 20% is the organic -- what we would call the organic growth, which would take the opex out.

Analyst
Edward Marshall

Okay. So that is -- so that is constant currency. Okay.

Executive
John J. Haines

Yeah, that's the -- that takes out both the acquisition impact and which is zero because we've lapped the IRP acquisition and it takes out the opex. So the opex impact,