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Franklin Electric Company (NASDAQ:FELE)

Q3 2008 Earnings Call

October 27, 2008 5:00 pm ET

Executives

Michael Butchko - Treasurer

Scott Trumbull - Chairman and Chief Executive Officer

John Haines - Chief Financial Officer

Robert Stone – Senior Vice President, North America Operations

Gregg Sengstack - Senior Vice President, Fueling and Asia Pacific

Analysts

Mike Schneider - Robert W. Baird

Ned Borland - Next Generation Equity Research

Paul Mammola - Sidoti & Company

Matt Summerville – KeyBanc

Operator

Welcome to the Franklin Electric Company third quarter 2008 earnings release. (Operator Instructions) It is now my pleasure to introduce your host Mike Butchko, Treasurer for Franklin Electric Company.

Michael Butchko

Welcome to Franklin Electric’s third quarter 2008 earnings conference call. With me today are Scott Trumbull, our Chairman and CEO; John Haines, our CFO; Robert Stone, Senior Vice President of America’s Water, and Gregg Sengstack, Senior Vice President of our Fueling and Asia Pacific business units.

On today’s call, Scott will review our third quarter results and discuss the key issues confronting our company for the balance of 2008 and into 2009. John will review our third quarter financials. When John is through, we will allow sometime for questions and answers.

Before we begin, let me remind you that 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 uncertainties with respect to general economic and currency conditions; various conditions specific to the company’s business and industry; weather conditions; new housing starts; market demand; competitive factors; changes in distribution channels; supply constraints; technology factors; litigation, government and regulatory actions; the company’s accounting policies; future trends and other risks which are detailed in the company’s Securities and Exchange Commission filings included in Item 1(a) of part 1 of the company’s annual report on Form 10-K for the fiscal year ending December 29, 2007; Exhibit 99.1 attached thereto; and in Item 1(a) of part 2 of the company’s quarterly reports on Form 10-Q.

These risks and uncertainties may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements made herein are based on information currently available and the company assumes no obligation to update any forward-looking statements.

I will now turn the call over to our Chairman and CEO.

Scott Trumbull

Thank you, Mike. We are pleased to report record third quarter sales, earnings and EPS. Earnings this quarter were the highest of any quarter in the company’s history. The performance of our fueling segment exceeded our expectations. Sales grew by over 90% and operating income grew by over 270% versus third quarter prior year. Most of the growth was driven by fueling sales in California as filling station owners installed vapor control and monitoring systems in accordance with the California Air Resources Board mandate. We estimate that the California conversion is now between 35% and 40% complete and that the sales surge from the mandate will wind down in the latter part of 2009.

In the meantime, our fueling management team is moving to expand our sales base outside of California in order to partially offset the impact of the surge winding down. We are encouraged that a number of countries outside the United States have either implemented vapor control initiatives or are actively considering them; these include China and India. We are modifying our vapor control and fuel management product lines to meet the specific needs of customers in these and other developing markets.

Also in mid-2009 we will introduce a line of vapor control and petroleum dispensing products for the European market. As we sell more Franklin vapor control systems in California and elsewhere in the world, we are building a large install base of nozzles and hardware that we recognize has a limited useful life due to handling wear, tear and damage. As we move into 2009 and 2010 we anticipate developing a $10 million to $15 million per year replacement business that will continue growing as our install base grows and ages.

Our water systems sales for the quarter grew by $21 million or 16%. Acquisitions accounted for $15.5 million of the $21 million overall growth. Water systems sales in international markets represented 47% of our total water sales and grew by 24% overall and 6% organically.

Water sales in the U.S. and Canada represented 53% of the total and grew by 10% overall and were up about 3% organically. In general, our water systems sales to the agricultural and commercial markets grew at high single-digit rates while our sales for residential applications were flat. The weakness in residential sales was due to the housing recession in the U.S. and portions of Western Europe. The major issue for the company during the third quarter was the 380 basis point decline in water systems operating margins versus the prior year. This decline came after a 480 basis point increase in water margins during the second quarter.

There were three factors that were primarily responsible for this decline. First, as we have discussed during previous conference calls, we entered 2008 with water systems inventory levels in our North American plants that were too high. During the second half of this year, we are focused on improving liquidity and inventory turns across the company, and especially in our North American water plants. As a result of this focus, by the end of the third quarter inventories in our North American water systems plants were 26% lower this year than the same period last year, while our year-to-date sales volume out of our North American facilities is running about 10% higher.

Reducing inventory in this fashion has required reducing facility utilization rates. We plan to continue curtailing production and inventories through the end of this year so that we will enter 2009 in a position to move utilization rates back up. Operating at lower utilization rates in order to reduce inventories has resulted in a 150 basis point reduction in operating margin.

The second factor impacting water systems margin in the third quarter was that operating expenses of acquired business units not included in the third quarter of 2007 have increased SG&A costs as a percentage of sales by about 100 basis points.

Third, because the company’s sales and earnings performance through September 2008 is significantly better than through September 2007 additional expenses for incentive compensation were incurred which increased SG&A expenses as a percentage of sales by about 100 basis points.

During the fourth quarter of this year we expect to finalize our plans for a major facility consolidation initiative in North America. The initiative will involve a phased move of approximately 500,000 man hours of production activity from older and higher cost facilities to our new, world-class plant complex in Linares, Mexico. This consolidation will increase our Linares production output by about 60%. All of this volume can be accommodated by the existing plant footprint and with only incremental additions to the fixed cost structure.

Based on our estimates now, we expect this move will reduce our labor costs by about $7 million and will also reduce our fixed manufacturing costs as we fully utilize the Linares operations and reduce capacity and overhead elsewhere. We expect the moves to be complete by the end of the second quarter 2009. At that point, with the lean initiatives that we are implementing in Linares, we expect to still have space for moving a significant amount of additional business into this low-cost plant complex. We expect to complete our planning for this consolidation over the next 60 days and we’ll announce the anticipated scope of these moves at that time.

While we are pleased to report record third quarter earnings, we are mindful of the challenges we anticipate in the fourth quarter. We foresee declining general economic conditions impacting our sales rate. As mentioned, we will continue to reduce water systems inventories which will lower capacity utilization rates. We expect our international sales and earnings growth to be negatively impacted by the strengthening dollar.

While we face these headwinds in the fourth quarter, we will continue to benefit from strong growth in our fueling business. As a result, we are maintaining our overall sales growth guidance of 25% to 30% for the full year. We are also confirming the guidance we have provided throughout the year that our fixed spending leverage for the full year will meet or exceed 220 basis points. Note that through the third quarter of 2008 our year-to-date fixed spending leverage was favorable by about 360 basis points. We expect our fixed spending leverage to decline in the fourth quarter due to expenses associated with the major consolidation into Linares and the prospect of slowing sales volume due to the deteriorating economic climate.

As we look to 2009, we anticipate achieving earnings improvement in our water systems business. While during the first half of 2008 we experienced unprecedented inflation in the cost of key raw materials such as steel and copper, in recent months we’ve seen a very rapid decline in the cost of these and other materials. These declines will start to be reflected in our cost structure during the first half of next year. In addition, we anticipate increasing facility utilization rates and reaping the benefits of consolidating North American production in our lowest cost facilities.

I’ll now turn the call over to John Haines, our CFO, who will provide some additional information regarding the company’s liquidity and financial position.

John Haines

Thank you, Scott. Our cash and equivalent balances on hand were $60.8 million at the end of the third quarter of 2008 versus $59.6 million of cash, equivalents and investments at the end of the third quarter 2007. Our net debt as a percent of total capital was 23%.

The recent financial uncertainty has not impacted the liquidity of the company and we believe our existing bank and financing arrangements are sufficient to fully support our operating needs. Our bank revolver debt has a $120 million limit of which we had $40 million outstanding at the end of the third quarter. Our revolver financing agreement is in place until December 2011. The company has $150 million of long-term notes at 5.79% with no principal payments due until 2015. We are operating well within all of our existing covenant restrictions and believe we have strong bank and private placement partners behind all of our debt obligations.

The company did not repurchase any shares of common stock in the third quarter of 2008. On Friday, October 24 2008 the board of directors of Franklin Electric declared a $0.125 dividend payable on the outstanding shares of common stock on November 20 2008 to shareowners of record on November 6 2008.

These comments conclude our formal remarks and we would like to now open the call for questions.

Question-and-Answer Session

Operator

Our first question is from Mike Schneider - Robert W. Baird.

Mike Schneider - Robert W. Baird

First we can start with fueling. Can you give us an update on any orders you may have already secured in Korea, Spain, the UK, or some of these other emerging markets for your fueling systems?

Gregg Sengstack

As Scott commented, the equipment requirements in Europe are fundamentally different than the equipment requirements in United States due to nozzle design and local preference and certification requirements, so we have limited sales in Western Europe. We are seeing interest in Korea, although with the current uncertainty that’s going on in the world economic markets, Korea has been particularly hard hit so we are not sure how that’s going to develop at this time.

Mike Schneider - Robert W. Baird

Are there any proposals with timelines associated with them right now that you’re aware of in any of these emerging countries?

Gregg Sengstack

Certainly in China there is a big opportunity over the next couple of years in both the Shanghai area and the Guangzhou, Shenzhen area. Those are mandates that were put in place several years ago, much like with the Beijing with the Olympics. In Shanghai and Guangzhou areas you have both the Asian Games and the World Expo are coming up here in the next year or so, so that’s going to be a big opportunity for us.

Korea does have a deadline out. I believe it is two years from now. That will be an opportunity, it’s just question specifically about orders right now in hand.

With respect to India, now that price of oil has come down, we would expect India to come back online, although there’s nothing formal at this point in India. We do see pockets in other areas of the world where there’s interest in trying out systems on a test basis.

Mike Schneider - Robert W. Baird

Gregg, have you seen any impact in California from the financial mess we’re in, either on the ability of station owners to get credit to retrofit the stations and as well, marketing margins for the station owners have plummeted as well. I am just curious if this has had an impact on the rollout.

Gregg Sengstack

I’d make two observations. One is that relative to the overall revenue of a station, the amount of money we’re talking about here in the upgrade is in the tens of thousands of dollars, less than $100,000 and it can be financed over a period of years, I know there are several finance companies that are pursuing that business actively. I cannot comment about the current or last few weeks in that regard.

Overall marketers’ margins, while the overall price of fuel is declining and you could think that marketers’ margins were narrow, in fact in the near term prices are still a little sticky so they could possibly benefit from the decline in fuel prices in the near term.

Mike Schneider - Robert W. Baird

Margins within fueling, Gregg, 31.5% this quarter, it was up basically 7 points sequentially. I’ll ask the same question as last quarter, which is if you look at the incremental margins they were enormous. Would you expect margins as the peak really hits in full force, to continue to lead with these rates?

Gregg Sengstack

Mike, as you pointed out, sequentially we had a large increase in sales. We are getting the benefit of great operating leverage and you have to look at how you think this is going to roll out over the next 9 to 12 months. Our utilization factor is being fully reflected now.

Mike Schneider - Robert W. Baird

Have you been able to keep up production rates with demand at this point or are lead times stretching for you?

Gregg Sengstack

We have no delay in deliveries.

Operator

Your next question comes from Ned Borland - Next Generation Equity Research.

Ned Borland - Next Generation Equity Research

On the water side of the business here, what is your target for inventory and how far down are you trying to get it? If you are 26% lower now, what do you expect to exit the year at?

John Haines

On a consolidated basis, the target we set for ourselves is basically to get all inventory down to about the same levels we ended last year at which is the $155 million to $160 million range. We set that target there because we said if we could increase our sales by 25% or 30% or in that range and keep our inventories effectively flat, that’s going to be a very significant step forward in terms of our company in managing inventories.

The 26%, that we referenced in this release is really just talking about the inventories for certain facilities in our North American Water Systems segment. That’s the goal that we had set for year and how we came up with it.

Ned Borland - Next Generation Equity Research

And then the roughly 140 basis points of fixed cost leverage that you are going to get back this quarter, we look at that as mostly a cost of goods sold hit or is some of that in SG&A as well?

John Haines

It’s in both. I think the best way to say it is the factors that we pointed to in this release, the under-utilization of our facilities in an effort to lower inventories, the SG&A coming from our Schneider acquisition in Brazil earlier this year and then the additional SG&A related to commissions and incentive compensation which we really didn’t have much of unfortunately in 2007, all those factors that we pointed to in the third quarter of 2008 will be present and continue to be a drag on earnings in the fourth quarter of 2008.

Ned Borland - Next Generation Equity Research

Can you comment on the pricing environment in water? You have housing in the gutter here and raw materials have slid a little bit. Is there any pressure by some of these distributors to maybe concede a little on price?

Robert Stone

We have seen some discounting this year, Ned, but it hasn’t been anything like what we saw last year. What we see in the market is that distributors though at this time are fairly full of inventory and contractors are not taking on inventory reflecting their concerns about the sale of that inventory, but we haven’t had the same level of discounting as we’ve seen in 2007.

Scott Trumbull

I just would make the point that the margin decline that we saw in water really did have to do with the three issues that we pointed to: the utilization, the year-on-year effect of the acquired companies and specifically Schneider down in Brazil has a very diverse and large marketing infrastructure; that has increased our SG&A as a percentage of sales and the accruals for compensation-related expenses.

Price versus cost has actually been pretty good so far this year. We have fully covered the extraordinary inflation that we have seen in the cost of raw materials during the first half. While they’re coming down, the way our purchasing agreements work and just the way the costs flow through inventory and eventually get onto our P&L we really won’t see the benefit of these declining costs until the first part of next year. So in spite of that, the sales/price relationship has not really been a factor in the margin deterioration that we experienced in the third quarter.

Ned Borland - Next Generation Equity Research

Finally, the lack of share repurchase, you’re building a good level of cash here. Are you still hunting for acquisitions? Is that going to be the focus of cash going forward?

Scott Trumbull

Well in this climate with, as we all know, uncertainty regarding our end markets, I do think our business is perhaps less volatile than many industries. But nevertheless we have to be mindful that any projections in this climate are subject to a much wider standard deviation than they have been in the recent past. I am just hesitant to see us increase the leverage ratios or go out any further than necessary on our revolver.

We’re going to be fairly conservative but we’re not going to completely pull in our horns. If we see an opportunity for a strategic acquisition we will pursue that, and then work on financing it in a way that doesn’t put the company in jeopardy at all.

Operator

Your next question comes from Paul Mammola - Sidoti & Company.

Paul Mammola - Sidoti & Company

Is there a lump sum cost estimate for the move down to Linares? Will that be taken as a restructuring expense in the fourth quarter?

John Haines

There is and a portion of it may be taken in the fourth quarter. As we indicated, we’re still planning this out. We’re still trying to make sure we have all these costs identified and properly categorized. We do expect to take some restructuring charge in the fourth quarter related to these moves. Our intention is to provide our investors a little bit more disclosure on that and understanding of that within the next 60 days or so.

Paul Mammola - Sidoti & Company

Given the state of credit right now, is there any concern for aging receivables or uncollectible accounts at this point?

John Haines

Our receivables are up, as you probably saw, Paul, but as we tear through those we don’t really see any significant customer concerns. Our percent of receivables that are past due has remained fairly constant through the course of this year. It is something that our credit team watches very closely. It’s something we are on high alert for, but so far we’ve not seen any real significant increase in past-due receivables or have any specific customers that we have concern about.

Paul Mammola - Sidoti & Company

Any comments or color on the high thrust market and what a domestic recession would mean for the higher margin products for you?

Scott Trumbull

We have had a competitor who has indicated that they intend to launch a high thrust motor or a family of high thrust motors. They initially were to have launched those products in early 2008 and to our knowledge they are still not available in any significant quantities. Trade rumors have it that they really won’t be available until 2009 now. We really haven’t seen much additional competitive impact in that market up to now.

Also up to now, the commercial and agricultural markets which are characterized by the use of higher horsepower motors have been the strong point for our business, not only in the Americas but also elsewhere in international markets; and the residential market, which is characterized by the smaller jet pumps, 4-inch submersibles, some sewage effluent pumps, those product lines have been most negatively impacted by the housing recession.

Right now I think it’s too early to tell how the ag and the commercial markets that rely on our larger motors and pumps are going to be affected. We are coming into, at least in the northern hemisphere, a seasonally down period anyway, so we would expect our sales to fall off. We haven’t really seen our sales of those products fall off by a greater degree than we would normally expect due to seasonality up to this point, but we are certainly mindful of the risks.

Gregg Sengstack

Just as a reminder, as well Paul remember that in these high thrust products they are generally sold separately -- the pump and the motor -- so our customers have a choice between the pump and the motor in how they acquire and install this. So we’ve had competition, as you know, on the high thrust side for a long time and for most of these commercial and agriculture applications it’s going to be a much greater risk for the ag installer to want to install a new motor there for the commercial application, given the downside potential that could come from a failure.

Operator

Your next question comes from Matt Summerville - KeyBanc.

Matt Summerville - KeyBanc

How much copper, in pounds, do you buy a year, Scott?

Scott Trumbull

Matt, we haven’t disclosed that number and I’m not sure I have, off the top of my head, the number of pounds that we buy. If you wanted an approximate number?

Matt Summerville - KeyBanc

Sure.

Gregg Sengstack

2.2 million to 3 million pounds, Matt.

Matt Summerville - KeyBanc

Getting back to California, can you talk about thus far what kind of market share you’ve seen as far as Franklin on the vapor management systems? Can you talk about whether or not you’ve been able to generate some success with the new ISD products you launched, I think it was a month or two ago? Similarly what your flow share is there?

Gregg Sengstack

Matt, I’d just say in general with the Healy vapor management system we continue to see very large market share in California. You may recall there is another system that was approved about six months ago but we continue to see very large market share with Healy. Our ISD system, In Station Diagnostics, you’re talking about the electronics, it was approved at the beginning of the year. We are getting more traction with that. We saw more traction in the third quarter.

We had additional product to add to the ISD that makes it a much simpler, lower-cost installation, particularly in stations where they have issues where they have to break concrete. That’s our DTU unit, Data Transfer Unit, it’s a Wireless solution is what we call it. We got approval for that in the middle of the third quarter. We are seeing very good interest in that product to go along with our ISD.

I’d say, one positive surprise is that many people are choosing to use that system even though they don’t have to break concrete, because it just makes the installation very straightforward.

Matt Summerville - KeyBanc

Are you finding the station owners that had purchased your ISD earlier in the year are opting now to go with that additional option? Am I understanding you right?

Gregg Sengstack

No, it would be at the time of purchase because when you’re buying the ISD system and installing it, at that point you’re making a decision about how you’re going to wire it. You either use existing conduit, if you know that conduit is clear and pull wires through that. Or what you can do is you actually cut the concrete and lay new wires. The DTU unit that we had approved in August eliminates the need to cut concrete at the time of initial installation. It would not be something you could retrofit to an ISD that you installed earlier in the year.

Matt Summerville - KeyBanc

With respect to the water systems business, I think you mentioned international core was plus 6, U.S./Canada plus 3. When I look at the business overall, how much of that growth is price versus actual volume? What are you expecting in Q4 in water systems’ volume relative to last year? Can you remind us what kind of comparison you face there?

John Haines

The price versus volume, as Scott said, we feel good that we got price in the quarter to offset some of the raw material cost increases. As we look forward into the fourth quarter, we see the residential market being very soft and at least in the northern hemisphere we are going out of season on some of the agricultural and commercial applications.

I think the short of it is, is that we think the fourth quarter is going to be a tough volume quarter for us, not only in the North American geography but also in certain parts of Europe as well.

Matt Summerville - KeyBanc

Would you anticipate then margins in water systems -- again, I’m trying to make sure I understand also the seasonality of the business, because it’s a little bit different now than it was a couple years ago -- would you anticipate then the fourth quarter to be below watermark, if you will, as far as operating margins in water?

John Haines

As we said, the volume that we go into the fourth quarter with is what we’re concerned about and there are a lot of indicators that it could be lower. All of the factors that contributed to the third quarter margin are going to be in play again in the fourth quarter. We expect that it’s going to be a tough volume and a tough margin quarter.

Matt Summerville - KeyBanc

With respect to the renewal of the R&D tax credit, is that aiding your tax rate in Q3? What do you expect it to be in Q4? Is there anything we need to worry about with regards to LIFO in Q4?

John Haines

We certainly have LIFO risk in Q4, Matt. As you know, the LIFO expense that we take is a product of both prices we have at the end of the year on our key commodities and the volume of those key commodities. I think maybe the biggest or the most significant risk that we run is just the year-over-year change between 4Q08 and 4Q07.

It’s worth pointing out that in 4Q07 we did not have to take additional LIFO expense. Quite the opposite, we actually had some throwback of LIFO provisions so it’s too soon for to us tell, but that is a risk, for sure, for the fourth quarter of ‘08.

Matt Summerville - KeyBanc

And then taxes, John?

John Haines

I’m sorry. Ask your question again, Matt?

Matt Summerville - KeyBanc

On the R&D tax credit, did that benefit your Q3? And then what should we be modeling for --

John Haines

I’m sorry. We’ll continue to take R&D tax credit when we can, but we would not say it benefited our Q3.

Matt Summerville - KeyBanc

What tax rate should we model in the fourth quarter, roughly?

John Haines

I think what you’ve historically used is a safe bet, Matt.

Scott Trumbull

Matt, just to clarify. The 2.2 million pounds for copper is accurate for a portion of our business. If you look at the overall, it’s 4 million to 5 million pounds.

Operator

Your last question comes from Mike Schneider - Robert W. Baird.

Mike Schneider - Robert W. Baird

Maybe we could just get a little more color on the North American water business. Can you discuss now if there is any great discrepancy in growth between the Little Giant business and the submersible business?

Scott Trumbull

We’ve seen that what we call our water transfer business has been harder hit by the housing recession than our water systems business. The old Little Giant business has been hurt overall more than our groundwater pumping business.

Mike Schneider - Robert W. Baird

Would it be correct to assume then if we take North America that was up 3% organically, presumably the larger horsepower and ag applications, etc. were up? Presumably residential, especially water transfer, was down mid to high single-digits?

Scott Trumbull

No. It actually came out pretty much the way I believe we said it, which was that business overall was flat. By that business I mean the residential business overall is flat.

Directionally, you’re right; water transfer as I indicated might have been down somewhat and our water systems business might have been up somewhat.

Mike Schneider - Robert W. Baird

A similar question just in Europe. Could you give us a sense for the international growth being up 6%, maybe what the emerging markets are growing for you versus the traditionally European market and just what the trends have been as of late?

Scott Trumbull

The European market in total was pretty flat for us with larger motors being up and small motors being flat to down a little bit. The developing markets were up low double-digits overall.

Mike Schneider - Robert W. Baird

In terms of those markets, Scott, with at least the foreign crisis that are seeming to spread from the U.S. to some of these developing markets, have you seen your order patterns change materially in just the last three or four weeks?

Scott Trumbull

Not yet. I think we’d be really optimistic to assume that the markets are going to skate by unaffected, other than in Asia. We have seen a marked slowdown in, for instance, Korea. A lot of the product that goes in there, all the product that we ship in there is imported and the Korean won has fluctuated widely and the customers have really pulled in their horns because of FX there and in other Asian markets.

But up to now, Latin America has stayed reasonably strong, including Brazil. Our business in South Africa in local currency has done very well. The Middle East, Northern Africa continues to be quite strong. I’d say the only place we’ve really seen a marked slowdown in the last three weeks has been in Asia.

Mike Schneider - Robert W. Baird

How about the same question just domestically? Scott, what have you seen in the last three or four weeks here?

Scott Trumbull

I’ll let Robert respond to that, Mike.

Robert Stone

Mike, it’s been seasonally what you would really kind of expect. We had customers place good size orders through September. Now as the weather has started to change that has started to slow a bit, but it’s really been to this point more seasonal than anything else. I think a lot of the contractors were hit by the housing earlier -- much earlier -- especially if you look in certain areas like Florida so that started to affect us some time ago and the latest shenanigans haven’t really had an effect.

Scott Trumbull

Thank you all. That will end our call -- sorry. Matt?

Robert Stone

Matt?

Operator

One moment.

Matt Summerville - KeyBanc

North America water, as we sit here right now on a run rate basis, how much is residential construction by your estimates versus ag? Could you answer the same question for international water? What I am trying to get at, I am betting that mix has changed and I’m just looking for what the current run rate is?

Robert Stone

I’ll speak first to the international markets, I’ve got some experience there also. The residential markets tend to be a much smaller piece of the business that we play in, in groundwater pumping in international markets so it’s much more commercial and agriculture and industrially driven.

In North America, if I look at the submersible business, between it and the ag industrial business, it’s about close to 50-50.

Matt Summerville - KeyBanc

50 res versus other applications outside of res?

Robert Stone

Yes.

Matt Summerville - KeyBanc

Gregg, how much of your fueling business right now would you say is international versus domestic?

Gregg Sengstack

The international component of fueling is in the range of 20%, 25% in that range. That’s the area of focus of growth for us. We’re seeing double-digit growth really outside the United States in developing areas of the world.

Scott Trumbull

Thank you. That will end our call.

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Source: Franklin Electric Company Q3 2008 Earnings Call Transcript

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