Franklin Electric(US:FELE)2019-02-19 19:57Financial Data and Key Metrics Changes - The company reported fully diluted earnings per share (EPS) of $0.51 for Q4 2018, compared to $0.17 for Q4 2017, marking a significant increase [15] - Q4 2018 sales were $316.7 million, an increase of 10% from $288.2 million in Q4 2017, driven by both acquired entities and organic sales growth of about 9% [17] - The consolidated gross profit for Q4 2018 was $104.3 million, up from $94.6 million in Q4 2017, with a gross profit margin of 33% compared to 32.8% in the previous year [23] Business Line Data and Key Metrics Changes - Water Systems sales reached $196 million in Q4 2018, an increase of 8% from $181.5 million in Q4 2017, with organic sales up about 11% [18] - Fueling Systems sales were $75.9 million in Q4 2018, a 12% increase from $67.9 million in Q4 2017, with organic sales growth of about 10% [20] - Distribution segment sales were $56 million in Q4 2018, compared to $49.5 million in Q4 2017, but the segment recorded an operating loss of $2.9 million, worsening from a $2 million loss in Q4 2017 [22] Market Data and Key Metrics Changes - The Water Systems unit in the U.S. and Canada experienced organic growth of 23%, while international markets saw mid-to-upper single digits organic growth in Europe, Middle East, Africa, and Asia Pacific [5][7] - Latin America faced a 10% organic sales decline, primarily in Brazil, which negatively impacted overall performance [8] - The Fueling Systems team achieved approximately 60% revenue growth in China, indicating strong market demand [9] Company Strategy and Development Direction - The company aims to maintain momentum in North America and Europe for Water Systems and globally for Fueling Systems, while remaining cautious about developing regions [13] - The focus for 2019 includes tight expense control and expected organic growth in the mid-single digits, with operating income before restructuring projected to grow in double digits [13] - The company plans to enhance its distribution segment performance by selling a broader range of clean water pumping systems and wastewater products [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for continued growth in the Water Systems and Fueling Systems segments, despite challenges in emerging markets [13][50] - The company anticipates a higher effective tax rate in 2019, which may impact earnings per share growth [26] - Management noted that the fourth quarter is typically a challenging seasonal period, with expectations for improved performance in the second and third quarters of 2019 [38] Other Important Information - The company ended 2018 with a cash balance of $59.2 million, down $8 million from the end of 2017, due to higher debt repayments and stock repurchases [28] - A quarterly cash dividend of $0.145 per share was announced, representing a 21% increase from the previous dividend [30] Q&A Session Summary Question: Pricing actions and their impact - Management achieved price realization of about $8.5 million in Q4 2018, which helped offset raw material inflation and tariffs [31][32] Question: Distribution business profitability - Management expects meaningful profit growth in the distribution segment for 2019, with plans to improve performance through integration and operational efficiency [33][34] Question: Performance in emerging markets - Management remains cautious about emerging markets, particularly Brazil, but sees slow improvement [50][51] Question: Agricultural market outlook - The agricultural market is stable, with no significant catalysts for growth, but any upward movement in farm income could benefit the company [54]