UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q _________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 Commission file number 0-362 FRANKLIN ELECTRIC CO., INC. (Exact name of registrant as specified in its charter) Indiana 35-0827455 (State or other jurisdiction of incorporation or organization) 9255 Coverdale Road OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIE ...

Financial Data and Key Metrics Changes - The company reported consolidated sales of $587.4 million for Q2 2025, an 8% increase year over year, driven by higher volume and pricing across all segments [17][11] - Fully diluted earnings per share were $1.31, up from $1.26 in the prior year, reflecting a 6 cent increase [17] - Consolidated operating income reached $88.1 million, an 11% increase from $79.1 million in the previous year, with operating income margin improving to 15% from 14.6% [19][11] - Gross profit was $211.8 million, up from $199.8 million, but gross margin decreased by 70 basis points to 36.1% [18][11] Business Line Data and Key Metrics Changes - Water Systems segment sales increased by 8% year over year, benefiting from favorable pricing and volume, although operating income decreased slightly to $61.8 million due to margin pressures [12][21] - Energy Systems sales grew by 6%, with operating income rising to $29.1 million and operating income margin improving to 37.5% [22][23] - Distribution segment sales increased by 5% to $200 million, with operating income rising significantly to $16.1 million, reflecting a 300 basis point margin improvement [21][14] Market Data and Key Metrics Changes - Sales in the U.S. and Canada for Water Systems increased by 5%, while international sales rose by 12%, with foreign currency translation negatively impacting sales by 1% [19][20] - The company noted a healthy backlog across all segments, with book-to-bill ratios above one, indicating strong order trends [51][86] Company Strategy and Development Direction - The company is focused on innovation, global portfolio expansion, and strengthening its leadership position in key markets, with a commitment to operational efficiency and capital deployment [27][28] - Recent acquisitions are performing well, and the company aims to leverage synergies to drive growth and improve standardization across its operations [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining momentum despite global market uncertainties, citing a healthy backlog and encouraging order trends [6][8] - The company plans to maintain its full-year sales expectations and GAAP EPS guidance, while also preparing for potential non-cash impacts from pension terminations [26][96] Other Important Information - The company announced a quarterly cash dividend of 26.5 cents, payable on August 21 to shareholders of record on August 7 [25] - The company repurchased approximately 1.4 million shares for about $120 million during the quarter, indicating a commitment to returning capital to shareholders [24][28] Q&A Session Summary Question: Did Q2 benefit from pull forward orders? - Management indicated there was no significant pull forward from Q3 to Q2, maintaining a traditional order pattern [36] Question: How much did cost actions contribute to margin expansion in the distribution segment? - Cost actions contributed about a third of the 300 basis point margin expansion, with operational efficiency also playing a significant role [37][39] Question: Update on integration at PumpEngine and Barnes? - Integration is progressing well, with strong growth synergies being realized faster than expected [40][41] Question: Insights on the water segment's product mix? - Most mix pressure is product-driven, with a strong order book and backlog expected to support performance in the second half [50][51] Question: What catalysts are expected for the residential market? - Management noted that the residential business is primarily replacement-driven, and new product innovations are expected to help offset weaker housing starts [54][56] Question: Update on M&A pipeline? - The company has an active M&A pipeline and is focused on acquiring products that can drive growth in faster-growing markets [70][72]

Financial Data and Key Metrics Changes - The company reported consolidated sales of $587.4 million for Q2 2025, an 8% increase year-over-year [17] - Fully diluted earnings per share were $1.31, up from $1.26 in the prior year, reflecting a 6 cent increase [17] - Consolidated operating income reached $88.1 million, an 11% increase from $79.1 million in the previous year, with operating income margin at 15%, up from 14.6% [20][24] Business Line Data and Key Metrics Changes - Water Systems segment sales increased by 8% year-over-year, with operating income at $61.8 million, a slight decrease from the previous year due to margin pressures [13][22] - Energy Systems sales grew by 6%, with operating income rising to $29.1 million and operating income margin improving to 37.5% [14][24] - Distribution segment sales were $200 million, a 5% increase, with operating income at $16.1 million, reflecting a 300 basis point improvement in operating income margin [15][22] Market Data and Key Metrics Changes - Sales in markets outside the US and Canada for Water Systems increased by 12%, with foreign currency translation negatively impacting sales by 1% [21] - The company noted a healthy backlog and order trends, indicating stability in demand across various markets [6][65] Company Strategy and Development Direction - The company is focused on innovation, global portfolio expansion, and strengthening its leadership position in key markets [28] - Recent acquisitions are performing well, and the company aims to leverage synergies to enhance operational efficiency [29] - The company plans to maintain its capital return strategy while investing in growth opportunities [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining momentum despite global market uncertainties related to tariffs and commodity inflation [8][26] - The company anticipates a normal market cadence in the second half of the year, with a focus on executing its growth strategy [65][66] Other Important Information - The company ended Q2 2025 with a cash balance of $104.6 million and generated $52 million in net cash flows from operating activities [25] - A quarterly cash dividend of 26.5 cents was announced, payable on August 21 [25] Q&A Session Summary Question: Did Q2 benefit from pull forward orders? - Management indicated there was no significant pull forward from Q3 to Q2, stating it was business as usual [36] Question: How much did cost actions contribute to margin expansion in the distribution segment? - Cost actions contributed about a third of the 300 basis points margin expansion, with operational efficiency also playing a significant role [38] Question: Update on integration at PumpEngine and Barnes? - Integration is progressing well, with strong growth synergies being realized faster than expected [41] Question: Insights on the water segment's product mix? - Most of the mix pressure is product-driven, with a strong order book and backlog expected to support performance in the back half [49] Question: What catalysts are expected for the residential market? - The company is focusing on new product innovations and believes it can offset weaker housing starts through its high service and replacement demand [53] Question: Thoughts on the M&A pipeline? - The company has a robust M&A pipeline and is optimistic about future opportunities to enter faster-growing markets [68] Question: Strength in orders and backlog compared to last year? - Backlogs are up in the low double digits year-over-year, with a book-to-bill ratio above one for all segments [83]

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) This section provides an overview of the company's strong second-quarter 2025 results, segment performance, cash flow, and updated full-year guidance [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) The company reported strong growth in Q2 2025, with an 8% increase in consolidated net sales to $587.4 million and an 11% rise in operating income to $88.1 million. GAAP fully diluted EPS was $1.31, up from $1.26 in the prior year | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $587.4M | $543.3M | +8% | | Operating Income | $88.1M | $79.1M | +11% | | Operating Margin | 15.0% | 14.6% | +40 bps | | GAAP Diluted EPS | $1.31 | $1.26 | +4% | [Management Commentary](index=1&type=section&id=Management%20Commentary) The CEO highlighted strong execution and momentum, with record sales in the Water and Distribution segments and record operating income in the Energy segment. The company is confident for the second half of 2025, citing a healthy backlog and positive order trends, and remains committed to returning capital to shareholders - Achieved **record sales** in both Water and Distribution segments[3](index=3&type=chunk) - The Energy segment delivered **record operating income and margin performance**[3](index=3&type=chunk) - The company is entering the second half of the year with a healthy backlog and positive order trends, reinforcing confidence in sustained performance[4](index=4&type=chunk) - Capital was returned to shareholders during the quarter through dividends and share repurchases[3](index=3&type=chunk) [Segment Performance](index=1&type=section&id=Segment%20Performance) All three business segments reported year-over-year net sales growth in Q2 2025. Water Systems sales grew 8% to $340.8 million, Distribution sales increased 5% to $200.0 million, and Energy Systems sales rose 6% to $77.5 million. Operating income grew significantly in Distribution and Energy, but saw a slight decline in Water Systems | Segment | Q2 2025 Net Sales (in millions) | YoY Change | Q2 2025 Operating Income (in millions) | Q2 2024 Operating Income (in millions) | | :--- | :--- | :--- | :--- | :--- | | Water Systems | $340.8 | +8% | $61.8 | $62.3 | | Distribution | $200.0 | +5% | $16.1 | $9.8 | | Energy Systems | $77.5 | +6% | $29.1 | $26.0 | - Water Systems sales growth was driven by acquisitions, volume, and price realization, partially offset by negative foreign currency translation[5](index=5&type=chunk) - Distribution and Energy Systems sales increases were primarily driven by higher volumes[6](index=6&type=chunk)[7](index=7&type=chunk) [Cash Flow](index=2&type=section&id=Cash%20Flow) For the first six months of 2025, net cash flows from operating activities were $32.0 million, a slight decrease from $35.0 million in the same period of 2024 - Net cash flows from operating activities for the first six months of 2025 were **$32.0 million**, compared to **$35.0 million** in the prior-year period[9](index=9&type=chunk) [2025 Full-Year Guidance](index=2&type=section&id=2025%20Full-Year%20Guidance) The company maintained its full-year 2025 guidance, projecting sales between $2.09 billion and $2.15 billion and EPS between $3.95 and $4.25. This guidance excludes an expected non-cash EPS impact of approximately $1.00 per share from a planned pension plan termination in Q3 | Metric | 2025 Full Year Guidance | | :--- | :--- | | Sales | $2.09B - $2.15B | | EPS | $3.95 - $4.25 | - A planned termination of the US Pension Plan in Q3 is expected to have a non-cash EPS impact of approximately **$1.00 per share**, which is not included in the current guidance[10](index=10&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents the condensed consolidated statements of income, balance sheets, and cash flows, detailing the company's financial position and performance [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The income statement shows a year-over-year increase in net sales to $587.4 million and operating income to $88.1 million for the second quarter. Net income attributable to the company was $60.1 million, up from $59.1 million in Q2 2024, with diluted EPS rising to $1.31 from $1.26 | (In thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $587,434 | $543,258 | | Gross profit | $211,826 | $199,797 | | Operating income | $88,141 | $79,149 | | Net income attributable to Franklin Electric | $60,140 | $59,099 | | Diluted EPS | $1.31 | $1.26 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2025, shows total assets of $2.02 billion, an increase from $1.82 billion at the end of 2024. The growth was primarily driven by increases in receivables, inventories, and goodwill, while cash and cash equivalents decreased | (In thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $104,592 | $220,540 | | Inventories | $573,597 | $483,875 | | Total current assets | $1,036,440 | $964,191 | | Total assets | $2,017,912 | $1,820,606 | | Total current liabilities | $604,117 | $433,727 | | Total equity | $1,265,062 | $1,268,610 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash from operating activities was $32.0 million. The company used $127.3 million in investing activities, mainly for acquisitions ($109.7 million), and $22.1 million in financing activities, which included $129.3 million in share repurchases and $134.9 million in net debt proceeds | (In thousands) | Six Months Ended June 30, 2025 | | :--- | :--- | | Net cash flows from operating activities | $31,997 | | Net cash flows from investing activities | ($127,321) | | Net cash flows from financing activities | ($22,112) | | Net change in cash and cash equivalents | ($115,948) | [Key Performance Indicators](index=7&type=section&id=Key%20Performance%20Indicators) This section provides a detailed analysis of net sales and operating income margins across business segments and geographic regions [Net Sales Summary](index=7&type=section&id=Net%20Sales%20Summary) This section provides a detailed breakdown of Q2 2025 net sales by business segment and geographic region. Consolidated net sales grew 8% to $587.4 million, with Water Systems sales up 8%, Energy Systems up 6%, and Distribution up 5%. Geographically, Latin America showed strong growth of 26% in the Water segment | Q2 2025 Net Sales (in millions) | Water Systems | Energy Systems | Distribution | Consolidated | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $340.8 | $77.5 | $200.0 | $587.4 | | % YoY Change | 8% | 6% | 5% | 8% | [Operating Income and Margin Summary](index=7&type=section&id=Operating%20Income%20and%20Margin%20Summary) The company's consolidated operating margin improved to 15.0% in Q2 2025 from 14.6% in Q2 2024. The Energy segment achieved the highest margin at 37.5%, up from 35.6%. The Distribution segment saw the largest margin expansion, rising from 5.1% to 8.1%, while the Water Systems margin contracted slightly from 19.7% to 18.1% | Q2 Operating Margin | 2025 | 2024 | | :--- | :--- | :--- | | Water Systems | 18.1% | 19.7% | | Energy Systems | 37.5% | 35.6% | | Distribution | 8.1% | 5.1% | | **Consolidated** | **15.0%** | **14.6%** | [Other Information](index=2&type=section&id=Other%20Information) This section provides details on the earnings conference call, forward-looking statements, and an overview of Franklin Electric's business [Earnings Conference Call](index=2&type=section&id=Earnings%20Conference%20Call) The company will host a conference call at 9:00 am ET to review the quarterly results. The announcement provides links for a live webcast and for participants to register for the question-and-answer session. A replay will be available until August 5, 2025 - A conference call to review earnings is scheduled for **9:00 am ET**[11](index=11&type=chunk) - A replay of the call will be available through **9:00 am ET on Tuesday, August 5, 2025**[13](index=13&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This section contains the standard "Safe Harbor" statement, which cautions that forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially. It directs investors to the company's SEC filings, such as the Form 10-K, for a detailed description of these risks - The report includes forward-looking statements that involve risks and uncertainties detailed in the Company's Securities and Exchange Commission filings[14](index=14&type=chunk)[15](index=15&type=chunk) [About Franklin Electric](index=3&type=section&id=About%20Franklin%20Electric) Franklin Electric is a global leader in systems and components for moving water and energy, serving a wide range of applications including residential, commercial, agricultural, and industrial. The company has been recognized in Newsweek's and USA Today's lists for corporate responsibility, trustworthiness, and climate leadership - Franklin Electric is a global leader in the production and marketing of systems and components for the movement of water and energy[16](index=16&type=chunk)

Company Overview - Franklin Electric Co., Inc. is a global leader in the production and marketing of systems and components for the movement of water and energy, serving various sectors including residential, commercial, agricultural, industrial, municipal, and fueling applications [4] Upcoming Earnings Release - The company will release its second quarter 2025 earnings on July 29, 2025, at 8:00 am ET, followed by a conference call at 9:00 am ET to review earnings and business developments [1] - The earnings call will be available via a live webcast, accessible in listen-only mode [1] Participation in Conference Call - Interested participants can register for the question-and-answer portion of the call through a provided link, receiving dial-in information and a PIN for access [2] - It is recommended to join the call 10 minutes prior to the event start [2] Replay Availability - A replay of the conference call will be available from July 29, 2025, through August 5, 2025, at 9:00 am ET [3] Recognition and Awards - Franklin Electric has been recognized in several lists, including Newsweek's America's Most Responsible Companies 2024, Most Trustworthy Companies for 2024, Greenest Companies 2025, Best Places to Work in Indiana 2024, and USA Today's America's Climate Leaders 2024 [4]

Core Insights - Franklin Electric Co., Inc. has appointed Daniela Williams as the new Chief Human Resources Officer (CHRO), who brings extensive experience in driving growth for global organizations [1][2][3] Company Overview - Franklin Electric is a global leader in the production and marketing of systems and components for the movement of water and energy, serving various sectors including residential, commercial, agricultural, industrial, municipal, and fueling applications [4] - The company has received multiple recognitions, including being listed in Newsweek's America's Most Responsible Companies 2024 and USA Today's America's Climate Leaders 2024 [4] Leadership and Strategy - In her role, Williams will set the strategic direction for talent acquisition and management, overseeing employee relations, compensation, benefits, development, and compliance [2] - Williams has a strong background in HR technology, talent development, and global workforce strategy, which will be critical for Franklin Electric's future growth initiatives [3] - Williams previously led HR functions and global talent acquisition at Visteon Corporation, where she also initiated a Women's Leadership Program [3][4] Commitment to Growth - Williams emphasized her focus on supporting decisions that contribute to growth, profitability, and long-term success, aligning with Franklin Electric's dedication to fostering talent [4]

Company Announcement - Franklin Electric Co., Inc. has appointed Jennifer Wolfenbarger as Chief Financial Officer (CFO) and Chief Accounting Officer, aiming to shape the company's financial future and oversee fiscal accountability [1][3] Executive Background - Wolfenbarger has held divisional CFO roles at notable manufacturing companies such as Caterpillar, Stryker, and Owens Corning, where she managed strategic planning and financial reporting for a $4 billion global insulation business [2][3] Leadership Perspective - CEO Joe Ruzynski praised Wolfenbarger's exceptional experience and value-driven approach, highlighting her potential to enhance continuous improvement within the company [3] Community Engagement - Throughout her career, Wolfenbarger has contributed to her community by serving as Treasurer on not-for-profit boards and mentoring at Indiana University's Kelley School of Business [3] Company Overview - Franklin Electric is a global leader in producing and marketing systems and components for water and energy movement, serving various sectors including residential, commercial, and industrial applications [4] Recognition - The company has received accolades such as being listed in Newsweek's America's Most Responsible Companies 2024 and Best Places to Work in Indiana 2024, reflecting its commitment to corporate responsibility and employee satisfaction [4]

Core Points - Franklin Electric Co., Inc. has successfully completed a stock purchase transaction involving 1,200,000 shares at a price of $86.78 per share, reflecting the volume-weighted average price over the preceding five trading days [1] - The transaction was made to provide liquidity for the estate of Patricia Schaefer, who recently passed away, and demonstrates the company's confidence in its financial health and future prospects [2] - The Board of Directors has approved an increase in the company's share repurchase authorization by 1,200,000 shares, allowing for a total of 1,126,635 shares to be repurchased post-transaction [2] Company Overview - Franklin Electric is a global leader in the production and marketing of systems and components for the movement of water and energy, serving various sectors including residential, commercial, agricultural, industrial, municipal, and fueling applications [3] - The company has received recognition in multiple categories, including Newsweek's lists of America's Most Responsible Companies 2024 and Greenest Companies 2025, as well as being named one of the Best Places to Work in Indiana 2024 [3]

Leadership Changes - Jennifer L. Sherman has been elected as Chairperson of Franklin Electric Co., Inc. effective May 2, 2025, for a term expiring at the 2026 Annual Meeting of Shareholders [1] - Mark A. Carano has been appointed as a director effective May 7, 2025, for a term expiring at the 2027 Annual Meeting of Shareholders [1] Experience and Background - Jennifer L. Sherman has been a Director of Franklin Electric since 2015 and is currently the President and CEO of Federal Signal Corporation [1] - Mark A. Carano has extensive experience in finance and manufacturing, having served as CFO of SPX Technologies, Insteel Industries, and Big River Steel, along with 14 years in investment banking [1][2] Strategic Focus - Ms. Sherman expressed confidence in Mr. Carano's financial and manufacturing sector experience, highlighting its potential value for the company's growth through accretive acquisitions [3] Company Overview - Franklin Electric is a global leader in the production and marketing of systems and components for the movement of water and energy, serving various sectors including residential, commercial, agricultural, industrial, municipal, and fueling applications [4] - The company has received recognition in multiple categories, including Newsweek's lists of America's Most Responsible Companies 2024 and Greenest Companies 2025 [4]

Part I [Financial Information](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion for Q1 2025 [Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Franklin Electric's unaudited Q1 2025 consolidated financial statements and explanatory notes [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q1 2025 net sales declined to $455.2 million, with operating income at $44.1 million and diluted EPS at $0.67 | Financial Metric | Q1 2025 (In thousands) | Q1 2024 (In thousands) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $455,247 | $460,900 | -1.2% | | Gross Profit | $163,903 | $163,580 | +0.2% | | Operating Income | $44,101 | $47,936 | -8.0% | | Net Income Attributable to Franklin Electric | $30,962 | $32,959 | -6.1% | | Diluted EPS | $0.67 | $0.70 | -4.3% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets reached $1.93 billion by March 31, 2025, with liabilities at $628.6 million and equity at $1.30 billion | Balance Sheet Item | March 31, 2025 (In thousands) | December 31, 2024 (In thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $83,994 | $220,540 | | Total inventories | $560,338 | $483,875 | | Goodwill | $391,526 | $338,501 | | Total assets | $1,928,872 | $1,820,606 | | **Liabilities & Equity** | | | | Total current liabilities | $484,029 | $433,727 | | Total liabilities | $628,600 | $550,772 | | Total equity | $1,299,922 | $1,268,610 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 net cash used in operations was $19.5 million, and in investing $116.1 million, leading to a $136.5 million cash decrease | Cash Flow Activity (In thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash flows from operating activities | $(19,468) | $(1,362) | | Net cash flows from investing activities | $(116,117) | $(10,216) | | Net cash flows from financing activities | $(2,558) | $(6,343) | | Net change in cash and cash equivalents | $(136,546) | $(19,649) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail Q1 2025 acquisitions, goodwill, segment performance, debt structure, legal contingencies, and fair value measurements - In Q1 2025, the company completed two acquisitions: Barnes de Colombia S.A. for **$96.6 million** and PumpEng Pty Ltd for approximately **$15.0 million**. These acquisitions are part of the Water Systems segment[31](index=31&type=chunk)[36](index=36&type=chunk) - Goodwill increased by **$53.0 million** in Q1 2025, primarily due to **$50.7 million** from new acquisitions in the Water Systems segment[41](index=41&type=chunk) - The company is involved in a long-standing legal review in France concerning alleged issues with underground piping connections, with potential damages estimated at approximately **9.5 million Euro**. The company disputes that its products caused any damage[46](index=46&type=chunk)[48](index=48&type=chunk) Segment Performance (Q1 2025, In millions) | Segment Performance (Q1 2025, In millions) | Water Systems | Distribution | Energy Systems | | :--- | :--- | :--- | :--- | | External Sales | $246.5 | $141.9 | $66.8 | | Segment Operating Income | $43.4 | $2.1 | $21.9 | [Management's Discussion and Analysis (MD&A)](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial results, including sales, operating income, segment performance, liquidity, and cash flow [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Q1 2025 net sales decreased 1% to $455.2 million, with gross profit margin improving but operating income declining 8% - Overall net sales decreased by **1%** in Q1 2025 compared to Q1 2024, primarily due to lower volumes and a **2%** negative impact from foreign currency translation. This was partially offset by price realization and **$5.7 million** in sales from recent acquisitions[82](index=82&type=chunk)[83](index=83&type=chunk) Net Sales by Segment (In millions) | Net Sales by Segment (In millions) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Water Systems | $287.3 | $286.6 | +0.2% | | Energy Systems | $66.8 | $62.1 | +7.6% | | Distribution | $141.9 | $147.0 | -3.5% | | **Consolidated** | **$455.2** | **$460.9** | **-1.2%** | - Gross profit margin increased to **36.0%** in Q1 2025 from **35.5%** in Q1 2024, driven by a favorable sales mix in Energy Systems and improved performance in Distribution[92](index=92&type=chunk)[93](index=93&type=chunk) - SG&A expenses rose to **$119.6 million** from **$115.6 million**, primarily due to higher employee compensation, executive leadership transition costs, and expenses from recent acquisitions[94](index=94&type=chunk) [Segment Performance Analysis](index=27&type=section&id=Segment%20Performance%20Analysis) Q1 2025 saw flat Water Systems sales, Energy Systems operating income growth, and a slight increase in Distribution operating income - **Water Systems:** Operating income decreased by **$3.7 million** to **$43.4 million**, with the margin declining **130 basis points** to **15.1%**, primarily due to incremental expenses from recent acquisitions[97](index=97&type=chunk) - **Energy Systems:** Operating income increased by **$3.1 million** to **$21.9 million**, and the margin expanded by **250 basis points** to **32.8%**, driven by higher sales, price realization, and a favorable geographic mix[98](index=98&type=chunk) - **Distribution:** Operating income rose by **$0.3 million** to **$2.1 million**, with the margin improving by **30 basis points** to **1.5%**, attributed to reduced SG&A expenses from cost actions implemented in 2024[99](index=99&type=chunk) [Capital Resources and Liquidity](index=31&type=section&id=Capital%20Resources%20and%20Liquidity) The company's liquidity, supported by $281.6 million in credit, saw increased cash usage in operations and investing for Q1 2025 - As of March 31, 2025, the company had **$281.6 million** of available capacity under its **$350.0 million** revolving credit facility[109](index=109&type=chunk) - Cash used in operating activities increased to **$19.5 million** in Q1 2025 from **$1.4 million** in Q1 2024, primarily due to working capital changes and lower earnings[115](index=115&type=chunk) - Cash used in investing activities surged to **$116.1 million** in Q1 2025 from **$10.2 million** in Q1 2024, driven by the Barnes and PumpEng acquisitions[116](index=116&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No significant changes in market risk exposure occurred during Q1 2025, as detailed in the 2024 Form 10-K - There were no significant changes in the Company's market risk exposure during Q1 2025[121](index=121&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed effective disclosure controls and procedures as of March 31, 2025, with no material internal control changes - The CEO and Interim CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[122](index=122&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[123](index=123&type=chunk) Part II [Other Information](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, updated risk factors, and details on the company's equity repurchase program [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending various legal claims, including a material proceeding in France detailed in Note 6 - The company is defending various legal actions that have arisen in the ordinary course of business. A material proceeding is described in Note 6, related to a dispute in France[126](index=126&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the 2024 Form 10-K, except for an updated risk regarding foreign trade policy impacts - The company highlights the risk that changes in foreign trade policies, such as tariffs on steel, aluminum, and imports from China, Canada, and Mexico, could adversely impact its business and financial performance[128](index=128&type=chunk) [Issuer Repurchases of Equity Securities](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2025, the company repurchased 56,109 shares for $5.4 million, with 1,311,484 shares remaining for repurchase Repurchase Period (2025) | Repurchase Period (2025) | Total Shares Repurchased | Average Price Paid per Share | | :--- | :--- | :--- | | January | — | $— | | February | — | $— | | March | 56,109 | $96.70 | | **Total Q1** | **56,109** | **$96.70** | - As of March 31, 2025, the maximum number of shares that may still be purchased under the company's repurchase plan is **1,311,484**[129](index=129&type=chunk)[130](index=130&type=chunk)