Franklin Electric Co., Inc. · NASDAQ:FELE
Franklin Electric — Baird Industrial Conference November 2013
42 slides from Franklin Electric's conference presentation, Nov 5, 2013
Slide 1: Baird Industrial Conference November 2013
Baird Industrial Conference November 2013
Slide 2: Safe Harbor Statement
Safe Harbor Statement “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, inventor
Slide 3: Topics
Topics Company Overview --- Water Systems Growth Initiatives --- Fueling Systems Growth Initiatives 3
Slide 4: 2009-2012 Sales History
2009-2012 Sales History 4 2010 $0 $200 $300 $400 $500 $600 $700 2009 $626 M $100 2011 $1,000 $891 M 2012 $714 M $821 M $900 $800
Slide 5: 2009-2012 Operating Income History
2009-2012 Operating Income(1) History 5 1 After non-GAAP adjustments – See 10Q For reconciliation 2010 $0 $50 $75 $100 2009 $49.9 M $25 2011 $125 $114.9 M 2012 $72.4 M $95.7 M
Slide 6: 2013 Financial Summary
2013 Financial Summary 9 mos. YTD 2013 +(-) Prior Net Sales $736 M + 7.2% Earning Per Share(1) $1.43 + 10.9% ROIC(2) 19.5% - 0.5% 1 After non-GAAP adjustments – See 10Q For reconciliation (post stock split) 2 ROIC = LTM operating income after non-GAAP adjustments ÷ (net debt + equity) 6
Slide 7: June 2012 Drought Map
June 2012 Drought Map 7 June 26, 2012 Valid 7 a.m. EST (Released Thursday, Jun. 28, 2012) U.S. Drought Monitor CONUS http://droughtmonitor.unl.edu/ The Drought Monitor focuses on broad-scale conditions. Local conditions may vary. See accompanying text summary for forecast statements. D0 Abnormally D
Slide 8: June 2013 Drought Map
June 2013 Drought Map 8 June 25, 2013 Valid 7 a.m. EST (Released Thursday, Jun. 27, 2013) U.S. Drought Monitor CONUS http://droughtmonitor.unl.edu/ The Drought Monitor focuses on broad-scale conditions. Local conditions may vary. See accompanying text summary for forecast statements. D0 Abnormally D
Slide 9: Business Segments
Business Segments Water Systems 80% Fueling Systems 20% Fueling Systems 9mos. YTD 2013 +(-) Prior Sales $148 M + 14.8% Operating Income(1) $31 M + 17.3% Water Systems 9mos. YTD 2013 +(-) Prior Sales $588 M + 5.5% Operating Income(1) $109 M + 5.5% 1 After non-GAAP adjustments – See 10Q For reconcilia
Slide 10: Water Systems Sales by Geographical Region
Water Systems Sales 10 United States 46% Developed Non-US 16% Developing Regions 38% Geographical Regions – % of Water Systems Sales (P9YTD)
Slide 11: Water Systems Organic Growth 2009-2013 YTD
2010 2011 2012 YTD 2013 Developed World 13% 8% 2% 2% Developing World 13% 3% 9% 8% Water Systems 11 1 Excluding acquisitions and FX Organic Growth 2009-2013 YTD(1)
Slide 12: Water Systems Sales End Markets
Water Systems Sales 12 Groundwater Pumping Systems 62% Surface Pumps 38% End Markets – % of Water Systems Sales (P9YTD)
Slide 13: Water Systems Sales End Markets
Water Systems Sales Irrigation & Industrial Groundwater Pumping Systems 27% Residential Groundwater Pumping Systems 35% Residential Surface Pumps 19% Irrigation & Industrial Surface Pumps 19% 13 End Markets – % of Water Systems Sales (P9YTD)
Slide 14: Water Systems Sales End Markets
Water Systems Sales Irrigation & Industrial Groundwater Pumping Systems 27% Residential Groundwater Pumping Systems 35% Residential Surface Pumps 19% Irrigation & Industrial Surface Pumps 19% 14 End Markets – % of Water Systems Sales (P9YTD) #2 Global Supplier to residential water pumping systems di
Slide 15: Fixed Cost Leverage
Fixed Cost Leverage 15 2009 2010 2011 2012 LTM Q3 2013 CAGR 2009-13 Sales $626 $714 $821 $891 $941 10.7% Fixed Cost(1) $217 $241 $263 $279 $294 7.9% % 34.7% 33.8% 32.0% 31.3% 31.2% Operating Income(1) $50 $72 $96 $115 $124 25.5% % 8.0% 10.1% 11.7% 12.9% 13.2% Key is Continued Sales Growth ($ M) 1 Af
Slide 16: Water Systems Growth Strategy
Water Systems Growth Strategy • Geographic Expansion • Product Line Extensions • Acquisitions – Platform – Bolt-on 16
Slide 17: Geographic Expansion – Global Aquifer Map
Geographic Expansion – Global Aquifer Map 17 The World’s aquifers contain 50 times as much fresh water as all the World’s lakes, ponds, rivers, and streams combined.
Slide 18: Geographic Expansion – New International Distribution
Geographic Expansion – New International Distribution 18
Slide 19: Geographic Expansion – Sales in Developing Regions
Geographic Expansion – Sales in Developing Regions 19 2010 $0 $50 $75 $100 $125 $150 $175 $200 $225 2004 2005 2006 2007 2008 2009 $55 M $77 M $94 M $135 M $204 M $188 M $228 M % of Total Franklin Water Sales 16% 38% $25 2011 $270 M $250 $275 $300 $286 M 2012 2013 fcst.(1) $325 $295 M 1 2013 Forecast
Slide 20: Product Development Facility
Product Development Facility 20 Labs Comparison: Lab ft2 Water ft2 Test Sites Motor Testing Bluffton Lab 14,000 5 locations 500 39 350 hp Fort Wayne Lab 25,600 1 location 1,900 120 700 hp New State-of-the-Art Engineering Center of Excellence
Slide 21: Product Development Process
Product Development Process CONCEPT MODELING SIMULATION 200 250 300 350 0 500 1000 H ea d (Ft ) Flow (GPM RESULTS TESTING PROTOTYPE OPTIMIZE GEOMETRY 21
Slide 22: Product Line Extension – Oil and Gas Deliquification
Product Line Extension – Oil and Gas Deliquification 22 Gas Line Water Line Typical Water Well Depth (40 to 600 feet) Typical Oil/Gas Well Depth (2000 to 6000 feet)
Slide 23: Product Line Extension – Oil and Gas Deliquification
Product Line Extension – Oil and Gas Deliquification • Franklin System Advantages: – Lower cost – Superior Durability – Superior system controls • Market Focus – US/Canada, Australia, & South Africa – Coal bed methane wells, wet shale wells, & oil stripper wells – Vertical & horizontal wells less th
Slide 24: Water Systems – Residential Wastewater Pumps
Water Systems – Residential Wastewater Pumps • US/Canada Addressable Market ≈ $450 M (excluding Big Box retail)(1) • Franklin Market Rank = #2 • Last Year: Product Line Redesign – Improved Efficiency and Reduced Cost 24 1 Franklin management estimates
Slide 25: Water Systems – Residential Wastewater Pumps
Water Systems – Residential Wastewater Pumps • US/Canada Addressable Market ≈ $450 M (excluding Big Box retail)(1) • Franklin Market Rank = #2 • This Year: Product line extensions – Larger non-clog/grinder Pumps • Enter municipal market 25 1 Franklin management estimates
Slide 26: Water Systems – Vertical Boosters
Water Systems – Vertical Boosters • Improved efficiency • Superior features • Greater serviceability 26
Slide 27: Water Systems – Drives & Controls
Water Systems – Drives & Controls 27 • Leading supplier of drives and controls for low horsepower groundwater pumping applications • Cerus acquisition – technology leader in higher horsepower fluid transfer applications • Sell Cerus drives and controls with Franklin high horsepower pumps and motors
Slide 28: Water Systems – High Efficiency
Present Motor Eff. Water Systems – High Efficiency New 6” Motor - Unique High Efficiency Design 28
Slide 29: Water Systems – Solar Driven Water Systems
Water Systems – Solar Driven Water Systems 29
Slide 30: Water Systems – Mobile Pumping Systems
Water Systems – Mobile Pumping Systems • $1 B Global Addressable Market(1) • #4 Global Supplier • Pioneer Pump Sales Growth Rate: 18%/year (2006-2012) • Superior Efficiency, Durability, and Ease of Maintenance 30 1 Franklin management estimates
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Slide 32: Pioneer Pump Rental in UK
Pioneer Pump Rental in UK 32 • Opened first branch – Q2, 2013 • Acquired small competitor – Q3, 2013 • Breakeven – Q1, 2014
Slide 33: Water Systems 3-year growth rates
Water Systems 3 year sales growth rate: 10% per year 3 year operating income growth rate: 15% per year(1) 3 year operating income margin improvement: 15%(1) to 18%(1) 33 (for the 3 year period ending LTM 9/30/2013) 1 After non-GAAP adjustments – See 10Q For reconciliation
Slide 34: Fueling Systems
Fueling Systems 34 Fuel Management Systems #2 Global Supplier Vapor Recovery Systems #1 Global Supplier Piping & Containment Systems #1 Global Supplier Pumping Systems #1 Global Supplier Global Addressable Market: $1 B(1) 1 Franklin management estimates
Slide 35: Fueling Systems – Global Growth Up 5.8x
Fueling Systems – Global Growth 35 Up 5.8x North America 2000 2012 20 M 15.2 M 3 M 17.4 M China, India & Latin America 1 Source: Scotiabank Group Global Auto Report New Passenger Vehicle Sales(1)
Slide 36: Fueling Systems – Global Growth
Fueling Systems – Global Growth(1) 36 United States Rest of World Number of Stations 175,000 550,000 Stations with pressure pumping technology 97% 23% Stations with vapor recovery systems(2) 95% 17% Stations with fuel management systems 75% 35% Stations with flexible piping 45% 35% 1 Franklin manage
Slide 37: Fueling Systems – Global Growth
Fueling Systems – Global Growth 37 • Inventory management • Leak detection • Inventory measurement • Fraud prevention • Low-cost Adapting US Technologies to Needs of International Markets
Slide 38: Fueling Systems – Global Growth Bolt-On Acquisition
Fueling Systems – Global Growth 38 Bolt-On Acquisition
Slide 39: Fueling Systems – Segment Sales
Fueling Systems – Segment Sales 39 LTM Q3 2013 2004 $71 M $195 M $17 M $85 M % International 24% 44% International Sales
Slide 40: Fueling Systems 3-year growth rates
Fueling Systems 3 year sales growth rate: 18% per year 3 year operating income growth rate: 25% per year(1) 3 year operating income margin improvement: 18%(1) to 21%(1) 40 (for the 3 year period ending LTM 9/30/2013) 1 After non-GAAP adjustments – See 10Q For reconciliation
Slide 41: Acquisitions
Acquisitions • Fragmented Global Markets – Platform and Bolt-on Acquisition Opportunities • Franklin Acquisition Profile (Past 10 Years) – Acquisitions per Year – 1.3 – Average Purchase Price – $32 M – Average EBITDA Multiple – 7.2 X 41
Slide 42: Baird Industrial Conference November 2013
Baird Industrial Conference November 2013
Franklin Electric — Baird Industrial Conference November 2013 on 6ix