Franklin Electric (NASDAQ: FELE) reported Q1 EPS of $0.24, $0.05 better than the analyst estimate of $0.19. Revenue for the quarter came in at $266.8 million versus the consensus estimate of $281.9 million.

Gregg Sengstack, Franklin Electric’s Chairman and Chief Executive Officer, commented:

“Our first quarter results were better than our expectations. While manufacturing revenue was down double digits, improved mix, margins and reduced operating expenses produced an improvement in our operating income that was higher than our expectations. With more normal weather, our distribution revenue was ahead of expectations and results were better than last year. Overall, operating income before restructuring expense was up 11 percent on 8 percent lower sales and our earnings per share before restructuring expenses increased 14 percent versus the first quarter 2019.

As we look forward to the remainder of 2020, the Global Pandemic has created significant uncertainty in our outlook and caused disruptions to both our top and bottom lines. We are pleased to report that our employees around the globe are safe and Franklin Electric products are considered critical to the world’s infrastructure. Our Company’s balance sheet is strong, and whatever the eventual impact of this crisis, we are confident we can emerge even stronger and better prepared to serve our customers.”

Outlook

The Company believes it has enough liquidity to meet its operating and cash flow requirements for the foreseeable future.

Effects of the Global Pandemic

The top priority of the Company is the health and welfare of its employees and partners around the world. In response to the health risks posed by the Global Pandemic, the Company implemented and has been following the recommended hygiene and social distancing practices promulgated by the United States Centers for Disease Control and the World Health Organization.

The Company’s products and services are generally viewed as essential in most jurisdictions in which the Company operates. Accordingly, the Company’s global manufacturing and distribution operations generally remain open subject to temporary government mandated closures which have occurred in China, Italy, South Africa, India and several countries in South America. These temporary closures have not had a material impact on the ability to supply products to the Company’s customers.

The Company has assessed the end markets it serves to determine changes in demand patterns and customer behaviors. From this assessment, the Company currently believes that the most significant risks to the previously provided financial outlook for 2020 are a reduction of large dewatering equipment sales in the Water Systems segment; Water Systems customers “de-stocking” their inventory, particularly in the U.S. and Canada plumbing channel; and, the deferral or cancellation of the construction of new filling stations in the Fueling Systems segment in the U.S and Canada. Additionally, the strengthening of the U.S. dollar versus most international currencies will result in lower translations of both Net Sales and earnings from many of the Company’s businesses outside the U.S. Beyond these specific end market considerations, the Company may experience other negative impacts to profitability from various government mandated closures and related customer behavior.

Additional adverse financial impacts from these risks include lost operational efficiencies, de-leveraging of the manufacturing fixed costs base due to lower manufactured volumes, and the potential for higher bad debt expense.

The Company has taken action to offset the negative impacts of these risks by implementing various reductions in all discretionary spending.

Commenting on the outlook for 2020 and the effects of the Global Pandemic, Mr. Sengstack said:

“After considering the impacts of the Global Pandemic that we have outlined here, we are withdrawing our 2020 financial guidance. We will revisit the subject of guidance after the second quarter.

Despite the unprecedented and rapidly evolving environment we’re in, I remain confident in our Company’s ability to serve our customers and meet whatever marketplace demands we face. Our people are our greatest strength and are proving once again why Franklin Electric is such a great company.”

For earnings history and earnings-related data on Franklin Electric (FELE) click here.