Franklin Electric Co., Inc. · NASDAQ:FELE
Franklin Electric — KeyBanc Conference June 2008
37 slides from Franklin Electric's conference presentation, Jun 5, 2008
Slide 1: KeyBanc Conference June 2008
KeyBanc Conference June 2008 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 the Company’s financial results, business goals and sales growth, involve risks and uncertainties, including but not limited to, risks and
Slide 3: Topics
Topics • Overview – Strategy for Growth • Review Recent Financial Performance • Outlook 3
Slide 4: Strategic Focus
Strategic Focus Premier Global Supplier of Pumping Systems and Components to the Residential, Agricultural and Commercial (RAC) Water Systems and Petroleum Equipment Distribution Channels 4
Slide 5: Strategic Focus
Strategic Focus $6.1 Bil Addressable Market Residential, Water Pumping Installing Agricultural & Distributors Systems Producers Contractors Commercial End Users $1 Bil Addressable Market Petroleum Installing Filling Station Equipment Distributors Contractors Owners Producers • Growing Global Demand
Slide 6: Growth Strategy
Growth Strategy Product Line Extensions and Geographic Expansion Water Systems Franklin Motors, Controls Motors, Pumps, Drives Adjacent Pumping Global Submersible Motor and Drives and Controls Systems Sales 1950s 1990s 2004 2006 Opportunity Fueling Systems Franklin FE Petro FE Petro Turbine Adjacent
Slide 7: Franklin Product Mix
Franklin Product Mix Annualized Sales Run Rate Approx. $750 mil Water Systems Fueling Systems 76% 24% 7
Slide 8: Water Systems
Water Systems Core and Complimentary Products Complimentary Pumping Systems • Sump Pumps • Effluent Pumps • Condensate Pumps • Irrigation Pumps • Sewage Pumps • Pressure Boost Pumps • Utility Pumps Total Addressable Market $3.8 Bil Core Groundwater Pumping Systems Total Addressable Market $2.3 Bil 8
Slide 9: Business Dynamic
Business Dynamic Groundwater Capability Facilitates Building Distribution and Sales of Complimentary Products and Vice Versa Position in Groundwater Facilitates Sales and Distribution Growth of Complimentary Pumping Systems Growing Supply Base of Complimentary Pumping Systems Facilitates Sales and D
Slide 10: Franklin Global Market Position
Franklin Global Market Position Groundwater Pumping Systems % of $2.3 bil Global Addressable Market* Franklin Electric 16-18% Competitor A 11-13% Competitor B 10-11% Competitor C 9-11% Competitor D 3-4% All Others 44-50% Total 100% * Source – Franklin Management Estimates 10
Slide 11: Franklin Global Market Position
Franklin Global Market Position Residential, Agricultural and Commercial Pumping Systems % of $6.1 bil Global Addressable Market* Competitor A 13-16% Competitor B 10-12% Franklin Electric 9-11% 5-6% in 2004 Competitor C 6-8% Competitor D 2-3% All Others 53-59% Total 100% * Source – Franklin Manageme
Slide 12: Fueling Systems
Fueling Systems Product Line 12
Slide 13: Fueling Systems Growth
Fueling Systems Growth Process Control Products and Services: • Vapor Control and Monitoring • Variable Speed Pumping • Leak Detection • Inventory Control • Product Adulteration Detection 13
Slide 14: Franklin Fueling Global Market Position
Franklin Fueling Global Market Position Fueling Equipment* % of $1 bil Global Addressable Market** Franklin Electric 17% Competitor A 12-14% Competitor B 10-12% All Others 57-61% Total 100% * Excludes Dispensing Systems ** Source – Franklin Management Estimates 14
Slide 15: Franklin Sales Growth
Franklin Electric 2 Franklin Sales Growth 800 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Annualized) 15
Slide 16: Franklin EPS
Franklin EPS 1st Quarter 2008 up 67% vs. 1st Quarter 2007 16
Slide 17: Franklin Operating Units
Franklin Operating Units Sales Mix 2007 Operating Earnings 2007 Operating Earnings Down 65% Up 65% 2007 Operating Earnings 2007 Operating Earnings Up 55% Up 17% * Asia/Pacific, Europa, South Africa 17
Slide 18: Americas Water Systems
Americas Water Systems Business Model Before 2004 D C W P I O E U S N L Submersible Motors, M T T L Franklin Drives & Controls P R I R A Electric O B C O W E U T N M T O E s O R R R S S • Pump Industry Consolidation Master Distributors • 2 OEMs Control 70% of our Sales in North America 18
Slide 19: Americas Water Systems
Americas Water Systems Business Model After 2004 Submersible Motors, Controls, Drives , & Pumps D C W P I O E U S N L Small Submersible M T T L Franklin Motors & Controls P R I R A Electric O B C O W E U T N M T O E s O R R R S S Discontinue supply to major OEMs 1/1/07 19
Slide 20: Americas Water Systems
Americas Water Systems Sales Mix Stockpile • 2 major199 OEMs stockpile an estimated $40 mil of • Legal settlement – Franklin Franklin197 motors agrees to supply 4” motors to major OEMs • Major OEM threatens to until 1/1/07 displace Franklin • Franklin discontinues • Industry consolidation • Franklin
Slide 21: Americas Water Systems
Americas Water Systems Sales Mix Stockpile 220- 230 199 197 • Franklin sales to all other customers growing $20 to $30 mil per year heading into 2008 (Forecast) 21
Slide 22: North America Water Systems Industry
North America Water Systems Industry 4” Pump/Motor + Pump End Shipments (Units*) 2006 2007 % change Total Industry (WSC) 989,000 884,000 (10.6%) 2007 Franklin Shipments Up 32% 2007 2 Major OEMs Estimated Down 25% Response: Price Discounting * Source: Water Systems Council and Franklin Management Est
Slide 23: 2007 New Product and Facility Initiatives
2007 New Product and Facility Initiatives TRI-SEAL VersaJet New Linares Pump Plant Madison Consolidation Grant County Expansion 23
Slide 24: 2007 Earnings Performance
2007 Earnings Performance • Fueling, International Water and Water Transfer Systems Operating Earnings • Up 46% • Americas Water Systems Issues: • Stockpile Liquidation • Housing Recession • Strategic Initiatives 24
Slide 25: 2008 Earnings Improvement
2008 Earnings Improvement • Organic Sales Growth • Fixed Spending Leverage • Cost Reduction Initiatives • Accretive Acquisitions 25
Slide 26: 2008 Earnings Improvement: Organic Sales Growth
2008 Earnings Improvement Organic Sales Growth 2008 Organic Sales 2008 Growth Guidance 1st Quarter Global Water Systems 10% 12% Fueling Systems 30% 31% Total 12% 17% Overall Sales Growth 25% 34% (including acquisitions) 26
Slide 27: Americas Water Systems
Americas Water Systems Organic Sales Growth Stockpile 220- 230 199 197 (Forecast) 27
Slide 28: Water Systems Sales in Developing Regions
Water Systems Sales in Developing Regions* 2002 – 2008 Forecast ($ 000s) * Latin America/Brazil, Asia/Pacific, Middle East, Africa, Eastern Europe 28
Slide 29: Fueling Systems Organic Sales Growth in 2008
Fueling Systems Organic Sales Growth in 2008 Environmental Legislation – California Vapor Control Regulations • Vapor Control System Purchases 4/30/08 to 4/30/09 - $135 mil* • Vapor Monitoring System Purchases 4/30/08 to 10/1/10 - $60 mil* • Franklin 1 of Only 2 Approved Suppliers • Other Countries/
Slide 30: 2008 Earnings Improvement
2008 Earnings Improvement Fixed Spending Leverage* ($ mil) 29.2% 31.7% 29.5% $14 - 17 mil Cost Improvement * Fixed Spending = (SG & A Spending – Sales Commissions) + Fixed Manufacturing Spending + Restructuring Spending 30
Slide 31: 2008 Earnings Improvement
2008 Earnings Improvement Cost Reduction Initiatives Start to “Kick In” • Transition to New 4” Pumps Complete (2nd Qtr. 2008) • New Linares, Mexico Pump Plant Start-up (2nd Qtr. 2008) • Fueling Consolidation in Madison (4th Qtr. 2007) • Wittlich & Siloam Springs Rightsizing (During 2007) $7 - 10 mil
Slide 32: Accretive Acquisitions
2008 Earnings Improvement Accretive Acquisitions Pump Brands Monarch Pumps Bombas Schneider (Southern Africa) (Canada & US) (Brazil) Sales $35 Mil Sales $33 Mil Sales $44 Mil 32
Slide 33: 2008 Earnings Impact
2008 Earnings Impact • 10% Organic Growth – Water • 30% Organic Growth – Fueling • Fixed Spending Leverage (220 BPS) • Payback on Strategic Initiatives • Accretive Acquisitions 33
Slide 34: 1st Quarter EPS
1st Quarter EPS 2000 – 2008 • Raw Material and Freight Inflation 34
Slide 35: Franklin Changing Global Profile
Franklin Changing Global Profile ($ mil) 2004 2008 Products Motors Pump Systems/Components Customers Top 2 All Other Geographic Sales Developing Regions Developed Regions Manufacturing Headcount US & Western Europe Low-Cost Countries 35
Slide 36: Franklin Electric Dividend History
Franklin Electric Dividend History 2008 – Dividend Increased for 16th Consecutive Year 36
Slide 37: o c p o W in Frankl
o c p 0 o W in Frankl