Franklin Electric Co Inc (FELE) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Franklin Electric fourth-quarter 2010 earnings conference call. At this time, all participants are in a listen only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Mr. Patrick Davis, Treasurer. Please go ahead.

Thank you, Alli, and welcome to Franklin Electric's fourth-quarter and full-year 2010 earnings conference call. With me today are Scott Trumbull, our Chairman and CEO; John Haines, our CFO; Robert Stone, SVP of America's Water; and Gregg Sengstack, SVP of Fueling and International Water.

On today's call, Scott will review our fourth-quarter and full-year business results and John will review our fourth-quarter and full-year financial results. When John is through, we will have some time for questions and answers.

Before we begin, let me remind you that any forward-looking statements contained herein, including those relating to market conditions or the Company's financial results, costs, expenses, expense reductions, profit margins, inventory levels, foreign currency translation rates, liquidity expectations, business goals, and sales growth, involves risks and uncertainties.

These risks and uncertainties include, but are not limited to, general economic and currency conditions; various conditions specific to the Company's business and industry; weather conditions; new housing starts; market demand; competitive factors; changes in distribution channels; supply constraints; technology factors; litigation; government and regulatory action; the Company's accounting policies; and future trends and other risks, which are detailed in the Company's SEC filings and are included in Item 1A of Part 1 of the Company's annual report on Form 10-K for the fiscal year ending January 2, 2010, Exhibit 99.1 attached thereto, and in Item 1A of Part 2 of the Company's quarterly reports on Form 10-Q.

These risks and uncertainties may cause actual results to differ materially from those indicated by the forward-looking statements. All forward-looking statements made herein are based on information currently available, and the Company assumes no obligation to update any forward-looking statements. I will now turn the call over to our Chairman and CEO. Scott?

Thank you, Patrick. From an operational perspective, our Company performed well during the fourth quarter. Consolidated sales grew organically by 15%. And while our direct material costs as a percent of sales grew by 370 basis points compared to fourth quarter prior year, we more than offset this increase with manufacturing cost reductions, productivity gains and operating leverage. As a result, our consolidated gross profit margin increased by 90 basis points despite the material cost inflation.

During the fourth quarter and first quarter of 2011, we've announced and are implementing price increases that average 3% to 5% across our global product lines. We believe these price increases, combined with ongoing productivity gains and operating leverage, should enable us to maintain or slightly improve our gross profit margins in 2011, even though we continue to experience material cost inflation.

Our fourth-quarter SG&A spending as a percent of sales increased by 300 basis points compared to the prior year. And as a result, our fourth-quarter operating income margin before restructuring charges declined by 210 basis points. The higher SG&A spending was anticipated and primarily caused by two factors.

The first was higher incentive compensation costs. Recall that due to the recession in the fourth quarter 2009, we were reducing bonus accruals, and in 2010, exactly the opposite was happening. And second, we experienced higher than normal legal expenses in our Fueling business. In addition, there were $2.1 million of SG&A spending associated with the newly acquired PetroTechnik business.

Our Global Water Systems sales increased organically by 15% during the quarter as we continued to make good progress on two of our key long-term growth objectives for this segment of our business, the first being to increase our share of the North American groundwater and residential wastewater pump markets; and the second being to expand our sales and distribution base in developing regions, where the demand for our products is growing most rapidly.

We entered the North American pump market in late 2004 with the goal of becoming the industry leader in groundwater and residential wastewater pumping systems. Our strategy was to use the strength of our relationships as a submersible motor supplier to build the industry's best network of distributors and installing contractors, and to reinforce those relationships by supplying products designed for reliability and backed up by excellent field service engineering support. This strategy has worked as we are steadily approaching our goal of industry leadership.

During 2010, based on trade association data, we estimate that our unit shipments of our two largest pump product categories in North America, four-inch groundwater pumps and residential wastewater pumps, increased at twice the rate of the industry as a whole. Our team in North America captured 40% of the industry demand growth for these key product categories. We believe that Franklin is now the North American industry leader for groundwater pumping systems by a considerable margin, and the number two player overall in these categories.

While this is certainly a great progress since 2004, we believe there is substantial headroom for additional growth in North America as we continue to broaden our product offering, and as the North American housing market eventually recovers.

Also in 2004, we established a goal of increasing our sales base in developing regions because we anticipated that the demand for our Water Systems products would grow most rapidly in these markets. At that time, our sales in developing regions were about 15% of our total Water sales.

Since then, our sales of Water Systems products in developing regions have grown about fivefold and more than half the growth has been organic.

During the fourth quarter 2010, sales in developing regions represented 42% of our total Water sales. While we recognize that these markets may, from time to time, experience volatility, we believe that Franklin's strong presence in developing regions is positioning us well for long-term organic growth.

In our Fueling segment, year-on-year fourth-quarter sales grew by 45% overall, and by 12% excluding the PetroTechnik acquisition. Our Fueling gross profit also grew by 45% during the quarter as productivity and operating leverage combined to offset higher material costs as well as the negative mix impact of the lower margin PetroTechnik sales. Our operating earnings in fueling declined by about $0.5 million or about 10% compared to prior year entirely because of higher SG&A spending, again, due to incentive compensation costs and legal expenses.

Our plan for 2011 anticipates sharply lower SG&A spending as a percentage of sales in fueling, primarily due to lower legal costs and synergies from the PetroTechnik acquisition.

Looking ahead to the first quarter, we anticipate that our Water Systems sales growth rate will be in the mid-single digits as solid growth in developing regions is tempered by more moderate growth in North America and Western Europe. I should point out that we are encouraged by early signs that 2011 may be a strong year for agricultural and irrigation spending in North America, which could serve as a tailwind for us in the second and third quarters of this year.

Water Systems operating income before restructuring charges is also expected to increase at a mid-single digit pace during the first quarter 2011 compared to the first quarter 2010, after excluding a $1.2 million gain on the sale of property in South Africa realized in the first quarter 2010.

Our Water Systems operating income margins will continue to be pressured by raw material cost inflation. Water Systems price increases averaging about 4% and covering about 85% of our sales base will not be fully effective until the end of the first quarter. However, we believe that productivity improvements, operating leverage, and sales price increases that have already been implemented should be sufficient to provide first-quarter mid-single digit year-on-year Water Systems operating income growth, again before restructuring and the gain on the sale of the South Africa real estate. We expect Fueling Systems sales growth in the first quarter to be in excess of 30% compared to the first quarter 2010 as we will benefit from the PetroTechnik acquisition combined with modest organic growth.

We also expect between 15% and 20% growth in fueling operating income. Fueling operating income growth is projected to be slower than the sales growth rate because of the lower margins generated by portions of the new PetroTechnik product line. So, for the Company as a whole, we anticipate that our consolidated operating income before restructuring and property sales for the first quarter 2011 will be up by 4% to 7% compared to prior year. Now I'll turn the call over to John Haines, our CFO, who will provide some additional information on our financial performance.

Thank you, Scott, and good morning. Our fully diluted earnings per share were $0.36 for the fourth quarter 2010, an increase of 9% compared to the fourth-quarter of 2009 earnings per share of $0.33.

In the fourth quarter of 2010, the Company recognized charges for legal matters in Fueling Systems that resulted in a reduction to earnings per share of $0.03 per share. Therefore, diluted earnings per share for the fourth quarter of 2010 before restructuring and legal matters would have been $0.39, an increase of 15% compared to the prior year.

Fourth-quarter 2010 sales were $175 million, an increase of 21% compared to 2009 fourth-quarter sales of $144.9 million.

For the full year 2010, diluted earnings per share were $1.66, an increase of 48% compared to 2009 diluted earnings per share of $1.12. Earnings per share before restructuring charges were $1.81, an increase of 40% versus the prior year. In 2010, the Company also recognized charges for fuel for legal matters that resulted in a reduction to earnings per share of $0.13. Of this amount, $0.10 was incurred in the second quarter and $0.03 was incurred in the fourth quarter. Therefore, diluted earnings per share for the full year of 2010 before restructuring and legal matters would have been $1.94, an increase of 50% compared to the prior year.

Full-year 2010 sales were $713.8 million, an increase of 14% compared to 2009 sales of $626 million.

Water Systems revenue increased by $18.1 million or about 15% overall from the fourth quarter of 2009. All of the growth was organic. Sales increased in all major market areas with the most significant improvements in the United States, Latin America, the Middle East, Africa, and the Asia-Pacific regions.

Foreign exchange increased Water Systems sales by $0.9 million or less than 1% in the quarter.

Fueling Systems sales were $38.9 million and increased by 45% during the fourth quarter of 2010 compared to the same period in the prior year. Excluding the PetroTechnik acquisition, fourth-quarter sales were $30 million and grew by about 12% with about 15% growth in the US and Canada and about 2% growth in the rest of the world.

Additionally, during the fourth quarter 2010, the ongoing litigation between Fueling Systems and James Healy was adjudicated in federal court, and as a result, Fueling Systems incurred charges of $0.5 million in SG&A expenses and $0.7 million in interest expense. In total, these charges reduced earnings per share by about $0.03 in the fourth quarter. The Company's consolidated gross profit was $56.1 million for the fourth quarter of 2010, up $10.9 million from $45.2 million in the fourth quarter of 2009. Correspondingly, the gross profit margin increased to 32.1% for the fourth quarter of 2010 from 31.2% for the fourth quarter of 2009.

As Scott said, during the fourth quarter, we offset a 370 basis point increase in raw material costs as a percentage of sales with a combination of variable cost productivity and operating leverage on higher sales volume.

During the fourth quarter 2010, consolidated SG&A expenses increased by $11.5 million or about 37% compared to the fourth quarter 2009, primarily as a result of higher commissions, incentive-based compensation, and legal costs. SG&A expenses associated with the PetroTechnik acquisition were $2.1 million in the quarter.

There were no restructuring expenses in the fourth quarter of 2010. For the full year 2010, there were $5.3 million of restructuring expenses compared to $6.2 million in 2009. The majority of these expenses were related to the previously announced Phase 3 of the Company's global manufacturing realignment program, which primarily related to the consolidation of the Siloam Springs, Arkansas, facility with Linares, Mexico's operation.

As of the end of 2010, Phase 3 is considered complete. In total, the Company had previously estimate the cost for Phase 3 to be between $10 million and $12.8 million. The Company actually incurred $11.8 million in Phase 3 expenses from December 2008 through the third quarter of 2010. Approximately $8.2 million of the $11.8 million was for non-cash items.

The provision for income taxes in 2010 and 2009 was $15.1 million and $12.2 million, respectively. The effective tax rate for 2010 and 2009 were 27.4% and 31.3%, respectively. The effective tax rate for the fourth quarter and full year 2010 was reduced in part due to certain provisions of the tax bill which passed in the fourth quarter, primarily the extension of the R&D credit. The ongoing effective tax rate is projected to be between 28% and 30% for 2011. The projected tax rate will continue to be lower than the 2009 rate and the statutory rate, primarily due to the indefinite reinvestment of foreign earnings and reduced taxes on foreign and repatriated earnings after the restructuring of certain foreign entities. The Company has the ability to indefinitely reinvest these foreign earnings based on the earnings and cash projections of its other operations, as well as cash on hand and available credit.

The Company ended 2010 with cash on hand of about $140 million compared to about $87 million of cash on hand at the end of 2009. The Company generated $92.8 million in cash from operations during 2010 versus $112.6 million in 2009. Inventory was $126 million at year end 2010 and was $8.4 million or 6% lower than at year end 2009.

The Company purchased approximately $6.9 million or about 226,000 shares of Company stock pursuant to its authorized stock repurchase program during 2010. The Company has no outstanding balance on its revolving debt agreement at year end 2010 or 2009.

In fiscal year 2011, the Company plans to change the accounting for its remaining LIFO inventory to FIFO. The Company values its inventories at the lower of cost or market and determines inventory costs using primarily the first in/first out, or FIFO, method. As a year end 2010, approximately 10.8% of the Company's consolidated inventories were accounted for under the LIFO method. The amount of inventory accounted for under the LIFO method has decreased in recent years, primarily due to acquisitions of businesses with products that were dissimilar to the Company's existing products and that were not accounted for under the LIFO method, and organic growth in the businesses where LIFO was not used.

The Company has recognized LIFO liquidations for 2010, 2009, and 2008, primarily as a result of lower inventory balances overall. For full year 2010, these LIFO liquidation adjustments resulted in an income of about $0.1 million. So in total, these liquidations had less than $0.01 impact on 2010 EPS. However, in each of the first three quarters, that LIFO restatement will increase the 2010 restated EPS by about $0.01, and in the fourth quarter will reduce the EPS by about $0.02 when 2010 numbers are presented in 2011 results.

The LIFO reserve as of year end 2010 was approximately $14 million and will be reversed from inventory resulting in an increase in inventory values and an increase in the Company's equity. The resulting reversal for tax purposes will generate a tax liability of approximately $3.2 million and be spread over four years and is deemed not material to the total cash flows of the Company over that time.

This concludes our prepared remarks, and we would now like to open the call up for questions.

(Operator Instructions). Matt Summerville, KeyBanc..

A couple questions. Can you talk about the price increases in the two businesses? It sounded like you started to implement these increases across the businesses maybe in October, November of 2010, and you're talking about I guess being all the way through that process in the March, April timeframe. Can you just kind of walk through why it's taking five to six months to get those increases out there?

Well, we -- Matt, we started the price increases in our European business, where we experienced the greatest inflation in the fourth quarter of last year. And we had price increases in our US businesses earlier in the year in 2010. And, I will tell you, I don't like to increase prices twice in a year unless it's absolutely necessary. It's a -- it is an issue with our customers. Even though I think the market may have supported it, it is a major issue with our customers and with their customers. And I have resisted having a price increase, another price increase, in 2010 for that reason.

However, we are increasing prices in -- some in North America effective on February 1; some increases effective March 1; and some increases effective April 1. So across the piece, we are moving up our prices in our North American businesses both in Fueling and in Water in the 3% to 5% range over the first quarter of this year.

And to your point, Scott, how would you describe -- if assuming these increases that you have communicated to us and your customers goes through as planned, will you be in parity with your input costs? And I guess if input costs continue to increase, how do you view -- are you still holding onto that statement you just made in 2011 that it would be pretty tough to go back to the well for another price increase if we see more inflation?

I don't like to do it. If inflation -- if we have extraordinary inflation, then as far as that is concerned, all bets are off. But, we think right now that the increases that we are putting in effect will be, as I indicated in my comments, sufficient to that combined with leverage and productivity, that the increases should be sufficient to maintain or modestly improve our gross profit margin levels in 2011. That's the way we're looking at it right now.

The way we have to -- our purchasing people obviously track these increases very carefully. We saw sharp increases in the third and fourth quarter. They have, according to our read, the rate of increase is slowing down, and we think we're going to have sufficient volume and sufficient cost reduction programs combined so we will get operating leverage. And we think that between the leverage and the cost reduction programs and our currently anticipated rate of inflation for our inputs, we think that we, as I said, we can hold the margins or even improve them somewhat through the course of -- the whole course of 2011.

These material costs, I think you realize, are influenced by unpredictable factors. And so we will be alert to changes as they occur throughout the year, but that's our read as we're looking at it right now.

And then just one more question and I'll get back in queue. Can you talk about if there was anything unusual in terms of year-end buy patterns on the part of your customers and what would your current assessment be of channel inventories in your Water business? Thanks, Scott.

We did not see anything unusual at year end in our Water businesses around the world. And, our customers, we believe, continue to be conservative with respect to their policies as far as inventory builds are concerned. We don't think that there is an unusually large inventory in the trade at all.

Great. Thanks a lot.

Ned Borland, Hudson Securities.

So I'm just trying to clarify here on Water, sort of following up on what Matt's questions were talking about pricing; basically it sounds like in the first quarter, you're going to get kind of squeezed on the raw materials. You've got to wait for the price increases to take hold, and then you maybe get some more favorable mix from the ag-related markets in the second and third quarters. Is that a fair look at things?

That's a fair look at things.

Okay. And then, on Fueling, I guess with regard to the additional SG&A, some of that from PetroTechnik, you said that you're going to be seeing that go down as a percentage of sales. What -- how quickly does that sort of ramp down? And what are some of the things you can do?

Ned, this is Gregg. We bought this business for about a third of sales. It's a single digit EBIT business. It was a smaller business than our existing business, focused on one product line. And they also have a tank business, which is a relatively low margin business as well.

And so, what we were doing is we were integrating them into Franklin's Fueling globally, and that gives us scale and opportunity in the SG&A area, as well as in purchasing. And that's going to take some time. It's going to take -- throughout the year we're going to be doing this, we are also getting our pricing aligned to be consistent around the globe. That will help the margins. But we're just going to step by step through the year, you should see margin improvement in the fueling business as the margins on the buying business continue to increase because of the take out of costs.

Okay. That's helpful. And then, this is sort of a tough question. On the Water side on the incentive payments, the distributors, the higher commissions, you had a little catch-up in the back half of the year. I know it kind of depends on how the overall water market goes in 2011, but how would you say that you're going to be accruing for incentives going forward? I mean you're going to take a more conservative line initially or how are you thinking about that?

Well we're coming off -- I don't think this phenomenon is just a Franklin phenomenon. I think a lot of companies experienced the same thing. Early in 2009, we didn't know how bad things were going to be in 2009, and I think probably many companies over-accrued a little bit for their incentive compensation payments in the first quarter or two, and then seeing how the results were unfolding, had started backing off in the back half of the year.

In 2010, again, coming into 2010, I think companies didn't -- were hesitant to project a rebound in their businesses were perhaps a little conservative on their accruals in 2010. And then as it became clear through the year that the earnings profile of our Company and others was improving, started to play a little bit of a catch-up game on the accruals with the fourth quarter being particularly higher at least for us in 2010. And it showed up in year-on-year comparisons because the exact opposite was occurring in 2009.

As we go into 2011, we're -- we'll book to achieve our targets, assuming that we are going to achieve our targets, and then read and react as we go through the year.

Okay, thank you.

Brian Meyer, Robert Baird.

Just a couple here, first off on the price increases, I'm just curious if you can quantify maybe the level of copper at which those price increases are expected to be effective. Is it $4 or $4.40? Just maybe kind of a direction there.

I'm sorry. Brian, you were not -- it was difficult for us to hear your question at the beginning. Would you repeat your question?

Oh, sure. I apologize. Yes, I was just curious what level of copper your price increases are intended to be effective. Is it more around $4 or is it more kind of in-line with the recent levels we've seen in this $4.40, $4.50 range?

Well, copper is an important commodity for us. It does represent less than 1% -- a little over 1.5% of our sales, I would say, as an element of our cost structure. And, we hedge copper, so we have -- I don't know that I would say -- hedge might not be the right word. We buy contracts, forward contracts, on copper, which have, because of the rising price environment, helped us control our rate of inflation. And so we have a -- some control of our destiny on copper as we go into 2011. We don't usually buy contracts sufficient to cover our entire purchase requirements, but it covers a meaningful percentage of them. And so, as we look at it, we look at a weighted average of our known copper costs and the expected copper costs. And for that portion that's expected, we would be looking at price levels where they currently are, well above $4. But our overall weighted average cost of copper would likely be materially lower than that.

Got it. Okay. And just a question on Fueling here. The margin this quarter on an adjusted basis looks like it was around 13% or so. Guidance seems to be for next quarter in that 13% to 14% range as well. I'm just curious what you guys would consider to be kind of the new structural run rate for that business with PetroTechnik. Should we be expecting more of this mid-teen margin range as opposed to the higher teens? Just kind of any longer-term guidance there would be helpful.

While we don't get into guidance, I would say that when we bought the company, it was our goal to move ourselves back over a period of time back to the kind of margins that we've seen in the past, to be in the higher teens. But it's going to be a step by step. And I think we should see some improvement each quarter over the next four quarters.

Got it. And then one more if I may on fueling. Looking at the top line here sequentially, if I back out what PetroTechnik did on a sequential basis, it looks like you guys were probably down a little bit on an organic basis. Can you just talk about whether or not there's anything that concerns you? Maybe it's just normal seasonally? Just anything that helps us understand kind of the sequential trend there and what we should be expecting going forward.

I think from John's comments, we mentioned that Fueling was up in the above 10% in the North American market and outside of US and Canada was up low single digits.

And, I would say that for the US Canada market, what we are seeing is that many of the dollars that were being invested in this industry were being directed to PCI compliance, upgrading dispensers to handle the debit card transactions at the dispensers. And that was a major focus of service station operators and marketers throughout 2009 and 2010.

That program is kind of essentially now complete as I understand it. And so are seeing more dollars being directed in our North American business into our Fueling Systems, into our product line, you know, in pumping systems, field management and so on.

In the external, or outside of North America, we saw a kind of a winding up in China of the vapor recovery initiatives in Guangzhou and Shanghai areas. There was a little bit of softness there, but overall we still had a single-digit increase outside of North America. And so our combined increase for Fueling was about 12% for the quarter, excluding PetroTechnik.

Okay. Thanks a lot, guys. That helps.

Matt Summerville, KeyBanc.

Just a couple other items. With regards to the customer rebates which you talked a lot about last quarter, Scott, as something you had to kind of play catch-up with this year, given that just by definition, not having a big inventory drawdown at your customer base, your outgoing sales for those guys were up, so that made complete sense. And incentive comps this year again, probably kicked into a little higher gear as the year progressed. Do you actually expect in dollar terms a meaningful reduction in customer rebate and/or incentive comp at Franklin? Should we be thinking about it that way?

Most of these incentives are structured as a percent of the customers' sales of our products or purchases of products from us. So, the distributor incentives are set up as a percent. So if they are -- if our sales grow, then there is upward pressure on the dollar sales.

Now, the targets get -- and then if they start exceeding their targets, then the percentages go up, so it's kind of a progressive scale relative to targets. And, so, while each year, we ratchet, tend to ratchet up the targets so that the distributor needs to grow in order to get to the percentage discount that they achieved in the prior year, if their sales grow, even at -- and the percentage remains constant, obviously the dollar base is going to go up. So we are anticipating that our customer deductions in an absolute sense will be up in absolute dollars next year. And right now, we have to project that as a percentage of sales, they will be more or less flat.

Okay.

So I don't know -- is that responsive to your question?

Yes; I'm just trying to figure out the way that the -- in terms of nominal dollars, how I should be thinking about it. So, I think you answered my question there.

The other thing I was looking for, maybe if you could spend just a minute on Water and a minute on Fueling. Emerging markets have become such an important part of both of those businesses. Can -- Scott or Gregg, maybe just take a minute and talk about some more of what you are seeing from a current demand trend in places like Brazil, India, China, other parts of the Middle East in those key emerging markets for your two segments?

Sure. I'll comment on our developing country business in Water, and I will let Gregg comment and on the Fueling side.

Really, in 2010 and in the fourth quarter, the profile of our developing region sales in Water were about the same. So the fourth quarter and the full year were very similar. Our developing region sales were up about 17% in the fourth quarter, or excuse me, were up about 21% in the fourth quarter. They represented about 42% of our total Water sales, and for the full year, they were up 22%.

Latin America was -- in the fourth quarter was up 13%, excluding Brazil. Brazil was up 22%. We had strong sales in the Gulf region of the Middle East, up 33%. Our business in North Africa, which is a smaller area for us, represents only about 1% of our total Water sales, but is growing nicely. It was up 200%.

Our business in central and South Africa, which is about 10% of our Water business, was up 24%. Our business in the [Ossion] region of Asia was up 51%. So we're getting strong growth across a wide range of developing regions around the world. So -- and we really didn't see declines in very many places at all.

So, our developing region business looks pretty good, both in the fourth quarter and in the first -- through the full year last year. At this point, we have difficulty projecting another 21% growth year going forward, but that -- but the trends are certainly good.

With respect to Fueling, if you look at the four broad product lines that we take globally, pumping systems, fuel management systems, pipe and containment systems, and dispensing, I mentioned that we had some softness in China with the dispensing winding up Guangzhou and Shanghai.

Outside of that project, there is -- we're still seeing pretty steady demand for vapor recovery systems. There is, I would say, a bit of a [nadir] here. You know that there's going to be a European initiative across Europe, so that's going to be over the next five years, six years if that's going to happen. So I imagine it's going to be somewhat of a hockey stick in that respect.

But we are seeing good organic growth in our pumping systems; getting traction with fuel management, particularly with [delivery] in developing markets. And the key to the PetroTechnik acquisition was that it provided a line of piping systems for markets that we couldn't currently reach with our UL-certified product that has very large share in the North American market. And so that has positioned us well, both on an individual basis for the product line and also collectively in a way that we can offer bundles of hot products and one-stop shopping where customers can -- emerging markets, they come to Franklin for complete system solutions for their underground needs of the gas station.

So we feel well-positioned. We've been seeing good double-digit growth around the globe, but as I said, with the exception of kind of the nadir in dispensing in China, we remain again optimistic as we go into 2011.

Thanks, Scott. Thanks, Gregg.

I'm showing no further questions at this time. I would like to turn the call back over to management for any closing remarks.

This concludes our conference call. Thank you for your interest in Franklin Electric.

Ladies and gentlemen, that does conclude today's conference. You may all disconnect and have a wonderful day.