SEGMENT AND GEOGRAPHIC INFORMATION

6 Months Ended

Jun. 30, 2025

The Company’s business consists of the Water Systems, Distribution, and Energy Systems reportable segments, based on the principal end market served. The Company includes unallocated corporate expenses and intercompany eliminations that are not part of a reportable segment in its reconciliations to consolidated results.

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, 2024. 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 Systems and Energy Systems 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 Systems and Energy Systems 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 Systems to Distribution as intersegment revenue at market prices to properly reflect the commercial arrangement of vendor to customer that exists between the Water Systems and Distribution segments.

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, net, and income tax expense are also not allocated to each segment.

The following tables summarize reportable business segment information with a reconciliation to our condensed consolidated results for the periods presented:


Second Quarter Ended June 30, 2025	Water Systems		Distribution		Energy Systems		Total
(In millions)

External sales	$	309.9	$	200.0	$	77.5	$	587.4
Intersegment sales	30.9		—		—		30.9
	$	340.8	$	200.0	$	77.5	$	618.3

Elimination of intersegment sales							$	(30.9)
Total consolidated sales							$	587.4

Cost of sales	$	222.9	$	146.6	$	38.2
Selling, general and administrative expenses	56.0		37.3		10.2
Restructuring expense	0.1		—		—
Segment operating income	$	61.8	$	16.1	$	29.1	$	107.0

Reconciliation of segment operating income to income before income taxes
Deferred intersegment profit							$	1.1
Corporate general and administrative expenses							(20.0)
Interest expense							(2.8)
Other income (expense), net							(0.2)
Foreign exchange expense, net							(4.5)
Consolidated income before income taxes							$	80.6


Second Quarter Ended June 30, 2024	Water Systems		Distribution		Energy Systems		Total
(In millions)

External sales	$	279.7	$	190.5	$	73.1	$	543.3
Intersegment sales	35.9		—		—		35.9
	$	315.6	$	190.5	$	73.1	$	579.2

Elimination of intersegment sales							$	(35.9)
Total consolidated sales							$	543.3

Cost of sales	$	202.3	$	140.0	$	36.2
Selling, general and administrative expenses	51.0		40.7		10.9
Restructuring expense	—		—		—
Segment operating income	$	62.3	$	9.8	$	26.0	$	98.1

Reconciliation of segment operating income to income before income taxes
Deferred intersegment profit							$	(0.9)
Corporate general and administrative expenses							(18.1)
Interest expense							(2.0)
Other income (expense), net							0.2
Foreign exchange expense, net							(0.4)
Consolidated income before income taxes							$	76.9


Six Months Ended June 30, 2025	Water Systems		Distribution		Energy Systems		Total
(In millions)

External sales	$	556.5	$	341.9	$	144.3	$	1,042.7
Intersegment sales	71.6		—		—		71.6
	$	628.1	$	341.9	$	144.3	$	1,114.3

Elimination of intersegment sales							$	(71.6)
Total consolidated sales							$	1,042.7

Cost of sales	$	414.1	$	249.0	$	72.6
Selling, general and administrative expenses	108.6		74.5		20.7
Restructuring expense	0.1		0.2		—
Segment operating income	$	105.3	$	18.2	$	51.0	$	174.5

Reconciliation of segment operating income to income before income taxes
Deferred intersegment profit							(3.0)
Corporate general and administrative expenses							(39.3)
Interest expense							(4.6)
Other income (expense), net							0.7
Foreign exchange expense, net							(5.8)
Consolidated income before income taxes							$	122.5


Six Months Ended June 30, 2024	Water Systems		Distribution		Energy Systems		Total
(In millions)

External sales	$	531.5	$	337.5	$	135.2	$	1,004.2
Intersegment sales	70.7		—		—		70.7
	$	602.2	$	337.5	$	135.2	$	1,074.9

Elimination of intersegment sales							$	(70.7)
Total consolidated sales							$	1,004.2

Cost of sales	$	391.6	$	247.4	$	68.9
Selling, general and administrative expenses	101.1		78.4		21.6
Restructuring expense	—		—		—
Segment operating income	$	109.5	$	11.7	$	44.7	$	165.9

Reconciliation of segment operating income to income before income taxes
Deferred intersegment profit							(3.7)
Corporate general and administrative expenses							(35.2)
Interest expense							(3.4)
Other income (expense), net							0.9
Foreign exchange expense, net							(5.3)
Consolidated income before income taxes							$	119.2


	Second Quarter Ended				Six Months Ended
(In millions)	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Depreciation and amortization
Water Systems	$	11.6	$	9.7	$	21.8	$	19.3
Distribution	2.3		2.4		4.7		4.8
Energy Systems	1.1		1.0		2.1		2.1
Total segment depreciation and amortization	$	15.0	$	13.1	$	28.6	$	26.2
Corporate	0.8		0.8		1.6		1.5
Total depreciation and amortization	$	15.8	$	13.9	$	30.2	$	27.7

Capital Expenditures
Water Systems	10.2		6.7		13.4		10.5
Distribution	1.4		3.5		3.1		6.1
Energy Systems	0.2		0.5		1.0		1.0
Total segment capital expenditure	$	11.8	$	10.7	$	17.5	$	17.6
Corporate	0.5		1.0		0.9		1.8
Total capital expenditures	$	12.3	$	11.7	$	18.4	$	19.4

Assets
Water Systems	$	1,282.1	$	1,056.5
Distribution	399.0		415.5
Energy Systems	269.2		259.5
Total segment assets	1,950.3		1,731.5
Corporate	67.6		52.8
Total assets	$	2,017.9	$	1,784.3

Cash and property, plant and equipment are the major asset groups in “Corporate” of total assets for the quarters ended June 30, 2025 and June 30, 2024.

The following table disaggregates the Company's net sales from contracts with customers by segment:


	Second Quarter Ended				Six Months Ended
(In millions)	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
	Net sales
Water Systems
External sales
United States & Canada	$	172.9	$	157.7	$	307.9	$	295.7
Latin America	52.8		41.8		92.3		83.1
Europe, Middle East & Africa	55.7		56.0		107.2		108.3
Asia Pacific	28.5		24.2		49.1		44.4
Intersegment sales
United States & Canada	30.9		35.9		71.6		70.7
Total sales	340.8		315.6		628.1		602.2
Distribution
External sales
United States & Canada	200.0		190.5		341.9		337.5
Intersegment sales	—		—		—		—
Total sales	200.0		190.5		341.9		337.5
Energy Systems
External sales
United States & Canada	60.5		58.4		112.3		105.1
All other	17.0		14.7		32.0		30.1
Intersegment sales	—		—		—		—
Total sales	77.5		73.1		144.3		135.2

Intersegment Eliminations/Other	(30.9)		(35.9)		(71.6)		(70.7)
Consolidated	$	587.4	$	543.3	$	1,042.7	$	1,004.2

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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+ Details

FRANKLIN ELECTRIC CO INC 10-Q