Franklin Electric Co., Inc. · NASDAQ:FELE
Franklin Electric — Baird Industrial Conference 2009
28 slides from Franklin Electric's conference presentation, Nov 10, 2009
Slide 1: Baird Industrial Conference
Baird Industrial Conference November 10, 2009 V2 1
Slide 2: 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, expense reductions, liquidity expectations, business goals and sales growth, involve
Slide 3: Business Overview and Financial Overview
Baird Industrial Conference November 10, 2009 Business Overview Scott Trumbull Financial Overview John Haines 3
Slide 4: Financial Summary
Financial Summary Full Year 3Q 2008 YTD 2009 Sales $746 M (up 24%) $481 M (down 19%) Net Income (Before Restructuring) $45.5 M (up 56%) $22.1 M (down 46%) Cash Flow from Operations $44.4 M $88.3 M Net Debt/Equity 40% 21% Contribution Margin 42.3% 42.7% Fixed Spending per month $20 M $18 M 4
Slide 5: Strategic Focus
Strategic Focus Residential, Agricultural & Commercial Water Systems Fueling Equipment $5.1 B global market potential $1.0 B global market potential • Brand equity • Leading market position • Global growth potential • Fragmented customer base • Fragmented competitor base 5
Slide 6: Product Sales Mix
Product Sales Mix 3Q YTD 2009 Sales 6
Slide 7: Geographic Sales Mix
Geographic Sales Mix 3Q YTD 2009 Sales 7
Slide 8: Franklin Water Systems Sales in Developing Regions 2003-2008
Franklin Water Systems Sales in Developing Regions 2003-2008 ($ M) 8
Slide 9: Global Market Leadership
Global Market Leadership Major Product Categories Franklin Market Water Systems Share Rank Groundwater Pumping # 1 (Global) Residential Wastewater Pumping # 2 (North & South America) Fueling Systems Fuel Pumping & Containment Systems # 1 (Global) Fuel & Vapor Management Systems # 2 (Global) 9
Slide 10: Growth Strategy
Growth Strategy Product Line Extensions & Geographic Expansion Water Systems Franklin Motors, Controls Motors, Pumps, Drives Adjacent Pumping $5.1 B Global Submersible Motor and Drives and Controls Systems Addressable 1950s 1990s 2004 2006 Market Fueling Systems Franklin FE Petro FE Petro Turbine Ad
Slide 11: Residential Water Systems
Residential Water Systems Homeowner Dissatisfaction • Low and fluctuating water pressure – Well owners – Municipal water systems users 11
Slide 12: Water Systems - Product Line Extensions
Water Systems - Product Line Extensions Homes on Water Wells • Pressure tanks: 20 psi differential • Alternative well solutions = $4,500 • Franklin installed base: 12 million homes • Homeowner cost installed = $1,000 • Franklin revenue/unit: + $400 Launch date: March 2010 Homes on Municipal Water •
Slide 13: Colibri Fuel Management System for Developing Countries
Colibri Fuel Management System TM for Developing Countries • Electronic inventory control and tank leak detection • Developing countries – 200,000 stations • Durable, easy to install, multilingual, easy to use • Installed cost about 40% less than competitive systems Launch date: October 2009 • Frank
Slide 14: Manufacturing Headcount in Low Cost Regions
Manufacturing Headcount In Low Cost Regions 14
Slide 15: Linares, Mexico
Linares, Mexico Plant Complex 2007 - Business Directions Initiative – Platinum Era Quality Award (Best Manufacturing Facility in Mexico) Motor 2008 - Great Places to Work Institute – #1 Manufacturing Pump Facility in Mexico 2009 - Finalist, Industry Week’s – Best Plants in North America 15
Slide 16: Opportunities for growth and earnings improvement as markets stabilize
Opportunities for growth and earnings improvement as markets stabilize • Fueling – Positioning beyond the California sales surge • Water – Operating leverage and margin improvement 16
Slide 17: Fueling Systems – Beyond California
Fueling Systems – Beyond California Sales ($ M) • Carryover California sales • California replacement sales • Recovering base business • International sales • New products Operating Income $8.2 M $15.0 M $26.1 M $49.5 M $26.3 M % Operating Income 13.0% 16.3% 19.3% 26.2% 18.9% 17 - 19% 17
Slide 18: Water Systems - Sales Bridge
Water Systems - Sales Bridge 9 mos. 2008 vs. 9 mos. 2009 ($ M) 18
Slide 19: North American Residential Pump Market
North American Residential Pump Market Industry Unit Shipments 2008-2009 (000 units) 2009 % 2008 (LTM June) Change Wastewater Pumps(1) 3,365 2,744 (18%) Groundwater Pumps(2) 1,302 1,091 (16%) Total Residential 4,667 3,835 (17%) • Housing starts • Trade inventory • Consumer spending Franklin 2008-200
Slide 20: Water Systems Economics
Water Systems Economics Full year 2008 and LTM September 2009 Full Year LTM Sept. • Reduce raw 2008 2009 material costs • Stable pricing Sales $557 M $494 M • Fixed spending reductions Operating Income $71 M $61 M % Operating Income 12.7% 12.3% Q3 % Contribution Margin 41.5% 43.1% 44% Fixed Spending
Slide 21: Water Systems Pro-forma Operating Income
Water Systems Pro-forma Operating Income Sales Recover and Q3 Margins and Fixed Cost Pro-forma Partial Pro-forma Full Full Year LTM Sept. Sales Recovery Sales Recovery 2008 2009 Q3 Margins/Fixed Q3 Margins/Fixed Sales $557 M $494 M $525 M $557 M % Contribution Margin 41.5% 43.1% 44% 44% Contribution
Slide 22: Balance Sheet Strength
Balance Sheet Strength Strong cash generation used to pay down debt 22
Slide 23: Summary
Summary • Strong brand in attractive businesses • Technical leader in our specialties • Large and growing presence in developing regions • World class, low-cost manufacturing footprint • Strong balance sheet • Positioned to achieve leveraged earnings growth as markets recover 23
Slide 24: Appendix: Non-GAAP Disclosures
Appendix Non-GAAP Disclosures 24
Slide 25: Earnings and Earnings Per Share Before and After Restructuring Expense
Earnings and Earnings Per Share Before and After Restructuring Expense For the Third Quarter For the First Nine Months (in millions except Earnings Per Share) 2008 2009 Change 2008 2009 Change Net Income attributable to FE Co.,Inc. $ 17.3 $ 8.6 -50% $ 40.7 $ 18.3 -55% Restructuring Expense (Before T
Slide 26: Net Sales For the Third Quarter and First Nine Months
Net Sales For the Third Quarter For the First Nine Months (in millions) Water Fueling Consolidated Water Fueling Consolidated Sales for 2008 $ 154.6 $ 61.2 $ 215.8 $ 448.7 $ 144.8 $ 593.5 Acquisitions $ 6.5 $ - $ 6.5 $ 18.9 $ - $ 18.9 Foreign Exchange $ (5.4) $ (0.1) $ (5.5) $ (26.9) $ (0.9) $ (27.8
Slide 27: Operating Income and Margin Percentages Before and After Restructuring Expense
Operating Income and Margin Percentages Before and After Restructuring Expense (in millions) For the Third Quarter 2009 For the First Nine Months 2009 Water Fueling Corporate Consolidated Water Fueling Corporate Consolidated Reported Operating Income $ 20.8 $ 3.9 $ (9.2) $ 15.5 $ 45.9 $ 15.8 $ (27.6
Slide 28: Net Contribution Margin – Water Systems only
Net Contribution Margin – Water Systems only Water Systems (million $) Actual LTM Sept. 2008 2009 Change Net Sales $ 557 $ 494 $ (63) Operating Income Before restructuring expense $ 71 $ 61 $ (10) Total fixed costs (a) $ 160 $ 152 $ 8 Net Contribution $ 231 $ 213 $ (18) as a % of sales 41.5% 43.1% 1