Franklin Electric(FELE)2019-10-29 16:27Financial Data and Key Metrics Changes - The company reported record earnings per share (EPS) of 0.63 in Q3 2018 [14] - Total sales for Q3 2019 were 341.9 million in Q3 2018, with a revenue decline of approximately 2% due to foreign currency translation [16][24] - Free cash flow after capital expenditures increased by about 65% through the first three quarters of 2019 compared to the same period in 2018 [5][32] Business Line Data and Key Metrics Changes - Water Systems sales were 199.3 million in Q3 2018, with organic sales increasing by about 2% [17][18] - Fueling Systems achieved record sales of 77.8 million in Q3 2018, with organic sales also up by about 2% [20][21] - Distribution segment sales rose to 78 million in Q3 2018, with organic growth of about 2% [22][23] Market Data and Key Metrics Changes - In the U.S. and Canada, groundwater pump sales increased by about 1%, while sales through professional distribution channels rose by 7% overall [6] - The Water Systems business in Latin America grew organically in mid-single digits, with sales flat in Mexico but up in Brazil and significantly increased in the Southern Cone [8] - The Fueling Systems business experienced a 20% year-over-year decline in China, while growth was noted in India and Southeast Asia [9] Company Strategy and Development Direction - The company aims to continue improving its operational efficiency and market share, particularly in the Fueling Systems segment, driven by capital investments in upgrading networks [48] - The acquisition of First Sales, LLC is expected to enhance the company's position in the fragmented water treatment market [19] - Management anticipates modest growth in U.S. groundwater and surface pumping lines, with expectations for a recovery in the Chinese market [12] Management's Comments on Operating Environment and Future Outlook - Management noted that the third quarter's earnings improvement was largely due to favorable weather conditions and acquisitions, despite organic sales growth being below expectations in some segments [4][5] - The company expects Q4 2019 results to be similar to the previous year in both revenue and earnings, with full-year EPS guidance at the low end of expectations [13] - Management expressed cautious optimism regarding the Fueling Systems segment, highlighting a robust market environment and ongoing capital investments [47] Other Important Information - The company recognized about 0.04 [29] - The company ended Q3 2019 with a cash balance of $47.8 million, down from the previous year, primarily due to acquisitions and debt repayments [30] Q&A Session Summary Question: What drove the improved performance in the Headwater division? - Management indicated that improved weather conditions and restructuring efforts contributed to the better operating income, despite a decline in revenue [35][38] Question: What are the expectations for the Fueling Systems margins moving forward? - Management noted that positive sales mix and effective cost management are expected to sustain margins, although caution remains regarding potential shifts in product mix [42][43] Question: What factors are affecting the slowdown in the China market? - Management identified a shift towards local products and reduced capital allocation by state-owned enterprises as key factors impacting sales in China [50][51] Question: How does the groundwater business outlook look for 2020? - Management suggested that a more normalized weather year could positively impact sales, although the current trend has been relatively flat [54]