Franklin Electric Co., Inc. · NASDAQ:FELE
Franklin Electric — KeyBanc Investor Conference 2009
38 slides from Franklin Electric's conference presentation, Jun 2, 2009
Slide 1: KeyBanc Investor Conference
KeyBanc Investor Conference Boston, Massachusetts – June 2, 2009
Slide 2: Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
“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, expense reductions, liquidity expectations, business goals and sales growth, involve
Slide 3: Topics
Topics Page Financial Summary – 2008 and 1st Quarter 2009 4 Sales Outlook 13 Growth Strategies: Water 14 Fueling 24 3
Slide 4: 2008 Financial Highlights
2008 Financial Highlights 2008 vs. 2007 Sales $745.6 M +24% Earnings per share $1.90 +56% Water sales $557.0 M +19% Water operating earnings $67.6 M +19% Fueling sales $188.6 M +40% Fueling operating earnings $49.4 M +100% Interest coverage ratio1 9.3X +4% Dividends per share $0.50 per year +6% 1) E
Slide 5: Franklin Financial Performance vs. Global Competitors 2008
Franklin Financial Performance vs. Global Competitors 2008 % Sales % Op. Income % OI/Avg Growth Growth Assets Pentair (Water) -1.1% -8.8% 9.4% ITT (Fluid Technologies) 9.4% 9.7% 12.1% Grundfos 13.1% -17.2% 7.8% Ebara (Fluid Machinery) 5.1% 25.6% 1.1% AO Smith (Electrical) -4.0% 4.1% 7.5% Danaher (Pr
Slide 6: 200 Best Run Small Companies in America
Selected by Forbes Magazine for 6 years as one of the “200 Best Run Small Companies in America” 6
Slide 7: 1st Quarter 2009 Financial Summary
1st Quarter 2009 Financial Summary 1st Qtr. 2009 Change vs. 2008 Sales $149.8 M - 15% EPS $0.19 - 46% (before Restructuring Expense) 7
Slide 8: Sales Bridge
Sales Bridge 1st Quarter 2008 vs. 1st Quarter 2009 $176 mil ($13.3 mil) ($16.2 mil) ($3.4 mil) $6.7 mil $149.8 mil Foreign Exchange US/Canada Fueling International Water Water Sales ($) • Housing starts & customer inventory reductions • Partially offset by Franklin share growth 1st Quarter 1st Quart
Slide 9: Recession Impact on US/Canada 4" Groundwater Pump Systems
Recession Impact on US/Canada 4” Groundwater Pump Systems Industry Unit Shipments Source: Trade Association Data 9
Slide 10: Recession Impact on US/Canada Larger than 4" Groundwater Pumps
Recession Impact on US/Canada Larger than 4” Groundwater Pumps Industry Unit Shipments Source: Trade Association Data 10
Slide 11: Recession Impact on US/Canada Sump, Sewage, Effluent and Utility Pumps
Recession Impact on US/Canada Sump, Sewage, Effluent and Utility Pumps Industry Unit Shipments Source: Trade Association Data 11
Slide 12: Response to Global Recession
Response to Global Recession • Customer Focus – Best Quality, Service & Value • Reduce Cost 2009 Full Year Cost 1st Quarter 2009 Cost Reduction vs. 20082 Reduction vs. 2008 Direct Labor & Material -$8 M to -$12 M +$1.5 M SG&A Spending1 -$8 M -$0.9 M Fixed Manufacturing Spending1 -$7 M Flat Total -$2
Slide 13: Sales Outlook
Sales Outlook Water Systems Segment • Q2 and Q3 sales decline at lower rate than in Q1 • Q4 sales flat to up • Margins improving in back half Fueling Systems Segment • Sales decline for balance of the year due to recession and wind-down of California surge 13
Slide 14: Strategic Focus
Strategic Focus Residential, Agricultural & Commercial Water Systems Petroleum Equipment $5.2 B global market potential $1.2 B global market potential • Brand equity • Leadership position • Growing globally • Fragmented customer base • Fragmented supply base * Current Franklin management estimates 1
Slide 15: Product/Market Sales Mix
Product/Market Sales Mix 2008 Sales - $745.6 mil Fueling US Water Systems Systems 25% 33% International Water Systems 42% 15
Slide 16: Water Systems
Water Systems Product Line Extensions and Geographic Expansion 1950s 1980s 2005 2006 Today Franklin Submersible Sub Motors, Controls Sub Motors, Controls, Sub Motors, Controls, Drives, Ongoing Product Line Motor and Drives Drives and Clean water and Extension and Global Clean water Pumps Wastewater
Slide 17: Water Systems Growth Initiative
Water Systems Growth Initiative Product Line Extensions and Geographic Expansion Existing Products Product Line Extensions Existing Geographic Markets Existing Geographic Markets • Work with distributors who carry Franklin submersible motor products to earn a growing pump market position Existing Pr
Slide 18: Residential, Agricultural & Commercial
Residential, Agricultural & Commercial US/Canada Pumping Systems Product Line Extensions (2004-2008) Year of Franklin Entry Product Categories Before 2004 2005 2006 2007 2008 Submersible Motors, Drives & Controls X X X X X 4” Submersible Pumps X X X X 6-8” Pump Ends X X X X Jet Pumps X X X X Small C
Slide 19: Water Systems Growth Initiative
Water Systems Growth Initiative Product Line Extensions and Geographic Expansion Existing Products Product Line Extensions Existing Geographic Markets Existing Geographic Markets • Work with distributors who carry • Differentiated Products Franklin submersible motor • Constant Pressure Systems produ
Slide 20: Residential Constant Pressure Systems
Residential Constant Pressure Systems Franklin U.S. Market Potential • Franklin residential well installed base: 11 million wells (without constant pressure) • Provide constant pressure without replacing existing pump and motor • Free “Test Drive” option • Estimated 80%+ buy after “Test Drive” • Fra
Slide 21: Inline Pressure Boosting Systems
Inline Pressure Boosting Systems Franklin U.S. Market Potential • Target homeowners with lower than desired incoming pressure (municipal or water well) • Provides boosted and constant pressure over a wide range of flow demands • Low cost, quiet, compact & easy to install • Proprietary Franklin drive
Slide 22: Water Systems Growth Initiative
Water Systems Growth Initiative Product Line Extensions and Geographic Expansion Existing Products Product Line Extensions Existing Geographic Markets Existing Geographic Markets • Work with distributors who carry • Differentiated Products Franklin submersible motor • Constant Pressure Systems produ
Slide 23: Water Systems: International Sales Growth
Water Systems International Sales Growth 23
Slide 24: Fueling Systems
Fueling Systems Product Line Extensions and Geographic Expansion 1960s 1980s 1990s 2000s Today Franklin Explosion-Proof FEPetro Pumps FEPetro Pumps Adjacent Products Ongoing Product Line Submersible Motor and Drives Extension and Geographic Expansion Franklin $0.5 M $1 M $21 M $92 M $189 M Fueling (
Slide 25: Fueling Systems California Vapor Control Mandate
Fueling Systems Recent Product Line Extensions • Vapor Control Systems – 2006 (Healy acquisition) • Vapor Monitoring Systems – 2007 (internal development) California Vapor Control Mandate • 10,550 Vapor Control Systems: • $18,000 per station • As of 5/1/09 – 75-80% shipped to market • Franklin share
Slide 26: Fueling Systems Growth Initiative
Fueling Systems Growth Initiative Product Line Extensions and Geographic Expansion Existing Products Product Line Extensions Existing Geographic Markets Existing Geographic Markets • Replacement Business • Pressure Systems for Europe • Vapor Recovery India/China Existing Products Product Line Extens
Slide 27: Replacement Business
Replacement Business • Nozzles and hanging hardware • Limited product life due to wear and tear • $10-$20 M sales by 2010 and growing as installed base increases and ages 27
Slide 28: Pressure Systems for Europe
Pressure Systems for Europe • Vast majority of European stations are ‘suction’ • New standard for ‘pressure’ systems, Franklin will be first approved system • Major multi-national oil company has mandated pressure for all new installs and upgrades 28
Slide 29: Vapor Recovery India/China
Vapor Recovery India/China • Air quality is a continued and growing concern • Less than 5% of stations have stage II • Franklin is market leader in both countries • With over 60,000 stations yet to convert, market opportunity exceeds $350 M 29
Slide 30: Fueling Systems Growth Initiative
Fueling Systems Growth Initiative Product Line Extensions and Geographic Expansion Existing Products Product Line Extensions Existing Geographic Markets Existing Geographic Markets • Replacement Business • European Community Vapor • Pressure Systems for Europe Recovery Mandate (2018) • Entry Level T
Slide 31: European Community Vapor Recovery Mandate (2018)
European Community Vapor Recovery Mandate (2018) • 118,000 stations in EC • 60,000 already converted to vapor control • 40,000 to convert by 2018 • Annual nozzle market potential $60 M – expected to grow to $100 M + with vapor control conversion 31
Slide 32: Colibri Inventory Management System
Colibri Inventory Management System • Small, fast, low cost inventory management system based on proven digital technology • Features for US small operators and developing regions: 1. Remote inventory monitoring/control 2. Reconciliation (pay only for gallons delivered) 3. Product adulteration monit
Slide 33: Slide 33
Slide 34: Appendix
la Franklin Electric © © ve) . . t \ App endix «
Slide 35: Earnings and Earnings Per Share Before and After Restructuring Expense
Earnings and Earnings Per Share Before and After Restructuring Expense (in Million US $ except Earnings Per Share) For the First Quarter 2008 2009 Change Net Income Attributable to FE Co., Inc. $8.1 $3.8 -53% Restructuring Expense (Before Tax) $0.1 $0.9 800% Average Fully Diluted Shares Outstanding
Slide 36: EBITDA Reconciliation to Net Income (Unaudited)
EBITDA Reconciliation to Net Income (Unaudited) (in Million US $) For Fiscal Year Ended 2007 2008 Net Income (as reported) $28.7 $44.1 Depreciation and Amortization $20.4 $24.2 Interest Expense, Net $8.1 $11.0 Provision for Income Taxes $15.4 $22.9 Estimated EBITDA for Acquistions (a) $4.4 Earnings
Slide 37: Operating Income Before and After Restructuring Expense
Operating Income Before and After Restructuring Expense (in Million US $ except Earnings Per Share) For Fiscal Year Ended 2007 2008 Change Operating Income Attributable to FE Co., Inc. $49.2 $76.7 55.9% Restructuring Expense (Before Tax) $3.9 $2.2 -43.6% Operating Income Before Restructuring Expense
Slide 38: Slide 38