Franklin Electric Co., Inc. · NASDAQ:FELE
Franklin Electric — Baird Industrial Conference 2010
32 slides from Franklin Electric's conference presentation, Nov 9, 2010
Slide 1: Baird Industrial Conference
Baird Industrial Conference November 2010
Slide 2: Topics
BAIRD INDUSTRIAL CONFERENCE Topics: • YTD financial summary • Market focus and position • Growth initiatives 2
Slide 3: Financial Performance Summary
FRANKLIN ELECTRIC Financial Performance Summary 9 mos. YTD % +(-) 2010 Prior Sales $539 M + 12% (+ 11% organic) Operating Income1 $59.3 M + 49% EPS1 $1.55 + 64% Gross Profit Margin 32.3% + 270 BPS LTM Return on 16.1% + 620 BPS Invested Capital2 Net Debt/Equity 7.4% - 1350 BPS 1 Before restructuring
Slide 4: Strategic Objective
FRANKLIN ELECTRIC Strategic Objective To be the world’s leading supplier to two global distribution channels: Addressable Sales LTM Market: 9/30/10: • Groundwater and adjacent $5.2 B $563 M pumping systems • Fueling systems $1.0 B $119 M 4
Slide 5: Global Market Leadership
FRANKLIN ELECTRIC Global Market Leadership Major Product Categories Franklin Market Share Rank Water Systems Groundwater Pumping #1 (Global) Residential Wastewater Pumping #2 (North & South America) Fueling Systems Fuel Transfer Systems #1 (Pumping & Containment) (Global) Fuel & Vapor Management Sys
Slide 6: Water Systems Growth
FRANKLIN ELECTRIC WATER SYSTEMS Water Systems Growth Product Line Extensions and Geographic Expansion Franklin Submersible Motors, Controls Motors, Pumps, Drives Adjacent Pumping Motor and Drives and Controls Systems 1950s 1990s 2004 2006 Developing Regions Pump share growth in US/Canada Packaged sy
Slide 7: Growth in Developing Regions
FRANKLIN ELECTRIC WATER SYSTEMS Growth in Developing Regions Global Water Supply 0.3% Lakes and river storage Freshwater 2.5% 30.8% Groundwater, including (35,000,000 km3) soil moisture, swamp water and permafrost 68.9% Glaciers and permanent snow cover Saltwater 97.5% (1,365,000,000 km3) Source: Ig
Slide 8: Growth in Developing Regions
FRANKLIN ELECTRIC WATER SYSTEMS Growth in Developing Regions Water Withdrawals by Region1 km3/year US/Canada 700 Western Europe 400 Latin America 350 Eastern Europe2 200 74% in Developing Mideast/Africa 400 Regions Asia Pacific 2,100 Total 4,150 1 Source UNESCO and management estimates 2 Russia, Ukr
Slide 9: Growth in Developing Regions
FRANKLIN ELECTRIC WATER SYSTEMS Growth in Developing Regions Water Withdrawals by Region1 % Withdrawals for km3/year Growth Trend Agriculture Use US/Canada 700 Flat 40% Western Europe 400 Flat 20% Latin America 350 Growing 90% Eastern Europe2 200 Growing 70% Mideast/Africa 400 Growing 80% Asia Pacif
Slide 10: Sales in Developing Regions
FRANKLIN ELECTRIC WATER SYSTEMS 10% Share of Sales in Developing Regions1 Addressable Market $228M2 $225 Total $204M Growth $200 $188M $180M $175 Acquisition $150 $135M Growth $64M $125 $100 $94M $77M Organic $75 Growth $55M $116M $50 $48M $25 $0 2003 2004 2005 2006 2007 2008 2009 2010 % of Total Fr
Slide 11: Manufacturing in Low Cost Regions
FRANKLIN ELECTRIC WATER SYSTEMS Manufacturing in Low Cost Regions % of Total Water Systems Manufacturing Man-hours 100% 90% 80% 70% 65% 60% 60% 52% 50% 42% 40% 35% 31% 30% 20% 20% 13% 10% 0% 2003 2004 2005 2006 2007 2008 2009 20101 1 2010 is an estimated full year projection 11
Slide 12: New Manufacturing in Low Cost Regions
FRANKLIN ELECTRIC WATER SYSTEMS New Manufacturing in Low Cost Regions Linares, Mexico Brno, Czech Republic Suzhou, China 300,000 sq. ft. 80,000 sq. ft. 60,000 sq. ft. 12
Slide 13: Manufacturing in Low Cost Regions
FRANKLIN ELECTRIC WATER SYSTEMS Manufacturing in Low Cost Regions Linares, Mexico Manufacturing Complex “Best Manufacturing Plant in Mexico” - Business Directive Initiatives Platinum Quality Award “Best Manufacturing Plant in Mexico” - Best Places to Work Institute “Finalist” - Industry Week Magazin
Slide 14: Pump Share Growth in US/Canada
FRANKLIN ELECTRIC WATER SYSTEMS Pump Share Growth in US/Canada Objective: Expand share of $1.2 B addressable market in the US/Canada Strategy: Use strong motor customer relationships to expand pump sales Focus on the needs of the installing contractor: - Product reliability - Training and technical
Slide 15: Pump Share Growth in US/Canada
FRANKLIN ELECTRIC WATER SYSTEMS Pump Share Growth in US/Canada % Franklin Share - Residential Groundwater Pumps1 (4” Submersibles + Jets) (Year of market entry to most recent quarter) 25-30% 30% 25% Organic 20% Share Growth 15% 10% 5-6% 5% 0% 2005 Q3 2010 1 Management estimates based on Trade Associ
Slide 16: Pump Share Growth in US/Canada
FRANKLIN ELECTRIC WATER SYSTEMS Pump Share Growth in US/Canada % Franklin Share - Residential Wastewater Pumps1 (Sump, Sewage, Effluent, Utility < 2 hp) (Year of market entry to most recent quarter) 30% 20-25% 25% Organic 20% Share Growth 15% 13-14% 10% 5% 0% 2006 Q3 2010 1 Management estimates base
Slide 17: Extend Product Lines to Include More Packaged Systems
FRANKLIN ELECTRIC WATER SYSTEMS Extend Product Lines to Include More Packaged Systems Franklin Motor + Brand “X” Pump Installation + Brand “Y” Drive & Control 17
Slide 18: Extend Product Lines to Include More Packaged Systems
FRANKLIN ELECTRIC WATER SYSTEMS Extend Product Lines to Include More Packaged Systems Franklin Prepackaged Motor, Pump, Installation Drive & Control Contractor benefit: Franklin benefit: - Simplified installation - More revenue per - Performance guarantee installation Motor only Motor & pump Motor,
Slide 19: Extend Product Lines to Include More Packaged Systems
FRANKLIN ELECTRIC WATER SYSTEMS Extend Product Lines to Include More Packaged Systems Coal Seam Natural Gas: Metal pipe with cement on outside isolates Perforations are made through the uphole formations from coal seam. casing and cement, into the coal, so gas and water can flow into the well. Metha
Slide 20: Extend Product Lines to Include More Packaged Systems
FRANKLIN ELECTRIC WATER SYSTEMS Extend Product Lines to Include More Packaged Systems Coal Seam Natural Gas – Current Systems: Nodding Donkey Oil Field Pump System ($100,000 to $150,000 per well) ($50,000 to $70,000 per well) 20
Slide 21: Extend Product Lines to Include More Packaged Systems
FRANKLIN ELECTRIC WATER SYSTEMS Extend Product Lines to Include More Packaged Systems Coal Seam Natural Gas – Franklin System: (up to 1000 meters depth) Pump Motor Drive Telemetry ≈ $30,000/well Discharge head Ancillary equipment 21
Slide 22: Extend Product Lines to Include More Packaged Systems
FRANKLIN ELECTRIC WATER SYSTEMS Extend Product Lines to Include More Packaged Systems Solar Groundwater Pumping Systems: • Franklin system: Pump Annual Market Potential: Motor ≈ $25-35 M per year Inverter/Drive • Franklin value proposition: • Deliver maximum water per unit of sunlight (efficiency) •
Slide 23: Product Line Extensions and Geographic Expansion
FRANKLIN FUELING SYSTEMS Product Line Extensions and Geographic Expansion Franklin Submersible FE Petro FE Petro Turbine Adjacent Products Motor Turbine Pump and Drive 2000s 1960s 1980s 1990s International Expansion: Growing motor vehicle population Installation of new technologies 23
Slide 24: Annual Sales of Cars & Light Trucks
FRANKLIN FUELING SYSTEMS Annual Sales of Cars & Light Trucks FCST 2000 2010 North America 20 M 14 M China, India & Up 500% 3M 15 M Latin America 24
Slide 25: Installation of New Technologies in International Markets
FRANKLIN FUELING SYSTEMS Installation of New Technologies in International Markets US Rest of World (175,000 stations) (500,000 stations) Stations with pressure 97% 23% pumping technology Stations with vapor 60-80% 17% recovery systems (on board) Stations with fuel 75% 36% management systems 25
Slide 26: International Sales Growth
FRANKLIN FUELING SYSTEMS International Sales Growth $100 $80 $70 M $60 $40 $35 M $17 M $20 $0 2005 2010 Proforma for Petrotechnik acquisition % of Franklin Fueling Sales: 22% 45% 26
Slide 27: 2010
FRANKLIN ELECTRIC 2010 • Double-digit organic sales growth • Superior return on invested capital • Strong balance sheet • Robust global growth opportunities 27
Slide 28: Appendix
BAIRD INDUSTRIAL CONFERENCE Appendix 28
Slide 29: 2010 Forecasted Sales by End Market
FRANKLIN ELECTRIC 2010 Forecasted Sales by End Market 29
Slide 30: 2010 Forecasted Sales by Product Type
FRANKLIN ELECTRIC 2010 Forecasted Sales by Product Type 30
Slide 31: 2010 Forecasted Sales by Geographic Region
FRANKLIN ELECTRIC 2010 Forecasted Sales by Geographic Region Water Fueling 31
Slide 32: Outlook
FRANKLIN ELECTRIC Outlook 4th Qtr. 2010 versus 4th Qtr. 2009 (assuming current exchange rates) • Consolidated sales up 15-20% • Consolidated EPS will be flat to up modestly • Water: Sales up 6-8% and operating income down 5-10% • Fueling: Sales up 50-60% and operating income up 30-35% (including imp