00000387252023Q2false--12-3100000387252023-01-012023-06-30iso4217:USDxbrli:shares00000387252023-07-26xbrli:shares00000387252023-04-012023-06-30iso4217:USD00000387252022-04-012022-06-3000000387252022-01-012022-06-3000000387252023-06-3000000387252022-12-3100000387252021-12-3100000387252022-06-300000038725fele:HydropompeSrlMember2023-06-30xbrli:pure0000038725us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2023-01-012023-03-310000038725us-gaap:FairValueMeasurementsRecurringMember2023-06-300000038725us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2023-06-300000038725us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-06-300000038725us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-06-300000038725us-gaap:FairValueMeasurementsRecurringMember2022-12-310000038725us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-12-310000038725us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-12-310000038725us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2022-12-310000038725us-gaap:CarryingReportedAmountFairValueDisclosureMember2023-06-300000038725us-gaap:CarryingReportedAmountFairValueDisclosureMember2022-12-310000038725us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2023-06-300000038725us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2022-12-310000038725us-gaap:NondesignatedMemberus-gaap:EquitySwapMember2023-04-012023-06-300000038725us-gaap:NondesignatedMemberus-gaap:EquitySwapMember2023-06-300000038725us-gaap:NondesignatedMemberus-gaap:EquitySwapMember2022-12-310000038725us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:NondesignatedMemberus-gaap:EquitySwapMember2023-04-012023-06-300000038725us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:NondesignatedMemberus-gaap:EquitySwapMember2023-01-012023-06-300000038725us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:NondesignatedMemberus-gaap:EquitySwapMember2022-04-012022-06-300000038725us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:NondesignatedMemberus-gaap:EquitySwapMember2022-01-012022-06-300000038725us-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMember2023-06-300000038725us-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMember2022-12-310000038725us-gaap:ForeignExchangeForwardMemberus-gaap:ForeignCurrencyGainLossMemberus-gaap:NondesignatedMember2023-04-012023-06-300000038725us-gaap:ForeignExchangeForwardMemberus-gaap:ForeignCurrencyGainLossMemberus-gaap:NondesignatedMember2023-01-012023-06-300000038725us-gaap:ForeignExchangeForwardMemberus-gaap:ForeignCurrencyGainLossMemberus-gaap:NondesignatedMember2022-04-012022-06-300000038725us-gaap:ForeignExchangeForwardMemberus-gaap:ForeignCurrencyGainLossMemberus-gaap:NondesignatedMember2022-01-012022-06-300000038725us-gaap:CustomerRelationshipsMember2023-06-300000038725us-gaap:CustomerRelationshipsMember2022-12-310000038725us-gaap:PatentsMember2023-06-300000038725us-gaap:PatentsMember2022-12-310000038725us-gaap:TechnologyBasedIntangibleAssetsMember2023-06-300000038725us-gaap:TechnologyBasedIntangibleAssetsMember2022-12-310000038725us-gaap:TradeNamesMember2023-06-300000038725us-gaap:TradeNamesMember2022-12-310000038725us-gaap:OtherIntangibleAssetsMember2023-06-300000038725us-gaap:OtherIntangibleAssetsMember2022-12-310000038725us-gaap:TradeNamesMember2023-06-300000038725us-gaap:TradeNamesMember2022-12-310000038725fele:WaterSystemsMember2022-12-310000038725fele:FuelingSystemsMember2022-12-310000038725fele:DistributionMember2022-12-310000038725fele:WaterSystemsMember2023-01-012023-06-300000038725fele:FuelingSystemsMember2023-01-012023-06-300000038725fele:DistributionMember2023-01-012023-06-300000038725fele:WaterSystemsMember2023-06-300000038725fele:FuelingSystemsMember2023-06-300000038725fele:DistributionMember2023-06-300000038725us-gaap:PensionPlansDefinedBenefitMember2023-01-012023-06-300000038725us-gaap:PensionPlansDefinedBenefitMember2023-04-012023-06-300000038725us-gaap:PensionPlansDefinedBenefitMember2022-04-012022-06-300000038725us-gaap:PensionPlansDefinedBenefitMember2022-01-012022-06-300000038725us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2023-01-012023-06-300000038725us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2023-04-012023-06-300000038725us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-04-012022-06-300000038725us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-01-012022-06-300000038725fele:NewYorkLifeInvestorsLLCMember2023-06-300000038725fele:NewYorkLifeInvestorsLLCMember2022-12-310000038725us-gaap:RevolvingCreditFacilityMember2023-06-300000038725us-gaap:RevolvingCreditFacilityMember2022-12-310000038725us-gaap:ConstructionLoansMember2023-06-300000038725us-gaap:ConstructionLoansMember2022-12-310000038725us-gaap:ForeignLineOfCreditMember2023-06-300000038725us-gaap:ForeignLineOfCreditMember2022-12-310000038725fele:AllOtherMember2023-06-300000038725fele:AllOtherMember2022-12-310000038725us-gaap:RevolvingCreditFacilityMember2023-01-012023-06-300000038725us-gaap:RevolvingCreditFacilityMember2022-01-012022-12-310000038725us-gaap:BankOverdraftsMember2023-06-300000038725us-gaap:BankOverdraftsMember2022-12-310000038725us-gaap:CommonStockMember2023-03-310000038725us-gaap:AdditionalPaidInCapitalMember2023-03-310000038725us-gaap:RetainedEarningsMember2023-03-310000038725us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310000038725us-gaap:NoncontrollingInterestMember2023-03-310000038725fele:ParentandNoncontrollingInterestMember2023-03-3100000387252023-03-310000038725us-gaap:RetainedEarningsMember2023-04-012023-06-300000038725us-gaap:NoncontrollingInterestMember2023-04-012023-06-300000038725fele:ParentandNoncontrollingInterestMember2023-04-012023-06-300000038725us-gaap:CommonStockMember2023-04-012023-06-300000038725us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300000038725us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300000038725us-gaap:CommonStockMember2023-06-300000038725us-gaap:AdditionalPaidInCapitalMember2023-06-300000038725us-gaap:RetainedEarningsMember2023-06-300000038725us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300000038725us-gaap:NoncontrollingInterestMember2023-06-300000038725fele:ParentandNoncontrollingInterestMember2023-06-300000038725us-gaap:CommonStockMember2022-03-310000038725us-gaap:AdditionalPaidInCapitalMember2022-03-310000038725us-gaap:RetainedEarningsMember2022-03-310000038725us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310000038725us-gaap:NoncontrollingInterestMember2022-03-310000038725fele:ParentandNoncontrollingInterestMember2022-03-3100000387252022-03-310000038725us-gaap:RetainedEarningsMember2022-04-012022-06-300000038725us-gaap:NoncontrollingInterestMember2022-04-012022-06-300000038725fele:ParentandNoncontrollingInterestMember2022-04-012022-06-300000038725us-gaap:CommonStockMember2022-04-012022-06-300000038725us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300000038725us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300000038725us-gaap:CommonStockMember2022-06-300000038725us-gaap:AdditionalPaidInCapitalMember2022-06-300000038725us-gaap:RetainedEarningsMember2022-06-300000038725us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300000038725us-gaap:NoncontrollingInterestMember2022-06-300000038725fele:ParentandNoncontrollingInterestMember2022-06-300000038725us-gaap:CommonStockMember2022-12-310000038725us-gaap:AdditionalPaidInCapitalMember2022-12-310000038725us-gaap:RetainedEarningsMember2022-12-310000038725us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000038725us-gaap:NoncontrollingInterestMember2022-12-310000038725fele:ParentandNoncontrollingInterestMember2022-12-310000038725us-gaap:RetainedEarningsMember2023-01-012023-06-300000038725us-gaap:NoncontrollingInterestMember2023-01-012023-06-300000038725fele:ParentandNoncontrollingInterestMember2023-01-012023-06-300000038725us-gaap:CommonStockMember2023-01-012023-06-300000038725us-gaap:AdditionalPaidInCapitalMember2023-01-012023-06-300000038725us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-06-300000038725us-gaap:CommonStockMember2021-12-310000038725us-gaap:AdditionalPaidInCapitalMember2021-12-310000038725us-gaap:RetainedEarningsMember2021-12-310000038725us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000038725us-gaap:NoncontrollingInterestMember2021-12-310000038725fele:ParentandNoncontrollingInterestMember2021-12-310000038725us-gaap:RetainedEarningsMember2022-01-012022-06-300000038725us-gaap:NoncontrollingInterestMember2022-01-012022-06-300000038725fele:ParentandNoncontrollingInterestMember2022-01-012022-06-300000038725us-gaap:CommonStockMember2022-01-012022-06-300000038725us-gaap:AdditionalPaidInCapitalMember2022-01-012022-06-300000038725us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-06-300000038725us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2022-12-310000038725us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2022-12-310000038725us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2022-12-310000038725us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2023-01-012023-06-300000038725us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2023-01-012023-06-300000038725us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2023-01-012023-06-300000038725us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2023-06-300000038725us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2023-06-300000038725us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2023-06-300000038725us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2021-12-310000038725us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2021-12-310000038725us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2021-12-310000038725us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2022-01-012022-06-300000038725us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2022-01-012022-06-300000038725us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2022-01-012022-06-300000038725us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2022-06-300000038725us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2022-06-300000038725us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember2022-06-300000038725fele:WaterSystemsMemberfele:UnitedStatesCanadaMember2023-04-012023-06-300000038725fele:WaterSystemsMemberfele:UnitedStatesCanadaMember2022-04-012022-06-300000038725fele:WaterSystemsMemberfele:UnitedStatesCanadaMember2023-01-012023-06-300000038725fele:WaterSystemsMemberfele:UnitedStatesCanadaMember2022-01-012022-06-300000038725fele:WaterSystemsMembersrt:LatinAmericaMember2023-04-012023-06-300000038725fele:WaterSystemsMembersrt:LatinAmericaMember2022-04-012022-06-300000038725fele:WaterSystemsMembersrt:LatinAmericaMember2023-01-012023-06-300000038725fele:WaterSystemsMembersrt:LatinAmericaMember2022-01-012022-06-300000038725fele:WaterSystemsMemberus-gaap:EMEAMember2023-04-012023-06-300000038725fele:WaterSystemsMemberus-gaap:EMEAMember2022-04-012022-06-300000038725fele:WaterSystemsMemberus-gaap:EMEAMember2023-01-012023-06-300000038725fele:WaterSystemsMemberus-gaap:EMEAMember2022-01-012022-06-300000038725fele:WaterSystemsMembersrt:AsiaPacificMember2023-04-012023-06-300000038725fele:WaterSystemsMembersrt:AsiaPacificMember2022-04-012022-06-300000038725fele:WaterSystemsMembersrt:AsiaPacificMember2023-01-012023-06-300000038725fele:WaterSystemsMembersrt:AsiaPacificMember2022-01-012022-06-300000038725fele:WaterSystemsMemberfele:UnitedStatesCanadaMemberus-gaap:IntersegmentEliminationMember2023-04-012023-06-300000038725fele:WaterSystemsMemberfele:UnitedStatesCanadaMemberus-gaap:IntersegmentEliminationMember2022-04-012022-06-300000038725fele:WaterSystemsMemberfele:UnitedStatesCanadaMemberus-gaap:IntersegmentEliminationMember2023-01-012023-06-300000038725fele:WaterSystemsMemberfele:UnitedStatesCanadaMemberus-gaap:IntersegmentEliminationMember2022-01-012022-06-300000038725fele:WaterSystemsMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300000038725fele:WaterSystemsMemberus-gaap:OperatingSegmentsMember2022-04-012022-06-300000038725fele:WaterSystemsMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300000038725fele:WaterSystemsMemberus-gaap:OperatingSegmentsMember2022-01-012022-06-300000038725fele:UnitedStatesCanadaMemberfele:DistributionMember2023-04-012023-06-300000038725fele:UnitedStatesCanadaMemberfele:DistributionMember2022-04-012022-06-300000038725fele:UnitedStatesCanadaMemberfele:DistributionMember2023-01-012023-06-300000038725fele:UnitedStatesCanadaMemberfele:DistributionMember2022-01-012022-06-300000038725fele:UnitedStatesCanadaMemberfele:DistributionMemberus-gaap:IntersegmentEliminationMember2023-04-012023-06-300000038725fele:UnitedStatesCanadaMemberfele:DistributionMemberus-gaap:IntersegmentEliminationMember2022-04-012022-06-300000038725fele:UnitedStatesCanadaMemberfele:DistributionMemberus-gaap:IntersegmentEliminationMember2023-01-012023-06-300000038725fele:UnitedStatesCanadaMemberfele:DistributionMemberus-gaap:IntersegmentEliminationMember2022-01-012022-06-300000038725us-gaap:OperatingSegmentsMemberfele:DistributionMember2023-04-012023-06-300000038725us-gaap:OperatingSegmentsMemberfele:DistributionMember2022-04-012022-06-300000038725us-gaap:OperatingSegmentsMemberfele:DistributionMember2023-01-012023-06-300000038725us-gaap:OperatingSegmentsMemberfele:DistributionMember2022-01-012022-06-300000038725fele:FuelingSystemsMemberfele:UnitedStatesCanadaMember2023-04-012023-06-300000038725fele:FuelingSystemsMemberfele:UnitedStatesCanadaMember2022-04-012022-06-300000038725fele:FuelingSystemsMemberfele:UnitedStatesCanadaMember2023-01-012023-06-300000038725fele:FuelingSystemsMemberfele:UnitedStatesCanadaMember2022-01-012022-06-300000038725fele:AllOtherMemberfele:FuelingSystemsMember2023-04-012023-06-300000038725fele:AllOtherMemberfele:FuelingSystemsMember2022-04-012022-06-300000038725fele:AllOtherMemberfele:FuelingSystemsMember2023-01-012023-06-300000038725fele:AllOtherMemberfele:FuelingSystemsMember2022-01-012022-06-300000038725fele:FuelingSystemsMemberus-gaap:IntersegmentEliminationMember2023-04-012023-06-300000038725fele:FuelingSystemsMemberus-gaap:IntersegmentEliminationMember2022-04-012022-06-300000038725fele:FuelingSystemsMemberus-gaap:IntersegmentEliminationMember2023-01-012023-06-300000038725fele:FuelingSystemsMemberus-gaap:IntersegmentEliminationMember2022-01-012022-06-300000038725fele:FuelingSystemsMemberus-gaap:OperatingSegmentsMember2023-04-012023-06-300000038725fele:FuelingSystemsMemberus-gaap:OperatingSegmentsMember2022-04-012022-06-300000038725fele:FuelingSystemsMemberus-gaap:OperatingSegmentsMember2023-01-012023-06-300000038725fele:FuelingSystemsMemberus-gaap:OperatingSegmentsMember2022-01-012022-06-300000038725fele:CorporateAndEliminationsMember2023-04-012023-06-300000038725fele:CorporateAndEliminationsMember2022-04-012022-06-300000038725fele:CorporateAndEliminationsMember2023-01-012023-06-300000038725fele:CorporateAndEliminationsMember2022-01-012022-06-300000038725fele:ConsolidatedMember2023-04-012023-06-300000038725fele:ConsolidatedMember2022-04-012022-06-300000038725fele:ConsolidatedMember2023-01-012023-06-300000038725fele:ConsolidatedMember2022-01-012022-06-300000038725fele:WaterSystemsMemberus-gaap:OperatingSegmentsMember2023-06-300000038725fele:WaterSystemsMemberus-gaap:OperatingSegmentsMember2022-12-310000038725us-gaap:OperatingSegmentsMemberfele:DistributionMember2023-06-300000038725us-gaap:OperatingSegmentsMemberfele:DistributionMember2022-12-310000038725fele:FuelingSystemsMemberus-gaap:OperatingSegmentsMember2023-06-300000038725fele:FuelingSystemsMemberus-gaap:OperatingSegmentsMember2022-12-310000038725fele:CorporateAndEliminationsMember2023-06-300000038725fele:CorporateAndEliminationsMember2022-12-310000038725fele:EssoSAFMemberus-gaap:PendingLitigationMemberus-gaap:DamagesFromProductDefectsMember2023-01-012023-06-30iso4217:EUR

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

For the transition period from _____ to _____

 

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.

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).

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.

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

(Unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)

(Unaudited)

(In thousands, except per share amounts)			June 30, 2023						December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents			$	53,227					$	45,790
Receivables, less allowances of $3,942 and $4,211, respectively			299,485						230,404
Inventories:
Raw material			194,336						196,876
Work-in-process			30,597						30,276
Finished goods			349,709						317,828
Total inventories			574,642						544,980
Other current assets			39,036						36,916
Total current assets			966,390						858,090
Property, plant, and equipment, at cost:
Land and buildings			165,670						159,253
Machinery and equipment			308,593						297,496
Furniture and fixtures			54,725						50,264
Other			56,334						50,249
Property, plant, and equipment, gross			585,322						557,262
Less: Allowance for depreciation			(360,858)						(342,108)
Property, plant, and equipment, net			224,464						215,154
Lease right-of-use assets, net			44,160						48,948
Deferred income taxes			7,140						6,778
Intangible assets, net			223,997						231,275
Goodwill			330,297						328,046
Other assets			6,633						5,910
Total assets			$	1,803,081					$	1,694,201

(Unaudited)

			Six Months Ended
(In thousands)			June 30, 2023						June 30, 2022
Cash flows from operating activities:
Net income			$	97,736					$	89,882
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization			26,259						24,521
Non-cash lease expense			8,523						8,526
Share-based compensation			6,410						6,322
Deferred income taxes			1,924						2,004
Loss on disposals of plant and equipment			357						721
Foreign exchange expense			5,615						914
Changes in assets and liabilities, net of acquisitions:
Receivables			(70,725)						(93,063)
Inventory			(24,125)						(123,817)
Accounts payable and accrued expenses			(3,880)						29,969
Operating leases			(8,706)						(8,526)
Income taxes			(6,691)						(1,891)
Income taxes-U.S. Tax Cuts and Jobs Act			(2,902)						(355)
Employee benefit plans			831						826
Other, net			12,400						1,426
Net cash flows from operating activities			43,026						(62,541)
Cash flows from investing activities:
Additions to property, plant, and equipment			(20,241)						(20,084)
Proceeds from sale of property, plant, and equipment			—						6
Cash paid for acquisitions, net of cash acquired			(6,641)						(1,365)
Other, net			2						(8)
Net cash flows from investing activities			(26,880)						(21,451)
Cash flows from financing activities:
Proceeds from issuance of debt			294,650						341,810
Repayments of debt			(262,479)						(215,538)
Proceeds from issuance of common stock			9,010						1,916
Purchases of common stock			(25,541)						(30,644)
Dividends paid			(20,872)						(18,205)
Deferred payments for acquisitions			(186)						—
Net cash flows from financing activities			(5,418)						79,339
Effect of exchange rate changes on cash and cash equivalents			(3,291)						(2,658)
Net change in cash and cash equivalents			7,437						(7,311)
Cash and cash equivalents at beginning of period			45,790						40,536
Cash and cash equivalents at end of period			$	53,227					$	33,225

The accompanying condensed consolidated balance sheet as of December 31, 2022, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements as of June 30, 2023, and for the second quarters and six months ended June 30, 2023 and June 30, 2022 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all accounting entries and adjustments (including normal, recurring adjustments) considered necessary for a fair presentation of the financial position and the results of operations for the interim periods have been made. Operating results for the second quarter and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023. For further information, including a description of the critical accounting policies of Franklin Electric Co., Inc. (the "Company"), refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires entities to recognize and measure contracts on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. This will improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. ASU 2021-08 is effective for interim and annual periods beginning after December 15, 2022 with early adoption permitted. ASU 2021-08 should be applied on a prospective basis to business combinations that occur after the effective date. The Company adopted this ASU on January 1, 2023, and it did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. ASU 2022-04 creates the obligation for a company that uses a supplier finance program to purchase goods or services to disclose qualitative and quantitative information about its supplier finance program(s). This will allow financial statement users to better consider the effect of the program(s) on the entity's working capital, liquidity and cash flow over time. ASU 2022-04 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023 with early adoption permitted. ASU 2022-04 should be applied retrospectively to each period in which a balance sheet is presented except for the amendment on rollforward information, which should be applied prospectively. The Company adopted this ASU on January 1, 2023, and it did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows as the Company has no current supplier finance programs.

During the first quarter ended March 31, 2023, the Company acquired 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 both acquisitions is preliminary as of June 30, 2023. In addition, the Company has not presented separate results of operations of the acquired companies since the closing of the acquisitions or combined pro forma financial information of the Company and the acquired interests since the beginning of 2022, as the results of operations for both acquisitions are immaterial.

Transaction costs were expensed as incurred under the guidance of FASB Accounting Standards Codification Topic 805, Business Combinations and were insignificant for all periods presented.

FASB ASC Topic 820, Fair Value Measurements and Disclosures, provides guidance for defining, measuring, and disclosing fair value within an established framework and hierarchy. 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.

As of June 30, 2023 and December 31, 2022, the assets and liabilities measured at fair value on a recurring basis were as set forth in the table below:

(In millions)			June 30, 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			$	11.7		$	11.7		$	—		$	—
Share swap transaction			0.9			0.9			—			—
Total assets			$	12.6		$	12.6		$	—		$	—
Liabilities:
Forward currency contracts			$	0.1		$	—		$	0.1		$	—
Total liabilities			$	0.1		$	—		$	0.1		$	—
			December 31, 2022			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents			$	7.9		$	7.9		$	—		$	—
Total assets			$	7.9		$	7.9		$	—		$	—
Liabilities:
Share swap transaction			$	0.1		$	0.1		$	—		$	—
Total liabilities			$	0.1		$	0.1		$	—		$	—

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 and forward currency contracts assets and liabilities are recorded within the "Receivables" and "Accounts Payable" lines of the condensed consolidated balance sheets and are further described in Note 5 - Financial Instruments.

Total debt, including current maturities, have carrying amounts of $248.5 million and $216.1 million and estimated fair values of $244.9 million and $213.2 million as of June 30, 2023 and December 31, 2022, 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.

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 the 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 June 30, 2023 and December 31, 2022, respectively, the swap had a notional value based on 240,000 shares and 225,000 shares. For the second quarter and six months ended June 30, 2023, changes in the fair value of the swap resulted in a gain of $1.7 million and a gain of $4.7 million, respectively. For the second quarter and six months ended June 30, 2022, changes in the fair value of the swap resulted in a loss of $2.1 million and a loss of $4.6 million, respectively. Gains and losses resulting from the swap were largely offset by gains and losses on the fair value of the deferred compensation stock liability. All gains or losses and expenses related to the swap are recorded in the Company's condensed 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 June 30, 2023 and December 31, 2022, respectively, the Company had a notional amount of $27.9 million and $10.3 million in forward currency contracts outstanding and the related fair value of those contracts was not material. For the second quarter and six months ended June 30, 2023, changes in the fair value of the forward currency contracts resulted in gains of $0.6 million and $1.6 million, respectively. For the second quarter and six months ended June 30, 2022, changes in the fair value of the forward currency contracts resulted in gains of $0.5 million and $0.3 million, respectively. These gains are recorded in the Company's condensed consolidated statements of income within the "Foreign exchange expense" line.

The carrying amounts of the Company’s intangible assets, excluding goodwill, are as follows:

(In millions)						June 30, 2023												December 31, 2022
						Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Definite-lived intangibles:
Customer relationships						252.2						(108.8)						251.6						(101.5)
Patents						$	7.3					$	(7.3)					$	7.3					$	(7.3)
Technology						7.5						(7.4)						7.5						(7.4)
Trade names						41.7						(4.8)						$	41.8					(3.7)
Other						3.4						(2.8)						3.4						(2.7)
Total						$	312.1					$	(131.1)					$	311.6					$	(122.6)
Indefinite-lived intangibles:
Trade names						43.0						—						42.3						—
Total intangibles						$	355.1					$	(131.1)					$	353.9					$	(122.6)

 

Amortization expense related to intangible assets for the second quarters ended June 30, 2023 and June 30, 2022 was $4.3 million and $4.4 million, respectively, and for the six months ended June 30, 2023 and June 30, 2022 was $8.5 million and $8.7 million, respectively.

The change in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2023 is as follows:

(In millions)
						Water Systems						Fueling Systems						Distribution						Consolidated
Balance as of December 31, 2022						$	211.9					$	70.3					$	45.8					$	328.0
Acquisitions						1.0						—						—						1.0
Foreign currency translation						1.1						0.2						—						1.3
Balance as of June 30, 2023						$	214.0					$	70.5					$	45.8					$	330.3

The following table sets forth the aggregated net periodic benefit cost for all pension plans for the second quarters and six months ended June 30, 2023 and June 30, 2022:

The following table sets forth the aggregated net periodic benefit cost for the other post-retirement benefit plan for the second quarters and six months ended June 30, 2023 and June 30, 2022:

Accrued expenses and other current liabilities consist of:

The Company’s effective tax rate for the six-month period ended June 30, 2023, was 20.0 percent as compared to 21.2 percent for the six-month period ended June 30, 2022. The effective tax rate differs from the U.S. statutory rate of 21 percent primarily due to the recognition of the U.S. foreign-derived intangible income (FDII) provisions, partially offset by state taxes, and certain discrete events including excess tax benefits from share-based compensation. For the second quarter of 2023, the effective tax rate was 19.1 percent compared to 21.9 percent for the second quarter of 2022.

The decrease in the effective tax rates for the second quarter and first six months of 2023 compared to the comparable periods in the prior year was a result of more favorable discrete events in 2023, primarily related to excess tax benefits from share-based compensation.

Debt consisted of the following:

(In millions)						June 30, 2023						December 31, 2022
New York Life Agreement						75.0						75.0
Credit Agreement						158.3						122.8
Tax increment financing debt						14.7						15.3
Foreign subsidiary debt						0.6						3.1
Other						—						—
Less: unamortized debt issuance costs						(0.1)						(0.1)
						$	248.5					$	216.1
Less: current maturities						(159.8)						(126.8)
Long-term debt						$	88.7					89.3

As of June 30, 2023, the Company had $158.3 million outstanding borrowings with a weighted-average interest rate of 5.9 percent, $3.6 million in letters of credit outstanding, and $188.1 million of available capacity under its credit agreement. As of December 31, 2022, the Company had $122.8 million outstanding borrowings with a weighted-average interest rate of 5.0 percent, $4.0 million in letters of credit outstanding, and $223.2 million of available capacity under its credit agreement.

The Company also has overdraft lines of credit for certain subsidiaries with various expiration dates. The aggregate maximum borrowing capacity of these overdraft lines of credits is $20.3 million. As of June 30, 2023, there were $0.1 million outstanding borrowings and $20.2 million of available capacity under these lines of credit. As of December 31, 2022, there were $22.0 million overdraft lines of credit with $2.7 million of outstanding borrowings and $19.3 million of available capacity under these lines of credit.

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:

			Second Quarter Ended												Six Months Ended
(In millions, except per share amounts)			June 30, 2023						June 30, 2022						June 30, 2023						June 30, 2022
Numerator:
Net income attributable to Franklin Electric Co., Inc.			$	59.6					$	59.4					$	96.9					$	89.1
Less: Earnings allocated to participating securities			0.2						0.2						0.3						0.4
Net income available to common shareholders			$	59.4					$	59.2					$	96.6					$	88.7
Denominator:
Basic weighted average common shares outstanding			46.2						46.3						46.2						46.4
Effect of dilutive securities:
Non-participating employee stock options, performance awards, and deferred shares to non-employee directors			0.7						0.6						0.7						0.7
Diluted weighted average common shares outstanding			46.9						46.9						46.9						47.1
Basic earnings per share			$	1.29					$	1.27					$	2.09					$	1.91
Diluted earnings per share			$	1.27					$	1.26					$	2.06					$	1.89

There were 0.1 million and 0.1 million stock options outstanding for the second quarters ended June 30, 2023 and June 30, 2022, and 0.1 million and 0.1 million stock options outstanding for the six months ended June 30, 2023 and June 30, 2022, respectively, that were excluded from the computation of diluted earnings per share, as their inclusion would be anti-dilutive.

The schedules below set forth equity changes in the second quarters and six months ended June 30, 2023 and June 30, 2022:

Changes in accumulated other comprehensive income/(loss) by component for the six months ended June 30, 2023 and June 30, 2022, are summarized below:

(In millions)			Foreign Currency Translation Adjustments						Pension and Post-Retirement Plan Benefit Adjustments (2)						Total
For the six months ended June 30, 2023:
Balance as of December 31, 2022			$	(191.3)					$	(40.1)					$	(231.4)
Other comprehensive income/(loss) before reclassifications			10.9						—						10.9
Amounts reclassified from accumulated other comprehensive income/(loss) (1)			—						0.8						0.8
Net other comprehensive income/(loss)			10.9						0.8						11.7
Balance as of June 30, 2023			$	(180.4)					$	(39.3)					$	(219.7)
For the six months ended June 30, 2022:
Balance as of December 31, 2021			$	(179.6)					$	(49.0)					$	(228.6)
Other comprehensive income/(loss) before reclassifications			(10.7)						—						(10.7)
Amounts reclassified from accumulated other comprehensive income/(loss) (1)			—						1.8						1.8
Net other comprehensive income/(loss)			(10.7)						1.8						(8.9)
Balance as of June 30, 2022			$	(190.3)					$	(47.2)					$	(237.5)

(1) This accumulated other comprehensive income/(loss) component is included in the computation of net periodic pension cost (refer to Note 7 for additional details) and is included in the "Other income/(expense), net" line of the Company's condensed consolidated statements of income.

(2) Net of tax expense of $0.3 million and $0.5 million for the six months ended June 30, 2023 and June 30, 2022, respectively.

Amounts related to noncontrolling interests were not material.

The accounting policies of the operating segments are the same as those described in Note 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Revenue is recognized based on the invoice price at the point in time when the customer obtains control of the product, which is typically upon shipment to the customer. The Water and Fueling segments include manufacturing operations and supply certain components and finished goods, both between segments and to the Distribution segment. The Company reports these product transfers between Water and Fueling as inventory transfers as a significant number of the Company's manufacturing facilities are shared across segments for scale and efficiency purposes. The Company reports intersegment transfers from Water to Distribution as intersegment revenue at market prices to properly reflect the commercial arrangement of vendor to customer that exists between the Water and Distribution segments.

Segment operating income is a key financial performance measure. Operating income by segment is based on net sales less identifiable operating expenses and allocations and includes profits recorded on sales to other segments of the Company. 

Financial information by reportable business segment is included in the following summary:

			Second Quarter Ended												Six Months Ended
(In millions)			June 30, 2023						June 30, 2022						June 30, 2023						June 30, 2022
			Net sales
Water Systems
External sales
United States & Canada			$	176.8					$	158.4					$	336.2					$	293.1
Latin America			42.0						41.7						82.3						79.6
Europe, Middle East & Africa			54.6						49.7						105.0						100.7
Asia Pacific			22.2						24.2						41.0						44.7
Intersegment sales
United States & Canada			26.1						36.5						63.8						65.0
Total sales			321.7						310.5						628.3						583.1
Distribution
External sales
United States & Canada			193.1						191.1						336.1						326.0
Intersegment sales			—						—						—						—
Total sales			193.1						191.1						336.1						326.0
Fueling Systems
External sales
United States & Canada			60.4						64.2						114.4						116.0
All other			20.0						21.8						38.7						42.5
Intersegment sales			—						—						—						—
Total sales			80.4						86.0						153.1						158.5
Intersegment Eliminations/Other			(26.1)						(36.5)						(63.8)						(65.0)
Consolidated			$	569.1					$	551.1					$	1,053.7					$	1,002.6
			Second Quarter Ended												Six Months Ended
			June 30, 2023						June 30, 2022						June 30, 2023						June 30, 2022
			Operating income/(loss)
Water Systems			$	50.8					$	49.0					$	99.8					$	82.2
Distribution			17.8						23.3						22.5						32.7
Fueling Systems			26.7						26.1						47.5						43.8
Intersegment Eliminations/Other			(14.4)						(17.4)						(36.3)						(37.8)
Consolidated			$	80.9					$	81.0					$	133.5					$	120.9

Other Assets are generally Corporate assets that are not allocated to the segments and are comprised primarily of cash and property, plant and equipment.

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 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 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 June 30, 2023, the Company had $11.1 million of commitments primarily for capital expenditures and purchase of raw materials to be used in production.

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 condensed consolidated balance sheet for the six months ended June 30, 2023, are as follows:

Net sales in the second quarter and first six months of 2023 increased 3 percent and 5 percent, respectively, from the prior-year periods. The sales increase was primarily due to price realization and volume, partially offset by the negative impact of foreign currency translation. The Company's consolidated gross profit was $188.5 million and $350.7 million, respectively, for the second quarter and first six months of 2023, a decrease of $0.8 million and an increase of $16.1 million, respectively, from the prior-year periods. Diluted earnings per share was $1.27 and $2.06, respectively, for the second quarter and first six months of 2023, increases of $0.01 and $0.17, respectively, from the prior-year periods.

Net sales increased 3 percent in the second quarter and 5 percent in the first six months of 2023, as compared to the prior-year periods. Foreign currency unfavorably impacted net sales by 2 and 3 percentage points during the second quarter and first six months of 2023, respectively, compared to the prior-year periods, principally due to the strengthening of the U.S. Dollar relative to the Turkish Lira and Argentine Peso.

Water Systems net sales increased 4 percent in the second quarter and 8 percent in the first six months of 2023, as compared to the prior-year periods. This sales growth was primarily due to price and volume, which increased due to strong end market demand. Partially offsetting the increase, sales decreased 4 percent in the second quarter and 5 percent in the first six months of 2023 due to the negative impact from foreign exchange rates, as compared to prior-year periods. While net sales increased in 2023, Water Systems sales were negatively impacted by unfavorable weather conditions and customer inventories trending to more normalized levels.

Water Systems net sales in the U.S. and Canada increased 4 percent in the second quarter and 12 percent in the first six months of 2023, as compared to the prior-year periods. Sales decreased 1 percent in both the second quarter and first six months of 2023 due to the negative impact from foreign exchange rates, as compared to prior-year periods. In the second quarter of 2023, sales of large dewatering equipment increased 102 percent, sales of groundwater pumping equipment decreased 16 percent and sales of all other surface pumping equipment were flat compared to 2022. In the first half of 2023, sales of large dewatering equipment increased 120 percent, sales of groundwater pumping equipment decreased 5 percent and sales of all other surface pumping equipment increased 6 percent compared to 2022.

Water Systems net sales in markets outside the U.S. and Canada increased 3 percent in the second quarter and 1 percent in the first six months of 2023, as compared to the prior-year periods. Sales decreased 10 percent in the second quarter and 11 percent in the first six months of 2023 due to the negative impact from foreign exchange rates, as compared to prior-year periods. In both the second quarter and first half of 2023, outside the U.S. and Canada, excluding the impact of foreign currency translation, sales increases in EMEA and Latin America more than offset sales declines in the Asia Pacific markets.

Fueling Systems net sales decreased 7 percent in the second quarter and 3 percent in the first six months of 2023, as compared to the prior-year periods. This sales decline was primarily due to lower volumes. Sales decreased less than 1 percent in both the second quarter and first six months of 2023 due to the negative impact from foreign exchange rates, as compared to prior-year periods.

Fueling Systems net sales in the U.S. and Canada decreased 6 percent in the second quarter and 1 percent in the first six months of 2023, as compared to the prior-year periods. The decrease was primarily in dispensing and piping. Outside the U.S. and Canada, Fueling Systems sales decreased 8 percent in the second quarter and 9 percent in the first six months of 2023, as compared to the prior-year periods, due primarily to the divestiture of the above ground storage tank business in 2022 and lower sales in China.

Distribution net sales increased 1 percent in the second quarter and 3 percent in the first six months of 2023, as compared to the prior-year periods. The Distribution segment sales growth was primarily due to price and volume. While net sales increased in 2023, Distribution sales were negatively impacted by unfavorable weather conditions, commodity pricing continuing to decline and customer inventories trending to more normalized levels.