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Franklin Electric Co., Inc. (FELE)
Q4 2013 Earnings Conference Call
February 19, 2014 05:00 pm ET
Scott Trumbull – Chief Executive Officer
Gregg Sengstack – President & Chief Operating Officer
John Haines – Vice President & Chief Financial Officer
Robert Stone – Senior Vice President & President, International Water Systems
Jeff Frappier – Treasurer
Matt Summerville – KeyBanc Capital Markets
Mike Halloran – Robert W. Baird
David Rose – Wedbush Securities
Previous Statements by FELE
» Franklin Electric Co., Inc. Discusses Q4 2013 Results (Webcast)
» Franklin Electric Management Discusses Q3 2013 Results - Earnings Call Transcript
» Franklin Electric Co., Inc. Discusses Q3 2013 Results (Webcast)
» Franklin Electric Management Discusses Q2 2013 Results - Earnings Call Transcript
Thank you, Syed, and welcome everybody to Franklin Electric’s Q4 2013 Earnings Conference Call. With me today are Scott Trumbull, our Chairman and CEO; John Haines, our CFO; Robert Stone, SVP and President of International Water Systems; and Gregg Sengstack, President and COO.
On today’s call Scott will review our Q4 and 2013 full year business results and then John will review our Q4 and full year financial results. When John is through we will have some times for questions and answers.
Before we begin, let me remind you that as we conduct this call we will be making any 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.
Also our press release and this call contain non-GAAP financial measures that include but are not limited to earnings after GAAP adjustments, fully diluted earnings per share after non-GAAP adjustments or adjusted EPS, operating income after non-GAAP adjustments, and percent operating income to net sales after non-GAAP adjustments or operating income margin after non-GAAP adjustments.
The company believes that these measures help investors understand underlying trends in the company’s business more easily. The differences between these measures and the most comparable GAAP measures are reconciled in the table in our 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. Scott?
Thanks, Jeff. We’re pleased to report that our sales and adjusted net income for both Q4 and full-year 2013 were again records for any Q4 and year in the company’s history, and we ended the year on a strong note.
During Q4 our consolidated sales grew by 12% and our consolidated operating income after non-GAAP adjustments grew by 14% compared to Q4 the prior year. Our Global Water Systems business had a very strong quarter with sales increasing by 13%, and operating income after non-GAAP adjustments increasing by 18%.
While our Water Systems businesses grew in virtually all regions of the world, our Water Teams in the US and Canada w2re our star performers, providing 39% of our consolidated sales during Q4 and achieving 25% sales growth led by strong demand for mobile dewatering systems, residential and light commercial groundwater pump systems, and drives and controls.
The US demand for our Pioneer branded mobile dewatering equipment grew rapidly in the upstream oil & gas market during Q4. In addition, we believe that Pioneer is gaining share in the US pump rental market because of that brand’s reputation for efficiency and durability. Our Pioneer team also achieved significant sales gains in the commercial construction market, particularly in Western Canada during Q4.
Our US and Canadian sales of residential and light commercial groundwater pumps increased by 25% during the quarter. During Q3 2013 last year our sales of residential and light commercial groundwater pumps declined, and we believe that this decline resulted in our distributors’ inventory falling below target levels.
So we believe a portion of the 25% sales increase during Q4 is attributable to distributors rebuilding their stock to target levels in the face of perceived growing demand in the residential construction market. We also believe that during Q4 a number of our distributors increased their purchases in order to achieve their annual sales volume rebate targets.
Our US and Canadian drive and control business grew by 18% in Q4. Our sales of drives and controls in the residential and light commercial market grew by over 20% during the quarter, a reflection again of anticipated more robust new home construction activity. Our line of drives for agricultural and industrial applications also grew at a strong double-digit rate as we’re having success selling the high horsepower drive product line that we obtained in our 2012 acquisition of Cerus Industrial.
Our Water Systems Q4 sales in Latin America represented 13% of our consolidated sales and grew organically by 8% after excluding foreign exchange. Most of our sales growth in Latin America occurred in Brazil and most of our growth in Brazil came from continued growth in demand for the line of 4-inch groundwater pumps and motors that we launched in Brazil two years ago. In total our sales in Brazil grew organically by 13% excluding foreign exchange. The new factory that we’re building in Brazil to support additional growth is scheduled to open in Q2 2014.
Our Water Systems sales in the Middle East and Africa represented 12% of our consolidated sales during the quarter and grew organically by 9% excluding foreign exchange. Growing demand for our line of Impo branded groundwater pumps and motors produced in our Turkish factory accounted for much of our growth in the Middle East and Africa during Q4.