Greetings and welcome to the First Quarter 2009 Earnings Release Conference Call for Franklin Electric Company. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Mr. Patrick Davis, Treasurer for Franklin Electric. Thank you. Mr. Davis, you may begin.

Thank you, Tani. And welcome to the Franklin Electric first quarter 2009 earnings conference call. With me today are Scott Trumbull, our Chairman and CEO; John Haines, our CFO; Robert Stone, SVP of Americas Water and Gregg Sengstack, SVP of our Fueling and International Water. On today's call Scott will review our first quarter business results and John will review our first quarter financials. When John is through we will allow some time for questions and answers. Before we begin let me remind you that any forward-looking statements contained herein including those related to the company's financial results, business goals and sales growth involve risks and uncertainties, these include but are not limited to risks and uncertainties with respect to general economic and currency condition, 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 actions, the company's accounting policies and future trends and other risk which are detailed in the company's SEC filings included in item 1A of Part 1 of the company's Annual Report on Form 10-K for the fiscal year ended January 03, 2009, 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. The major factor impacting our earnings during the quarter was the sales volume decline brought on by the weak global economy. Water Systems represent about 75% of our total sales. During the first quarter our Water Systems revenues declined by about 16% overall and by 11% organically before the impact of foreign exchange. Virtually the entire organic sales decline occurred as a result of weakness in the US Canada market which represents about half of our total Water segment sales. As an indication of overall market weakness, trade association data and our own analysis of market trends indicate that first quarter industry-wide groundwater pump sales were down about 33% versus prior year. And while our sales did not decline as much, we were nevertheless impacted by the extraordinary drop in the overall market. We believe the industry sales decline was caused by the on-going slump in housing, with new housing starts off by about 50% versus the first quarter of 2008. In addition, we believe the downstream distributor in contract of customers reduced inventories during the quarter which negatively impacted our shipments. International sales represents about half of Water Systems revenues and were up about 3% organically, but were negatively impacted by $12.8 million due to foreign exchange translation. During the quarter, organic sales growth in Asia Pacific, Latin America and Southern Africa offset the decline in Europe and Middle East. Fueling sales represent about 25% of our total revenues and sales in this segment declined by about 10% during the quarter. Our fueling sales in the US grew by about 2%, with growth of sales in California offsetting an 8% decline in the balance of the country. Fueling sales in international markets declined sharply during the first quarter of 2009, because last year in January and…

Thank you, Scott and good morning. Our fully diluted earnings per share for the first quarter 2009 were $0.17 a 51% decrease over the first quarter of 2008. Earnings per share before the impact of restructuring charges were $0.19 down 46% from 2008. On a consolidated basis our first quarter revenue was $149.8 million down about 15% from the first quarter of 2008. As Scott mentioned the revenue declines we experienced in our Water segment occurred principally in the United States and Canada and in international markets for our fuelling segment. The strengthening US dollar lowered revenue by $13.3 million versus the first quarter 2008. Gross profit decreased by 40 basis points to 28.8% in the quarter versus 29.2% in the first quarter of 2008. The bulk of the decline was Dubai, however this was partially offset by improvements in price versus cost. Operating income before the impact of restructuring charges decreased as a percent of sales by 280 basis points in the first quarter versus 2008 due to significant loss in sales volume that Scott described above. As a result of significant market weakness Water Systems sales declined by $22.3 million or 16% in the first quarter 2009 versus 2008, $12.8 million of this decline was due to translation impact of the strengthening US dollar against most foreign currencies. As Scott mentioned the volume decline can be attributed to weak end market demand primarily as a result of the significant residential weakness in the United States. And our customers continuing effort to preserve cash and focus on working capital given the uncertain economic times. We believe the impact of destocking and slowing but we will assess this further as the northern hemisphere water season kicks off during the second quarter. Acquisitions contributed $6 million in revenue during the first…

Thank you (Operator Instructions) And we will take our first question from Michael Schneider from Robert W. Baird.

Good morning guys.

Good morning.

May be we can start on Water and I am curious about the seasonality because it is clear the distribution channel was destocking aggressively. If you look at prior years guys I am just curious about the sequential move in Water that you expect. If you look back at prior years you basically showed $20 million to $22 million in greater sales Q2 over Q1 in Water. Obviously the economy is soft but you saw that in Q1. So should we expect based on some relief from destocking and maybe some delayed seasonality that boost is actually greater this year, despite the economy and may be you can just give us your thoughts on what unfolds here in Q2?

Well there is no doubt that our sales in Q2 will be higher than they were in Q1. but whether they will be higher by more than they were in prior years or not, then increase will be greater I guess. I would have trouble giving that guidance at this point. There are no indications that we are going to, we could see that we are going to benefit from a significantly strengthening economy. Year-on-year housing starts we believe will continue to be down perhaps not by down as much, because the comparisons get progressively easier as the year goes on. But nevertheless we will continue to be down. We do think that the inventory destocking and the trades has peaked and they will likely be some, perhaps even inventory built which could work to the point that you are making. But I think our distributors are going to try to work as hard as they can to keep building inventory and try to rely on their vendors to make availability rapid availability for them.

Is there the potential than that as you get into Q2 that you in effect experience all the seasonality in Q2 versus prior years and normal years where you would have experienced some in February, March and do you have indications in your April orders?

We haven't seen it in our April orders at this point.

And Mike, this is John Haines, the other thing to think about on the Water side is this drag of FX which will continue to be a headwind in the second quarters when you look at the Real, you look at the Euro in 2Q '08 and kind of works out now and what you may think it might go to in the second quarter of this year. In the first quarter it was a 12.8 million drag on the Water Systems revenue line and that’s going to continue, there is really no view that that’s going to get dramatically better as we go into the second quarter.

Okay. And Robert, just sticking with Water. Have you guys analyzed just what rate this industry is running at versus the replacement rate, because it's strikes me at least in our analysis that if you look at the replacement rate or the assumed historical replacement rate, the industry is running far below that right bow. Do you have any parameters you can put around at least on your analysis of where this is headed and I guess what it implies for I guess the balance of this year as presumably the replacement rate ultimately drives demand.

Mike, I would say that perhaps some of our prior assumptions are we are not quite correct. The run rate, it all depends on what your assumptions are, like clearly I would say the run rate we are experiencing now is due entirely to replacement depending on what you believe about new housing starts. I would leave at that.

Okay. And then just on terms now, and pricing and the channel. There is typically seasonal discounts that are put into place. I am curious if you changed your discounting strategy here in the first four months of the year, either offering more or less discounting to try and smooth the seasonality here. And then also could you just address terms, we continue to hear that terms are stretching quite a bit with distributors as part of pricing negotiations?

I, Mike, was somewhat encouraged that during the first quarter across our Water business. Our price year-on-year exceeded costs increases. If that is encouraging because we have not seen in our P&L the benefit of cost reductions, material cost reductions that we know are coming. Material cost as a percentage of sales in the first quarter was actually up modestly, and we know because we know what prices we have negotiated that as we go through the balance of the year. Material cost as a percentage of sales will decline and down we think around by year-end 100 basis points versus prior year. So, we were up in the first quarter but by the end of the year we will down in that regard. And right now we are not and again on a global basis, seeing an indication of major year-on-year price erosion. We for the last several year's had quite a bit of price activity in the form of individual promotions in the marketplace that continues, but it isn't across the piece greater than it has been in previous year's. And as far as terms necessarily Rob, do you want to comment on that?

Sure, yes. Mike the, I think there is pressure there for terms, but we actually did not see a lot of that in the first quarter and I think the reason for that is that distributors, they were really interested in destocking and it would have taken a ridiculous terms to get them to take anything. They were much more focused on bringing up inventory or cash. It remains to be seen what happens and later part of the second quarter what will happen there, but I suspect it's going to be a matter of to come back here on your other question earlier. We will see the seasonal demand, much more apparent in the second quarter and probably for the remainder of the year. And distributors are going to be looking for companies that can deliver.

And on the terms Robert, I have heard terms as long as a year. Are you willing to offer those and I guess take on that financing risks at this point (inaudible) with this economy?

We have no plans to do that, I actually have not heard of that kind of term with -- what competitive products that we compare against. I can't speak to pipe, wire or other types of products. But certainly in the pump arena, I haven't seen that.

And we have no intention of doing that.

Mike, our DSO is actually in the first quarter of this year down slightly from our DSO in the first quarter of last year.

Okay, but with the following market demand and declining inventories, we wouldn't see longer terms hit anybody's or stay. I am curious just about what’s going on.

Yes.

Okay. I appreciate that, then final question I will be back in line. Just on the Ag and municipal markets. Could you talk about the higher horsepower markets? Ag was strong last year, have you seen even greater deterioration in Ag demand than you would have expected. And then same question on pricing in the higher horsepower markets. Now the (inaudible) has entered these markets, have you seen undue or renewed price pressure in that end of the market.

I will address the Ag and municipal side first. I would say there Mike that, that market segment is at or slightly better than what we had expected, especially considering the destocking that we know is going on. And as we discussed before, we have expected that market to be down slightly compared to last year. So again it's at or slightly better depending on the region than what we had expected. In terms of the larger horsepower, and specifically (inaudible) that has really not been a factor in the market. We have seen some of the product and got in some, but we haven't seen any effect in the marketplace today.

Okay. Thank you.

And we will take our next question from Anthony Kure from KeyBanc.

Good morning, gentlemen. Just a couple of quick questions. I wanted to address Fueling. From April standpoint, do you expect Fueling station owners will have the ability to maybe get some more credit easier or have you seen any change thus far maybe over the last couple of months and their ability to get credit either because of listening terms or maybe some impact of some federal stimulus dollars if that’s a factor?

Gregg Sengstack, who heads our International Water and Fueling Group will respond to that.

Okay.

While we do not have direct contact with station owners, I would say that just [if I closer] this than we are is that generally I think credit is beginning to free up. These are transactions or retrofits that are under $100,000 of size, there are companies that view this business underwriting for a living. And so I think as generally as credit markets are beginning to ease that credit would be available, but we don't have any direct contact with the station owners and as such.

Okay. Moving over to maybe international markets for Fueling. I understand what’s going on in China given the tough comp, but just wondering if you see if there any impact there again from there direct stimulus. And if it's the same answer that’s fine, but I was wondering if that were a factor that you are thinking about that.

We are currently seeing anything, really the stimulus package. However, there are mandates in place for the other coastal cities in China to put in vapor recovery systems and we would expect to start seeing more sales in vapor recovery systems towards the back half of this year.

Can you just remind me what the overall opportunity size in China is?

Well there are tens of thousands of gas stations, the question is at what rate will the government expect those stations to convert over. Certainly, the Shanghai and the Guangzhou, which is a next is to there to comply are probably normally three times a size of the Beijing area. As I would expect that kind of demand over the next couple of year's, the next wave of larger cities is expected in the next couple of three year's and it's just a question of how the government is going to enforce those regulations. And then along those line, is there a similar approval hurdles like they were in California are the standards a little more loose or little more stringent. De-qualification is with the oil companies themselves they do their own testing and then you got on an approved list and the number of competitors for the second round will might be greater all indications will be greater number than the first round, but if the qualification through the oil companies.

Okay and then just moving over the cost savings you outlined just given the demand environment you are seeing mostly obviously in the US and Canada markets, do you expect to give put a little color around the majority or the amount that you are expected to maintain. Or you are factoring in for cost savings moving in the second half of the year?

Go ahead John.

Yeah, Anthony, if I understand your question we have outlined three broad categories of cost savings for the year. The raw material cost savings which as Scott mentioned we started to see indications of in the first quarter. But the real benefit it is $5 million to $7 million benefit that we outlined we think we will be in the later half of the year. The second category of cost of course is the direct labor savings that we get as we move more of our production hours from high cost facilities in the United States to our Linares, Mexico facility. Again we have seen some benefit from that in the first quarter but the bulk of the $3 million to $5 million that we have outline will be in the later half of the year. The real core of the Siloam Springs, Arkansas move will happen in the second quarter. That’s where you are going to see the bulk of that move taking place. And you will see the benefits of that move more in the second half. And then the final category of cost that we have outlined is fixed cost reductions which are a combination of both manufacturing fixed costs and SG&A spending. So we have taken a number of actions in both the manufacturing world then in the SG&A world corporate salary headcounts we have looked at our benefit plans we have looked at things like matching 401(k) all of those kind of discretionary spending. And we have identified what we believe will be about $15 million of cost reductions from that group of expenses again more skewed towards the back half of the year. So in total we are, you were guiding to somewhere in the range of $23 million to $27 million of combined cost reductions.

As I mentioned on the material cost side we really did see a significant amount of material cost reduction in the first quarter that's all coming. In the first quarter on as John pointed $15 million of fixed savings its actually $22 million to $23 million of fixed cost savings our based businesses offset by $6 million or $7 million of fixed cost at Vertical the company that we, we recently acquired. But in the first quarter we got about $1 million fixed savings. So we have $14 million of savings coming through from projects that are being implemented, in the back three quarters of the year. So the again most of the savings that we will benefit from will be occurring as we go through the balance of the year.

Okay, I appreciate the outline, that was helpful just what I am I guess driving at is do you expect to keep the majority of that or may be put a little given the environment and you touched on pricing already. But if pricing remains firm I guess summarize that you expect to keep the majority of that given what your comments were on pricing?

Our markets are very considerably, you got to remember that 50% of our Water business is outside the United States and, 25% of our business is the Fueling business and while there are pockets of our business that were they are known to be highly competitive and the year-on-year area even in those pockets of our business is not dramatically different than it was in prior years. And in other areas we are in a good position to increase pricing. So we think across the piece that we will be able to retain, offset, we will be able to retain these cost reductions.

Okay great. And then just last question, a housekeeping question how much did you say you have left in restructuring for the year?

We said restructuring for the balance of the year would be $5 million to $6 million, additional.

Great, thank you so much.

(Operator Instructions) And we will go next to Paul Mammola from Sidoti & Company. Paul Mammola - Sidoti & Company: Hi good morning.

Hi Paul. Paul Mammola - Sidoti & Company: How many of the 4100 stations left to convert actually have a permit do you know that?

Paul, the state released information on April 10th that said 92% of the sites that they believe needed to be converted by April 1 had permits. Paul Mammola - Sidoti & Company: Okay. So I mean there is reasonable assurance that does not get pushed anywhere past the next six months?

Well I will say that there is a bill in the legislature that is having a hearing on Monday that about 1 year extension. You have to make your own evaluations but with two-thirds of station owners already in compliance. I do not know how much traction that will get that’s your call. Paul Mammola - Sidoti & Company: Okay. Moving on you talked a lot about price --

One other thing though on that, that the deadline for the installation of the vapor monitoring equipment, the deadlines for the vapor control equipment which is vapor control equipment sells for roughly $18,000 a unit. That deadline is immediate. The vapor monitoring which goes for roughly $10,000 extends into 2010. And many of the stations that have installed vapor control systems have not yet installed the vapor monitoring systems. They will move, they are going to move the installation of that equipment out closer to that deadline. So while the vapor control system which is the bulk of the conversion, will wind down over as you were pointing out certainly over the next I believe over the next six months. The vapor monitoring portion of this mandate will continue on in the 2010. Paul Mammola - Sidoti & Company: Okay. On the monitoring are you still assuming that you get a quarter of the stations to install year technology?

That’s a reasonable estimate we made. It’s a little bit tough for us to get real clarity of the, of our share because as Scott pointed out given the focus on getting the vapor recovery system in place many people delayed installation of their vapor monitoring systems even they already have the permit for it.

Okay we seem to have some pretty good momentum with our product though. Paul Mammola - Sidoti & Company: Okay that’s helpful and moving back to Water and you talked a little bit about pricing terms obviously. But is it fair to say that competitors pricing aggressively has not affected you thus far and have assumed that, that could be a potential road bump to say in the next six months?

Paul would you restate your question please? Paul Mammola - Sidoti & Company: Sure in terms of price --

You are talking about the Water business? Paul Mammola - Sidoti & Company: Correct. Has competitors or have competitors pricing aggressively impacted your business thus far and do you assume that could be a potential problem say in the next six months? So it sounds like your price is fine you have been somewhat stable but obviously if the market place is trending downwards with lower commodity costs, margin assumption could be too wide. This is what I am asking really?

It is always dangerous to predict the competitive activity. Paul Mammola - Sidoti & Company: Did you see in 1Q how was that?

Well as I said in the first quarter across our Water business our prices were up versus the cost increases and we had not at that point actually started to, our raw material cost were still going on. As a percentage of sales in the first quarter. So our I would say across our Water business, there were pockets of competitive activity, but on balance price exceeded cost and on the good side of the ledger for us. We know that certainly in the US will experience price competition. It has taken the form of periodic heavy promotions, not in the form of reductions in lift costs, permanent reductions in list price. And that’s always a healthier form for that competition to occur, because it's confined in a period of time and usually confined to a few product line. And think it probably be, pretty optimistic for us to assume that that type of activity is going to diminish in this environment. I am not sure that it's going to be dramatically more aggressive than it has been in prior year's however. I am not prepared to make that assertion at this point based on what we have seen. Paul Mammola - Sidoti & Company: Okay. Thanks for that color. And then finally, what’s the utilization rate right now at [Len Aris] and what do you projected to be by the end of the year?

In a factory like [Len Aris], because we are not a process industry with defined capacity constraints. It's hard to define exactly a utilization rate, but I am glad you asked this question because we felt [Len Aris] has a 300,000 square foot manufacturing facility. And by the middle of June with the capacity that we were moving or the production activities that we were moving out of (inaudible) springs down there. We will have put roughly 400,00 square feet of manufacturing activity into the plant from higher cost plants. But our management team in [Len Aris] has been very effective at leaning out processes. And in spite of the fact that we will have moved 400,000 square feet in production activity into a 300,000 square foot plant, we believe that we still will have an opportunity after this round of moves to move 50,000 to 100,000 square feet more production activity down to [Len Aris] that they can comfortably accommodate that much more production activity out of higher cost plants. So, that the [Len Aris] plant by the middle of June will have accommodated all of the production that we had originally build the plant to accommodate, but because of I think good management practices our team down there has created an opportunity for us to move more production at significantly lower cost in most cases and proved quality, because the quality that comes out of [Len Aris] has been excellent. That created the opportunity for us to move more production down there. Paul Mammola - Sidoti & Company: So, given all that is that just assume to be a most efficient plant mid-year?

Yes. Paul Mammola - Sidoti & Company: Okay. Thanks for your time.

And we will take a follow-up from Michael Schneider from Robert W. Baird.

Can we discuss just gross margins again, you mentioned Scott that in March year up 70 basis points year-over-year in Water, 200 in Fueling. I am curious in Water I presume you expect that spread to increase as materials fall. Can you give us a sense of what your expectations are for the balance of the year? At some point do you expect to reach 200 basis points or more?

Well Mike, I hesitate in this environment to give margin guidance. I am we will describe what we see is the competitive activity and we will describe the situation, but I really hesitate to give specific guidance. I will tell you this, that it is certainly our expectation, that between with some recovery in the market. And with the cost initiatives that we have in place and will be putting in place, in addition to what we have outlined here, that we would see our Water margins grow by a couple of 100 basis points.

Well maybe put differently, so the $25 million in savings that you detailed in the release and on the call. Is that evenly spread now to the balance of the 9 months because the actions are complete or is there some front-end or back-end loading of those savings?

They will certainly be more in the second half then they will be in the second quarter.

And Mike as we also tried to point out, these savings on the raw material and direct labor side will of course depend on manufactured volumes which ultimately depends on sales volumes, on product mix, on inventory churns all those variable are going to enter into that. But its safe to assume that the bulk of those identified savings will be in the later half of the year.

Okay and the Linares's savings specifically I should say Siloam Springs and savings in last quarter you were outlining of annualized savings in this morning's release you have $3 million to $5 million for the balance of the year. Does that mean you do have the experience of fairly significant amount of that $8 million just in Q1?

No the difference is the $8 million is an annualized number that’s a 12 month number. The 3 to 5 is how much we will get this year, bearing in mind the kind of plan for starting up with all of the Siloam production is in June. Right now we are actually experiencing some cost penalty because we got still people in Siloam and we are training people in Linares and there is instance to faster moving the processes around, probably cost of money in the first quarter. That will switch in after by the end of June when all of that production down and all of it is running smoothly in the Linares facility.

I see so then as you look then in the 2010 that alone will give you another 3 to 5 in savings as you enjoy the first half savings in 2010. Is the same true then for the fixed cost reductions that you are expecting $15 million that there is an equal amount of carryover from those savings in 2010 in the first half?

Yeah, Mike the way we look at the fixed cost savings are that some of those are more kind of one time. But we believe, 80% roughly 80% of that will carryover into 2010 and beyond.

But I think we will get, we will get some of the fixed cost most of the Linares savings will come in the back half. Some of the fixed costs will come in the first half of this year.

Okay.

We will have carryover effect, we will certainly have carryover effect on the portion of the fixed cost savings as well.

Okay and then on Q1 so there is 4100 stations left most of which have been permitted it sounds like, can you tell us though as the way is the Franklin sales how many stations are left in your eyes in that I presume you have sold, you have already booked revenue for a portion of those 4100 stations given the lead times?

Mike I would say that from our point of view the distribution does not carry a whole lot of inventory particularly with just general destocking that you have seen in North America and many businesses. And we offer our inventory put it in place in California so its very close to them. So there may be I am guess 4 to 6 weeks of inventory in there and on our selves. So that gives you some sense for what's already been pre-sold of the 4200.

And Gregg in Scotts he mentioned that you expect Fueling to be flat to up year-on-year in the second quarter. But would you expect sales to be up sequentially from the amount this quarter as well?

Sequentially for the first quarter?

Yes.

Yeah, we will expect it to be sequentially up in the first quarter because second quarter sales last year were $44 million.

Okay, good point, I am sorry and the vapor recovery the bill that’s pending right now and has hearing. Agree that the probably does not have a lot of traction as it relates to the vapor control devices but the vapor monitoring devices seems to me that there is a legitimate argument for the station to get some reprieve from the monitoring side of the mandate, any thoughts there Gregg?

I am not quite sure why that would be the case, one of the issues from the resources is are these systems working and when there systems they have a lot of wear and tear on these systems and they want to make sure that they are working on a daily basis. So I am not sure that I would necessarily agree that the land monitoring side is the small piece of the equation and also it is oriented to the larger station so in the degree that you have small stations with less flow. They may not require they have been monitoring at all or they do have until 2010. So in the large stations that are mandated this September this side stations are next September and the small stations will not require.

And final question Gregg just on the litigation with your competitor could you give us on update on where that stands?

We are not going to comment on ongoing litigation.

Okay, thank you guys.

And at this time with no further questions in the queue. I would like to turn the conference back over to management for any additional or closing remarks.

Thank you for your attention. Good bye.

And this concludes today's conference. We thank you for your participation.