UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________
FORM 10-K
_________
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
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)
(I.R.S. Employer Identification No.)
9255 Coverdale Road
Fort Wayne, Indiana
46809
(Address of principal executive offices)
(Zip Code)
(260) 824-2900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.10 par value
FELE
NASDAQ Global Select Market
(Title of each class)
(Trading symbol)
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of each class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐
No ☒
1
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files).
Yes ☒
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”
“smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated
Filer
☒
Accelerated Filer
☐
Non-Accelerated Filer
☐
Smaller Reporting
Company
☐
Emerging Growth Company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-
based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant
to §240.10D-1(b).
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant at June 30, 2024 (the last
business day of the registrant’s most recently completed second quarter) was $4,386,004,855. The stock price used in this
computation was the last sales price on that date, as reported by NASDAQ Global Select Market. For purposes of this
calculation, the registrant has excluded shares held by executive officers and directors of the registrant, including restricted
shares and except for shares owned by the executive officers through the registrant’s 401(k) Plan. Determination of stock
ownership by non-affiliates was made solely for the purpose of responding to this requirement and the registrant is not bound
by this determination for any other purpose.
Number of shares of common stock outstanding at February 5, 2025:
45,717,687 shares
DOCUMENTS INCORPORATED BY REFERENCE
A portion of the Proxy Statement for the Annual Meeting of Shareholders to be held on May 2, 2025 (Part III).
2
FRANKLIN ELECTRIC CO., INC.
TABLE OF CONTENTS
Page
PART I.
Number
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Item 1A.
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Item 1B.
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Item 1C.
Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Item 2.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Item 4.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Supplemental Item - Information about our Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
PART II.
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . .
15
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) . . . . . . . . . . . . . .
55
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . .
57
Item 9A.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) . . . . . . . . . . . . . .
58
Item 9B.
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . .
59
PART III.
Item 10.
Directors, Executive Officers, and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
Item 11.
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
Item 13.
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . .
59
Item 14.
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
PART IV.
Item 15.
Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64
3
PART I
ITEM 1. BUSINESS
Description of the Business
Franklin Electric Co., Inc. (“Franklin Electric” or the “Company”) is an Indiana corporation founded in 1944 and incorporated
in 1946. Named after America’s pioneer electrical engineer, Benjamin Franklin, Franklin Electric manufactured the first water-
lubricated submersible motor for water systems and the first submersible motor for fueling systems. With 2024 revenue of
approximately $2.0 billion, the Company designs, manufactures and distributes water and fuel pumping systems, composed
primarily of submersible motors, pumps, electronic controls, water treatment systems, and related parts and equipment.
The Company’s water pumping systems move fresh and wastewater for the residential, agricultural and other industrial end
markets. The Company also sells various groundwater equipment products to well installation contractors, including water
pumping systems, through its and third-party distribution branches located in the U.S. With a growing global footprint, the
Company has also evolved into a top supplier of submersible fueling systems at gas stations, making pumps, pipes, electronic
controls and monitoring devices.
The Company’s products are sold worldwide by its employee sales force and independent manufacturing representatives. The
Company offers normal and customary trade terms to its customers, no significant part of which is of an extended nature.
Special inventory requirements are not necessary, and customer merchandise return rights do not extend beyond normal
warranty provisions.
Franklin Electric’s Key Factors for Success
While maintaining a culture of safety and lean principles, Franklin Electric strives to deliver quality, availability, service,
innovation, and cost in every encounter the Company has with stakeholders, including direct or indirect customers, employees,
shareholders, and suppliers. These key factors for success are a roadmap for the Company's growth as a global provider of
water and energy systems, through geographic expansion and product line extensions, leveraging its global platform and
competency in system design, all while consistently offering the best value to its customer.
Markets and Applications
The Company’s business consists of three reportable segments based on the principal end market served: Water Systems,
Energy Systems, and Distribution. The Company changed the name of the Fueling Systems segment to Energy Systems to
reflect its diverse portfolio and growth strategy, as well as to better reflect the markets and customers served by the segment.
The Company does not allocate corporate expenses or intersegment eliminations to a reportable segment. Segment and
geographic information appears in Note 15 - Segment and Geographic Information to the consolidated financial statements.
The market for the Company’s products is highly competitive and includes diversified accounts by size and type. The
Company’s Water Systems and Energy Systems products and related equipment are sold to specialty distributors and some
original equipment manufacturers (“OEMs”), as well as industrial and petroleum equipment distributors and major oil and
utility companies. The Company’s Distribution segment sells products primarily to water well contractors.
Water Systems Segment
Water Systems is a global leader in the production and marketing of water pumping systems and is a technical leader in
submersible motors, pumps, drives, electronic controls, water treatment systems, and monitoring devices. The Water Systems
segment designs, manufactures and sells motors, pumps, drives, electronic controls, monitoring devices, and related parts and
equipment primarily for use in groundwater, water transfer and wastewater.
Water Systems motors, pumps and controls are used principally for pumping clean water and wastewater in a variety of
residential, agricultural, municipal and industrial applications. Water Systems also manufactures electronic drives and controls
for the motors which control functionality and provide protection from various hazards, such as electrical surges, over-heating
and dry wells or dry tanks. In the three years ended December 31, 2024, the Company only completed one significant
acquisition in the segment when it acquired substantially all of the assets of Action Manufacturing & Supply, Inc. in 2023
expanding its portfolio in water treatment systems. In February 2025, the Company acquired PumpEng Pty Ltd. ("PumpEng"),
a manufacturer of submersible pumps for the mining sector headquartered in Australia. Also in February 2025, the Company
signed a definitive agreement to acquire Barnes de Colombia S.A. ("Barnes"), a leading manufacturer and distributor of
industrial and commercial pumps based in Colombia.
Water Systems products are sold in highly competitive markets. Water Systems contributed about 60 percent of the Company’s
total revenue in 2024. Significant portions of segment revenue come from selling groundwater and surface pumps, motors, and
4
controls for residential and commercial buildings, as well as agricultural sales which are more seasonal and subject to
commodity price changes. The Water Systems segment generates approximately 25 to 30 percent of its revenue in developing
markets, which often lack municipal water systems. As those countries install water systems and further develop with an
expanding middle class or improving quality of living, the Company views those markets as an opportunity. The Company has
had 6 to 9 percent compounded annual sales growth in developing regions in recent years. Water Systems competes in each of
its targeted markets based on product design, quality, performance, availability and price. The Company’s principal competitors
in the specialty water products industry are Grundfos Management A/S, Pentair, Inc. and Xylem, Inc.
2024 Water Systems research and development expenditures were primarily related to the following activities:
•
Development of new integrated pressure boosting systems for residential and commercial applications
•
Electronic variable frequency drives and controls for Pump and HVAC applications, including enhancements to
include tethering and IOT capability for our drives and making our key platforms easier to utilize by our customers
•
Development of expanded offering of standard electric skid pump package designs including the "SmartPrime"
variable frequency drive skid packages and updated stackable units for rental and municipal dewatering markets
•
Development of new HVAC condensate product offerings including new externally mounted mini-condensate pump
•
Greywater pumping equipment, including the expansion of our electrical submersible pump lines with addition of
range, materials, and control packages for the global market
•
Submersible pumps for commercial, municipal, and agricultural applications including the development of global
standardization of updated cast iron submersible turbine hydraulics, and upgrading the performance of line shaft
turbine product offering
•
Water treatment products focused on component performance improvements
Energy Systems Segment
Energy Systems is a global leader in the production and marketing of fuel pumping systems, fuel containment systems and
monitoring and control systems. The Energy Systems segment designs, manufactures and sells pumps, motors, pipe, sumps,
fittings, vapor recovery components, electronic controls, monitoring devices and related parts and equipment primarily for use
in energy system applications.
Energy Systems offers a complete array of components between the tank and the dispenser, including submersible pumps,
motors, station hardware, piping, sumps, vapor recovery, corrosion control systems and electronic controls and monitoring. The
Energy Systems segment growth has been sustained by a commitment to protecting human health and the environment while
delivering the lowest total cost of ownership. Energy Systems takes steps to ensure its products are installed and maintained
properly through robust global certification tools for their third-party contractors. The segment serves other energy markets
such as power reliability systems and includes intelligent electronic devices that are designed for online monitoring for the
power utility, hydroelectric, rail, and telecommunication and data center infrastructure.
Energy Systems products are sold in highly competitive markets. The Company believes there is growth opportunity in
developing markets. Energy Systems competes in each of its targeted markets based on product design, quality, performance,
availability and price. The Company’s principal competitors in the petroleum equipment industry are Vontier Corporation and
Dover Corporation.
2024 Energy Systems research and development expenditures were primarily related to the following activities:
•
Developed new overfill protection valve for the Indian market with a more robust valve design
•
Developed Distribution Transformer Monitoring antenna, which allows for improved wireless monitoring transmission
•
Developed new fiberglass tank sump and cover to withstand increased weight and side compression
•
Developed Remote Integration Panel to allow remote control and power cycling of breakers at fueling stations
•
Developed Trip Signature Monitor for continuous monitoring of substation circuit breakers
•
Developed EV-Controls NexPhase 800 & 2000A, an upgraded electric vehicle charger switchgear
Distribution Segment
The Distribution segment is operated as a collection of wholly owned leading groundwater distributors known as the Headwater
Companies. Headwater Companies deliver quality products and leading brands to the industry, providing contractors with the
products and services they demand to meet their application challenges. The Distribution segment operates within the U.S.
professional groundwater market. In 2023, the Distribution segment acquired substantially all of the assets of LCA Pump, LLC,
which operated Water Works Pump, a professional groundwater distributor operating in the Midwest.
5
Information Regarding All Reportable Segments
Research and Development
The Company incurred research and development expenses as follows:
(In millions)
2024
2023
2022
Research and development expenses
$
21.5 $
17.7 $
16.7
Expenses incurred were for activities related to the development of new products, improvement of existing products and
manufacturing methods and other applied research and development.
The Company owns a number of patents, trademarks, and licenses. In the aggregate, these patents are of material importance to
the operation of the business; however, the Company believes that its operations are not dependent on any single patent or
group of patents.
Raw Materials
The principal raw materials used in the manufacture of the Company’s products are coil and bar steel, stainless steel, copper
wire and aluminum ingot. Major components are electric motors, electrical components, motor protectors, forgings, gray iron
castings, plastic resins and bearings. Most of these raw materials are available from multiple sources in the U.S. and world
markets. Generally, the Company believes that adequate alternative sources are available for the majority of its key raw
material and purchased component needs; however, the Company is dependent on a single or limited number of suppliers for
certain materials or components. The Company believes that availability of fuel and energy is adequate to satisfy current and
projected overall operations unless interrupted by government direction, allocation or other disruption.
Major Customers
No single customer accounted for over 10 percent of net sales in 2024, 2023, or 2022. No single customer accounted for over
10 percent of gross accounts receivable in 2024 and 2023.
Backlog
The dollar amount of backlog by segment was as follows:
(In millions)
February 5, 2025
February 7, 2024
Water Systems
$
98.4
$
120.2
Energy Systems
21.5
16.9
Distribution
20.8
23.5
Consolidated
$
140.7
$
160.6
The backlog is composed of written orders for products for which prices are typically established at the time the order is placed,
primarily standard catalog items. All backlog orders are expected to be filled in 2025. The Company’s sales in the first quarter
are generally less than its sales in other quarters due to less water well drilling and overall product sales during the winter
months in the Northern hemisphere. Beyond that, there is no seasonal pattern to the backlog and the backlog has not proven to
be a significant indicator of future sales.
Environmental Matters
The Company believes that it is in compliance with all applicable federal, state and local laws concerning the discharge of
material into the environment, or otherwise relating to the protection of the environment. The Company has not experienced
any material costs in connection with environmental compliance, and does not believe that such compliance will have any
material effect upon the financial position, results of operations, cash flows or competitive position of the Company.
Human Capital Resources
As of December 31, 2024, the Company had approximately 6,300 employees. The Company is committed to providing safe
work environments for its employees, prioritizing wellness, health and safety best practices and requiring ethical compliance
with established policies. Further information regarding its human capital details and initiatives can be found in the 2024
Franklin Electric Sustainability Report available for download on the Company's website.
Available Information
The Company is a U.S. public reporting company under the Exchange Act and files reports, proxy statements and other
information with the SEC, which can be accessed from the SEC's home page on the Internet at www.sec.gov. The Company’s
website address is www.franklin-electric.com. The Company makes available free of charge on or through its website its annual
6
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, as
soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange
Commission. Additionally, the Company’s website includes the Company’s corporate governance guidelines, its Board
committee charters, Lead Independent Director charter, and the Company’s code of business conduct and ethics. Information
contained on the Company’s website is not part of this annual report on Form 10-K.
ITEM 1A. RISK FACTORS
The following describes the principal risks affecting the Company and its business. Additional risks and uncertainties, not
presently known to the Company, could negatively impact the Company’s results of operations or financial condition in the
future.
Risks Related to the Industry
Reduced housing starts adversely affect demand for the Company’s products, thereby reducing revenues and
earnings. Demand for certain Company products is affected by housing starts. Variation in housing starts due to economic
volatility both within the United States and globally could adversely impact gross margins and operating results.
The Company’s results may be adversely affected by global macroeconomic supply and demand conditions related to the
energy and mining industries. The energy and mining industries are users of the Company’s products, including the coal, iron
ore, gold, copper, oil, and natural gas industries. Decisions to purchase the Company’s products are dependent upon the
performance of the industries in which our customers operate. If demand or output in these industries increases, the demand for
our products will generally increase. Likewise, if demand or output in these industries declines, the demand for our products
will generally decrease. The energy and mining industries’ demand and output are impacted by the prices of commodities in
these industries which are frequently volatile and change in response to general economic conditions, economic growth,
commodity inventories, and any disruptions in production or distribution. Changes in these conditions could adversely impact
sales, gross margin, and operating results.
Volatility in the prices and availability of raw materials, components, finished goods and other commodities could adversely
affect operations. The Company purchases most of the raw materials for its products on the open market and relies on third
parties for the sourcing of certain finished goods. Accordingly, the cost of its products may be affected by changes in the
market price and its ability to successfully obtain raw materials, sourced components, or finished goods. The Company and its
suppliers also use natural gas and electricity in manufacturing products both of which have historically been volatile. The
Company does not generally engage in commodity hedging for raw materials and energy. Significant increases in the prices or
disruptions in the supply chain of commodities, sourced components, finished goods, energy or other commodities could cause
product prices to increase, which may reduce demand for products or make the Company more susceptible to competition.
Furthermore, in the event the Company is unable to pass along increases in operating costs to its customers, margins and
profitability may be adversely affected.
The growth of municipal water systems and increased government restrictions on groundwater pumping could reduce
demand for private water wells and the Company’s products, thereby reducing revenues and earnings. Demand for certain
Company products is affected by rural communities shifting from private and individual water well systems to city or municipal
water systems. Many economic and other factors outside the Company’s control, including governmental regulations on water
quality, and tax credits and incentives, could adversely impact the demand for private and individual water wells. A decline in
private and individual water well systems in the United States or other economies in the international markets the Company
serves could reduce demand for the Company’s products and adversely impact sales, gross margins, and operating results.
Demand for Energy Systems products is impacted by environmental legislation which may cause significant fluctuations in
costs and revenues. Environmental legislation related to air quality and fuel containment may create demand for certain Energy
Systems products which must be supplied in a relatively short time frame to meet the governmental mandate. During periods of
increased demand, the Company’s revenues and profitability could increase significantly, although the Company can also be at
risk of not having capacity to meet demand or cost overruns due to inefficiencies during ramp up to the higher production
levels. After the Company’s customers have met the compliance requirements, the Company’s revenues and profitability may
decrease significantly as the demand for certain products declines substantially. The risk of not reducing production costs in
relation to the decreased demand and reduced revenues could have a material adverse impact on gross margins and the
Company’s results of operations.
Changes in tax legislation regarding the Company’s U.S. or foreign earnings could materially affect future results. Since the
Company operates in different countries and is subject to taxation in different jurisdictions, the Company’s future effective tax
rates could be impacted by changes in such countries’ tax laws or their interpretations. Both domestic and international tax laws
7
are subject to change as a result of changes in fiscal policy, legislation, evolution of regulation and court rulings. The
application of these tax laws and related regulations is subject to legal and factual interpretation, judgment, and uncertainty. The
Company cannot predict whether any proposed changes in tax laws will be enacted into law or what, if any, changes may be
made to any such proposals prior to their being enacted into law. If the tax laws change in a manner that increases the
Company’s tax obligation, it could have a material adverse impact on the Company’s results of operations and financial
condition.
On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which
generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and
Development (OECD) Pillar Two Framework. A significant number of countries have enacted portions, or all, of the OECD
proposal with effective dates in 2024 and 2025 for different aspects of the directive, with many additional countries expected to
implement similar legislation with varying effective dates in the future. In 2024, Pillar Two did not have a material impact on
the Company’s income tax liability, provision for income taxes, or effective tax rate, nor does the Company expect a material
impact in the future.
Risks Related to the Business
The Company is exposed to political, economic and other risks that arise from operating a multinational business. The
Company has significant operations outside the United States, including Europe, South Africa, Brazil, Mexico, India, China,
Turkey, Canada and Argentina. Further, the Company obtains raw materials and finished goods from foreign suppliers.
Accordingly, the Company’s business is subject to political, economic, and other risks that are inherent in operating a
multinational business. These risks include, but are not limited to, the following:
•
Difficulty in enforcing agreements and collecting receivables through foreign legal systems
•
Trade protection measures and import or export licensing requirements
•
Inability to obtain raw materials and finished goods in a timely manner from foreign suppliers
•
Imposition of tariffs, exchange controls or other restrictions (including recent U.S. tariffs imposed or threatened to
be imposed on China, Canada and Mexico and other countries and any retaliatory actions taken by such countries)
•
Difficulty in staffing and managing widespread operations and the application of foreign labor regulations
•
Compliance with foreign laws and regulations
•
Changes in general economic and political conditions in countries where the Company operates
Additionally, the Company’s operations outside the United States could be negatively impacted by changes in treaties,
agreements, policies, and laws implemented by the United States. If the Company does not anticipate and effectively manage
these risks, these factors may have a material adverse impact on its international operations or on the business as a whole.
The Company has significant investments in foreign entities and has significant sales and purchases in foreign denominated
currencies creating exposure to foreign currency exchange rate fluctuations. The Company has significant investments
outside the United States, including Europe, South Africa, Brazil, Mexico, India, China, Turkey, Canada and Argentina.
Further, the Company has sales and makes purchases of raw materials and finished goods in foreign denominated
currencies. Accordingly, the Company has exposure to fluctuations in foreign currency exchange rates relative to the U.S.
dollar. Foreign currency exchange rate risk is partially mitigated through several means: maintenance of local production
facilities in the markets served, invoicing of customers in the same currency as the source of the products, prompt settlement of
intercompany balances, limited use of foreign currency denominated debt, and application of derivative instruments when
appropriate. To the extent that these mitigating strategies are not successful, foreign currency rate fluctuations can have a
material adverse impact on the Company’s international operations or on the business as a whole.
In the second quarter of 2022, the Company concluded that Turkey represents a highly inflationary economy as its three-year
cumulative inflation rate exceeded 100 percent. As a result, the Company started remeasuring the financial statements for the
Company’s Turkish operations in accordance with the highly inflationary accounting rules in the Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 830 "Foreign Currency Matters" as of the beginning of
the second quarter of 2022. As a result, all gains and losses resulting from the remeasurement of the financial results of
operations and other transactional foreign exchange gains and losses are reflected in earnings, which have resulted in volatility
within the Company’s earnings, rather than as a component of the Company’s comprehensive income within shareholders’
equity. The Company also remeasures its financial statements for its Argentina operations in accordance with the highly
inflationary accounting rules. Turkey and Argentina becoming highly inflationary economies has had an adverse effect on the
Company’s consolidated results of operations and further inflation may have additional adverse effects on the Company's
consolidated financial position, results of operations, or cash flows in future periods.
The Company’s acquisition strategy entails expense, integration risks, and other risks that could affect the Company’s
earnings and financial condition. One of the Company’s continuing strategies is to increase revenues and expand market share
through acquisitions that will provide complementary Water and Energy Systems products, add to the Company’s global reach,
8
or both. The Company spends significant time and effort expanding existing businesses through identifying, pursuing,
completing, and integrating acquisitions, which generate expense whether or not the acquisitions are actually completed.
Competition for acquisition candidates may limit the number of opportunities and may result in higher acquisition prices. There
is uncertainty related to successfully acquiring, integrating and profitably managing additional businesses without substantial
costs, delays or other problems. There can also be no assurance that acquired companies will achieve revenues, profitability or
cash flows that justify the investment. Failure to manage or mitigate these risks could adversely affect the Company’s results of
operations and financial condition.
The Company’s products are sold in highly competitive markets, by numerous competitors whose actions could negatively
impact sales volume, pricing and profitability. The Company is a global leader in the production and marketing of groundwater
and fuel pumping systems. End user demand, distribution relationships, industry consolidation, new product capabilities of the
Company’s competitors or new competitors, and many other factors contribute to a highly competitive environment.
Additionally, some of the Company’s competitors have substantially greater financial resources than the Company. The
Company believes that consistency of product quality, timeliness of delivery, service, and continued product innovation, as well
as price, are principal factors considered by customers in selecting suppliers. Competitive factors previously described may lead
to declines in sales or in the prices of the Company’s products which could have an adverse impact on its results of operations
and financial condition.
The Company’s products are sold to numerous distribution outlets based on market performance. The Company may, from
time to time, change distribution outlets in certain markets based on market share and growth. These changes could adversely
impact sales and operating results.
Transferring operations of the Company to lower cost regions may not result in the intended cost benefits. The Company is
continuing its rationalization of manufacturing capacity between all existing manufacturing facilities and the manufacturing
complexes in lower cost regions. To implement this strategy, the Company must complete the transfer of assets and intellectual
property between operations. Each of these transfers involves the risk of disruption to the Company’s manufacturing capability,
supply chain, and, ultimately, to the Company’s ability to service customers and generate revenues and profits and may include
significant severance amounts.
Delays in introducing new products or the inability to achieve or maintain market acceptance with existing or new products
may cause the Company’s revenues to decrease. The industries to which the Company belongs are characterized by intense
competition, changes in end-user requirements, and evolving product offerings and introductions. The Company believes future
success will depend, in part, on the ability to anticipate and adapt to these factors and offer, on a timely basis, products that
meet customer demands. Failure to successfully develop new and innovative products or to enhance existing products could
result in the loss of existing customers to competitors or the inability to attract new business, either of which may adversely
affect the Company’s revenues.
Certain Company products are subject to regulation and government performance requirements in addition to the
warranties provided by the Company. The Company’s product lines have expanded significantly and certain products are
subject to government regulations and standards for manufacture, assembly, and performance in addition to the warranties
provided by the Company. The Company’s failure to meet all such standards or perform in accordance with warranties could
result in significant warranty or repair costs, lost sales and profits, damage to the Company’s reputation, fines or penalties from
governmental organizations, and increased litigation exposure. Changes to these regulations or standards may require the
Company to modify its business objectives and incur additional costs to comply. Any liabilities or penalties actually incurred
could have a material adverse effect on the Company’s earnings and operating results.
The Company has significant goodwill and intangible assets and future impairment of the value of these assets may
adversely affect the Company's operating results and financial condition. The Company’s total assets include substantial
intangible assets, primarily goodwill. Goodwill results from the Company’s acquisitions, representing the excess of the
purchase price paid over the fair value of the net assets acquired. Goodwill and indefinite-lived intangible assets are tested
annually for impairment during the fourth quarter or as warranted by triggering events. If future operating performance at one
or more of the Company’s operating segments were to decline significantly below current levels, the Company could incur a
non-cash impairment charge to operating earnings. The recognition of an impairment of a significant portion of the Company’s
goodwill or intangible assets could have a material adverse impact on the Company’s results of operations and financial
condition.
The Company’s business may be adversely affected by the seasonality of sales and weather conditions. The Company
experiences seasonal demand in a number of markets within the Water Systems segment. End-user demand in primary markets
follows warm weather trends and is at seasonal highs from April to August in the Northern Hemisphere. Demand for residential
9
and agricultural water systems are also affected by weather-related disasters including heavy flooding and drought. Changes in
these patterns could reduce demand for the Company’s products and adversely impact sales, gross margins, and operating
results.
The Company depends on certain key suppliers, and any loss of those suppliers or their failure to meet commitments may
adversely affect the Company's business and results of operations. The Company is dependent on a single or limited number
of suppliers for some materials or components required in the manufacture of its products. If any of those suppliers fail to meet
their commitments to the Company in terms of delivery or quality, the Company may experience supply shortages that could
result in its inability to meet customer requirements, or could otherwise experience an interruption in operations that could
negatively impact the Company’s business and results of operations.
The Company’s operations are dependent on information technology infrastructure and failures could significantly affect its
business. The Company depends on information technology infrastructure in order to achieve business objectives. If the
Company experiences a problem that impairs this infrastructure, such as a computer virus, a problem with the functioning of an
important IT application, or an intentional disruption of IT systems by a third party, the resulting disruptions could impede the
Company's ability to record or process orders, manufacture and ship products in a timely manner, or otherwise carry on
business in the ordinary course. Any such events could cause the loss of customers or revenue and could cause significant
expense to be incurred to eliminate these problems and address related security concerns. The Company is also subject to
certain U.S. and international data protection and cybersecurity regulations. Complying with these laws may subject the
Company to additional costs or require changes to the Company’s business practices. Any inability to adequately address
privacy and security concerns or comply with applicable privacy and data security laws, rules and regulations could expose the
Company to potentially significant liabilities.
Additional Risks to the Company. The Company is subject to various risks in the normal course of business as well as
catastrophic events including severe weather events, earthquakes, fires, acts of war, terrorism, civil unrest, epidemics and
pandemics and other unexpected events. Exhibit 99.1 sets forth risks and other factors that may affect future results, including
those identified above, and is incorporated herein by reference.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
The Company’s data protection and privacy program is designed to help it assess, identify, manage, and mitigate risks relating
to cybersecurity threats and incidents. The Company designs its cybersecurity standards, policies, processes and controls to
operate in an integrated manner, leveraging applicable industry standards and security frameworks, including the National
Institute of Standards and Technology (NIST) Cybersecurity Framework and Center for Internet Security, Inc (CIS) Controls,
as guides in supporting its ability to perform such functions.
The Company manages its data protection and privacy program, fostering collaboration with partners across business units and
functional areas to identify and assess material cybersecurity threats, evaluate their severity, and explore ways to mitigate and
manage such risks. Third parties are engaged to assess the Company’s cybersecurity posture and adherence to the NIST
Cybersecurity Framework and CIS Controls, and the Company evaluates cybersecurity risks as part of its annual risk
assessment process. Cybersecurity risk mitigation strategies and initiatives are developed based on these assessments.
As part of the Company’s data protection and privacy program, it maintains a cyber risk management program that seeks to
address key risk management concepts, including mission and vision, escalation path for risk mitigation, risk assessments, and
risk treatment. The Company does so by conducting a variety of planning and preparedness activities, including employing
monitoring tools to identify suspicious or anomalous activity, vulnerabilities, or signs of compromise across its networks,
systems, and data. The Company utilizes data from attack surface management tools to produce a prioritized set of
vulnerabilities for remediation. A key area for the program is employee cybersecurity education. The Company’s employees
play a key role in cybersecurity and participate in mandatory cybersecurity training, phishing attack simulations, educational
events, and receive news bulletins. The Company’s data protection and privacy program is designed to adhere to and adapt to
global privacy and data protection laws.
The Company has established policies, processes, and controls that are designed to monitor, detect, investigate, respond to, and
escalate management of cybersecurity threats and incidents. If the Company experiences a cybersecurity incident, the Company
activates an incident response plan, which includes processes to enable it to triage, assess severity of, escalate, contain,
10
investigate, and remediate the incident, as well as to comply with applicable legal obligations and mitigate brand and
reputational harm. Based on initial investigation into such incident’s impact to the Company, the actor(s) involved, and other
factors, the Company assigns a severity level to an incident, which dictates the escalation path for a given incident. Incidents
rising to higher levels of severity and potential materiality are escalated to designated members of the Company’s senior
management for further assessment, response, and remediation. Additionally, the Company has established a Cyber Crisis
Management Team, responsible for addressing and responding to the most severe cyber incidents. If warranted, senior
management notifies the Audit Committee and/or the full Board of Directors, as appropriate. Throughout this process, the
Company continues to investigate the incident and, as its understanding of the incident evolves, updates its severity assessment,
as necessary.
Governance
The Company’s cybersecurity program and approach is overseen by its Board of Directors, in coordination with the Audit
Committee, and Senior Leadership, along with its Vice President, Information Technology. The Vice President, Information
Technology reports to the Chief Administration Officer and has more than 25 years of IT experience with over 10 years of
cybersecurity and international business experience. The Board of Directors receives annual reports from Senior Leadership on
the Company’s cybersecurity risks. In addition, Senior Leadership updates the Board of Directors, as necessary, regarding any
significant cybersecurity incidents. The Board of Directors and Senior Leadership review the strategy, tools, metrics and latest
trends affecting cybersecurity utilizing the NIST Cybersecurity Framework and CIS Controls as the foundation for its
cybersecurity strategy and approach.
The Company’s business strategy, results of operations and financial condition have not been materially affected and are not
reasonably likely to be affected by risks from cybersecurity threats, including as a result of previously identified cybersecurity
incidents, but it cannot provide assurance that they will not be materially affected in the future by such risks or any future
material incidents. For more information on the Company’s information technology related risks, see Item 1A Risk Factors of
this Annual Report on Form 10-K.
11
ITEM 2. PROPERTIES
Franklin Electric serves customers worldwide with over 220 manufacturing and distribution facilities located in over 20
countries. The Global Headquarters is located in Fort Wayne, Indiana, United States and houses sales, marketing and
administrative offices along with a state-of-the-art research and engineering facility. Besides the owned corporate facility, the
Company considers the following to be principal properties:
Location / Segment
Purpose
Own/Lease
Santa Catarina, Brazil / Water & Energy
Manufacturing/Distribution/Sales
Own
Sao Paulo, Brazil / Water & Energy
Manufacturing/Distribution/Sales
Own
Jiangsu Province, China / Water & Energy
Manufacturing
Own
Brno, Czech Republic / Water
Manufacturing
Own
Vicenza, Italy / Water
Manufacturing
Own
Nuevo Leon, Mexico / Water & Energy
Manufacturing
Own
Edenvale, South Africa / Water
Manufacturing
Own
Izmir, Turkey / Water & Energy
Manufacturing/Distribution/Sales/R&D
Own
Indiana, United States / Water
Manufacturing/Distribution/Sales
Lease
Montana, United States / Distribution
Distribution
Own
North Carolina, United States / Distribution
Distribution
Own
Oklahoma, United States / Water
Manufacturing
Own
Oregon, United States / Water
Manufacturing/Distribution/Sales/R&D
Lease
Wisconsin, United States / Energy
Manufacturing/Distribution/Sales/R&D
Own
The Company also owns and leases other smaller facilities which serve as manufacturing locations and distribution warehouses.
The Company does not consider these facilities to be principal to the business or operations. In the Company’s opinion, its
facilities are suitable for their intended use, adequate for the Company’s business needs, all currently utilized and in good
condition.
ITEM 3. LEGAL PROCEEDINGS
The Company is defending various claims and legal actions which have arisen in the ordinary course of business. For a
description of the Company's material legal proceedings, refer to Note 7 - Commitments and Contingencies, in the Notes to
Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual
Report on Form 10-K, which is incorporated into this Item 3 by reference. In the opinion of management, based on current
knowledge of the facts and after discussion with counsel, other claims and legal actions can be defended or resolved without a
material effect on the Company’s financial position, results of operations, and net cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
12
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Current executive officers of the Company, their ages, current position, and business experience during at least the past five
years as of December 31, 2024, are as follows:
Name
Age
Position Held
Period
Holding
Position
Gregg C. Sengstack
66
Chairperson of the Board
2015 - present
Chief Executive Officer
2015 - 2024
Joseph A. Ruzynski
49
Chief Executive Officer
2024-present
President of Enclosures, nVent Electric plc
2018-2024
Jeffery L. Taylor
58
Vice President, Chief Financial Officer
2021 - present
Chief Financial Officer, Blue Bird Corporation
2020 - 2021
Senior Vice President and Chief Financial Officer, Wabash National Corporation 2014 - 2020
Brent L. Spikes
53
Vice President, Global Manufacturing
2022 - present
Vice President, Global Water Engineering
2020 - 2022
Vice President, Manufacturing & Manufacturing Engineering
2019 - 2020
DeLancey W. Davis
59
Vice President and President, Headwater Companies
2017 - present
Greg M. Levine
51
Vice President and President, Global Water
2023 - present
President and CEO, Motion Control and Drives, Nidec Corporation
2020-2023
President, Motion Control, Nidec Corporation
2016-2020
Jay J. Walsh
55
Vice President and President, Energy Systems
2019 - present
Jonathan M. Grandon
49
Vice President, Chief Administrative Officer, General Counsel and Corporate
Secretary
2016 - present
All executive officers are elected annually by the Board of Directors at the Board meeting held in conjunction with the annual
meeting of shareholders. All executive officers hold office until their successors are duly elected or until their death, resignation
or removal by the Board.
13
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES
The number of shareholders of record as of February 5, 2025 was 554. The Company’s stock is traded on the NASDAQ Global
Select Market under the symbol FELE. Broadridge Corporate Issuer Solutions, Inc. 1155 Long Island Avenue, Edgewood, New
York, 11717 serves as the registrar, record keeper and stock transfer agent.
Dividends paid per common share as quoted by the NASDAQ Global Select Market for 2024 and 2023 were as follows:
Dividends per Share
2024
2023
1st Quarter
$
.250
$
.225
2nd Quarter
$
.250
$
.225
3rd Quarter
$
.250
$
.225
4th Quarter
$
.250
$
.225
The Company has increased dividend payments on an annual basis for 32 consecutive years. The payment of dividends in the
future will be determined by the Board of Directors and will depend on business conditions, earnings, and other factors.
Issuer Purchases of Equity Securities
In April 2007, the Company’s Board of Directors unanimously approved a plan to increase the number of shares remaining for
repurchase from 628,692 to 2,300,000 shares. There is no expiration date for this plan. On August 3, 2015, the Company’s
Board of Directors approved a plan to increase the number of shares remaining for repurchase by an additional 3,000,000
shares. The authorization was in addition to the 535,107 shares that remained available for repurchase as of July 31, 2015. In
February 2023, the Company’s Board of Directors approved a plan to increase the number of shares remaining for repurchase
by an additional 1,000,000 shares. The authorization was in addition to the 215,872 shares that remained available for
repurchase as of February 16, 2023. In October 2024, the Company’s Board of Directors approved a plan to increase the
number of shares remaining for repurchase by an additional 1,000,000 shares. The Company did not repurchase any shares
under this plan during the fourth quarter of 2024. The maximum number of shares that may still be purchased under this plan as
of December 31, 2024 is 1,367,593.
Stock Performance Graph
The following graph compares the Company’s cumulative total shareholder return (Common Stock price appreciation plus
dividends, on a reinvested basis) over the last five fiscal years with the Guggenheim S&P Global Water Index and the Russell
2000 Index.
Hypothetical $100 invested on December 31, 2019 (fiscal year-end 2019) in Franklin Electric common stock (FELE),
Guggenheim S&P Global Water Index, and Russell 2000 Index, assuming reinvestment of dividends:
YE 2019
2020
2021
2022
2023
2024
FELE
$
100
$
121
$
165
$
141
$
151
$
156
Guggenheim S&P Global Water
100
114
147
115
133
136
Russell 2000
100
118
135
107
125
140
14
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Discussion of the year-over-year comparison of changes in the Company's financial condition and results of operation as of and
for the fiscal years ended December 31, 2023 and December 31, 2022 can be found in Part II, Item 7. "Management’s
Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2023.
2024 vs. 2023
OVERVIEW
Net sales in 2024 decreased 2 percent compared to the prior year. The sales decrease in 2024 was primarily due to lower
volumes and the negative impact of foreign currency translation, partially offset by the incremental sales impact from recent
acquisitions. The Company's consolidated gross profit was $717.3 million for 2024, an increase of $20.3 million from the prior
year. Diluted earnings per share was $3.86 for 2024, a decrease of $0.25 or 6 percent from the prior year.
RESULTS OF OPERATIONS
Net Sales
Net sales in 2024 were $2.0 billion and decreased 2 percent compared to the prior year. Sales were negatively impacted by
changes in foreign exchange rates, principally due to the strengthening of the U.S. Dollar relative to the Argentine Peso,
Turkish Lira and Brazilian Real. However, the Company increases prices in the local currency to offset the impact of currency
devaluation in the Argentina and Turkey highly inflationary economies. As a result, the net negative impact of foreign currency
exchange rates on net sales was 1 percent in 2024.
Net Sales
(In millions)
2024
2023
2024 v 2023
Water Systems
$
1,184.0 $
1,203.7 $
(19.7)
Energy Systems
273.7
296.5
(22.8)
Distribution
685.5
673.3
12.2
Eliminations
(121.9)
(108.4)
(13.5)
Consolidated
$
2,021.3 $
2,065.1 $
(43.8)
Net Sales-Water Systems
Water Systems net sales decreased 2 percent in 2024, as compared to the prior year. This sales decline was primarily due to
lower volumes, which decreased due to weaker end market demand for large dewatering equipment. Additionally, net sales
decreased 2 percent in 2024 due to the negative impact from foreign exchange rates, as compared to prior year while the
incremental sales impact from recent acquisitions favorably impacted sales 1 percent in 2024.
Water Systems net sales in the U.S. and Canada decreased 5 percent in 2024, as compared to the prior year. In 2024, sales of
large dewatering equipment decreased 41 percent, sales of water treatment products increased 11 percent, sales of groundwater
pumping equipment increased 4 percent and sales of all other surface pumping equipment increased 5 percent compared to
2023.
Water Systems net sales in markets outside the U.S. and Canada increased 4 percent in 2024, as compared to the prior year.
Sales decreased 4 percent in 2024 due to the negative impact from foreign exchange rates, as compared to prior year. In 2024
excluding the impact of foreign currency translation, sales increased in all three major regions: EMEA, Latin America and Asia
Pacific.
Net Sales-Energy Systems
Energy Systems net sales decreased 8 percent in 2024, as compared to the prior year. This sales decline was primarily due to
lower volumes.
Energy Systems net sales in the U.S. and Canada decreased 3 percent in 2024, as compared to the prior year. Outside the U.S.
and Canada, Energy Systems sales decreased 18 percent in 2024, as compared to the prior year. The decreases were across all
product lines.
15
Net Sales-Distribution
Distribution net sales increased 2 percent in 2024, as compared to the prior year. The Distribution segment sales increase was
primarily due to the incremental sales impact from a recent acquisition, which favorably impacted net sales by 3 percent,
partially offset by the negative impact of commodity pricing declines and unfavorable weather.
Gross Profit and Expense Ratios
Fiscal Year
(In Millions)
2024
% of Net Sales
2023
% of Net Sales
Gross Profit
$
717.3
35.5 %
$
697.0
33.8 %
Selling, General and Administrative Expense
470.1
23.3 %
433.5
21.0 %
Gross Profit
The gross profit margin ratio was 35.5 percent and 33.8 percent in 2024 and 2023, respectively. The gross profit margin was
favorably impacted in 2024 by cost management, including lower freight costs in Water Systems and Energy Systems, and a
favorable product and geographic sales mix shift.
Selling, General and Administrative (“SG&A”)
SG&A expenses were $470.1 million in 2024 compared to $433.5 million in 2023. SG&A expenses increased in 2024 primarily
due to higher employee compensation costs, including incremental expenses associated with the Company's CEO transition,
and the incremental expense impact of recent acquisitions. The SG&A expenses ratio was 23.3 percent and 21.0 percent in 2024
and 2023, respectively.
Restructuring Expenses
Restructuring expenses were $3.5 million and $1.1 million in 2024 and 2023, respectively. Restructuring actions in 2024 were
primarily related to headcount reductions and facility closures to optimize the Company's cost structure. Restructuring expenses
in 2023 were primarily from continued miscellaneous manufacturing realignment activities, branch closings and consolidations.
Operating Income
Operating income decreased 7 percent in 2024, as compared to the prior year.
Operating income (loss)
(In millions)
2024
2023
2024 v 2023
Water Systems
$
197.9 $
196.6 $
1.3
Energy Systems
93.6
92.7
0.9
Distribution
24.3
34.3
(10.0)
Corporate Expenses and Eliminations
(72.2)
(61.2)
(11.0)
Consolidated
$
243.6 $
262.4 $
(18.8)
Operating Income-Water Systems
Water Systems operating income in 2024 was $197.9 million, an increase of $1.3 million as compared to the prior year. The
2024 operating income margin was 16.7 percent, an increase of 40 basis points from 16.3 percent in 2023. Operating income
and operating margin increased in 2024 primarily due to price realization, cost management and a favorable product and
geographic sales mix shift.
Operating Income-Energy Systems
Energy Systems operating income in 2024 was $93.6 million, an increase of $0.9 million as compared to the prior year. The
2024 operating income margin was 34.2 percent, an increase of 290 basis points from 31.3 percent in 2023. Operating income
and operating margin increased primarily due to a favorable geographic mix of sales, price realization and cost management.
Operating Income-Distribution
Distribution operating income in 2024 was $24.3 million, a decrease of $10.0 million as compared to the prior-year period. The
2024 operating income margin was 3.5 percent, a decrease of 160 basis points from 5.1 percent in 2023. Operating income and
operating income margin decreased in 2024 primarily due to the negative impact on sales from wet weather across much of the
United States, decreases in pricing of commodity-based products sold through the business and increased SG&A costs.
16
Operating Income-Corporate Expenses and Eliminations
Operating income-corporate expenses and eliminations is composed primarily of intersegment sales and profit eliminations and
unallocated general and administrative expenses. The intersegment profit elimination impact in 2024 compared to 2023 was an
unfavorable $2.7 million. The intersegment elimination of operating income effectively defers the operating income on sales
from Water Systems to Distribution in the consolidated financial results until such time as the transferred product is sold from
the Distribution segment to its end third party customer. General and administrative expenses increased $8.3 million, compared
to the prior year. The increase was primarily driven by to higher employee compensation costs, including incremental expenses
associated with the Company’s CEO transition.
Interest Expense
Interest expense was $6.3 million in 2024 and $11.8 million in 2023, respectively. The decrease in 2024 was primarily driven
by lower average borrowings in 2024.
Other Income or Expense
Other income (expense), net was a benefit of $1.3 million in 2024 and $3.7 million in 2023. The benefit in 2024 was lower than
2023 due to lower interest income realized in Argentina as excess cash balances and interest rates have declined in 2024
compared to 2023.
Foreign Exchange
Foreign currency-based transactions produced an expense of $6.8 million in 2024 and $12.1 million in 2023, respectively. The
expense in 2024 and 2023 was primarily due to transaction losses associated with the Turkish Lira and Argentine Peso relative
to the U.S. dollar. The Company reports the results of its subsidiaries in Argentina and Turkey using highly inflationary
accounting, which requires that the functional currency of the entity be changed to the reporting currency of its parent.
Income Taxes
The provision for income taxes in 2024 and 2023 were $50.2 million and $47.5 million, respectively. The effective tax rate for
2024 was about 22 percent and included a favorable benefit from discrete events of 1 percent. The effective tax rate for 2023
was about 20 percent and included a favorable benefit from discrete events of 1 percent. The effective tax rate differs from the
U.S. statutory rate of 21 percent, primarily due to U.S. states taxes, foreign earnings taxed at rates higher than the U.S. statutory
rate, and nondeductible officer’s compensation, partially offset by the recognition of the U.S. foreign-derived intangible income
(FDII) provisions, certain incentives, and discrete events.
Net Income
Net income for 2024 was $181.6 million compared to 2023 net income of $194.7 million. Net income attributable to Franklin
Electric Co., Inc. for 2024 was $180.3 million, or $3.86 per diluted share, compared to 2023 net income attributable to Franklin
Electric Co., Inc. of $193.3 million, or $4.11 per diluted share.
CAPITAL RESOURCES AND LIQUIDITY
Sources of Liquidity
The Company's primary sources of liquidity are cash on hand, cash flows from operations, revolving credit agreements, and
long-term debt funds available. The Company believes its capital resources and liquidity position at December 31, 2024 is
adequate to meet projected needs for the foreseeable future. The Company expects that ongoing requirements for operations,
capital expenditures, pension obligations, dividends, share repurchases, and debt service will be adequately funded from cash
on hand, operations, and existing credit agreements.
As of December 31, 2024, the Company had a $350.0 million revolving credit facility. The facility is scheduled to mature on
May 13, 2026. As of December 31, 2024, the Company had $304.1 million borrowing capacity under the Credit Agreement as
$4.5 million in letters of commercial and standby letters of credit were outstanding and undrawn and $41.4 million in revolver
borrowings were drawn or outstanding.
In addition, the Company maintains an uncommitted and unsecured private shelf agreement with NYL Investors LLC, an
affiliate of New York Life, and each of the undersigned holders of Notes (the "New York Life Agreement"). On May 15, 2024,
the Company entered into Amendment No. 1 that increased the total available facility amount from lenders to $250.0 million
from $200.0 million. As of December 31, 2024, the remaining borrowing capacity on the New York Life Agreement was
$175.0 million. The Company also maintains an uncommitted and unsecured note purchase and private shelf agreement with
PGIM, Inc. and its affiliates (the "Prudential Agreement"). On May 15, 2024, the Company entered into Amendment No. 1 that
increased the total available facility amount from lenders to $250.0 million from $150.0 million. The maturity dates of both
agreements were extended from July 30, 2024 to May 15, 2027.
17
At December 31, 2024, the Company had $47.1 million of cash and cash equivalents held in foreign jurisdictions, which the
Company intends to use to fund foreign operations. There is currently no need to repatriate these funds in order to meet
domestic funding obligations or scheduled cash distributions.
Cash Flows
The following table summarizes significant sources and uses of cash and cash equivalents:
(in millions)
2024
2023
Cash flows from operating activities
$
261.4
$
315.7
Cash flows from investing activities
$
(45.6) $
(74.3)
Cash flows from financing activities
$
(74.1) $
(192.2)
Impact of exchange rates on cash and cash equivalents
$
(6.1) $
(10.0)
Change in cash and cash equivalents
$
135.6
$
39.2
Cash Flows from Operating Activities
2024 vs 2023
Net cash provided by operating activities was $261.4 million for 2024 compared to $315.7 million for 2023. The change in
operating cash flow was primarily attributable to changes in working capital and lower earnings. In 2023, the Company's cash
flow benefited from actions it took to improve working capital including inventory reductions as its supply chain resiliency and
lead times improved significantly compared to 2022.
Cash Flows from Investing Activities
2024 vs. 2023
Net cash used in investing activities was $45.6 million in 2024 compared to $74.3 million in 2023. The change in investing cash
flow was primarily attributable to decreased acquisition activity in 2024.
In February 2025, the Company acquired 100 percent of the ownership interests of PumpEng for a purchase price of AUD 24.0
million (approximately $15 million), subject to working capital and net debt closing adjustments. Also in February 2025, the
Company signed a definitive agreement to acquire Barnes for an enterprise value of $110.0 million, subject to working capital
and net debt closing adjustments. The acquisition is subject to customary closing conditions, including Colombian antitrust
clearance, and is expected to close on or about March 1, 2025.
Cash Flows from Financing Activities
2024 vs. 2023
Net cash used by financing activities was $74.1 million in 2024 compared to $192.2 million in 2023. The change in financing
cash flow was primarily due to net borrowings under the Company's credit facility in 2024 compared to net repayments in 2023,
partially offset by lower proceeds from option exercises, increased share repurchase activity and higher dividends.
AGGREGATE CONTRACTUAL OBLIGATIONS
The majority of the Company’s contractual obligations to third parties relate to debt obligations. In addition, the Company has
certain contractual obligations for future lease payments and purchase obligations. The payment schedule for these contractual
obligations is as follows:
(In millions)
More than
Total
2025
2026-2027
2028-2029
5 years
Debt
$
129.5 $
117.8 $
3.0 $
2.9 $
5.8
Debt interest
9.4
7.5
1.0
0.5
0.4
Operating leases
73.5
22.7
30.2
13.9
6.7
Purchase obligations
12.6
12.6
—
—
—
Income Taxes-U.S. Tax Cuts and Jobs Act transition tax $
4.8 $
4.8 $
— $
— $
—
$
229.8 $
165.4 $
34.2 $
17.3 $
12.9
Interest payments on debt obligations are calculated for future periods using interest rates in effect at the end of 2024. Certain of
these projected interest payments may differ in the future based on interest rates or other factors or events. The projected
interest payments only pertain to obligations and agreements outstanding at December 31, 2024.
18
The Company has pension and other post-retirement benefit obligations not included in the table above which will result in
estimated future payments of approximately $7.3 million in 2025. In addition, due to the timing of funding in future periods
being uncertain and dependent on future movements in interest rates, investment returns, changes in laws and regulations and
other variables, the table above excludes the non-current liability of $24.1 million for cash outflows related to the Company's
pension plans.
The Company also has unrecognized tax benefits, none of which are included in the table above. The unrecognized tax benefits
of approximately $1.3 million have been recorded as liabilities and the Company is uncertain as to if or when such amounts
may be settled. Related to the unrecognized tax benefits, the Company has also recorded a liability for potential penalties and
interest of $0.1 million.
ACCOUNTING PRONOUNCEMENTS
For information regarding recent accounting pronouncements, refer to Note 2 - Accounting Pronouncements, in the Notes to
Consolidated Financial Statements in the sections entitled ""Adoption of New Accounting Standards" and "Accounting
Standards Issued But Not Yet Adopted", included in Part II, Item 8, "Financial Statements and Supplementary Data" of this
Annual Report on Form 10-K.
CRITICAL ACCOUNTING ESTIMATES
Management’s discussion and analysis of its financial condition and results of operations are based upon the Company’s
consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and
liabilities. Management evaluates estimates on an ongoing basis. Estimates are based on historical experience and on other
assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. There were no material changes to estimates or
methodologies used to develop those estimates in 2024. The Company’s critical accounting estimates are identified below:
Inventory Valuation
The Company uses certain estimates and judgments to value inventory. Inventory is recorded at the lower of cost or net
realizable value. The Company reviews its inventories for excess or obsolete products or components. Based on an analysis of
historical usage, management’s evaluation of estimated future demand, market conditions, and alternative uses for possible
excess or obsolete parts, carrying values are adjusted. The carrying value is reduced regularly to reflect the age and current
anticipated product demand. If actual demand differs from the estimates, additional reductions would be necessary in the period
such determination is made. Excess and obsolete inventory is periodically disposed of through sale to third parties, scrapping,
or other means.
Business Combinations and Valuation of Acquired Intangible Assets
The Company follows the guidance under FASB ASC Topic 805, Business Combinations. The acquisition purchase price is
allocated to the assets acquired and liabilities assumed based upon their respective fair values. The Company utilizes
management estimates and may use an independent third-party valuation firm to assist in determining the fair values of assets
acquired, including intangible assets, and liabilities assumed. The identifiable intangible assets acquired typically include
customer relationships and trade names. Identifiable intangible assets are initially valued using a methodology commensurate
with the intended use of the asset. The fair value of customer relationships is measured using the multi-period excess earnings
method ("MPEEM"). The fair value of trade names is measured using a relief-from-royalty ("RFR") approach, which assumes
the value of the trade name is the discounted amount of cash flows that would be paid to third parties had the Company not
owned the trade name and instead licensed the trade name from another company. Higher royalty rates are assigned to premium
brands within the marketplace based on name recognition and profitability, while other brands receive lower royalty rates. The
basis for future sales projections for both the RFR and MPEEM are based on internal revenue forecasts which the Company
believes represents reasonable market participant assumptions. The future cash flows are discounted using an applicable
discount rate as well as any potential risk premium to reflect the inherent risk of holding a standalone intangible asset. The key
uncertainties in the RFR and MPEEM calculations, as applicable, are the selection of an appropriate royalty rate, assumptions
used in developing estimates of future cash flows, including revenue growth and expense forecasts, assumed customer attrition
rates, as well as the perceived risk associated with those forecasts in determining the discount rate and risk premium. There is
inherent uncertainty in forecasted future cash flows and therefore, actual results may differ and could result in subsequent
impairment charges of acquired intangible assets and/or goodwill.
19
Indefinite-Lived Intangible Asset and Goodwill Impairment Evaluation
According to FASB ASC Topic 350, Intangibles - Goodwill and Other, goodwill and other intangible assets with indefinite
lives must be tested for impairment at least annually or more frequently as warranted by triggering events that indicate potential
impairment. The Company has the option to assess goodwill and other indefinite-lived intangible assets for impairment by
initially performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting
unit or indefinite-lived intangible asset is less than its carrying amount. If the Company determines that it is not more-likely-
than-not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying amount, then a
quantitative impairment test is not required to be performed. If the Company determines that it is more-likely-than-not that the
fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying amount, or if it does not elect the option
to perform an initial qualitative assessment, it performs a quantitative impairment test.
The Company uses a variety of methodologies in conducting impairment assessments including qualitative reviews as well as
quantitative reviews using the income and market approaches.
The market value approach compares the reporting units’ current and projected financial results to entities of similar size and
industry to determine the market value of the reporting unit. The income approach utilizes assumptions regarding estimated
future cash flows and other factors to determine the fair value of the respective assets. These cash flows consider factors
regarding expected future operating income and historical trends, as well as the effects of demand and competition. The
Company is required to record an impairment if these assumptions and estimates change whereby the fair value of the reporting
units or indefinite-lived intangible assets are below their associated carrying values.
During the fourth quarter of 2024, the Company completed its annual impairment tests of goodwill and indefinite-lived trade
names. The Company determined it was not more likely than not that the fair values of its reporting units were lower than their
carrying values. The Company also determined the fair value of all other indefinite-lived intangible assets were in excess of
their respective carrying values. Significant judgment is required to determine if an indication of impairment has taken
place. Factors to be considered include the following: adverse changes in operating results, decline in strategic business plans,
significantly lower future cash flows, and sustainable declines in market data such as market capitalization. A 10 percent
decrease in the estimated fair value of any of the indefinite-lived trade names would not have changed this determination. The
sensitivity analysis required the use of numerous subjective assumptions, which, if actual experience varies, could result in
material differences in the requirements for impairment charges. Further, an extended downturn in the economy may impact
certain components of the operating segments more significantly and could result in an impairment determination.
Income Taxes
Under the requirements of FASB ASC Topic 740, Income Taxes, the Company records deferred tax assets and liabilities for the
future tax consequences attributable to differences between financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
Company analyzes the deferred tax assets and liabilities for their future realization based on the estimated existence of
sufficient taxable income. This analysis considers the following sources of taxable income: prior year taxable income, future
reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and tax
planning strategies that would generate taxable income in the relevant period. If sufficient taxable income is not projected then
the Company will record a valuation allowance against the relevant deferred tax assets.
The Company’s operations involve dealing with uncertainties and judgments in the application of complex tax regulations in
multiple jurisdictions. These jurisdictions have different tax rates, and the Company determines the allocation of income to each
of these jurisdictions based upon various estimates and assumptions. In the normal course of business, the Company will
undergo tax audits by various tax jurisdictions. Such audits often require an extended period of time to complete and may result
in income tax adjustments if changes to the allocation are required between jurisdictions with different tax rates. The final taxes
paid are dependent upon many factors, including negotiations with taxing authorities in the various jurisdictions and resolution
of disputes arising from federal, state, and international tax audits. Although the Company has recorded all income tax
uncertainties in accordance with FASB ASC Topic 740, these accruals represent estimates that are subject to the inherent
uncertainties associated with the tax audit process. Management judgment is required in determining the Company’s provision
for income taxes, deferred tax assets and liabilities, which, if actual experience varies, could result in material adjustments to
tax expense and/or deferred tax assets and liabilities.
Pension and Employee Benefit Obligations
The Company consults with its actuaries to assist with the calculation of discount rates used in its pension and post retirement
plans. The discount rates used to determine domestic pension and post-retirement plan liabilities are calculated using a full yield
curve approach. Market conditions have caused the weighted-average discount rate to move from 4.90 percent last year to 5.48
20
percent this year for the domestic pension plans and from 4.88 percent last year to 5.47 percent this year for the postretirement
health and life insurance plan. A change in the discount rate selected by the Company of 25 basis points would result in a
change of about $0.1 million to employee benefit expense and a change of about $2.4 million of liability.
The Company consults with actuaries and investment advisors in making its determination of the expected long-term rate of
return on plan assets. Using input from these consultations such as long-term investment sector expected returns, the
correlations and standard deviations thereof, and the plan asset allocation, the Company will use an expected long-term rate of
return on plan assets of 5.75 percent in measuring net periodic cost for 2025. Market conditions have caused the expected long-
term rate or return to decrease from 6.20 percent as used in measuring net periodic cost for 2024. A change in the long-term rate
of return selected by the Company of 25 basis points would result in a change of about $0.3 million of employee benefit
expense.
FACTORS THAT MAY AFFECT FUTURE RESULTS
This annual report on Form 10-K contains certain forward-looking information, such as statements about the Company’s
financial goals, acquisition strategies, financial expectations including anticipated revenue or expense levels, business
prospects, market positioning, product development, manufacturing re-alignment, capital expenditures, tax benefits and
expenses, and the effect of contingencies or changes in accounting policies. Forward-looking statements are typically identified
by words or phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may increase,” “may fluctuate,” “plan,”
“goal,” “target,” “strategy,” and similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,”
and “could.” While the Company believes that the assumptions underlying such forward-looking statements are reasonable
based on present conditions, forward-looking statements made by the Company involve risks and uncertainties and are not
guarantees of future performance. Actual results may differ materially from those forward-looking statements as a result of
various factors, including general economic and currency conditions, various conditions specific to the Company’s business and
industry, new housing starts, weather conditions, epidemics and pandemics, market demand, competitive factors, changes in
distribution channels, supply constraints, effect of price increases, raw material costs, technology factors, integration of
acquisitions, litigation, government and regulatory actions, the Company’s accounting policies, and other risks, all as described
in Item 1A and Exhibit 99.1 of this Form 10-K. Any forward-looking statements included in this Form 10-K are based upon
information presently available. The Company does not assume any obligation to update any forward-looking information,
except as required by law.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk associated with changes in foreign currency exchange rates, interest rates, and
commodity prices. These exposures are actively monitored by management. Exposure to foreign exchange rate risk is due to
certain costs, revenue and borrowings being denominated in currencies other than one of the Company’s subsidiaries functional
currency. Similarly, the Company is exposed to market risk as the result of changes in interest rates which may affect the cost
of financing.
Foreign Currency Exchange Rate Risk
Foreign currency exchange rate risk is mitigated through several means including maintenance of local production facilities in
the markets served, invoicing of customers in the currency which the Company is billed for production inputs, prompt
settlement of third party and intercompany balances, limited use of foreign currency denominated debt, maintaining minimal
foreign currency denominated cash balances, and application of derivative instruments when appropriate. Based on the 2024
mix of foreign currencies, the Company estimates that a hypothetical strengthening of the US Dollar by about 2 percent would
have reduced the Company’s 2024 sales by less than 1 percent.
Interest Rate Risk
The results of operations are exposed to changes in interest rates primarily with respect to borrowings under the Company’s
revolving credit agreement (the “Credit Agreement”). Borrowings in USD under the Credit Agreement may be made either at
(i) a Secured Overnight Financing Rate (SOFR) Term Benchmark plus an applicable margin or (ii) an alternative base rate as
defined in the Credit Agreement. Borrowings in EUR under the Credit Agreement may be made either at (i) a Euro Interbank
Offer Rate (EURIBOR) Term Benchmark plus an applicable margin or (ii) an alternative base rate as defined in the Credit
Agreement. The Company had $41.4 million borrowings at year-end 2024 under the Credit Agreement. The Company
estimates that a hypothetical increase of 100 basis points in interest rates would have increased interest expense by $0.3 million
during 2024. The Company also has exposure to changes in interest rates in the form of the fair value of outstanding fixed rate
debt fluctuating in response to changing interest rates.
21
Commodity Price Exposures
Portions of the Company’s business are exposed to volatility in the prices of certain commodities, such as copper, steel and
aluminum, among others. The primary exposure to this volatility resides with the use of these materials in purchased component
parts. The Company generally maintains long-term fixed price contracts on raw materials and component parts; however, the
Company is prone to exposure as these contracts expire. Based on the 2024 use of commodities, the Company estimates that a
hypothetical 10 percent adverse movement in prices for raw metal commodities would result in less than 1 percent decrease of
gross margin as a percent of net sales.
22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
2024
2023
2022
Net sales
$
2,021,341 $
2,065,133 $
2,043,711
Cost of sales
1,304,061
1,368,125
1,352,276
Gross profit
717,280
697,008
691,435
Selling, general, and administrative expenses
470,136
433,476
432,076
Restructuring expense
3,499
1,091
2,170
Operating income
243,645
262,441
257,189
Interest expense
(6,319)
(11,790)
(11,525)
Other income/(expense), net
1,339
3,696
(3,201)
Foreign exchange expense
(6,818)
(12,124)
(7,236)
Income before income taxes
231,847
242,223
235,227
Income tax expense
50,238
47,489
46,416
Net income
$
181,609 $
194,734 $
188,811
Less: Net income attributable to noncontrolling interests
(1,300)
(1,462)
(1,479)
Net income attributable to Franklin Electric Co., Inc.
$
180,309 $
193,272 $
187,332
Earnings per share:
Basic
$
3.92 $
4.17 $
4.02
Diluted
$
3.86 $
4.11 $
3.97
See Notes to Consolidated Financial Statements.
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
2024
2023
2022
Net income
$
181,609 $
194,734 $
188,811
Other comprehensive income/(loss), before tax:
Foreign currency translation adjustments
(35,879)
12,026
(11,809)
Employee benefit plan activity:
Net gain/(loss) arising during period
1,492
(4,449)
6,660
Amortization arising during period
2,282
2,148
5,828
Other comprehensive income/(loss)
(32,105)
9,725
679
Income tax benefit/(expense) related to items of other comprehensive
income/(loss)
(938)
643
(3,647)
Other comprehensive income/(loss), net of tax
(33,043)
10,368
(2,968)
Comprehensive income
148,566
205,102
185,843
Less: Comprehensive income attributable to noncontrolling interests
(1,146)
(1,496)
(1,378)
Comprehensive income attributable to Franklin Electric Co., Inc.
$
147,420 $
203,606 $
184,465
See Notes to Consolidated Financial Statements.
23
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
$
220,540
$
84,963
Receivables, less allowances of $3,547 and $3,594, respectively
226,826
222,418
Inventories:
Raw material
160,875
176,706
Work-in-process
24,997
26,880
Finished goods
298,003
305,110
Total inventories
483,875
508,696
Other current assets
32,950
37,718
Total current assets
964,191
853,795
Property, plant, and equipment, at cost:
Land and buildings
161,860
167,028
Machinery and equipment
316,454
316,227
Furniture and fixtures
58,300
56,997
Other
67,004
59,747
Property, plant, and equipment, gross
603,618
599,999
Less: Allowance for depreciation
(380,052)
(370,260)
Property, plant, and equipment, net
223,566
229,739
Lease right-of-use assets, net
62,637
57,014
Deferred income taxes
8,210
8,758
Intangible assets, net
212,973
230,027
Goodwill
338,501
342,404
Other assets
10,528
6,385
Total assets
$
1,820,606
$
1,728,122
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
157,046
$
152,419
Accrued expenses and other current liabilities
119,771
100,249
Current lease liability
18,878
17,316
Income taxes
20,218
4,700
Current maturities of long-term debt and short-term borrowings
117,814
12,355
Total current liabilities
433,727
287,039
Long-term debt
11,622
88,056
Long-term lease liability
43,304
38,549
Income taxes payable non-current
—
4,837
Deferred income taxes
10,193
29,461
Employee benefit plans
29,808
35,973
Other long-term liabilities
22,118
33,914
Commitments and contingencies (see Note 7)
Redeemable noncontrolling interest
1,224
1,145
Shareholders’ equity:
Common stock (65,000 shares authorized, $0.10 par value) outstanding (45,716 and 46,067, respectively)
4,571
4,607
Additional paid-in capital
363,956
344,717
Retained earnings
1,151,575
1,078,512
Accumulated other comprehensive loss
(254,003)
(221,114)
Total shareholders’ equity
1,266,099
1,206,722
Noncontrolling interest
2,511
2,426
Total equity
1,268,610
1,209,148
Total liabilities and equity
$
1,820,606
$
1,728,122
See Notes to Consolidated Financial Statements.
24
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
2024
2023
2022
Cash flows from operating activities:
Net income
$
181,609
$
194,734
$
188,811
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization
56,073
52,260
50,374
Non-cash lease expense
21,438
18,852
17,406
Share-based compensation
12,061
10,133
10,973
Deferred income taxes
(19,648)
(1,609)
(1,230)
(Gain)/Loss on disposals of plant and equipment
(497)
(256)
1,285
Foreign exchange expense
6,818
12,124
7,236
Changes in assets and liabilities, net of acquisitions:
Receivables
(17,045)
19,150
(44,800)
Inventory
10,889
48,176
(101,080)
Accounts payable and accrued expenses
15,285
(23,085)
(12,283)
Operating leases
(21,129)
(18,874)
(17,406)
Income taxes
15,755
(1,524)
(679)
Income taxes-U.S. Tax Cuts and Jobs Act
(3,870)
(2,902)
(355)
Employee benefit plans
466
1,458
3,488
Other, net
3,148
7,073
(66)
Net cash flows from operating activities
261,353
315,710
101,674
Cash flows from investing activities:
Additions to property, plant, and equipment
(41,682)
(41,415)
(41,903)
Proceeds from sale of property, plant, and equipment
1,182
1,494
6
Cash paid for acquisitions, net of cash acquired
(5,201)
(34,831)
(1,186)
Other, net
73
463
9
Net cash flows from investing activities
(45,628)
(74,289)
(43,074)
Cash flows from financing activities:
Proceeds from issuance of debt
309,747
443,217
477,558
Repayments of debt
(280,512)
(558,746)
(448,622)
Proceeds from issuance of common stock
7,204
9,193
3,859
Purchases of common stock
(61,041)
(43,332)
(40,490)
Dividends paid
(46,876)
(41,723)
(36,991)
Deferred payments for acquisitions
(2,591)
(802)
(3,786)
Net cash flows from financing activities
(74,069)
(192,193)
(48,472)
Effect of exchange rate changes on cash and cash equivalents
(6,079)
(10,055)
(4,874)
Net change in cash and cash equivalents
135,577
39,173
5,254
Cash and cash equivalents at beginning of period
84,963
45,790
40,536
Cash and cash equivalents at end of period
$
220,540
$
84,963
$
45,790
Cash paid for income taxes, net of refunds
$
58,024
$
55,120
$
48,335
Cash paid for interest
$
6,423
$
12,115
$
11,209
Non-cash items:
Additions to property, plant, and equipment, not yet paid
$
1,748
$
2,229
$
628
Lease right-of-use assets obtained in exchange for new operating lease liabilities
$
30,796
$
25,899
$
17,599
Payable to sellers of acquired entities
$
1,750
$
7,027
$
354
Payable for share repurchases
$
—
$
—
$
1,083
Non-cash investment to acquire property in lieu of cash payment for products provided
$
—
$
419
$
—
Accrued dividends payable to noncontrolling interests
$
961
$
821
$
—
See Notes to Consolidated Financial Statements.
25
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Total Shareholders’ Equity
(In thousands)
Common
Shares
Outstanding
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Noncontrolling
Interest
Redeemable
Noncontrolling
Interest
Balance as of year-end 2021
46,483
$
4,648
$
310,617
$ 859,817
$
(228,581) $
2,161
$
(19)
Net Income
—
—
—
187,332
—
857
622
Currency translation adjustment
—
—
—
—
(11,708)
(118)
17
Pension and other post retirement plans,
net of tax expense $3,647
—
—
—
—
8,841
—
—
Dividends on common stock ($0.78/
share)
—
—
—
(36,367)
—
—
—
Dividend to noncontrolling interest
—
—
—
—
—
(624)
—
Common stock issued
90
9
3,850
—
—
—
—
Share-based compensation
136
14
10,959
—
—
—
—
Common stock repurchased
(516)
(52)
—
(41,521)
—
—
—
Balance as of year-end 2022
46,193
$
4,619
$
325,426
$ 969,261
$
(231,448) $
2,276
$
620
Net Income
—
—
—
193,272
—
935
527
Currency translation adjustment
—
—
—
—
11,992
36
(2)
Pension and other post retirement plans,
net of tax benefit $643
—
—
—
—
(1,658)
—
—
Dividends on common stock ($0.90/
share)
—
—
—
(41,723)
—
—
—
Dividend to noncontrolling interest
—
—
—
—
—
(821)
—
Common stock issued
216
22
9,171
—
—
—
—
Share-based compensation
131
13
10,120
—
—
—
—
Common stock repurchased
(473)
(47)
—
(42,298)
—
—
—
Balance as of year-end 2023
46,067
$
4,607
$
344,717
$ 1,078,512
$
(221,114) $
2,426
$
1,145
Net Income
—
—
—
180,309
—
1,193
107
Currency translation adjustment
—
—
—
—
(35,725)
(147)
(7)
Pension and other post retirement plans,
net of tax expense $938
—
—
—
—
2,836
—
—
Dividends on common stock ($1.00/
share)
—
—
—
(46,020)
—
—
—
Dividend to noncontrolling interest
—
—
—
—
—
(961)
(21)
Common stock issued
153
15
7,189
—
—
—
—
Share-based compensation
119
11
12,050
—
—
—
—
Common stock repurchased
(623)
(62)
—
(61,226)
—
—
—
Balance as of year-end 2024
45,716
$
4,571
$
363,956
$ 1,151,575
$
(254,003) $
2,511
$
1,224
See Notes to Consolidated Financial Statements.
26
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
INDEX TO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Number
Note 1.
Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28
Note 2.
Accounting Pronouncements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
Note 3.
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
Note 4.
Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
Note 5.
Accrued Expense and Other Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
Note 6.
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
Note 7.
Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
Note 8.
Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38
Note 9.
Accumulated Other Comprehensive Income/(Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
Note 10.
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
Note 11.
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46
Note 12.
Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
Note 13.
Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
Note 14.
Fair Value Measurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50
Note 15.
Segment and Geographic Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company--“Franklin Electric” or the “Company” shall refer to Franklin Electric Co., Inc. and its consolidated subsidiaries.
Fiscal Year--The financial statements and accompanying notes are as of and for the years ended December 31, 2024,
December 31, 2023 and December 31, 2022, and referred to as 2024, 2023 and 2022, respectively.
Principles of Consolidation--The consolidated financial statements include the accounts of Franklin Electric Co., Inc. and its
consolidated subsidiaries. All intercompany transactions have been eliminated.
Business Combinations--The Company allocates the purchase price of its acquisitions to the assets acquired, liabilities
assumed, and noncontrolling interests based upon their respective fair values at the acquisition date. The Company utilizes
management estimates and may use inputs from an independent third-party valuation firm to assist in determining these fair
values. The excess of the acquisition price over estimated fair values of the net assets acquired is recorded as goodwill.
Goodwill is adjusted for any changes to acquisition date fair value amounts made within the measurement period, which may be
up to one year from the acquisition date. If the preliminary, estimated fair values of the net assets acquired are in excess of the
acquisition price, that represents a bargain purchase gain, and the Company records this amount in "Accrued expenses and other
current liabilities" on the consolidated balance sheet until it completes its determination of fair values for the net assets
acquired. Once that fair value determination is completed, the bargain purchase gain is recognized on the consolidated
statements of income in "Other income/(expense), net". Acquisition-related transaction costs are recognized separately from the
business combination and expensed as incurred.
Revenue Recognition--Revenue is recognized when promised goods or services are transferred to customers in an amount that
reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The promise in a
contract to transfer goods or services to a customer represents a performance obligation. The Company typically sells its
products to customers by purchase order and does not have any additional performance obligations included in contracts to
customers. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate
performance obligation. Therefore, the Company allocates the transaction price based on a single performance obligation. The
Company typically ships products Free on Board (FOB) shipping point at which point control of the products passes to the
customers. The Company considers the performance obligation satisfied and recognizes revenue at a point in time, the time of
shipment. The Company applies a practical expedient to expense as incurred costs to obtain a contract with a customer when the
amortization period would have been one year or less as well as applies the financing component practical expedient when the
duration of the financing is one year or less.
The Company’s products may include routine assurance-type warranties which do not qualify as separate performance
obligations. In the event that significant post-shipment obligations were to exist for the Company’s products, revenue
recognition would be deferred until the performance obligations were satisfied.
The Company records net sales after discounts at the time of sale based on specific discount programs in effect, related
historical data, and experience.
28
The following table disaggregates the Company's net sales from contracts with customers by segment:
Net Sales
(In millions)
2024
2023
2022
Water Systems
External sales
United States & Canada
$
586.6 $
636.0 $
596.9
Latin America
170.9
174.2
159.3
Europe, Middle East & Africa
211.4
198.3
192.8
Asia Pacific
93.2
86.8
92.5
Intersegment sales
United States & Canada
121.9
108.4
116.0
Total sales
1,184.0
1,203.7
1,157.5
Distribution
External sales
United States & Canada
685.5
673.3
668.1
Total sales
685.5
673.3
668.1
Energy Systems
External sales
United States & Canada
212.4
220.9
242.6
All other
61.3
75.6
91.5
Total sales
273.7
296.5
334.1
Intersegment Eliminations/Other
(121.9)
(108.4)
(116.0)
Consolidated
$
2,021.3 $
2,065.1 $
2,043.7
Shipping and Handling Costs--Shipping and handling costs are considered activities required to fulfill the Company’s promise
to transfer goods, and do not qualify as a separate performance obligation. Shipping and handling costs in the Company's Water
Systems and Energy Systems segments are recorded as a component of cost of sales whereas shipping and handling costs in the
Company's Distribution segment are recorded as a component of selling, general and administrative expenses.
Research and Development Expense--The Company’s research and development activities are charged to expense in the period
incurred. The Company incurred expenses of approximately $21.5 million in 2024, $17.7 million in 2023, and $16.7 million in
2022 related to research and development.
Cash and Cash Equivalents--The Company considers cash on hand, demand deposits, and highly liquid investments with an
original maturity date of three months or less to be cash and cash equivalents.
Fair Value of Financial Instruments--Fair value is defined as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. The standard established a fair value hierarchy which requires an entity
to maximize the use of observable inputs and to minimize the use of unobservable inputs when measuring fair value. The three
levels of inputs that may be used to measure fair value within the hierarchy are as follows:
Level 1 – Quoted prices for identical assets and liabilities in active markets;
Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and
liabilities in markets that are not active, and model-derived valuations in which all significant inputs and significant value
drivers are observable in active markets; and
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are
unobservable.
29
Accounts Receivable, Earned Discounts, and Allowance for Credit Losses--Accounts receivable are stated at estimated net
realizable value. Accounts receivable are comprised of balances due from customers, net of earned discounts and estimated
allowances for credit losses. Earned discounts are based on specific customer agreement terms. In determining allowances for
credit losses, historical collection experience, current trends and reasonable, supportable future forecasts, aging of accounts
receivable, and periodic credit evaluations of customers’ financial condition are reviewed.
Inventories--Inventories are stated at the lower of cost or net realizable value. The majority of the cost of inventories is
determined using the first in, first out (FIFO) method with a portion of inventory costs determined using the average cost
method. The Company reviews its inventories for excess or obsolete products or components based on an analysis of historical
usage and management’s evaluation of estimated future demand, market conditions, and alternative uses for possible excess or
obsolete parts.
Property, Plant, and Equipment--Property, plant, and equipment are stated at historical cost. The Company capitalizes certain
computer software and software development costs incurred in connection with developing or obtaining computer software for
internal use, which are included in property, plant, and equipment. Depreciation of property, plant and equipment is calculated
on a straight line basis over the following estimated useful lives:
Land improvement and buildings
10 - 40 years
Machinery and equipment
5 - 10 years
Software
3 - 7 years
Furniture and fixtures
3 - 7 years
Maintenance, repairs, and renewals of a minor nature are expensed as incurred. Betterments and major renewals which extend
the useful lives or add to the productive capacity of buildings, improvements, and equipment are capitalized. The Company
reviews its property, plant, and equipment for impairment at the asset group level whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. If an indicator is present, the Company compares
carrying values to undiscounted future cash flows; if the undiscounted future cash flows are less than the carrying value, an
impairment would be recognized for the difference between the fair value and the carrying value.
The Company’s depreciation expense was $37.2 million, $35.1 million, and $33.1 million in 2024, 2023, and 2022,
respectively.
Leases--The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement and
determines whether it is an operating or financing lease. Operating and financing leases result in the Company recording a
right-of-use ("ROU") asset, current lease liability, and long term lease liability on its balance sheet. The Company has elected to
not present leases with an initial term of 12 months or less on the balance sheet. The ROU assets and liabilities are initially
recognized based on the present value of lease payments over the lease term. Initial direct costs and lease incentives are
generally not material when measuring the ROU asset present value. Lease expense for operating lease payments is recognized
on a straight-line basis over the lease term.
In determining the present value of the ROU liability, the Company utilizes interest rates from lease agreements unless the lease
agreement does not provide a readily determinable rate. In these instances, the Company utilizes its incremental borrowing rate
based on the Company’s borrowing information available at inception of the lease. A portion of the Company’s leases include
renewal options. The Company excludes these renewal options in the expected lease term unless the Company is reasonably
certain that the option will be exercised. In addition, the Company has elected not to separate non-lease components from lease
components when initially recording the ROU asset and liability.
Goodwill and Other Intangible Assets--Goodwill is the excess of the purchase price over the fair value of acquired assets and
liabilities in a business combination. Goodwill is not amortized but is subject to an impairment review annually and whenever
indicators of impairment exist. The Company has the option to assess goodwill for impairment by initially performing a
qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its
carrying amount. If the Company determines that it is not more-likely-than-not that the fair value of a reporting unit is less than
its carrying amount, then the quantitative goodwill impairment test is not required to be performed. If the Company determines
that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, or if it does not elect the
option to perform an initial qualitative assessment, the Company performs a quantitative goodwill impairment test. In the
quantitative impairment test, the Company calculates the estimated fair value of the reporting unit. If the carrying amount of the
reporting unit exceeds the estimated fair value, an impairment charge is recorded for the amount that its carrying amount,
including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit.
30
Indefinite-lived intangible assets, such as certain trade names with indefinite lives, are subject to an impairment review annually
and whenever indicators of impairment exist. The Company has the option to assess indefinite-lived intangible assets for
impairment by first performing qualitative assessments to determine whether it is more-likely-than-not that the fair values of the
indefinite-lived intangible assets are less than the carrying amounts. If the Company determines that it is more-likely-than-not
that an indefinite-lived intangible asset is impaired, or if the Company elects not to perform an initial qualitative assessment, the
Company then performs the quantitative impairment test by comparing the fair value of the indefinite-lived intangible asset
with its carrying amount. If the carrying amount exceeds the fair value of the indefinite-lived intangible asset, the Company
writes the carrying amount down to the fair value.
Amortization is recorded and calculated for definite-lived intangible assets on a basis that reflects cash flows over the estimated
useful lives. The estimated useful lives over which each intangible class is amortized is as follows:
Customer relationships
9 - 20 years
Patents
17 years
Technology
15 years
Trade names
5 - 20 years
Other
5 - 8 years
Definite-lived intangible assets are evaluated for impairment whenever a triggering event, including a significant change in the
use of the asset or unexpected change in financial condition, occurs that indicates the carrying value may be impaired. The
Company tests for impairment at the asset group level by comparing the carrying value of an asset group that includes the
applicable definite lived intangible asset(s) to that asset group's undiscounted future cash flows. An impairment exists if the
carrying value of the definite-lived intangible asset(s) is higher than the fair value, and the Company would record an
impairment charge for the difference.
Warranty Obligations--The Company provides warranties on most of its products. The warranty terms vary but are generally 2
years to 5 years from the date of manufacture or 1 year to 5 years from the date of installation. Provisions for estimated
expenses related to product warranty are made at the time products are sold or when specific warranty issues are identified.
These estimates are established using historical information about the nature, frequency, and average cost of warranty claims.
The Company actively studies trends of warranty claims and takes actions to improve product quality and minimize warranty
claims.
Income Taxes--Deferred tax assets and liabilities are determined based on the difference between the financial statement and
tax basis of assets and liabilities and net operating loss and credit carry forwards using enacted tax rates in effect for the year in
which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized. The Company records a liability for uncertain tax positions by establishing a more
likely than not recognition threshold and measurement attribute for recognition and measurement of a tax position taken or
expected to be taken in a tax return.
Defined Benefit Plans--The Company makes its determination for pension, post retirement, and post employment benefit plans
liabilities based on management estimates and consultation with actuaries. The Company incorporates estimates and
assumptions of future plan service costs, future interest costs on projected benefit obligations, rates of compensation increases,
employee turnover rates, anticipated mortality rates, expected investment returns on plan assets, asset allocation assumptions of
plan assets, and other factors.
Earnings Per Common Share--The Company utilizes the two-class method to compute earnings available to common
shareholders. Under the two-class method, the Company allocates net earnings to each class of common stock and participating
security as if all of the net earnings for the period had been distributed. The Company’s participating securities consist of share-
based payment awards that contain a non-forfeitable right to receive dividends and therefore are considered to participate in
undistributed earnings with common shareholders. Basic earnings per common share excludes dilution and is calculated by
dividing net earnings allocated to common shares by the weighted-average number of common shares outstanding for the
period. Diluted earnings per common share is calculated by dividing net earnings allocable to common shares by the weighted-
average number of common shares outstanding for the period, as adjusted for the potential dilutive effect of non-participating
share-based awards and non-employee deferred shares.
Translation of Foreign Currency Financial Statements--All assets and liabilities of foreign subsidiaries in a functional
currency other than the U.S. dollar are translated at year-end exchange rates. All revenue and expense accounts are translated at
31
average rates in effect during the respective period. Transaction gains and losses and highly inflationary accounting adjustments
are included in “Foreign exchange expense” within the Company’s consolidated statements of income, as incurred.
In the second quarter of 2022, the Company concluded that Turkey represents a highly inflationary economy as its three-year
cumulative inflation rate exceeded 100 percent. As a result, the Company started remeasuring the financial statements for the
Company’s Turkish operations in accordance with the highly inflationary accounting rules as of April 1, 2022. As a result, all
gains and losses resulting from the remeasurement of the financial results of operations and other transactional foreign
exchange gains and losses are reflected in earnings rather than as a component of the Company’s comprehensive income within
shareholders’ equity. Additionally, the Company’s operations in Argentina have also been accounted for using the highly
inflationary accounting rules since the date they were acquired in 2018.
Significant Estimates--The preparation of financial statements in conformity with accounting principles generally accepted in
the United States requires management to make significant estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of expenses during the reporting periods. Although the Company regularly assesses these estimates, actual results could
materially differ. The Company bases its estimates on historical experience and various other assumptions that it believes to be
reasonable under the circumstances.
2. ACCOUNTING PRONOUNCEMENTS
Adoption of New Accounting Standards
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 is intended to
improve reportable segment disclosure requirements, primarily through additional and more detailed information about a
reportable segment's expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim
periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied
retrospectively to all prior periods presented in the financial statements. The Company adopted this ASU in 2024 and the
required disclosures are included in Note 15 - Segment and Geographic Information.
Accounting Standards Issued But Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU
2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. This amendment modifies
the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation and additional
information for reconciling items that meet a quantitative threshold, (2) the amount of income taxes paid (net of refunds
received) (disaggregated by federal, state, and foreign taxes) as well as individual jurisdictions in which income taxes paid is
equal to or greater than 5 percent of total income taxes paid net of refunds, (3) the income or loss from continuing operations
before income tax expense or benefit (disaggregated between domestic and foreign) and (4) income tax expense or benefit from
continuing operations (disaggregated by federal, state and foreign). ASU 2023-09 is effective for annual periods beginning after
December 15, 2024, with early adoption permitted. ASU 2023-09 should be applied on a prospective basis, while retrospective
application is permitted. The Company will adopt this ASU effective with its 2025 annual financial statements and does not
anticipate the adoption to have a material impact on its financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional
disclosure of the nature of expenses included in the income statement. The standard requires disclosures about specific types of
expenses included in the expense captions presented in the income statement. This ASU is effective for fiscal years beginning
after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The
requirements should be applied on a prospective basis while retrospective application is permitted. The Company is currently
evaluating the impact that the adoption of this guidance will have on its disclosures.
3. ACQUISITIONS
2024
During the fourth quarter ended December 31, 2024, the Company acquired substantially all of the assets of FSHS
Incorporated, a water treatment systems distributor. The all-cash purchase price for the acquisition was $4.5 million. The fair
value of the assets acquired and liabilities assumed is preliminary as of December 31, 2024.
2023
During the fourth quarter ended December 31, 2023, the Company acquired substantially all of the assets of Aqua Systems of
Fort Myers, a water treatment systems distributor. In another separate transaction, the Company acquired substantially all of
the assets of Action Manufacturing and Supply, Inc., a water treatment equipment provider located in southwest Florida. The
32
Company also acquired, in a separate transaction, substantially all of the assets of LCA Pump, LLC, which operates Water
Works Pump, a Missouri based professional groundwater distributor. The combined, all-cash purchase price for the acquisitions
in the fourth quarter of 2023 was $36.0 million, including contingent consideration with an estimated fair value of $4.3 million,
after purchase price adjustments based on the level of working capital acquired. In 2024, the Company recorded a measurement
period adjustment of $1.3 million to increase the acquisition-date fair value of the contingent consideration transferred. The
measurement period adjustment resulted in an increase to acquired identifiable intangible assets of $2.3 million and a reduction
to acquired goodwill of $1.0 million. The measurement period adjustments did not have a significant impact on the Company’s
results of operations.
During the first quarter ended March 31, 2023, the Company acquired substantially all of the assets of Phil-Good Products, Inc.
("Phil-Good"). Phil-Good is an injection molded plastics component manufacturer. In another separate transaction in the first
quarter of 2023, the Company acquired 100 percent of the ownership interests of Hydropompe S.r.l. ("Hydropompe").
Hydropompe is a pump manufacturer with a focus in dewatering and sewage products. The combined, all-cash purchase price
for both acquisitions in the first quarter of 2023 was $8.7 million after purchase price adjustments based on the level of working
capital acquired.
The fair value of the assets acquired and liabilities assumed for all 2023 acquisitions is final as of December 31, 2024.
2022
During the fourth quarter ended December 31, 2022, the Company acquired 100 percent of the ownership interests of Casper
Well Products ("Casper") for a purchase price of $2.0 million after working capital adjustments. Casper conducts the sale and
distribution of pumps, drilling equipment, tanks, pipe, accessories and other equipment used in drilling water wells and
distribution of water-related products. The fair value of the assets acquired and liabilities assumed was final as of December 31,
2023.
The Company has not included various disclosures for the 2022 through 2024 acquisitions including presenting separate results
of operations of any of the acquired companies since the closing of the acquisitions or combined pro forma financial
information of the Company and the acquired interests, as the Company does not consider any of the acquisitions to be material
individually or in the aggregate.
Transaction costs for all acquisition-related activity were expensed as incurred under the guidance of FASB ASC Topic 805,
Business Combinations. Transaction costs are included in the "Selling, general, and administrative expenses" line of the
Company’s consolidated statements of income and were immaterial for all periods presented.
Subsequent Event
In February 2025, the Company acquired 100 percent of the ownership interests of PumpEng Pty Ltd ("PumpEng") for a
purchase price of AUD 24.0 million (approximately $15.0 million), subject to working capital and net debt closing adjustments.
PumpEng, based in Australia, specializes in the design, manufacture and service of submersible pumps for the mining sector.
The Company expects the purchase price to be primarily allocated to goodwill and other intangible assets.
Also in February 2025, the Company signed a definitive agreement to acquire Barnes de Colombia S.A., a leading manufacturer
and distributor of industrial and commercial pumps based in Colombia for an enterprise value of $110.0 million, subject to
working capital and net debt closing adjustments. The acquisition is subject to customary closing conditions, including
Colombian antitrust clearance, and is expected to close on or about March 1, 2025.
33
4. GOODWILL AND OTHER INTANGIBLE ASSETS
The carrying amounts of the Company’s intangible assets, excluding goodwill, are as follows:
(In millions)
2024
2023
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Amortizing intangibles:
Customer relationships
$
263.4 $
(128.8) $
263.7 $
(115.5)
Patents
7.2
(7.2)
7.3
(7.3)
Technology
7.5
(7.5)
7.5
(7.5)
Trade names
44.5
(8.1)
44.1
(5.8)
Other
2.8
(2.4)
3.4
(2.8)
Total
$
325.4 $
(154.0) $
326.0 $
(138.9)
Non-amortizing intangibles:
Trade names
41.6
—
42.9
—
Total intangibles
$
367.0 $
(154.0) $
368.9 $
(138.9)
Amortization expense related to intangible assets for the years ended December 31, 2024, 2023, and 2022, was $18.8 million,
$17.1 million, and $17.2 million, respectively.
Amortization expense for each of the five succeeding years is projected as follows:
(In millions)
2025
2026
2027
2028
2029
$
18.0 $
17.1 $
15.6 $
15.1 $
14.0
The change in the carrying amount of goodwill by reportable segment for 2024 and 2023, is as follows:
(In millions)
Water Systems
Energy Systems
Distribution
Consolidated
Balance as of December 31, 2022
$
211.9 $
70.3 $
45.8 $
328.0
Acquisitions
8.0
—
4.8
12.8
Adjustments to prior year acquisitions
0.1
—
—
0.1
Foreign currency translation
1.4
0.1
—
1.5
Balance as of December 31, 2023
$
221.4 $
70.4 $
50.6 $
342.4
Acquisitions
0.8
—
—
0.8
Adjustments to prior year acquisitions
(1.0)
—
—
(1.0)
Foreign currency translation
(3.6)
(0.1)
—
(3.7)
Balance as of December 31, 2024
$
217.6 $
70.3
50.6 $
338.5
5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of:
(In millions)
2024
2023
Salaries, wages, and commissions
$
49.0 $
45.9
Product warranty costs
9.0
9.3
Insurance
2.4
2.5
Employee benefits
19.9
13.8
Other
39.5
28.7
$
119.8 $
100.2
34
6. DEBT
Debt consisted of the following:
(In millions)
2024
2023
New York Life Agreement
$
75.0 $
75.0
Credit Agreement
41.4
11.0
Tax increment financing debt
12.8
14.1
Foreign subsidiary debt
0.3
0.5
Less: unamortized debt issuance costs
(0.1)
(0.1)
129.4
100.5
Less current maturities
(117.8)
(12.4)
Long-term debt
$
11.6 $
88.1
Debt outstanding at December 31, 2024, excluding unamortized debt issuance costs, matures as follows:
(In millions)
Total
2025
2026
2027
2028
2029
Thereafter
Debt
$
129.5 $
117.8 $
1.5 $
1.5 $
1.4 $
1.5 $
5.8
New York Life Agreement
On May 27, 2015, the Company entered into an uncommitted and unsecured private shelf agreement with NYL Investors LLC,
an affiliate of New York Life, and each of the undersigned holders of Notes (the “New York Life Agreement”) for $150.0
million maximum aggregate principal borrowing capacity. On October 28, 2016, the Company entered into the First
Amendment to the Note Purchase and Private Shelf Agreement. The Amendment was intended to make the covenants within
the New York Life Agreement consistent with the covenants that were modified in the Third Amended and Restated Credit
Agreement (the “Credit Agreement”). On September 26, 2018, the Company entered into the Second Amendment to the Note
Purchase and Private Shelf Agreement which increased the aggregate borrowing capacity to $200.0 million and authorized the
issuance of $75.0 million of fixed rate senior noted due September 26, 2025. These senior notes bear an interest rate of 4.04
percent with interest-only payments due semi-annually. The proceeds from the issuance of the notes were used to pay off
existing variable rate indebtedness with New York Life. On July 30, 2021, the New York Life agreement was renewed with an
expiration date of July 30, 2024. On May 15, 2024, the Company entered into Amendment No. 1 to the renewal that increased
the total available facility amount from lenders to $250.0 million from $200.0 million and changed the expiration date from
July 30, 2024 to May 15, 2027. As of December 31, 2024, there was $175.0 million of remaining borrowing capacity under the
New York Life Agreement.
Project Bonds
On December 31, 2012, the Company, Allen County, Indiana and certain institutional investors entered into a Bond Purchase
and Loan Agreement. Under the agreement, Allen County, Indiana issued a series of Project Bonds entitled “Taxable Economic
Development Bonds, Series 2012 (Franklin Electric Co., Inc. Project).” The aggregate principal amount of the Project Bonds
that were issued, authenticated, and are now outstanding thereunder was limited to $25.0 million. The Company then borrowed
the proceeds under the Project Bonds through the issuance of Project Notes to finance the cost of acquisition, construction,
installation and equipping of the new Global Corporate Headquarters and Engineering Center. These Project Notes (“Tax
increment financing debt”) bear interest at 3.6 percent per annum. Interest and principal balance of the Project Notes are due
and payable by the Company directly to the institutional investors in aggregate semi-annual installments commencing on July
10, 2013, and concluding on January 10, 2033. The use of the proceeds from the Project Notes was limited to assist the
financing of the new Global Corporate Headquarters and Engineering Center. On May 5, 2015, the Company entered into
Amendment No. 1 to the Bond Purchase and Loan Agreement. This amendment provided for debt repayment guarantees from
certain Company subsidiaries and waived certain non-financial covenants related to subsidiary guarantees.
Prudential Agreement
On April 9, 2007, the Company entered into the uncommitted and unsecured Amended and Restated Note Purchase and Private
Shelf Agreement (the “Prudential Agreement”) in the amount of $175.0 million. Under the Prudential Agreement, the Company
issued notes in an aggregate principal amount of $110.0 million on April 30, 2007 (the “B-1 Notes”) and $40.0 million on
September 7, 2007 (the “B-2 Notes”). The B-1 Notes and B-2 Notes bear a coupon of 5.79 percent and had, at issuance, an
average life of 10 years with a final maturity in 2019. On July 22, 2010, the Company entered into Amendment No. 3 to the
Prudential Agreement to increase its borrowing capacity by $25.0 million. On December 14, 2011, the Company entered into
Amendment No. 4 to the Second Amended and Restated Note Purchase and Private Shelf Agreement to redefine the debt to
35
EBITDA ratio covenant in order to be equivalent to that under the Agreement. On December 31, 2012, the Company and
Prudential Insurance Company of America entered into an amendment to the Second Amended and Restated Note Purchase and
Private Shelf Agreement to extend the effective date to December 31, 2015. On May 5, 2015, the Company entered into
Amendment No. 6 to the Second Amended and Restated Note Purchase and Private Shelf Agreement. This amendment
provided for debt repayment guarantees from certain Company subsidiaries and waived certain non-financial covenants related
to subsidiary guarantees. On May 28, 2015, the Company entered into a Third Amended and Restated Note Purchase and
Private Shelf Agreement with Prudential to increase the total borrowing capacity from $200.0 million to $250.0 million. On
October 28, 2016, the Company entered into Amendment No. 1 to the Third Amended and Restated Note Purchase and Private
Shelf Agreement. This amendment was intended to make the covenants within the Prudential Agreement consistent with the
covenants that were modified in the Credit Agreement (below). On July 30, 2021, the Company entered into the Fourth
Amended and Restated Note Purchase and Private Shelf Agreement, which reduced the borrowing capacity to $150.0 million
and extended the expiration date to July 30, 2024. On May 15, 2024, the Company entered into Amendment No. 1 to the Fourth
Amended and Restated Note Purchase and Private Shelf Agreement that increased the total available facility amount from
lenders to $250.0 million from $150.0 million and changed the expiration date from July 30, 2024 to May 15, 2027. As of
December 31, 2024, the Company has $250.0 million borrowing capacity available under the Prudential Agreement.
Credit Agreement
On May 13, 2021, the Company entered into the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”).
The Credit Agreement extended the maturity date of the Company’s previous credit agreement to May 13, 2026, and decreased
the commitment amount from $300.0 million to $250.0 million. On May 11, 2022, the Company entered into Amendment No.
1 that increased the commitment amount from $250.0 million to $350.0 million. The Credit Agreement provides that the
Borrowers may request an increase in the aggregate commitments by up to $125.0 million (not to exceed a total commitment
of $475.0 million) subject to the conditions contained therein. All of the Company’s present and future material domestic
subsidiaries unconditionally guaranty all of the Borrowers’ obligations under and in connection with the Credit Agreement.
Additionally, the Company unconditionally guaranties all of the obligations of Franklin Electric B.V. under the Credit
Agreement. Under the Credit Agreement, the Borrowers are required to pay certain fees, including a facility fee of 0.100
percent to 0.275 percent (depending on the Company’s leverage ratio) of the aggregate commitment, payable quarterly in
arrears. USD loans may be made either at (i) a Secured Overnight Financing Rate (SOFR) Term Benchmark, with a zero
percent floor, plus an applicable margin of 0.950 percent to 1.975 percent (depending on the Company's leverage ratio) or (ii)
an alternative base rate as defined in the Credit Agreement. EUR loans may be made in Euro Interbank Offer Rate (EURIBOR)
Term Benchmark, with a zero percent floor, plus an applicable margin of 0.850 percent to 1.875 percent (depending on the
Company’s leverage ratio) or (ii) an alternative base rate as defined in the Credit Agreement.
As of December 31, 2024, the Company had $41.4 million outstanding borrowings with a weighted-average interest rate of 3.7
percent, $4.5 million in letters of credit outstanding, and $304.1 million of available capacity under the Credit Agreement. As of
December 31, 2023, the Company had $11.0 million outstanding borrowings with a weighted average interest rate of 6.3
percent, $3.6 million in letters of credit outstanding, and $335.4 million of available capacity under the Credit Agreement.
The Company also has lines of credit for certain subsidiaries with various expiration dates. The aggregate maximum borrowing
capacity of these overdraft lines of credits is $16.8 million. As of December 31, 2024, there were no outstanding borrowings
and $16.8 million of available capacity under these lines of credit. As of December 31, 2023, there were $17.9 million overdraft
lines of credit with no outstanding borrowings and $17.9 million of available capacity under these lines of credit.
Covenants
The Company’s credit agreements contain customary financial covenants. The Company’s most significant agreements and
restrictive covenants are in the New York Life Agreement, the Project Bonds, the Prudential Agreement, and the Credit
Agreement; each containing both affirmative and negative covenants. The affirmative covenants relate to financial statements,
notices of material events, conduct of business, inspection of property, maintenance of insurance, compliance with laws and
most favored lender obligations. The negative covenants include limitations on loans, advances and investments, and the
granting of liens by the Company or its subsidiaries, as well as prohibitions on certain consolidations, mergers, sales and
transfers of assets. The covenants also include financial requirements including a maximum leverage ratio of 3.50 to 1.00 and a
minimum interest coverage ratio of 3.00 to 1.00. Cross default is applicable with the Credit Agreement, the Prudential
Agreement, the Project Bonds, and the New York Life Agreement, but only if the Company is defaulting on an obligation
exceeding $10.0 million. The Company was in compliance with all financial covenants as of December 31, 2024.
7. COMMITMENTS AND CONTINGENCIES
In 2011, the Company became aware of a review of alleged issues with certain underground piping connections installed in
filling stations in France owned by the French Subsidiary of Exxon Mobile, Esso S.A.F. A French court ordered that a
designated, subject-matter expert review 103 filling stations to determine what, if any, damages are present and the cause of
36
those damages. The Company has participated in this investigation since 2011, along with several other third parties including
equipment installers, engineering design firms who designed and provided specifications for the stations, and contract
manufacturers of some of the installed equipment. In May 2022, the subject-matter expert issued its final report, which
indicates that total damages incurred by Esso amounted to approximately 9.5 million Euro. It is the Company’s position that its
products were not the cause of any alleged damage. The Company submitted its response to the expert's final report in February
2023. The Company cannot predict the ultimate outcome of this matter. Any exposure related to this matter is neither probable
nor reasonably estimable at this time. If payments result from a resolution of this matter, depending on the amount, they could
have a material effect on the Company’s financial position, results of operations, or cash flows.
The Company is defending other various claims and legal actions which have arisen in the ordinary course of business. In the
opinion of management, based on current knowledge of the facts and after discussion with counsel, these claims and legal
actions can be defended or resolved without a material effect on the Company’s financial position, results of operations, and net
cash flows.
At December 31, 2024, the Company had $12.6 million of commitments primarily for capital expenditures and the purchase of
raw materials to be used in production.
At December 31, 2024, the Company has a contingent consideration liability with an estimated fair value of $5.0 million, the
maximum potential payout, that was paid in early 2025.
The changes in the carrying amount of the warranty accrual, as recorded in the “Accrued expenses and other current liabilities”
line of the Company’s consolidated balance sheets for 2024 and 2023, are as follows:
(In millions)
2024
2023
Beginning balance
$
9.3 $
11.2
Accruals related to product warranties
12.7
11.8
Additions related to acquisitions
—
—
Reductions for payments made
(13.0)
(13.7)
Ending balance
$
9.0 $
9.3
The Company maintains certain warehouses, distribution centers, office space, and equipment operating leases. The Company
also has lease agreements that are classified as financing. However, these financing leases are immaterial to the Company.
The components of the Company's operating lease portfolio as of 2024, 2023, and 2022 are as follows:
Lease Cost (In millions):
2024
2023
2022
Operating lease cost
$
22.0
$
18.8
$
17.4
Variable lease cost
$
8.1
$
7.6
$
6.9
Other Information:
Weighted-average remaining lease term
4.2 years
4.0 years
Weighted-average discount rate
5.0 %
4.3 %
The Company has entered into lease agreements with aggregate future minimum payments of approximately $2.3 million that
have not yet commenced as of December 31, 2024.
The future minimum rental payments for non-cancellable operating leases as of December 31, 2024, are as follows:
(In millions)
Total
2025
2026
2027
2028
2029
Thereafter
Undiscounted future minimum rental
payments
$
73.5 $
22.7 $
17.6 $
12.6 $
9.0 $
4.9 $
6.7
Less: Imputed Interest
11.3
Present value of lease liabilities
$
62.2
37
8. SHAREHOLDERS' EQUITY
Share-based Compensation
In 2023, the Company amended The Franklin Electric Co., Inc. 2017 Stock Plan, which is called The Franklin Electric Co., Inc.
Amended and Restated 2017 Stock Plan ("the 2017 Amended and Restated Stock Plan") and increased the number of shares
available under the Plan by 900,000 to 2,300,000. The 2017 Amended and Restated Stock Plan is a stock-based compensation
plan that provides for discretionary grants of stock options, stock awards, stock unit awards, and stock appreciation rights
(“SARs”) to key employees and non-employee directors. Stock options and SARs reduce the number of available shares by one
share for each share subject to the option or SAR, and stock awards and stock unit awards settled in shares reduce the number
of available shares by 1.5 shares for every one share delivered.
The Company also maintains the Franklin Electric Co., Inc. 2012 Stock Plan (the “2012 Stock Plan”), which is a share-based
compensation plan that provides for discretionary grants of stock options, stock awards and stock unit awards to key employees
and non-employee directors.
The 2012 Stock Plan authorized 2,400,000 shares for issuance as follows:
2012 Stock Plan
Authorized Shares
Stock Options
1,680,000
Stock/Stock Unit Awards
720,000
No additional options and awards are granted out of the 2012 Stock Plan. However, there are still unvested awards and
unexercised options under this plan.
The Company currently issues new shares from its common stock balance to satisfy option exercises and the settlement of stock
awards and stock unit awards made under the outstanding stock plans.
The Company recognizes share-based compensation expense only for the portion of shares that it expects to vest. As such, an
estimated forfeiture rate is applied to calculate the share-based compensation expense, which is based on historical forfeiture
data. The total share-based compensation expense recognized in 2024, 2023, and 2022 was $12.1 million, $10.1 million, and
$11.0 million, respectively. The tax benefit recognized in 2024, 2023, and 2022 was $5.0 million, $5.6 million, and $4.7
million. Included in the benefit in 2024, 2023, and 2022 were excess tax benefits on share-based compensation of $2.3 million,
$3.2 million, and $2.1 million, respectively.
Stock Options:
Under the above plans, the exercise price of each option equals the market price of the Company’s common stock on the date of
grant, and the options expire 10 years after the date of the grant. Options vest at 33 percent a year and become fully vested and
fully exercisable after 3 years. Vesting is accelerated upon retirement, death or disability. Subject to the terms of the plans, in
general, the aggregate option exercise price and any applicable tax withholding may be satisfied in cash or its equivalent, by the
plan participant’s delivery of shares of the Company’s common stock having a fair market value at the time of exercise equal to
the aggregate option exercise price and/or the applicable tax withholding or by having shares otherwise subject to the award
withheld by the Company or via cashless exercise through a broker-dealer.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model with a
single approach and amortized using a straight-line attribution method over the option’s vesting period. Options granted to
retirement eligible employees are immediately expensed. The Company uses historical data to estimate the expected volatility
of its stock, the weighted average expected life, the period of time options granted are expected to be outstanding, and its
dividend yield. The risk-free rates for periods within the contractual life of the option are based on the U.S. Treasury yield
curve in effect at the time of the grant.
38
The table below provides the weighted average grant-date fair values and key assumptions used for the Black-Scholes model to
determine the fair value of options granted during 2024, 2023, and 2022:
2024
2023
2022
Risk-free interest rate
4.38 %
4.02 %
1.87 %
Dividend yield
1.03 %
0.95 %
0.93 %
Volatility factor
33.01 %
33.81 %
33.88 %
Expected term
6.0 years
6.0 years
5.5 years
Weighted average grant-date fair value of options
$
35.03
$
34.51
$
26.05
A summary of the Company’s outstanding stock option activity and related information is as follows:
(Shares in thousands)
Shares
Weighted-
Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
(000’s)
Stock Options
Outstanding at beginning of 2024
900 $
58.96
Granted
116
96.90
Exercised
(153)
46.88
Forfeited
(2)
95.07
Expired
—
—
Outstanding at end of 2024
861 $
66.15
5.06 years
$
27,010
Expected to vest after applying forfeiture rate
857 $
66.03
5.04 years
$
27,001
Vested and exercisable at end of period
674 $
58.34
4.06 years
$
26,362
(In millions)
2024
2023
2022
Intrinsic value of options exercised
$
8.8 $
11.6 $
3.7
Cash received from the exercise of options
7.2
9.2
3.9
Fair value of shares vested
2.5
3.1
3.1
Tax benefit of options exercised
1.8
2.9
0.9
As of December 31, 2024, there was $2.2 million of total unrecognized compensation cost related to non-vested stock options
granted under the stock plans. That cost is expected to be recognized over a weighted-average period of 1.90 years.
Stock/Stock Unit Awards:
Under the 2017 Stock Plan, non-employee directors and employees may be granted stock awards and stock units. Stock awards
to non-employee directors are generally fully vested when made. Stock/stock unit awards to employees cliff vest over 3 years
(subject to accelerated vesting of a pro rata portion in the case of retirement, death or disability) and may be contingent on the
attainment of certain performance goals. Dividends are paid to the recipient prior to vesting, except that dividends on
performance-based stock awards under the 2012 Stock Plan and the 2017 Stock Plan will be paid only to the extent the
performance goals are met.
Stock/stock unit awards granted to retirement eligible employees are expensed over the vesting period. Compensation cost for
the performance stock/stock unit awards is accrued based on the probable outcome of specified performance conditions.
39
A summary of the Company’s restricted stock/stock unit award activity and related information is as follows:
(Shares in thousands)
Shares
Weighted-Average
Grant-
Date Fair Value
Restricted Stock/Stock Unit Awards
Non-vested at beginning of 2024
259 $
85.05
Awarded
174
93.97
Vested
(104)
75.70
Forfeited
(15)
90.30
Non-vested at end of 2024
314 $
92.83
The weighted-average grant date fair value of restricted stock/stock unit awards granted in 2024, 2023, and 2022, is $93.97,
$87.31, and $81.16, respectively. The fair value of restricted stock/stock unit awards that vested in 2024, 2023, and 2022, was
$7.9 million, $8.0 million, and $9.1 million, respectively.
As of December 31, 2024, there was $8.8 million of total unrecognized compensation cost related to non-vested stock/stock
unit awards granted under the stock plans. That cost is expected to be recognized over a weighted-average period of 1.42 years.
Authorized Shares
The Company has the authority to issue 65,000,000, $0.10 par value common shares.
The Company also has the authority to issue 100,000 preference shares with no par value and 5,000,000 preferred shares with
no par value. No preference or preferred shares have been issued.
Repurchased Shares
During 2024, 2023, and 2022, pursuant to a stock repurchase program authorized by the Company’s Board of Directors, the
Company repurchased and retired the following amounts and number of shares:
(In millions, except share amounts)
2024
2023
2022
Repurchases
$
53.1 $
32.5 $
36.3
Shares
549,062
371,452
453,207
The Company retired shares in the amount of 74,513, 101,690, and 63,133 in 2024, 2023, and 2022, respectively, that were
received from employees as payment for the exercise price of their stock options and taxes owed upon the exercise of their
stock options and release of their restricted awards. The Company also reduced outstanding shares in the amount of 5,930, 0,
and 16,839 in 2024, 2023, and 2022, respectively, that had been previously granted as stock awards to employees but were
forfeited upon not meeting the required restriction criteria or termination.
40
9. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
Changes in accumulated other comprehensive income/(loss), net of tax, by component are summarized below:
(In millions)
Foreign
Currency
Translation
Adjustments
Pension and
Post-
Retirement
Plan Benefit
Adjustments
Total
Balance, December 31, 2021
$
(179.6) $
(49.0) $ (228.6)
Other comprehensive income/(loss) before reclassifications(1)
(11.7)
4.9
(6.8)
Amounts reclassified from accumulated other comprehensive income/(loss) (2)(3)
—
4.0
4.0
Net other comprehensive income/(loss)
(11.7)
8.9
(2.8)
Balance, December 31, 2022
$
(191.3) $
(40.1) $ (231.4)
Other comprehensive income/(loss) before reclassifications(1)
12.0
(3.3)
8.7
Amounts reclassified from accumulated other comprehensive income/(loss) (2)(3)
—
1.6
1.6
Net other comprehensive income/(loss)
12.0
(1.7)
10.3
Balance, December 31, 2023
$
(179.3) $
(41.8) $ (221.1)
Other comprehensive income/(loss) before reclassifications(1)
(35.7)
1.1
(34.6)
Amounts reclassified from accumulated other comprehensive income/(loss) (2)(3)
—
1.7
1.7
Net other comprehensive income/(loss)
(35.7)
2.8
(32.9)
Balance, December 31, 2024
$
(215.0) $
(39.0) $ (254.0)
(1) Net of tax (benefit)/expense of $0.3 million, $(1.1) million and $1.8 million for 2024, 2023, and 2022, respectively.
(2) This accumulated other comprehensive income/(loss) component is included in the computation of net periodic pension cost
(refer to Note 10 - Employee Benefit Plans for additional details) and is included in the “Other income/(expense), net” line of
the Company’s consolidated statements of income.
(3) Net of tax expense of $0.6 million, $0.5 million and $1.8 million for 2024, 2023, and 2022, respectively.
Amounts related to noncontrolling interests were not material.
10. EMPLOYEE BENEFIT PLANS
Defined Benefit Plans - As of December 31, 2024, the Company maintained two domestic pension plans and three German
pension plans. The Company used a December 31, 2024 measurement date for these plans. One of the Company’s domestic
pension plans covers one active management employee, while the other domestic plan covers all eligible employees. Both
domestic plans were frozen as of December 31, 2011. The two domestic and three German plans collectively comprise the
‘Pension Benefits’ disclosure caption.
Other Benefits - The Company’s other post-retirement benefit plan provides health and life insurance to domestic employees
hired prior to 1992. The Company effectively capped its cost for those benefits through plan amendments made in 1992,
freezing Company contributions for insurance benefits at 1991 levels for current and future beneficiaries with actuarially
reduced benefits for employees who retire before age 65. The disclosures surrounding this plan are reflected in the “Other
Benefits” caption.
41
The following table sets forth aggregated information related to the Company’s pension benefits and other postretirement
benefits, including changes in the benefit obligations, changes in plan assets, funded status, amounts recognized in the balance
sheet, amounts recognized in accumulated other comprehensive income, and actuarial assumptions that the Company
considered in its determination of benefit obligations and plan costs.
(In millions)
Pension Benefits
Other Benefits
2024
2023
2024
2023
Accumulated benefit obligation, end of year
$
127.1 $
136.4 $
4.6 $
5.6
Change in projected benefit obligation:
Benefit obligation, beginning of year
$
137.5 $
135.2 $
5.6 $
6.0
Service cost
0.6
0.6
—
—
Interest cost
6.1
6.4
0.3
0.3
Actuarial (gain)/loss
(5.3)
4.2
(0.6)
—
Settlements paid
—
(0.5)
—
—
Benefits paid
(9.8)
(8.9)
(0.7)
(0.7)
Foreign currency exchange
(1.2)
0.5
—
—
Benefit obligation, end of year
$
127.9 $
137.5 $
4.6 $
5.6
Change in plan assets:
Fair value of assets, beginning of year
$
111.7 $
113.4 $
— $
—
Actual return on plan assets
3.1
6.9
—
—
Company contributions
0.6
0.6
0.7
0.7
Settlements paid
—
(0.4)
—
—
Benefits paid
(9.8)
(8.9)
(0.7)
(0.7)
Foreign currency exchange
(0.3)
0.1
—
—
Plan assets, end of year
$
105.3 $
111.7 $
— $
—
Funded status
$
(22.6) $
(25.8) $
(4.6) $
(5.6)
Amounts recognized in balance sheet:
Non current assets
$
7.6 $
4.2 $
— $
—
Current liabilities
(6.1)
(0.5)
(0.7)
(0.7)
Non current liabilities
(24.1)
(29.5)
(3.9)
(4.9)
Net liability, end of year
$
(22.6) $
(25.8) $
(4.6) $
(5.6)
Amount recognized in accumulated other
comprehensive income/(loss):
Prior service cost
$
— $
— $
— $
—
Net actuarial gain (loss)
(39.8)
(42.1)
0.8
0.3
Settlement
—
—
—
—
Total recognized in accumulated other
comprehensive income/(loss)
$
(39.8) $
(42.1) $
0.8 $
0.3
As of December 31, 2024, the pension benefits' aggregate accumulated benefit obligation and projected benefit obligation for
plans that have an accumulated benefit obligation and projected benefit obligation in excess of plan assets was $33.6 million
and $34.5 million, respectively and as of December 31, 2023, was $33.3 million and $34.4 million, respectively. As of
December 31, 2024 and December 31, 2023, the aggregate fair value of plan assets related to these plans was $4.3 million and
$4.4 million, respectively.
42
The following table sets forth other changes in plan assets and benefit obligation recognized in other comprehensive income for
2024 and 2023:
(In millions)
Pension Benefits
Other Benefits
2024
2023
2024
2023
Net actuarial (gain)/loss
$
(0.9) $
4.4 $
(0.6) $
—
Amortization of:
Net actuarial loss
(2.3)
(2.1)
—
—
Prior service credit
—
—
—
—
Settlement recognition
—
—
—
—
Deferred tax asset
0.8
(0.6)
0.1
—
Foreign currency exchange
0.1
—
—
—
Total recognized in other comprehensive income
$
(2.3) $
1.7 $
(0.5) $
—
The increased discount rate, partially offset by unfavorable returns on assets were the largest contributors to the net actuarial
gains recorded in 2024. The decreased discount rate is the largest contributor to the net actuarial losses affecting the benefit
obligation for the defined benefit pension plans in 2023.
Weighted-average assumptions used to determine domestic benefit obligations:
Pension Benefits
Other Benefits
2024
2023
2024
2023
Discount rate
5.48 %
4.90 %
5.47 %
4.88 %
Rate of increase in future compensation
— %*
— %*
2.00 - 9.00%
(Graded)
2.00 - 9.00%
(Graded)
*No rate of increases in future compensation were used in the assumptions for 2024 and 2023, as the cash balance component
of the domestic Pension Plan was frozen and the other domestic Pension Plan components do not base benefits on
compensation. The weighted-average interest crediting rate of the cash balance component of the domestic Pension Plan was
4.5 percent for 2024, 2023, and 2022 and is based on the approximate 30-year Treasury rate as of November of the prior year
with a minimum of 4.5 percent.
Assumptions used to determine domestic periodic benefit cost:
Pension Benefits
Other Benefits
2024
2023
2022
2024
2023
2022
Discount rate
4.95 %
5.14 %
2.79 %
4.88 %
5.08 %
2.57 %
Rate of increase in future
compensation
— %*
— %*
— %*
2.00 - 9.00%
(Graded)
2.00 - 9.00%
(Graded)
2.00 - 9.00%
(Graded)
Expected long-term rate of
return on plan assets
6.20 %
5.70 %
4.50 %
— %
— %
— %
*No rate of increases in future compensation were used in the assumptions for 2024, 2023, and 2022, as the cash balance
component of the domestic Pension Plan was frozen and the other domestic Pension Plan components do not base benefits on
compensation.
For the years ended December 31, 2024 and December 31, 2023, the Company used the PRI-2012 aggregate mortality table,
and then projected forward from 2012 using Scale MP-2021 released by the Society of Actuaries during 2021 to estimate future
mortality rates based upon current data.
43
The following table sets forth the aggregated net periodic benefit cost for all defined benefit plans for 2024, 2023, and 2022:
(In millions)
Pension Benefits
Other Benefits
2024
2023
2022
2024
2023
2022
Service cost
$
0.6 $
0.6 $
0.7 $
— $
— $
—
Interest cost
6.1
6.4
3.3
0.3
0.3
0.1
Expected return on assets
(7.5)
(7.2)
(6.1)
—
—
—
Amortization of:
Transition obligation
—
—
—
—
—
—
Settlement cost
—
—
—
—
—
—
Prior service cost
—
—
—
—
—
—
Actuarial loss
2.3
2.1
5.6
—
—
0.1
Settlement cost
—
—
—
—
—
—
Net periodic benefit cost
$
1.5 $
1.9 $
3.5 $
0.3 $
0.3 $
0.2
The Company consults with a third party investment manager for the assets of the funded domestic defined benefit plan. The
plan assets are currently invested primarily in pooled funds, where each fund in turn is composed of mutual funds that have at
least daily net asset valuations. Thus, the Company’s funded domestic defined benefit plan assets are invested in a “fund of
funds” approach.
The Company’s Board has delegated oversight and guidance to an appointed Employee Benefits Committee. The Committee
has the tasks of reviewing plan performance and asset allocation, ensuring plan compliance with applicable laws, establishing
plan policies, procedures, and controls, monitoring expenses, and other related activities.
The plan’s investment policies and strategies focus on the ability to fund benefit obligations as they come due. Considerations
include the plan’s current funded level, plan design, benefit payment assumptions, funding regulations, impact of potentially
volatile business results on the Company’s ability to make certain levels of contributions, and interest rate and asset return
volatility among other considerations. The Company currently attempts to maintain plan funded status at approximately 80
percent or greater pursuant to the Pension Protection Act of 2007. Given the plan’s current funded status, the Company’s cash
on hand, cash historically generated from business operations, and cash available under committed credit facilities, the
Company sees ample liquidity to achieve this goal.
Risk management and continuous monitoring requirements are met through monthly investment portfolio reports, quarterly
Employee Benefits Committee meetings, annual valuations, asset/liability studies, and the annual assumption process focusing
primarily on the return on asset assumption and the discount rate assumption. As of December 31, 2024 and December 31,
2023, funds were invested in equity, fixed income, and other investments as follows:
Target Percentage
Plan Asset Allocation at Year-End
Asset Category
at Year-End 2024
2024
2023
Equity securities
16 %
16 %
16 %
Fixed income securities
79 %
79 %
79 %
Other
5 %
5 %
5 %
Total
100 %
100 %
100 %
The Company does not see any particular concentration of risk within the plans, nor any plan assets that pose difficulties for fair
value assessment. The Company currently has no allocation to potentially illiquid or potentially difficult to value assets such as
hedge funds, venture capital, private equity, and real estate.
The Company works with actuaries and consultants in making its determination of the asset rate of return assumption and also
the discount rate assumption.
Asset class assumptions are set using a combination of empirical and forward-looking analysis for long-term rate of return on
plan assets. A variety of models are applied for filtering historical data and isolating the fundamental characteristics of asset
classes. These models provide empirical return estimates for each asset class, which are then reviewed and combined with a
qualitative assessment of long-term relationships between asset classes before a return estimate is finalized. This provides an
44
additional means for correcting for the effect of unrealistic or unsustainable short-term valuations or trends, opting instead for
return levels and behavior that are more likely to prevail over long periods. With that, the Company has assumed an expected
long-term rate of return on plan assets of 5.75 percent for the 2025 net periodic benefit cost, down from 6.20 percent in the prior
year.
The Company uses the Aon Hewitt AA Above Median curve to determine the discount rate. All cash flow obligations under the
plan are matched to bonds in the Aon Hewitt universe of liquid, high-quality, non-callable / non-puttable corporate bonds with
outliers removed. From that matching exercise, a discount rate is determined.
The Company’s German pension plans are funded by insurance contract policies whereby the insurance company guarantees a
fixed minimum return. Due to tax legislation, individual pension benefits can only be financed using direct insurance policies
up to certain maximums. These maximum amounts in respect of each member are paid into such an arrangement on a yearly
basis.
The Company designated all equity and most domestic fixed income plan assets as Level 1, as they are mutual funds with prices
that are readily available. The U.S. Treasury securities and German plan assets are designated as Level 2 inputs. The fair value
of the German plan assets are measured by the reserve that is supervised by the German Federal Financial Supervisory
Authority. The U.S. Treasury securities are administered by the United States government.
The fair values of the Company’s pension plan assets for 2024 and 2023 by asset category are as follows:
(In millions)
2024
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Equity
International equity mutual funds
$
17.2 $
17.2 $
— $
—
Fixed income
U.S. treasury and government agency securities
11.1
—
11.1
—
Fixed income mutual funds
72.1
72.1
—
—
Other
Insurance contracts
4.3
—
4.3
—
Cash and equivalents
0.6
0.6
—
—
Total
$
105.3 $
89.9 $
15.4 $
—
(In millions)
2023
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Equity
International equity mutual funds
$
18.3 $
18.3 $
— $
—
Fixed income
U.S. treasury and government agency securities
12.3
—
12.3
—
Fixed income mutual funds
76.0
76.0
—
—
Other
Insurance contracts
4.4
—
4.4
—
Cash and equivalents
0.7
0.7
—
—
Total
$
111.7 $
95.0 $
16.7 $
—
The Company estimates total contributions to the plans of about $7.3 million in 2025.
45
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid in accordance
with the following schedule:
(In millions)
Pension Benefits
Other Benefits
2025
$
16.0 $
0.6
2026
$
15.7 $
0.6
2027
$
14.8 $
0.6
2028
$
9.4 $
0.5
2029
$
9.1 $
0.5
Years 2030 through 2034
$
41.7 $
2.0
Defined Contribution Plans - The Company maintained two defined contribution plans during 2024, 2023, and 2022. The
Company’s cash contributions are allocated to participant’s accounts based on investment elections.
The following table sets forth Company contributions to the defined contribution plans:
(In millions)
2024
2023
2022
Company contributions to the plans
$
11.4 $
11.5 $
11.4
11. INCOME TAXES
Income before income taxes consisted of the following:
(In millions)
2024
2023
2022
Domestic
$
169.5 $
163.9 $
157.6
Foreign
62.3
78.3
77.6
$
231.8 $
242.2 $
235.2
The income tax provision/(benefit) consisted of the following:
(In millions)
2024
2023
2022
Current:
Federal
$
42.5 $
27.0 $
25.3
Foreign
17.3
14.9
15.3
State
10.0
7.2
7.0
Total current
69.8
49.1
47.6
Deferred:
Federal
(16.0)
(1.1)
(0.1)
Foreign
(0.8)
(0.3)
(2.6)
State
(2.8)
(0.2)
1.5
Total deferred
$
(19.6) $
(1.6) $
(1.2)
$
50.2 $
47.5 $
46.4
46
A reconciliation of the tax provision for continuing operations at the U.S. statutory rate to the effective income tax expense rate
as reported is as follows:
2024
2023
2022
U.S. Federal statutory rate
21.0 %
21.0 %
21.0 %
State income taxes, net of federal benefit
2.3
2.3
2.9
Foreign operations
1.0
(0.7)
(0.5)
R&D tax credits
(0.6)
(0.4)
(0.4)
Uncertain tax position adjustments
0.2
(0.1)
0.1
Valuation allowance on state and foreign deferred tax
0.2
(0.2)
(0.6)
Share-based compensation
(0.8)
(1.0)
(0.7)
Other items
0.9
(0.1)
(0.5)
Foreign Derived Intangible Income
(3.5)
(2.4)
(2.6)
Nondeductible officer's compensation
1.0
1.2
1.0
Effective tax rate
21.7 %
19.6 %
19.7 %
The effective tax rate differs from the U.S. statutory rate of 21 percent primarily due to U.S. state taxes, foreign earnings taxed
at rates higher than the U.S. statutory rate, and nondeductible officer’s compensation, which were partially offset by the
recognition of the U.S. foreign-derived intangible income (FDII) provisions, certain incentives, and discrete events.
The Company recorded discrete excess tax benefits from share-based compensation of $2.3 million in the year ended December
31, 2024. The Company recorded an increased benefit in the U.S. foreign-derived intangible income (FDII) provisions related
to a prepayment of inventory from foreign subsidiaries, that is unlikely to recur in future periods.
Significant components of the Company’s deferred tax assets and liabilities were as follows:
(In millions)
2024
2023
Deferred tax assets:
Accrued expenses and reserves
$
15.5 $
15.1
Compensation and employee benefits
16.0
17.4
Intercompany prepayments (FDII related)
16.9
—
Net operating losses, tax credit carryforwards, and other
11.8
13.2
Lease liability
15.7
14.7
Research and development expenditures, net
7.4
7.0
Valuation allowance on state and foreign deferred tax
(4.4)
(4.1)
Other items
—
0.1
Total deferred tax assets
78.9
63.4
Deferred tax liabilities:
Accelerated depreciation on fixed assets
15.6
17.7
Amortization of intangibles
49.2
51.3
Lease right-of-use asset, net
15.7
14.7
Other items
0.4
0.4
Total deferred tax liabilities
80.9
84.1
Net deferred tax liabilities
$
(2.0) $
(20.7)
The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be
generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the
cumulative loss for certain U.S. state and foreign income tax purposes incurred over the 3-year period ended December 31,
2024. Such objective evidence limits the ability to consider other subjective evidence, such as the Company's projections for
future growth.
47
On the basis of this evaluation, as of December 31, 2024, a valuation allowance of $4.4 million has been recorded to recognize
only the portion of the deferred tax asset that is more likely than not to be realized. The Company has foreign income tax net
operating loss (“NOL”) and credit carryforwards of $8.1 million and U.S. state income tax credit carryforwards of $3.7 million,
which will expire on various dates as follows:
(In millions)
2025-2029
$
4.8
2030-2034
0.4
2035-2039
0.5
Unlimited
6.1
$
11.8
The Company believes that it is more likely than not that the benefit from certain foreign NOL carryforwards as well as certain
U.S. state credit carryforwards will not be realized. In recognition of this risk, the Company has provided a valuation allowance
of $3.2 million on the deferred tax assets related to these foreign NOL carryforwards and a valuation allowance of $1.2 million
on the deferred tax assets related to these U.S. state credit carryforwards.
As of December 31, 2024, the Company has estimated accumulated undistributed earnings generated by the Company's foreign
subsidiaries of approximately $542.4 million. Any taxes due with respect to such earnings or the excess of the amount for
financial reporting over the tax basis of its foreign investments would generally be limited to foreign and U.S. state taxes. The
Company intends, however, to indefinitely reinvest these earnings and expects future U.S. cash generation to be sufficient to
meet future U.S. cash needs. The Company, therefore, has not recorded a deferred tax liability of approximately $4.4 million.
As of the beginning of 2024, the Company had gross unrecognized tax benefits of $0.8 million, excluding accrued interest and
penalties. The unrecognized tax benefits increased due to uncertain tax positions identified for the current and prior years based
on evaluations made during 2024, which were offset by statute expirations. The Company had gross unrecognized tax benefits,
excluding accrued interest and penalties, of $1.3 million as of December 31, 2024.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2024, 2023, and 2022 (excluding
interest and penalties) is as follows:
(In millions)
2024
2023
2022
Beginning balance
$
0.8 $
0.9 $
0.9
Additions for tax positions of the current year
0.6
0.3
0.1
Additions for tax positions of prior years
0.2
—
—
Reductions for tax positions of prior years
—
—
—
Statute expirations
(0.3)
(0.4)
(0.1)
Settlements
—
—
—
Ending balance
$
1.3 $
0.8 $
0.9
If recognized, each annual effective tax rate would be affected by the net unrecognized tax benefits of $1.3 million, $0.8
million, and $0.9 million as of year-end 2024, 2023, and 2022, respectively.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. The
Company has accrued interest and penalties as of December 31, 2024, December 31, 2023, and December 31, 2022 of
approximately $0.1 million, $0.1 million, and $0.2 million, respectively.
The Company is subject to taxation in the United States and various U.S. state and foreign jurisdictions. With few exceptions,
as of December 31, 2024, the Company is no longer subject to U.S. federal income tax examinations by tax authorities for
years before 2021 and is no longer subject to foreign or U.S. state income tax examinations by tax authorities for years before
2019.
It is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months as a result of an
audit or due to the expiration of a statute of limitation. Based on the current audits in process and pending statute expirations,
the payment of taxes as a result could be up to $0.1 million.
48
12. EARNINGS PER SHARE
The Company calculates basic and diluted earnings per common share using the two-class method. Under the two-class
method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the
period had been distributed. The Company’s participating securities consist of share-based payment awards that contain a non-
forfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common
shareholders.
Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocable to common shares by
the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by
dividing net earnings allocated to common shares by the weighted-average number of common shares outstanding for the
period, as adjusted for the potential dilutive effect of non-participating share-based awards.
The following table sets forth the computation of basic and diluted earnings per share:
(In millions, except per share amounts)
2024
2023
2022
Numerator:
Net income attributable to Franklin Electric Co., Inc.
$
180.3 $
193.3 $
187.3
Less: Earnings allocated to participating securities
0.7
0.7
0.7
Net income available to common shareholders
$
179.6 $
192.6 $
186.6
Denominator:
Basic weighted average common shares outstanding
45.9
46.2
46.3
Effect of dilutive securities:
Non-participating employee stock options, performance
awards, and deferred shares to non-employee directors
0.6
0.7
0.7
Diluted weighted average common shares outstanding
46.5
46.9
47.0
Basic earnings per share
$
3.92 $
4.17 $
4.02
Diluted earnings per share
$
3.86 $
4.11 $
3.97
There were 0.1 million stock options outstanding as of 2024, 2023, and 2022, respectively, that were excluded from the
computation of diluted earnings per share, as their inclusion would be anti-dilutive.
13. FINANCIAL INSTRUMENTS
The Company’s non-employee directors' deferred compensation stock program is subject to variable plan accounting and,
accordingly, is adjusted for changes in the Company’s stock price at the end of each reporting period. The Company has entered
into share swap transaction agreements (“the swap”) to mitigate the Company’s exposure to these fluctuations in the
Company’s stock price. The swap has not been designated as a hedge for accounting purposes and is cancellable with 30 days
written notice by either party. As of December 31, 2024 and December 31, 2023, the swap had a notional value based on
250,000 shares and 240,000 shares, respectively. For the years ended December 31, 2024, December 31, 2023, and
December 31, 2022, the swap resulted in a loss of $1.3 million, a gain of $2.5 million, and a loss of $3.4 million, respectively.
Gains and losses resulting from the swap were primarily offset by gains and losses on the fair value of the deferred
compensation stock liability. All gains or losses and expenses related to the deferred compensation stock liability and the swap
are recorded in the Company’s consolidated statements of income within the “Selling, general, and administrative expenses”
line.
The Company is exposed to foreign currency exchange rate risk arising from transactions in the normal course of business
including making sales and purchases of raw materials and finished goods in foreign denominated currencies with third party
customers and suppliers as well as to wholly owned subsidiaries of the Company. To reduce its exposure to foreign currency
exchange rate volatility, the Company enters into various forward currency contracts to offset these fluctuations. The Company
uses forward currency contracts only in an attempt to limit underlying exposure from foreign currency exchange rate
fluctuations and to minimize earnings volatility associated with foreign currency exchange rate fluctuations and has not elected
to use hedge accounting. Decisions on whether to use such derivative instruments are primarily based on the amount of
exposure to the currency involved and an assessment of the near-term market value for each currency. As of December 31,
2024 and December 31, 2023, the Company had no foreign currency contracts outstanding. For the years ended December 31,
2024, December 31, 2023, and December 31, 2022, the forward currency contracts resulted in a loss of $0.2 million, a gain of
$1.6 million, and a gain of $1.2 million, respectively. This is recorded in the Company's consolidated statements of income
within the "Foreign exchange expense" line.
49
14. FAIR VALUE MEASUREMENTS
As of December 31, 2024 and December 31, 2023, the assets and liabilities measured at fair value on a recurring basis were as
set forth in the table below:
(In millions)
December 31, 2024
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Assets:
Cash equivalents
$
5.0 $
5.0 $
— $
—
Total assets
$
5.0 $
5.0 $
— $
—
Liabilities:
Share swap transaction
$
2.5 $
2.5 $
— $
—
Contingent payments
related to acquisition
5.0
—
—
5.0
Total liabilities
$
7.5 $
2.5 $
— $
5.0
December 31, 2023
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Assets:
Cash equivalents
$
10.9 $
10.9 $
— $
—
Share swap transaction
1.1
1.1
—
—
Total assets
$
12.0 $
12.0 $
— $
—
Liabilities:
Contingent payments
related to acquisition
3.0
—
—
3.0
Total liabilities
$
3.0 $
— $
— $
3.0
The Company’s Level 1 cash equivalents assets are generally comprised of foreign bank guaranteed certificates of deposit and
short term deposits. The share swap transaction is recorded within the "Accounts Payable" and "Receivables" lines of the
consolidated balance sheets and is further described in Note 13 - Financial Instruments.
The Company has no assets measured on a recurring basis classified as Level 2 excluding the recurring fair value measurements
in the Company's pension and other retirement plans as discussed in Note 10 - Employee Benefit Plans.
The Company's Level 3 category includes contingent consideration related to acquisitions, which valuation inputs are
unobservable and significant to the fair value measurement. Projections and estimated probabilities are used to estimate future
contingent earn-out payments, which are discounted back to present value to compute contingent earn-out liabilities. The
following table provides a roll-forward of the contingent consideration liability, which is included in "Accrued expenses and
other liabilities" as of December 31, 2024 and "Other long-term liabilities" as of December 31, 2023 in the consolidated balance
sheets:
(In millions)
2024
2023
Fair value at beginning of period
$
3.0 $
—
Additions
—
3.0
Adjustment to prior year acquisition
1.3
—
Change in fair value recognized in earnings
0.7
—
Payments
—
—
Fair value at end of period
$
5.0
3.0
Total debt, including current maturities, have carrying amounts of $129.4 million as of December 31, 2024 and $100.5 million
at December 31, 2023. The estimated fair value of all debt was $128.0 million and $98.6 million as of December 31, 2024 and
50
December 31, 2023, respectively. In the absence of quoted prices in active markets, considerable judgment is required in
developing estimates of fair value. Estimates are not necessarily indicative of the amounts the Company could realize in a
current market transaction. In determining the fair value of its debt, the Company uses estimates based on rates currently
available to the Company for debt with similar terms and remaining maturities. Accordingly, the fair value of debt is classified
as Level 2 within the valuation hierarchy.
15. SEGMENT AND GEOGRAPHIC INFORMATION
The Company’s business consists of the Water Systems, Distribution, and Energy Systems reportable segments, based on the
principal end market served. The Company changed the name of the Fueling Systems segment to Energy Systems to reflect its
diverse portfolio and growth strategy, as well as to better reflect the markets and customers served by the segment. The
Company includes unallocated corporate expenses and intercompany eliminations that are not part of a reportable segment in its
reconciliations to consolidated results.
The Water Systems segment designs, manufactures and sells motors, pumps, electronic controls, water treatment systems and
related parts and equipment primarily for use in submersible water or other fluid system applications. The Energy Systems
segment designs, manufactures and sells pumps, electronic controls and related parts and equipment primarily for use in
submersible fueling system applications. The Energy Systems segment integrates and sells motors and electronic controls
produced by the Water Systems segment. The Company reports these product transfers between Water Systems and Energy
Systems as inventory transfers since a significant number of the Company's manufacturing facilities are shared across segments
for scale and efficiency purposes. The Distribution segment sells to and provides presale support and specifications to the
installing contractors. The Distribution segment sells products produced by the Water Systems segment. The Company reports
intersegment transfers from Water Systems to Distribution as intersegment sales at market prices to properly reflect the
commercial arrangement of vendor to customer that exists between the Water Systems and Distribution segments.
The accounting policies of the Company’s reportable segments are the same as those described in Note 1 - Summary of
Significant Accounting Policies. The Company's chief operating decision maker is its Chief Executive Officer. Performance is
evaluated based on the sales and operating income of the segments. Operating income and margin are used to evaluate income
generated from segment assets in deciding whether to reinvest profits into each segment or other parts of the entity. Operating
income is also used to monitor budget versus actual results, for purposes of determining portions of management compensation
and for benchmarking against similar measures used by peers and competitors. These results are not necessarily indicative of
the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods
presented as corporate expenses are not allocated to segments. Interest expense, other income (expense), net, foreign exchange
expense and income tax expense are also not allocated to each segment.
51
Financial information by reportable business segment is included in the following summary:
2024
Water Systems
Distribution
Energy Systems
Total
(In millions)
External sales
$
1,062.1 $
685.5 $
273.7 $
2,021.3
Intersegment sales
121.9
—
—
121.9
$
1,184.0 $
685.5 $
273.7 $
2,143.2
Elimination of intersegment sales
$
(121.9)
Total consolidated sales
$
2,021.3
Cost of sales
$
782.0 $
505.9 $
137.6
Selling, general and administrative expenses
201.7
154.6
42.1
Restructuring expense
2.4
0.7
0.4
Segment operating income
$
197.9 $
24.3 $
93.6 $
315.8
Reconciliation of segment operating income to
income before income taxes
Deferred intersegment profit
$
(0.5)
Corporate general and administrative expenses
(71.7)
Interest expense
(6.3)
Other income/(expense), net
1.3
Foreign exchange expense
(6.8)
Consolidated income before income taxes
$
231.8
52
2023
Water Systems
Distribution
Energy Systems
Total
(In millions)
External sales
$
1,095.3 $
673.3 $
296.5 $
2,065.1
Intersegment sales
108.4
—
—
108.4
$
1,203.7 $
673.3 $
296.5 $
2,173.5
Elimination of intersegment sales
$
(108.4)
Total consolidated sales
$
2,065.1
Cost of sales
$
819.3 $
497.4 $
162.0
Selling, general and administrative expenses
187.3
141.6
41.2
Restructuring expense
0.5
—
0.6
Segment operating income
$
196.6 $
34.3 $
92.7 $
323.6
Reconciliation of segment operating income to
income before income taxes
Deferred intersegment profit
$
2.2
Corporate general and administrative expenses
(63.4)
Interest expense
(11.8)
Other income/(expense), net
3.7
Foreign exchange expense
(12.1)
Consolidated income before income taxes
$
242.2
2022
Water Systems
Distribution
Energy Systems
Consolidated
(In millions)
External sales
$
1,041.5 $
668.1 $
334.1 $
2,043.7
Intersegment sales
116.0
—
—
116.0
$
1,157.5 $
668.1 $
334.1 $
2,159.7
Elimination of intersegment sales
$
(116.0)
Total consolidated sales
$
2,043.7
Cost of sales
$
801.8
471.6
$
191.0
Selling, general and administrative expenses
182.1
141.8
45.7
Restructuring expense
1.4
0.2
0.6
Segment operating income
$
172.2 $
54.5 $
96.8 $
323.5
Reconciliation of segment operating income to
income before income taxes
Deferred intersegment profit
$
(3.9)
Corporate general and administrative expenses
(62.5)
Interest expense
(11.5)
Other income/(expense), net
(3.2)
Foreign exchange expense
(7.2)
Consolidated income before income taxes
$
235.2
53
(In millions)
2024
2023
2022
Depreciation and amortization
Water Systems
$
39.0 $
36.9 $
35.2
Distribution
9.6
7.6
6.9
Energy Systems
4.3
4.2
4.2
Total segment depreciation and amortization
$
52.9 $
48.7 $
46.3
Corporate
3.2
3.6
4.1
Total depreciation and amortization
$
56.1 $
52.3 $
50.4
Capital Expenditures
Water Systems
$
27.8 $
28.6 $
23.4
Distribution
9.3
9.3
13.4
Energy Systems
2.3
3.0
2.7
Total segment capital expenditure
$
39.4 $
40.9 $
39.5
Corporate
1.8
2.3
1.6
Total capital expenditure
$
41.2 $
43.2 $
41.1
Assets
Water Systems
$
998.8 $
1,044.4 $
1,017.5
Distribution
358.9
365.6
360.4
Energy Systems
250.4
256.4
269.1
Total segment assets
$
1,608.1 $
1,666.4 $
1,647.0
Corporate
212.5
61.7
47.2
Total assets
$
1,820.6 $
1,728.1 $
1,694.2
Cash and property, plant and equipment are the major asset groups in “Corporate” of total assets for the years ended December
31, 2024 and December 31, 2023.
Financial information by geographic region is as follows:
Net sales
Long-lived assets
(In millions)
2024
2023
2022
2024
2023
2022
United States
$
1,400.4 $
1,441.6 $
1,414.1 $
626.6 $
625.3 $
601.7
Foreign
620.9
623.5
629.6
221.6
240.3
227.6
Consolidated
$
2,021.3 $
2,065.1 $
2,043.7 $
848.2 $
865.6 $
829.3
Net sales are attributed to geographic regions based upon the ship to location of the customer. Long-lived assets are attributed
to geographic regions based upon the country of domicile.
The Company offers a large array of products and systems to multiple markets and customers. Product sales information is
tracked regionally and products are categorized differently between regions based on local needs and reporting requirements.
However, net sales by segment are representative of the Company’s sales by major product category. The Company sells its
products through various distribution channels including wholesale and retail distributors, specialty distributors, industrial and
petroleum equipment distributors, as well as major oil and utility companies and original equipment manufacturers.
No single customer accounted for more than 10 percent of the Company’s net sales in 2024, 2023, or 2022. No single customer
accounted for more than 10 percent of the Company’s gross accounts receivable in 2024 or 2023.
54
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Franklin Electric Co., Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Franklin Electric Co., Inc. and subsidiaries (the "Company")
as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, equity, and cash
flows, for each of the three years in the period ended December 31, 2024, and the related notes and the schedule listed in the
Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 21, 2025, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Income Taxes – Uncertain Tax Positions — Refer to Notes 1 and 11 to the financial statements
Critical Audit Matter Description
The Company’s operations involve dealing with uncertainties and judgments in the application of complex tax regulations in
multiple jurisdictions. The Company records a liability for uncertain tax positions by establishing a more likely than not
recognition threshold and measurement attribute for recognition and measurement of a tax position taken or expected to be
taken in a tax return. Accruals for income tax uncertainties represent estimates that are subject to the inherent uncertainties
associated with the tax audit process.
Because of the numerous taxing jurisdictions in which the Company files its tax returns and the complexity of tax laws and
regulations, auditing uncertain tax positions and the determination of whether the more likely than not threshold was met
requires a high degree of auditor judgment and increased extent of effort, including the involvement of our income tax
specialists.
55
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to unrecognized tax benefits included the following, among others:
•
We tested the effectiveness of controls over income taxes, including those over identifying and evaluating uncertain
tax positions.
•
We evaluated, with the assistance of our tax specialists, a selection of the Company’s uncertain tax positions and the
Company’s application of the more likely than not principle by performing the following:
•
Obtaining management memoranda, including, as applicable, third-party specialist memoranda, regarding the
analysis of uncertain tax positions and identifying the key judgments and evaluating whether the analysis was
consistent with our interpretation of the relevant laws and regulations.
•
Evaluating the matters raised by tax authorities in former and ongoing tax examinations and considering the
implications of these matters on open tax years.
•
Assessing changes and interpretation of applicable tax law.
/s/DELOITTE & TOUCHE LLP
Chicago, Illinois
February 21, 2025
We have served as the Company’s auditor since 1988.
56
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
As of the end of the period covered by this report (the “Evaluation Date”), the Company carried out an evaluation, under the
supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and
the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls
and procedures pursuant to Exchange Act Rules 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer
and the Company’s Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and
procedures were effective.
There have been no changes in the Company’s internal control over financial reporting identified in connection with the
evaluation required by Rules 13a-15 under the Exchange Act during the last fiscal quarter that have materially affected, or are
reasonably likely to materially affect the Company’s internal control over financial reporting.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting of
the Company. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the
United States of America.
The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of the Company; (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance with respect
to financial statement preparation and may not prevent or detect misstatements. Further, because of changes in conditions,
effectiveness of internal controls over financial reporting may vary over time.
Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the
framework in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Management excluded the asset acquisition of FSHS, Incorporated (Note 3 - Acquisitions) from its
assessment of internal controls over financial reporting as the acquisition occurred in 2024. This exclusion is in accordance with
the general guidance from the Staff of the Securities and Exchange Commission that an assessment of a recently acquired
business may be omitted from the scope of management’s assessment of internal control over financial reporting for one year
following the acquisition. The net sales and total assets of the current year acquisition represented less than 1 percent of the
consolidated financial statement amounts as of and for the year ended December 31, 2024. Based on its evaluation,
management concluded that the Company’s system of internal control over financial reporting was effective as of December 31,
2024.
Our independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2024. This report appears on page 58.
57
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Franklin Electric Co., Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Franklin Electric Co., Inc. and subsidiaries (the “Company”) as
of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our
report dated February 21, 2025, expressed an unqualified opinion on those financial statements.
As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment
the internal control over financial reporting at FSHS Incorporated, which was acquired in 2024. This acquired business
constitutes less than 1% of net sales and total assets of the consolidated financial statements of the Company as of and for the
year ended December 31, 2024. Accordingly, our audit did not include the internal control over financial reporting at this
acquired business.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 21, 2025
58
ITEM 9B. OTHER INFORMATION
None of the Company’s directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule
10b5-1 trading arrangement during the Company’s fiscal quarter ended December 31, 2024.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information concerning directors and director nominees required by this Item 10 is set forth in the Company’s Proxy
Statement for the Annual Meeting of Shareholders to be held on May 2, 2025, under the headings of “PROPOSAL 1:
ELECTION OF DIRECTORS” and “INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS,”
and is incorporated herein by reference.
The information concerning executive officers required by this Item 10 is contained in Part I of this Form 10-K under the
heading of “INFORMATION ABOUT OUR EXECUTIVE OFFICERS,” and is incorporated herein by reference.
The information concerning Regulation S-K, Item 405 disclosures of delinquent Form 3, 4, or 5 filers required by this Item 10
is set forth in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 2, 2025, under the
heading of “DELINQUENT SECTION 16(a) REPORTS” and is incorporated herein by reference.
The information concerning the procedures for shareholders to recommend nominees to the Company’s board of directors, the
Audit Committee of the board of directors, and the Company’s code of conduct and ethics required by this Item 10 is set forth
in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 2, 2025 under the heading
“INFORMATION ABOUT THE BOARD AND ITS COMMITTEES,” and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is set forth in the Company’s Proxy Statement for the Annual Meeting of Shareholders to
be held on May 2, 2025, under the headings of “INFORMATION ABOUT THE BOARD AND ITS COMMITTEES,”
“MANAGEMENT ORGANIZATION AND COMPENSATION COMMITTEE REPORT,” “COMPENSATION,
DISCUSSION AND ANALYSIS,” “SUMMARY COMPENSATION TABLE,” “GRANT OF PLAN BASED AWARDS
TABLE,” “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE,” “OPTION EXERCISES AND STOCK
VESTED TABLE,” “PAY VERSUS PERFORMANCE TABLE,” “PENSION BENEFITS TABLE,” “NON-QUALIFIED
DEFERRED COMPENSATION,” “POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL OF
THE COMPANY,” and “DIRECTOR COMPENSATION,” and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by Item 12 is set forth in the Company’s Proxy Statement for the Annual Meeting of Shareholders to
be held on May 2, 2025, under the headings of “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,”
“SECURITY OWNERSHIP OF MANAGEMENT” and “SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY
COMPENSATION PLANS,” and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 is set forth in the Company’s Proxy Statement for the Annual Meeting of Shareholders to
be held on May 2, 2025, under the heading “INFORMATION ABOUT THE BOARD AND ITS COMMITTEES,” and is
incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is set forth in the Company’s Proxy Statement for the Annual Meeting of Shareholders to
be held on May 2, 2025, under the heading “PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF DELOITTE &
TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2025
FISCAL YEAR,” and is incorporated herein by reference.
59
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
Documents filed as part of this report:
1. Financial Statements - Franklin Electric Co., Inc.
Consolidated Statements of Income for the three years ended December 31, 2024
Consolidated Statements of Comprehensive Income for the three years ended December 31, 2024
Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023
Consolidated Statements of Cash Flows for the three years ended December 31, 2024
Consolidated Statements of Equity for the three years ended December 31, 2024
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
2. Financial Statement Schedule - Franklin Electric Co., Inc.
Schedule II - Valuation and Qualifying Accounts
Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the
required information is disclosed elsewhere in the financial statements and related notes.
3. Exhibits
Number
Description
3.1 Amended and Restated Articles of Incorporation of Franklin Electric Co., Inc. (incorporated by reference to
Exhibit 3.1 of the Company’s Form 8-K filed on May 7, 2019)
3.2 Amended and Restated Bylaws of Franklin Electric Co., Inc., as amended January 27, 2020 (incorporated
by reference to Exhibit 3.1 of the Company’s Form 8-K filed on January 30, 2020)
4.1 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
(incorporated by reference to Exhibit 4.1 of the Company's Form 10-K filed on February 24, 2021)
10.1 Franklin Electric Co., Inc. 2012 Stock Plan (incorporated by reference to Exhibit A of the Company’s
Proxy Statement for the Annual Meeting held on May 4, 2012)*
10.2 Franklin Electric Co., Inc. 2017 Stock Plan (incorporated by reference to Exhibit A of the Company’s 2017
Proxy Statement filed on March 21, 2017)*
10.3 Franklin Electric Co., Inc. Amended and Restated 2017 Stock Plan (incorporated by reference to Exhibit A
to the Company's 2023 Proxy Statement for the Annual Meeting held on May 5, 2023)*
10.4 Franklin Electric Co., Inc. Non-employee Directors’ Deferred Compensation Plan, as amended and restated
(incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed on May 6, 2020)*
10.5 First Amendment to the Franklin Electric Co., Inc. Non-employee Directors' Deferred Compensation Plan
dated December 18, 2020 (incorporated by reference to Exhibit 10.5 of the Company's Form 10-K filed on
February 24, 2021)*
10.6 Amended and Restated Franklin Electric Co., Inc. Pension Restoration Plan (incorporated by reference to
Exhibit 10.4 of the Company’s Form 10-K filed for the fiscal year ended January 3, 2009)*
10.7 First Amendment to the Franklin Electric Co., Inc. Pension Restoration Plan dated December 20, 2012
(incorporated by reference to Exhibit 10.8 of the Company’s Form 10-K for the fiscal year ended December
29, 2012)*
10.8 Second Amendment to the Franklin Electric Co., Inc. Pension Restoration Plan (incorporated by reference
to Exhibit 10.10 of the Company’s Form 10-K for the fiscal year ended January 3, 2015)*
10.9 Franklin Electric Co., Inc. Supplemental Retirement and Deferred Compensation Plan, as Amended and
Restated Effective January 1, 2022 (incorporated by reference to Exhibit 10.9 of the Company's Form 10-K
filed for the fiscal year ended December 31, 2021)*
10.10 Offer Letter to Joseph Ruzynski dated April 26, 2024 (incorporated by reference to Exhibit 10.1 of the
Company's Form 10-Q filed on July 26, 2024)*
10.11 Employment Security Agreement between the Company and Joseph Ruzynski (incorporated by reference to
Exhibit 10.2 of the Company's Form 10-Q filed on July 26, 2024)*
10.12 Employment Agreement between the Company and Gregg C. Sengstack (incorporated by reference to
Exhibit 10.13 of the Company’s Form 10-K for the fiscal year ended December 29, 2012)*
60
Number
Description
10.13 Employment Security Agreement between the Company and Jeffery L. Taylor (incorporated by reference to
Exhibit 10.1 of the Company's form 10-Q filed on August 3, 2021)*
10.14 Form of Employment Security Agreement between the Company and DeLancey W. Davis (incorporated by
reference to Exhibit 10.1 of the Company’s Form 8-K filed on May 7, 2013)*
10.15 Employment Security Agreement between the Company and Jonathan M. Grandon (incorporated by
reference to Exhibit 10.1 of the Company’s Form 10-Q filed on November 1, 2016)*
10.16 Employment Security Agreement between the Company and Jay J. Walsh (incorporated by reference to
Exhibit 10.18 of the Company's Form 10-K for the fiscal year ended December 31, 2019)*
10.17 Employment Security Agreement between the Company and Kenneth Keene (incorporated by reference to
Exhibit 10.1 of the Company's Form 10-Q filed on August 2, 2022)*
10.18 Employment Security Agreement between the Company and Brent Spikes (incorporated by reference to
Exhibit 10.2 of the Company's Form 10-Q filed on August 2, 2022)*
10.19 Employment Security Agreement between the Company and Greg Levine (incorporated by reference to
Exhibit 10.2 of the Company's Form 10-Q filed on July 28, 2023)*
10.20 Confidentiality and Non-Compete Agreement between the Company and Joseph Ruzynski (incorporated by
reference to Exhibit 10.3 of the Company's Form 10-Q filed on July 26, 2024)*
10.21 Form of Confidentiality and Non-Compete Agreement between the Company and Greg Levine
(incorporated by reference to Exhibit 10.3 of the Company's Form 10-Q filed on July 28, 2023)*
10.22 Form of Confidentiality and Non-Compete Agreement between the Company and Gregg C. Sengstack,
Jeffery L. Taylor, DeLancey W. Davis, Jonathan M. Grandon, Brent Spikes, Kenneth Keene, and Jay J.
Walsh (incorporated by reference to Exhibit 10.15 of the Company’s Form 10-K for the fiscal year ended
January 1, 2005)*
10.23 Franklin Electric Co., Inc. Executive Severance Policy, as amended and restated effective July 1, 2024
(incorporated by reference to Exhibit 10.4 of the Company's Form 10-Q filed on July 26, 2024)*
10.24 Description of the Executive Officer Annual Incentive Cash Bonus Program (incorporated by reference to
Exhibit 10.19 of the Company’s Form 10-K for the fiscal year ended January 2, 2016)*
10.25 Franklin Electric Co., Inc. Management Incentive Plan (incorporated by reference to Exhibit A of the
Company’s Proxy Statement for the Annual Meeting of Shareholders held May 8, 2015)*
10.26 Form of Non-Qualified Stock Option Agreement for Non-Director Employees (incorporated by reference to
Exhibit 10.1 of the Company’s Form 8-K filed on March 12, 2013)*
10.27 Form of Non-Qualified Stock Option Agreement for Director Employees (incorporated by reference to
Exhibit 10.2 of the Company’s Form 8-K filed on March 12, 2013)*
10.28 Form of Restricted Stock Unit Agreement for Non-Director Employees (incorporated by reference to
Exhibit 10.5 of the Company’s Form 8-K filed on March 12, 2013)*
10.29 Form of Restricted Stock Unit Agreement for Director Employees (incorporated by reference to Exhibit
10.4 of the Company’s Form 8-K filed on March 12, 2013)*
10.30 Form of Restricted Stock Agreement for Non-Director Employees (incorporated by reference to Exhibit
10.3 of the Company’s Form 8-K filed on March 12, 2013)*
10.31 Form of Restricted Stock Award Agreement for Director Employees (incorporated by reference to the
Company’s Form 8-K filed on May 4, 2012)*
10.32 Form of Performance Stock Unit Award Agreement for Non-Director Employees (incorporated by
reference to Exhibit 10.6 of the Company’s Form 8-K filed on March 12, 2013)*
10.33 Form of Performance Stock Unit Award Agreement for Director Employees (incorporated by reference to
Exhibit 10.7 of the Company’s Form 8-K filed on March 12, 2013)*
10.34 Fourth Amended and Restated Note Purchase and Private Shelf Agreement by and among Franklin Electric
Co., Inc., Franklin Electric B.V., Prudential Insurance Company of America and the purchasers named
therein (incorporated by reference to Exhibit 10.6 of the Company’s Form 10-Q filed on August 3, 2021)
10.35 First Amendment to Fourth Amended and Restated Note Purchase and Private Shelf Agreement, dated May
15, 2024, by and among Franklin Electric Co., Inc., Franklin Electric B.V., Prudential Insurance Company,
and the purchasers named therein (incorporated by reference to Exhibit 10.2 of the Company's Form 8-K
filed on May 16, 2024)
61
Number
Description
10.36 Bond Purchase and Loan Agreement, dated December 31, 2012, among the Company, The Board of
Commissions of the County of Allen, Indiana, and the Bondholders referred to therein (incorporated by
reference to Exhibit 10.1 of the Company’s Form 8-K filed on January 2, 2013)
10.37 Amendment No. 1 to Bond Purchase and Loan Agreement and Waiver, dated May 5, 2015, among the
Company, The Board of Commissioners of the County of Allen, and the Bondholders referred to therein
(incorporated by reference to the Company’s Form 10-Q filed on May 6, 2015)
10.38 Fourth Amended and Restated Credit Agreement, dated May 13, 2021, by and among Franklin Electric Co.,
Inc., Franklin Electric B.V., JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America,
N.A., as Syndication Agent, and the lenders identified therein (incorporated by reference to Exhibit 10.1 of
the Company's Form 8-K filed on May 13, 2021)
10.39 Amendment No. 1 dated May 11, 2022 to the Fourth Amended and Restated Credit Agreement, dated May
13, 2021, by and among Franklin Electric Co., Inc., Franklin Electric B.V., JPMorgan Chase Bank, N.A., as
Administrative Agent, Bank of America, N.A., as Syndication Agent, and the lenders identified therein
(incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed on May 11, 2022)
10.40 Amended and Restated Note Purchase and Private Shelf Agreement by and among Franklin Electric Co.,
Inc., Franklin Electric B.V., NYL Investors LLC, and the purchasers named therein (incorporated by
reference to Exhibit 10.5 to the Company's form 10-Q filed on August 3, 2021)
10.41 First Amendment to Amended and Restated Note Purchase and Private Shelf Agreement, dated May 15,
2024, by and among Franklin Electric Co., Inc., Franklin Electric B.V., NYL Investors LLC , and the
purchasers named therein (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed on
May 16, 2024)
10.42 Issuance of Series B Notes Pursuant to the New York Life Agreement dated May 27, 2015 (incorporated by
reference to Exhibit 4.1 of the Company’s Form 8-K filed on October 1, 2018)
10.43 Stock Redemption Agreement, dated April 15, 2015, between the Company and Ms. Patricia Schaefer and
Ms. Diane Humphrey (incorporated by reference to Exhibit 99.1 of the Company’s Form 8-K filed on April
20, 2015)
19 Insider Trading Policy (filed herewith)*
21 Subsidiaries of the Registrant
23.1 Consent of Independent Registered Public Accounting Firm
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes–Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes–Oxley Act of 2002
32.1 Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
32.2 Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
97 Form of Franklin Electric Co., Inc. Dodd-Frank Restatement Recoupment Policy (incorporated by reference
to Exhibit 97 of the Company’s Form 10-K for the fiscal year ended December 31, 2023)*
99.1 Forward-Looking Statements
101 The following financial information from Franklin Electric Co., Inc.'s Annual Report on Form 10-K for the
year ended December 31, 2024, formatted in Inline eXtensible Business Reporting Language (Inline
XBRL): (i) Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022 (ii)
Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2024, 2023,
and 2022, (iii) Consolidated Balance Sheets as of December 31, 2024 and 2023, (iv) Consolidated
Statement of Cash Flows for the years ended December 31, 2024, 2023, and 2022, (v) Consolidated
Statements of Equity for the years ended December 31, 2024, 2023, and 2022, and (vi) Notes to Condensed
Consolidated Financial Statements (filed herewith)
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Management Contract, Compensatory Plan or Arrangement
62
FRANKLIN ELECTRIC CO., INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In millions)
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Deductions (a)
Other (b)
Balance at End
of Period
2024
Allowance for credit losses
$
3.6 $
1.6 $
1.7 $
— $
3.5
Allowance for deferred taxes
4.1
0.7
0.4
—
4.4
2023
Allowance for credit losses
$
4.2 $
(0.3) $
0.4 $
0.1 $
3.6
Allowance for deferred taxes
4.9
—
0.8
—
4.1
2022
Allowance for credit losses
$
4.0 $
0.1 $
(0.1) $
— $
4.2
Allowance for deferred taxes
6.5
0.4
2.0
—
4.9
(a) Charges for which allowances were created.
(b) Primarily related to acquisitions
63
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
FRANKLIN ELECTRIC CO., INC.
Registrant
Date: February 21, 2025
By
/s/ Joseph A. Ruzynski
Joseph A. Ruzynski, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on February 21, 2025.
64
By
/s/ Joseph A. Ruzynski
Joseph A. Ruzynski
Chief Executive Officer
(Principal Executive Officer)
/s/ Jeffery L. Taylor
Jeffery L. Taylor
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Gregg C. Sengstack
Gregg C. Sengstack
Chairperson of the Board of Directors
/s/ Victor Grizzle
Victor Grizzle
Director
/s/ Alok Maskara
Alok Maskara
Director
/s/ Renee J. Peterson
Renee J. Peterson
Director
/s/ Jennifer L. Sherman
Jennifer L. Sherman
Director
/s/ Thomas R. VerHage
Thomas R. VerHage
Director
/s/ Chris Villavarayan
Chris Villavarayan
Director
/s/ David M. Wathen
David M. Wathen
Director
65