Franklin Electric Co (NASDAQ:FELE)
Q2 2016 Earnings Conference Call
July 26, 2016 9:00 AM ET
Jeff Frappier - Treasurer
Gregg Sengstack - Chief Executive Officer
John Haines - Chief Financial Officer
Robert Stone - Senior Vice President and President-International Water Systems Unit
Edward Marshall - Sidoti
Ryan Connors - Boenning & Scattergood
Matt Summerville - Alembic Global
Ryan Cassil - Seaport Global
Good day, ladies and gentlemen and thank you for standing by. Welcome to the Franklin Electric Co Inc. Quarter 2, 2016 Earnings Conference Call. At this time all participant lines are in a listen-only mode, later we will host a question-and-answer session and our instructions will follow at that time. [Operator Instructions] As reminder to our audience, this conference is being recorded for replay purposes.
I would now like to hand the conference over to Jeff Frappier, Franklin’s Treasurer. Sir, you have the floor.
Thank you, Brian and welcome everyone to Franklin Electric’s second quarter 2016 earnings conference call. With me today are Gregg Sengstack, our CEO; Robert Stone, Senior Vice President and President of our International Water Systems Unit; and John Haines, our CFO. On today’s call, Gregg will review our second quarter business results and then John will review our second quarter financial results. When John is through, we will have some time for questions and answers.
Before we begin, let me remind you that as we conduct this call we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, many of which could cause actual results to differ materially from such forward-looking statements.
A discussion of these factors may be found in the Company’s Annual Report on Form 10-K, and in today’s earnings release. All forward-looking statements made during this call are based on information currently available, and except as required by law, the Company assumes no obligation to update any forward-looking statements.
During this call, we will also discuss certain non-GAAP financial measures, which the Company believes help investors understand underlying trends in the Company’s business more easily. A full reconciliation of non-GAAP to GAAP financial measures is included in today’s earnings release, which you can find on Franklin Electric’s website.
With that, I will now turn the call over to our CEO, Gregg Sengstack.
Thank you, Jeff. Our company delivered solid execution in the second quarter, with 2% overall sales growth and 5% organic sales growth excluding the impact of foreign currency translation. Our sales growth was broad based and led by higher groundwater sales in the U.S. combined with stronger Water Systems sales in Latin America and Asia Pacific.
Consolidated adjusted operating income increased 33%, as we realize the continued benefits of more raw material cost, increased prices and favorable sales index. The performance of our Water Systems business continues to improve. After non-GAAP adjustments, Water Systems operating income increased 24% on a reported 2% increase in sales. Water Systems adjusted operating margins increased at 150 basis points sequentially and 290 basis points compared to the second quarter of 2015.
On a 3% sales increase, Fueling Systems adjusted operating income was $15.5 million, an increase of 22% versus the second quarter of 2015 and a record for any second quarter in the segment’s history. Fueling Systems second quarter adjusted operating margin was 27%, an increase of 420 basis compared to the second quarter of 2015.
Turning to end markets, with more normal weather conditions in the U.S., our groundwater business showed a nice improvement over the last year’s depressed levels, with 13% growth in agricultural and 8% growth in residential pumping systems sales. Our surface pumping business was steady in the quarter.
Overall, our water business in the U.S. and Canada was up 7% compared to the second quarter of 2015. Outside the U.S. and Canada, business was again uneven, but overall positive. Excluding the impact of foreign translation, we again saw organic growth of 4%. Revenue growth in Latin America was strong, business in Brazil recovered from a soft first quarter delivering 14% organic growth, more than offsetting lower sales in Mexico and Argentina. Sales growth in Asia Pacific continued unabated, with joint favorable weather conditions in Southeast Asia and strong performance in Australia propelling the business forward.
Results in EMEA [ph] were below our expectations for two principle reasons, general weak demand in the Gulf region due to reduced investment by the public sector and a weak end market demand in Turkey.
In our Fueling Systems business, excluding the 1% headwind from foreign currency translation, our business grew 4% organically. Domestically, the U.S. team delivered another strong quarter up 6% with fuel management sales continuing to increase as more marketers specify our products.
Outside the U.S., organic sales were down about 1% with strong performance in Asia Pacific and India not being able to totally offset weak results in Mexico, Argentina and Europe.
Our European Fueling business is weak due to two factors, weak demand for storage tanks for North Europe production [ph] and a lack of infrastructure spending in Russia.
Looking towards the back half of the year, we expect our U.S. water business to continue to improve. We continue to get traction between products particularly drive controls and pressure boosting systems. Outside the U.S. with the exception of the Middle East, end markets remain firm. We anticipate continuous strong performance in Asia and to a lesser degree of Latin America. We expect Europe to be steady with some improvement in sales to the Gulf region, however, the impact and recent events in Turkey on our water business is currently not clear.
For our fueling business we expect continued high single digit revenue growth in the U.S., outside the U.S., we expect our fueling business to deliver revenue growth as well. But currently we remain confident that our 2016 results will be in line with our guidance of $1.60 to $1.70 adjusted earnings per share.
I will now turn the call over to John Haines, our CFO.
Thank you, Gregg. Our fully diluted earnings per share as reported were $0.50 for the second quarter of 2016 versus $0.33for the second quarter of 2015. As we note the tables in the earnings release, the Company adjusts the as-reported GAAP operating income and earnings per share for items we consider not operational in nature.
Non-GAAP expenses for the second quarter 2016 were 0.3 million related to retired executive pension cost. The second quarter 2016 non-GAAP adjustments had a net EPS impact that reduced earnings by $0.01. Non-GAAP expenses for the second quarter of 2015 were 1.7 million and included 0.8 million in restructuring cost, 0.5 million related to business realignment cost , primarily with severance and targeted fixed cost reduction actions, 0.3 million related to retired executive pension cost and 0.1 million for pending and completed acquisition related cost.
In total, the second quarter of 2015 non-GAAP had the effects of lowering the EPS by $0.02. So after consideration of the non-GAAP items, second quarter 2016 adjusted earnings per share was $0.51versus the second quarter 2015 adjusted earnings per share of $0.35, an increase of 46%.
Water Systems sales were $194.6 million in the second quarter of 2016, an increase of 30 million or about 2% versus the second quarter of 2015 sales of 191.6 million. Foreign currency translation reduced Water Systems sales by 7.2 million or about 4% in the quarter. Excluding foreign currency translation, Water Systems sales grew about 6%, compared to the second quarter of 2015.
Water Systems operating income was $31.5 million in the second quarter 2016, up 7.2 million or 30% versus the second quarter of 2015 as reported and up 6.1 million or 24% versus the second quarter 2015 after non-GAAP adjustments. The second quarter operating income margin was 16.2%, up 290 basis points from 13.3% in the second quarter of 2015 after non-GAAP adjustments.
Fueling Systems sales were $57.5 million in the second quarter of 2016, an increase of 1.7 million or about 3% versus the second quarter of 2015 sales of 55.8 million. Fueling Systems sales decreased by 23 million or about 1% in the quarter due to foreign currency translation. Fueling Systems sales were up about 4% after excluding foreign currency translation.
Fueling Systems operating income was 15.5 million in the second quarter of 2016, up 3.1 million or about 25%, compared to 12.4 million in the second quarter of 2015 as reported and up 2.8 million or 22%, compared to 12.7 million after non-GAAP adjustments in the second quarter of 2015. The second quarter operating income margin was 27%, an increase of 420 basis points from the 22.8% of net sales in the second quarter of 2015 after non-GAAP adjustments.
The company’s consolidated gross profit 90.7 million for the second quarter of 2016, an increase of 10.5 million or about 13% from the second quarter of 2015 gross profit of 80.2 million. The gross profit as a percentage of net sales was 36% in the second quarter of 2016 and increased about 360 basis points versus 32.4% during the second quarter of 2015. The gross profit margin increase was primarily due to favorable pricing, lower direct material cost, a better sales mix and lower fixed manufacturing cost.
Selling, general and administrative expenses were 58 million in the second quarter of 2016, compared to 56.3 million in the second quarter of the prior year, an increase of 1.5 million or about 3%. The company’s SG&A expenses increased by $2.5 million in the quarter due to higher variable compensation expenses, partially offset by lower fixed cost and the effect of foreign currency translation.
The effective tax rate for the second quarter of 2016 was flat with last year at about 25% before the impact of discreet events was about 26%. The effective tax rate for the second quarter of 2015 was 45% and before the impact of discreet events was about 28%. The tax rate as a percentage of pre-tax earnings for full year 2016 is projected to be about 26%, flat with the second quarter of 2016 tax rate before discreet adjustments.
The company ended the second quarter of 2016 with a cash balance of 72 million, which was $10 million lower than at the end of 2015. The cash balance decreased primarily due to higher capital expenditures and seasonal working capital requirements in the Northern Hemisphere. The company generated about $30 million in cash flows from operation in the first half of 2016.
The company had borrowings of $22 million on its revolving debt facility at the end of the second quarter 2016. The Company had no borrowings on its revolving debt facility at the end of 2015. The company did not purchase any shares for its common stock in the open market during the second quarter of 2016 and as of the end of the second quarter of 2016. The total remaining authorized shares that may be repurchased is about 2.2 million. Yesterday, the Franklin Electric Board of Directors declared quarterly cash dividend of $0.10 per share at August 18, 2016 to shareholders who record on August 4, 2016.
This concludes our prepared remarks and we would now like to turn the call over for questions.
[Operator Instructions] Our first question comes from the line of Edward Marshall from Sidoti. Your line is open, please go ahead.
Good morning, guys.
Hey, Ed. Good morning.
Good work on the gross margin line and I know there’s some seasonality from - in the first half versus the second half rather the second half versus the first half and I just wanted to get your sense on the delta that we should anticipate especially as materials like coal, raw steel and copper which I think you consume is increasing as well. How do you think about it?
Yeah, Ed I guess the way I would best speak to that is more on the OI or the operating income margin line. The gross profit line should continue to see some of the benefits that we saw in the first half of the year. Although, as you’re pointing we are seeing the inflation in some of the raw materials most notably some of the categories of steel, but the way we’re thinking about the back half overall margin wise on the operating income margin line is that - we made $0.80 in the first half of the year to make $1.70 which is the high end of our range, we need to make $0.90 in the back half of the year. We figure if we can get 3% to 4% top-line growth and then expand our operating income margin 50 basis points to 75 basis points from where they were in the second half of 2015, we should effectively be on top of that $0.90. Now, you may say, wait a minute, $0.90 or the expansion of 50 basis points to 75 basis points from the OI line, there’s some building pieces in there as well and I pointed out in the first half of the year, we were up about 400 basis points on operating income margin. We shouldn’t expect that in the back half of the year for a variety of different reasons, but least of which is the comparable from 2015 packed up is already 12%, so we are already making some progress in the back half of the year, last year. So we’ll still see generally raw material deflation, but not as much as we saw in the first half. Price was the key contributor for both gross profit and operating income in the first half; we’ll still continue to see that. Where we’re going to have some drawback is in higher SG&A cost most notably around compensation related cost, which you may recall, in the back half of last year was decreased or lowered in a pretty meaningful way. So that’s where we’re thinking about the back half where we’re thinking about margins, I think the gross profit is coming all the way back to a position where it’ll be a plus that we are seeing some material inflation that’s going to hit especially in the fourth quarter and on an OI basis we margin expansion, but not nearer to the expansion that we saw in the first half.
Got it. Any benefit in 2Q or in the current quarter regarding I guess Zika and/or the Olympics, if you could measure?
We would say that - no, there was no tailwind or headwind from either of those. When you have the World Cup in Brazil as maybe there is a global modest uptick before and little bit softer business during the event, but our products are principally focused in agriculture markets in Brazil, yes, there is some in industrial sector which is the growing sector for us and the residential sector, but these sectors have been pretty much not impacted by the activities either Zika or the Olympics as we see it.
Got them and then I guess competitor Dover acquired Wayne and what can you tell me about the competitive landscape, I’m particularly interested in how maybe you are preparing for changes in the distribution customers?
Yeah, I don’t know if that deal is closed yet. They also acquired Tokheim earlier in the year and in Europe I expect it will be fair amount of dispenser consolidation activity, European Veeder [ph]. Yeah, we have been competing with Gilbarco, Veeder, a subsidiary of now Fortive for a number of years well over a decade. They have some vertical integration of above ground dispense equipment and below ground equipment. So we expect in - these markets will see a similar competitive environment. We have done well that and so we expect will continue to do well in the future with the combination of Tokheim and Wayne and OPW.
Got them. Thanks, guys.
Thank you. Our next question comes from the line of Ryan Connors with Boenning & Scattergood. Your line is now open please go ahead.
Great, thank you. I want to talk a little bit about the agricultural vertical Fareast, you called out in the press release, double-digit top line growth there which quite a bit more bullish than some of the other companies selling into that space, so I just want to get some color behind where that strength is coming from.
Sure Ryan, couple of factors one is that you may recall I think quarter last year was particularly softening, it was the second one of the second quarter in U.S. history. All sectors were underwater and it was a very difficult environment throughout in the middle of the country, so we have - frankly we have an easier comp in that respect. The other thing is, keep in mind that as people compare essentially with people using irrigation equipment, we are more a replacement item than a capital good. So given the large and solid base out there with more normal weather conditions people are going to operate their existing pumping systems many of which were probably not operating last year. So that we would call as the - drives the replacement market which is much better part of our business in the initial install market. So I think that would be a little bit of few principle reasons why our numbers are up compared to say others that you’d look at in this industry.
Got it, okay. And then my other one had to do with Forex. I apologies if I might have missed this, but I think the past you have given some pretty good granularity the around what Forex assumptions you’re making in the guidance. Do you have any update for us there?
Yeah, the - Ryan, the Forex will continue abate as we go through the back half of the year. I think in total we are expecting something in the 3 to 350 basis points impact from foreign exchange. The key culprits remain the [indiscernible], the South African Rand, we saw some moment obviously just recently in the Turkish Lira. So we are going to laps on a bit as we go through the back half. So the FX won’t be nearly as bigger impact as it has been on Franklin, but there is still going to be some headwind there. As we think about the Euro, it trends fairly stable now 110, 112 range that’s something that - if it gets stronger that is certainly beneficial to us, but given everything is going on in Europe economically, politically, Brexit, all of that, it is hard to predict, so that is kind of way we are thinking about FX right now.
Okay, that’s it. It’s very helpful. Thanks for your time.
Thank you. Our next question comes from the line of Matt Summerville with Alembic Global. Your line is now open, please go ahead.
Good morning, a couple of questions. First, with respect to the Middle East and Turkey, can you just review what you’re revenue exposure is to that region and can you actually see a hit to your business at this point?
Our revenue exposure - Matt, good morning - in Turkey is around 30 million and our water business is - our fuel business in Turkey is also small. We had a good first of quarter in Turkey and then this made a slowdown in second quarter, which was more kind of the wet start to the year. We are not seeing any current disruptions in business. As a matter of fact our leadership team was there with kind of business as usual. It is the question of is this going to have some impact over the next couple of quarters at the margin. Robert Stone traveled there - was recently there, Robert what’s your view on that?
Yeah, from our business standpoint Gregg and Matt, we are largely unaffected other than by weather as Gregg already mentioned. The bigger impact for us is the situation in the Gulf and Middle East area in particular Saudi, where the government there has just really cut back on spending and the government probably represents 80% to 90% of the GDP of the area. And with oil prices were they have been, Saudi is not spending, so we have seen a definite slowdown there and in other areas were roughly comparable to prior year.
Got you and then just - this is a follow-up you mentioned Fueling business, particularly in the U.S. sales of fuel management systems have been pretty robust, is that being driven by an upgrade replacement cycle or is this sort of a gas station for the first time implementing one of these things. I guess what I’m trying to get at is, is there life to this?
Matt, there is life to this. Over the years we have upgraded reinvented are fuel management system platform and we work very, very hard to get the specification of the end marketer for our system. And we have been doing that now and were beginning to see fruits of lot of labor by lot of people out in the marketplace. That is the key in this business is getting the end marketer satisfy the product and provide them systems were they can see the lowest total cost of ownership. And so we are getting more traction on that space. There has been a lot of talk about EMV phenomenon, which should be a upgrade of the card reading equipment and the dispensers. One could look at the EMV pending deadline as being - people are going to allocate capital to dispenses and maybe it not too much to underground, other people are going to look at and say, look I’m going to doing my dispensers. The vast major upgrade of gas stations was back in the late 90s, when all the underground tanks were replaced. So many stations are coming up maybe on 20 year anniversaries and they’re saying, look it’s time to kind of do the whole station. So we have seen again solid organic growth quarter over quarter in North America the U.S. and Canadian market in particular and we are getting the success in fuel management through people changing their respective cycle.
Got it and then just one last one, you talked about restructuring your European operations, restructuring something you found in Brazil, is there a way to quantify to savings you generated from those programs and still what’s kind of on the horizon on an incremental basis, thank you.
Yeah Matt, we haven’t quantified that in terms of the actual OI or margin impact of those activities. We have said generally that when we take on these restructuring projects we’re generally looking at three-year or less type of a payback. Now, the one in Europe is longer than that just because of how usual the cost of that was relative to severance and closing that facility in Germany. As we look forward - as we discussed in the past, we constantly are evaluating our global footprint, our manufacturing and distribution footprint. We have ideas and thoughts about other opportunities that maybe out there, but we won’t - until we are ready, we are actually commit to that, we won’t talk about those are - what’s the potential savings of those could be. I would say generally that the Brazilian restructuring that as we’ve talked about has been a success and is contributing to the financial - it’s contributing positively to the financial results of that business unit and I would say the same up for the action in Europe, basically wound down and completed. We are seeing labor benefits, we are seeing the fixed cost benefits of those actions, but we have them specifically laid out those savings.
Got it. Thanks guys.
Thank you our next question comes from Ryan Cassil with Seaport Global. Your line is now open, please go ahead.
Good morning guys.
Good morning Ryan
Looking at water systems, I didn’t see much comment either on the surface, could you give a little color on what the trends are seeing there and the competitive landscape and maybe more specifically whether you’re getting positive pricing in this environment?
Sure Ryan, we are seeing an in the North American business - we are seeing some strengthening in our pioneer product line over the last year. We are still pretty soft in the some sewage effluence space, end market demand and the regions of the country where we sell has been fairly soft, again we didn’t have much in the way of weather events not essentially strongest demand for various pumping systems. But pricing is okay, we are getting a little bit of price there in North America for that product line. If we go down to our surface pumping business in Brazil we are clearly getting a price there, we recovered from the challenges of inflation and the exchange rates where the Brazilian to arbitrarily weaken relative to the dollar or the currencies last year. The demand for surface pumping residential is okay as the Brazilian economy is not great. We are gaining share in the industrial and commercial space in those markets, so that will be the other significant surface pumping market for us.
Okay great, should we expect then I guess in the second-half that the groundwater continues to outpace surface and maybe that ratio of ground to surface sort of normalizes back towards more historical levels here in the back half of the year?
Yes, I would make few points there; yes we should continue to see the groundwater business improve that will certainly continue to drive more favorable mix because we’re vertically integrated in the groundwater space. At the same time we have been harder out there our condensate pump business which again is - in the likes of the demand for air conditioning equipment. I think that’s an - again that’s relatively cool start this year, we would probably see more. We anticipate seeing more activity there as well.
Okay, great and then changing over to fueling sort of a bigger picture question here. I think you guys talked about in the past profitability normalizing in that segment down towards more than low 20s in terms of margins, but things keep trending higher, has that outlook perhaps changed at all and does the consolidation that’s taking place in the industry maybe help that overall outlook for a better profitability for everyone in the space?
Well, I think Ryan as we discussed the mix, both product wise and geographic wise matters a lot on the fueling operating income margin. So I don’t think anybody here would get too carried away with going beyond the low 20s, 22, 23, 24 just because [indiscernible]. The mix factors, what types of products we are selling, for example this quarter we sold a lot less of the storage tanks, these underground tanks in the UK, as Gregg mentioned and those have very, very poor margins, so less of that from a revenue perspective means higher operating income margins. So that’s price best we can do on that right now the business is doing a good job and getting priced, the business is doing a good job at leveraging its fixed cost i.e. growing its top line growing its fixed cost less than that. So all the things that are margin and hand setters [ph] are present there but I don’t know that I would be too carried away about where that end margin can go despite being second quarter results. Gregg, commented on the consolidation that is going on in this space and just to further that, the fueling business over entire life have been competing in this environment where we have some very big competitors or distributors actually like independent players like the idea there is an alternative from a product perspective to some of the bigger players. And all this equipment, I like to point out all this equipment is compatible itself, so the guys are expecting other station can say, I want the Dover equipment here, I want the Franklin equipment here, I want the Gilbarco or the Veeder equipment here and so far that are fueling business fairly well. Now, there’s a lot - these are big changes that Dover has made, it is very bold apply into the space; there is no question about it. So we are going to have to wait and kind of see what is the real impact of that is, but if not what we have in operated in this type of environment, we basically have been operating this segment in that environment for its entire life.
Okay, that’s helpful. And then last one for me I think you talked about increasing the dividend and I think I saw a small opportunistic plucking [ph] out cannot acquisition, but can you talk about priorities for capital allocation moving forward here, thanks.
Yeah, the priorities haven’t changed, meaning fully the dividend of $0.40 a year, we are trying to manage a payout ratio in the 20 range, low 20 range and as we - as our trailing 12 months earnings per share improves, I think we’ll be there Ryan. Our primary objective for free cash is accretive acquisitions and to the extent that we don’t see a robust pipeline or an ability to close on further accusations, we will consider share repurchases. However, we will only consider those share repurchase when we think that our not full multiple is lagging in a historical level or a peer group level. In terms of the recent acquisition, we don’t often talk about it, our fuel business has a nice smaller business that is around monitoring devices for electro distribution equipment and this was a great example of front line extension where we can go buy products, fold that into our commercial and manufacturing operations and we will leverage that with the Franklin names. It’s not particularly big, we’re not expecting much out of it for the back half of 2016, but it’s a nice product fit into a small sort of existing products that we have in that business. Probably Gregg, do you want to add anything on group fueling [ph]?
Yeah, this is a - we go back to our fueling business, fuel management systems, that product line was more acquired 14 years ago and again history of the business is we acquired each companies and then we systematically upgraded the products. We did the same thing with a small product line that came along with that purchase of Incon [ph] and that was in the power liability system space for the transmission distributions space. And so we have a serried of modern devices for Transformers, we developed another device for monitoring SF6 Gas and high voltage circuit breakers and our guys were watching the business and saw there’s group sense of being opportunity by product line that is naturally –– folded in, so it’s a small transaction, it was key to that little business of course.
Okay, appreciate the color guys. Thanks.
Thank you. We have a follow-up question from the line of Edward Marshall with Sidoti. Your line is now open, please go ahead.
I just had a couple of follow-ups. What was the other income of 1.4 million, typically that’s I think other - income from securities, but generally that runs about 100,000. Why so high this quarter?
Yeah, it’s about the same Ed as it was last year, about 1.4 million. So it would be earned interests on cash deposits for example in Brazil. The minority earnings of equity investments that we have is rolling out being too unusual in that number in the second quarter.
Yeah, got it and I’m wondering the Fueling operating margin, you may have touched on this, but I just wanted a further clarification, was it mix of pricing that got you there and was there anything unusual from a shipment perspective say an Indian tender or something like that?
I wouldn’t say that was necessarily anything unusual, it was mix end price, we did have some India business in the quarter as well, so that even makes it more positive. We did have some - we did have a particularly spectacular second quarter of ‘15 in Fueling, we have a few accounting and inventory type adjustments, we take that well in the margin last year, but for the current wasn’t particularly aggressive, I want to say Ed. But as I said, the business is getting price, the businesses water genetics [ph] cost, they’re getting some of the same raw material input benefit that water side businesses are getting - they’re certainly participating in that as well. So all of those factors combined with lesser percent in total, least profitable businesses in that segment are contributing to what we’re seeing in the second quarter.
Maybe, I can ask you different way. I think you said in your prepared remarks it’s the highest company’s history in any quarter for the fueling business. When you look at the full year, in your 160 to 170 guidance, what are you forecasting for Fueling margin on the operating level?
Yeah, maybe down in the 20 - sub 25 range.
Sub 25, got it. And then finally, the Pioneer business in UK, is it large enough because of any mismatch between cost and sales, maybe cost in pounds and sales in the euro region.
No, Ed. If you think about our Pioneer business in the UK, it’s relatively small and it has two parts, the rental component and the sales component and it’s doing that in pounds principally for the local market. On an export basis some of the sales you may have made in dollars or currencies, but it’s not going to be a major - you’re not going to see a major cost mismatch. Yes, the product is imported into the country from other parts of the world, but again we’re talking about a business that on a run rate basis is 10 million pounds to 12 million pounds potential, it’s not going to have a major room.
Got it. Okay, guys. Thanks very much.
Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I would now like to hand the call back Franklin Electric’s CEO, Gregg Sengstack for closing comments.
We thank you for following our company and look forward to speaking to you after the third quarter. Have a good week.
Well, ladies and gentlemen, this does conclude today’s program and you may all disconnect. Everyone have a wonderful day.
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