Good day and welcome to the Franklin Electric Q4 and Full-Year 2013 Earnings Call. (Operator instructions.) As a reminder this conference call is being recorded. I would now like to turn the conference over to Mr. Jeff Frappier, Treasurer. Sir, you may begin.

Thank you, Syed, and welcome everybody to Franklin Electric’s Q4 2013 Earnings Conference Call. With me today are Scott Trumbull, our Chairman and CEO; John Haines, our CFO; Robert Stone, SVP and President of International Water Systems; and Gregg Sengstack, President and COO. On today’s call Scott will review our Q4 and 2013 full year business results and then John will review our Q4 and full year financial results. When John is through we will have some times for questions and answers. Before we begin, let me remind you that as we conduct this call we will be making any forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, many of which could cause actual results to differ materially from such forward-looking statements. A discussion of these factors may be found in the company’s annual report on Form 10(k) and in today’s earnings release. Also our press release and this call contain non-GAAP financial measures that include but are not limited to earnings after GAAP adjustments, fully diluted earnings per share after non-GAAP adjustments or adjusted EPS, operating income after non-GAAP adjustments, and percent operating income to net sales after non-GAAP adjustments or operating income margin after non-GAAP adjustments. The company believes that these measures help investors understand underlying trends in the company’s business more easily. The differences between these measures and the most comparable GAAP measures are reconciled in the table in our earnings release. All forward-looking statements made during this call are based on information currently available and except as required by law the company assumes no obligation to update any forward-looking statements. With that I will now turn the call over to our Chairman and CEO. Scott?

Thanks, Jeff. We’re pleased to report that our sales and adjusted net income for both Q4 and full-year 2013 were again records for any Q4 and year in the company’s history, and we ended the year on a strong note. During Q4 our consolidated sales grew by 12% and our consolidated operating income after non-GAAP adjustments grew by 14% compared to Q4 the prior year. Our Global Water Systems business had a very strong quarter with sales increasing by 13%, and operating income after non-GAAP adjustments increasing by 18%. While our Water Systems businesses grew in virtually all regions of the world, our Water Teams in the US and Canada w2re our star performers, providing 39% of our consolidated sales during Q4 and achieving 25% sales growth led by strong demand for mobile dewatering systems, residential and light commercial groundwater pump systems, and drives and controls. The US demand for our Pioneer branded mobile dewatering equipment grew rapidly in the upstream oil & gas market during Q4. In addition, we believe that Pioneer is gaining share in the US pump rental market because of that brand’s reputation for efficiency and durability. Our Pioneer team also achieved significant sales gains in the commercial construction market, particularly in Western Canada during Q4. Our US and Canadian sales of residential and light commercial groundwater pumps increased by 25% during the quarter. During Q3 2013 last year our sales of residential and light commercial groundwater pumps declined, and we believe that this decline resulted in our distributors’ inventory falling below target levels. So we believe a portion of the 25% sales increase during Q4 is attributable to distributors rebuilding their stock to target levels in the face of perceived growing demand in the residential construction market. We also believe that during Q4 a number…

Thank you, Scott. Our fully diluted earnings per share were $0.27 for Q4 2013 versus $0.27 for Q4 2012. As we note in the tables in the earnings release the company adjusts the as-reported GAAP operating income and earnings per share for items we consider not operational in nature. We believe presenting these matters in this way gives our investors a more accurate picture of the actual operational performance of the company. Non-GAAP expenses for Q4 2013 were $2.4 million and included $1.5 million in restructuring costs, of which $1.3 million related to an asset write down on the pending sale of a property in Oklahoma City, Oklahoma. Additionally relocation costs for the new corporate headquarters and engineering center in Ft. Wayne Indiana were $0.2 million and other legal and advisory costs primarily related to potential acquisitions were $0.9 million. Q4 2013 non-GAAP adjustments round to an EPS impact of about $0.03. The non-GAAP EPS adjustments in Q4 2012 rounded to an EPS impact of about $0.01. So after considering these non-GAAP items Q4 2013 adjusted EPS is $0.30 which is 7% higher than the $0.28 adjusted EPS the company reported in Q4 2012. Overall, for Q4 2013 revenue, gross profit, adjusted operating income, adjusted net income, and adjusted earnings per share were records for any Q4 in the company’s history. Water Systems sales were $178.4 million in Q4 2013, an increase of $20.9 million or about 13% versus the Q4 2012 sales of $157.5 million. Sales from businesses acquired since Q4 2012 were $0.6 million or less than 1%. Water Systems sales were reduced by $4.9 million or about 3% in the quarter due to foreign currency translation. Water Systems sales growth excluding acquisitions and foreign currency translation was about 16%. Water Systems operating income after non-GAAP adjustments was…

Thanks, John. Today we’ve announced that after 11 years I’ll be retiring as Chief Executive Officer of Franklin Electric following our Annual Shareholders Meeting on May 2 of this year. I’ll remain as non-executive Chairman of the Board for a period of time. My successor will be Greg Sengtack whose made much-needed contributions to the company’s success over his entire 25-year career with Franklin Electric – most particularly during his time as President and Chief Operating Officer, and prior to that as Chief Financial Officer. Greg is a strong leader, an excellent strategist, and I am confident the company will continue to grow and prosper under his leadership. During the past 11 years Franklin people worldwide have accomplished a great deal. We’ve transformed the company from being a submersible motor supplier and pump manufacturer, to being a pumping systems supplier for distributors. We’ve increased our sales in high-growth emerging markets to 37% of our total sales and we’ve increased our market capitalization from around $500 million to around $2 billion. As an employee, Board member and share owner I’m excited about Franklin’s future and I’m very pleased that Greg Sengstack will be succeeding me as CEO. Thank you.

This concludes our prepared remarks. We’d now like to turn the call over for questions.

Thank you. (Operator instructions.) Our first question comes from Matt Summerville with KeyBanc. Your line’s open, please go ahead. Matt Summerville – KeyBanc Capital Markets: Hi. A couple questions – first, in US/Canada you mentioned up 25%. If you were to bucket it or excuse me, quantify the three buckets, how much of that growth would you say was driven by mobile dewatering versus growth in the residential light commercial versus drives and controls if you divided up that 25% growth?

I would say 60% mobile dewatering, no, maybe 50% mobile dewatering; 30% to 35% from the residential groundwater; and 10% to 15% from the drives and controls. Matt Summerville – KeyBanc Capital Markets: And then I guess how sustainable is what you’re experiencing in the dewatering business as we move through 2014?

We think 2014’s going to be a good year for our mobile dewatering business, for the Pioneer brand. And beyond that it’s difficult to project. I don’t think it’s realistic for us to assume growth at the same rate that’s occurred in Q4 last year to continue indefinitely into the future but our market share in this product line in the US is still relatively low. And so we think we’ve got pretty good headroom for growth and of course right now the demand for pumping systems in the natural gas, oil & gas field is very strong and we all know that that fluctuates over time. So but we are looking at 2014 as being, it should be a very strong year for Pioneer Pump. Matt Summerville – KeyBanc Capital Markets: What are you seeing in terms of price versus raw material costs in both of your businesses right now?

We in Q4 and early Q1 will have increased our prices on average 2% to 3% across our global platform, and we’re seeing pretty stable costs at this point. So we’ve been getting good support for the price increases and the combination of productivity and purchasing programs has enabled us to keep the costs in line. Matt Summerville – KeyBanc Capital Markets: And then just one more on the well de-liquefaction. Can you talk about how much revenue you generated in ’13 and what your projection is as far as 2014, and then maybe update us as to how these test wells are progressing in number?

Okay. We sold a couple million dollars’ worth of product in 2013. We are targeting $5 million for that product line this year, 2014. However, there’s… I don’t think there’s a great deal of downside to the $5 million and there’s potentially some fairly significant upside – and I think we could start to see very good growth for this product, in particular as we move into 2015. At the end of last year in southern Africa we got our first million-dollar order for equipment for this type of artificial lift equipment for a company that’s developing gas fields in that part of the world. Just this week we received orders for eight systems from two of the national Chinese oil companies that, assuming success with these initial eight installations could in relatively short order turn into very large orders for this type of equipment. We’ve got tests underway with several large natural gas exploration companies in North America that are going well and that we believe also have the potential to turn into very large orders. But as I’ve pointed out in the past, the sales cycle for this kind of thing is we’ve got a new concept, it’s proving itself out but generally these customers want to buy a couple, put them in the ground; see how they perform in many cases up to a year before they’ll commit to ordering dozens of systems or large quantities. And we’re just kind of… I know it’s perhaps frustrating a little bit because this is the way it is but we’re happy with the progress we’re making, Matt, in this product line and we think there’s smoke now and before long there may be some fire. Matt Summerville – KeyBanc Capital Markets: Got it, thanks Scott.

Thank you. And our next question comes from Mike Halloran with Robert W Baird. Your line’s open, please go ahead. Mike Halloran – Robert W. Baird: Good afternoon everyone. So just on the dewatering on the share side, maybe just dig a little bit into what you’re attributing it to. Is it now that you’ve got a bigger piece of Pioneer in your portfolio you can do more in the marketplace? Is it just brand recognition and momentum? Is there a pricing component to how you’re gaining the share or is it just baseline blocking and tackling?

Robert Stone will respond to that who among other things is responsible for our Pioneer business unit.

Hi, Mike. There is a lot of blocking and tackling but the real story is that we have a superior product and we have a customer base that is winning in the marketplace on top of a market that’s picking up a little bit as Scott mentioned in terms of gas and oil. Gas prices have picked up significantly and that’s been a big help, and our customers are winning in the field. Mike Halloran – Robert W. Baird: And in this case the customers you’re referring to are those who would actually be doing the rental and the work in the field?

Yes, these are... I’m referring to our customers who have rental pump fleets. Mike Halloran – Robert W. Baird: Got it. Yep, that’s exactly what I thought. And then on the drives and controls side obviously very healthy growth on that side of the platform, on that light commercial residential side. Maybe you can talk a little bit about what that sell process looks like today. When you talk to the average consumer’s decision making process, why are they starting to move towards these products? Is it as simple as it’s become more cost affordable with better visibility like you referred to? And just kind of what that sales cycle looks like for the average consumer.

I’m going to ask Greg Sengstack to respond to that question.

Yeah, as these systems become more proven and more cost-effective what you’re seeing is the customer has a choice and they’re looking at an opportunity to have a better quality system that provides constant pressure and it’s just a desirable system. But it’s a longer sales cycle to be introduced to the customer where they can see the benefits and where we get the contractors comfortable with installing these systems. And we’ve had a long track record and our customers are getting more comfortable and we continue to train them as they explain the benefits to the consumers; and the consumers are willing to adopt these products.

You know, the products help reduce energy costs in a system and more and more customers are receptive to sustainability arguments and to lifecycle, product lifecycle cost arguments. But a drive will not only protect the motor but can have a significant influence on the operating cost from the electrical consumption perspective. So as the cost of that product comes down that economic equation improves and I think that’s been a factor as well. But in terms of pump companies that operated in the US we are basic in drives. We make our own drives and we are designing them to be very application-specific. And our principal competitors in this market are not basic – they buy off-the-shelf drives and do some adaptation to it and then resell it in the market. So we believe we’re in a stronger position to develop products that really meet the needs of our customers, and evidence has borne that out. Mike Halloran – Robert W. Baird: That makes a lot of sense. And then can you talk about your ag expectations as we work through 2014 and what you’re seeing in the environment?

Well certainly with the ag situation, last year we had an extremely wet situation in the Eastern half of the country – you saw a very big change in the drought maps. Now if the conditions continue to be very dry in the United States then we’ll just have to see how things unfold this year after all the snow melts. That’s specific to the US market, and the Europe market also had a very wet year last year. We’ll have to see how that plays out at the margin as well as other Northern Hemisphere markets. You’ve seen our results. In the Southern Hemisphere we continue to have great double-digit growth in our developing regions in the Southern Hemisphere and so that’s a good part of our story but that’s a smaller part of our overall market. Mike Halloran – Robert W. Baird: And what do the inventory levels look like at the distributors on the ag side right now?

Well, our Q4 growth – and first of all, I assume you’re talking about North America. Mike Halloran – Robert W. Baird: Yeah, I’m sorry, that’s absolutely true.

Our Q4 growth in North America was really fueled by increases in our residential line of groundwater pumping products, not by our ag irrigation lines – our larger pumps and motors. And so I don’t have evidence that the channel is overly stocked with ag irrigation equipment at this point in the year. January is a pretty tough month because of weather but I think that the inventory levels for ag products are probably in line with where they usually are at this time of year. Mike Halloran – Robert W. Baird: Mm-hmm. Well great, I appreciate the time and congratulations to both you and Greg. Good luck with everything.

Thanks a lot.

Thank you. And our next question comes from David Rose from Wedbush Securities. Your line’s open, please go ahead. David Rose – Wedbush Securities : Good afternoon. A couple follow-up questions: one is if you could provide a little bit more color around the acquisition expense line item. Obviously you have some legal expenses. Can I assume that since nothing took place that we’ll see something very similar in Q1 or did a product move away and we won’t see that line item repeat in Q1?

David, this is John. Are you talking about the non-GAAP item we called out in acquisition expenses? David Rose – Wedbush Securities : Yeah.

Yeah, so our pipeline right now for deals, I think we would all agree we would say is pretty robust. We have both platform deals, we have bolt-on deals – many of them are international opportunities. So just remember that when we go into these international acquisition opportunities we’re largely using professional service providers that speak the local language, that know the local rules be it for financial due diligence, legal due diligence, those kinds of things. So those are the costs we’re bussing here and saying “Hey, it doesn’t really make sense because they all related to a specific transaction to put them in the operations if you will.” But at the same time I will point out that the close cycle on many of these deals is very long, and we have been working on certain transactions for six, nine months through the agreements, through the final negotiations, through the closing. So that’s really what that is and that’s a little bit of why we call it out as non-GAAP. David Rose – Wedbush Securities : And I appreciate that, John, and I guess the question is, is that something we’re going to see ramp up as you get closer to consummating a transaction or is that sort of an ongoing number?

Well, I’d hate to say it’s an ongoing number – I think it’s going to fluctuate a bit. But as I said I also think there’s some things kind of in the hopper here that could keep that going. So I guess I’d hate to guess too much about what that’s going to look like but if I think about some of the indications of interest that we’re working on right now, which is very early in that process, and the countries that some of those are in we’re going to spend some money to complete those transactions. There’s just no doubt about it. So I don’t know if I’d hang onto that amount every quarter but there’s going to be some more like that. I don’t think there’s any question about it. David Rose – Wedbush Securities : Okay, that’s helpful. And then a couple quick ones – can you provide us with a little more color on the DC, the distribution center updates, just what you saw the last six months and what we should expect in terms of new openings for 2014?

We opened a new distribution center for our Pioneer product lines in Australia; and then we opened a whole, for that Pioneer product line, network of pump rental facilities in the UK. And the operation in Australia is up and operating and contributing to the company and the pump rental facilities in the UK, which is a new business model for us, are up and operating. During 2013 they were a noticeable drag in terms of startup costs on our quarterly earnings. We think that we’re going to be in good shape in that business. It should not be a drag on our earnings in Q1 so we’ve got that stabilized and up and running and hopefully it will prove to be a platform for us to expand that business both in the UK and then that business model into other regions in the world as well. In addition we opened a new distribution center for our Water Systems business at the end of last year in Sao Paulo, Brazil, and that has really taken off well and is a reasonably important part of our growth story in the back half of the year, the last quarter or so of the year in Brazil. We opened a new distribution center in Bogota, Colombia, and that quite frankly has gotten off to a slower start. So we’re working on that one but it’s not a material factor on the company’s overall performance, but it’s something that we opened it with certain expectations and we attend to achieve them. We’re not quite achieving them yet. David Rose – Wedbush Securities : And India?

India is really just now getting started and so it’s a little early to say how the operation in Delhi is going to impact our Asia-Pacific Water Systems performance. David Rose – Wedbush Securities : Okay, and then Zambia?

Oh yeah, Zambia. That one is also not quite up and operating yet.

The Zambian operation, we’ve run into a couple of snags. So from a facility being operational standpoint we are a little behind but I can say that our presence there already is helping us win business by a significant measure. We will have it up sometime this quarter and then expect greater growth in that area from that point on. David Rose – Wedbush Securities : Okay, and then how many more DCs can we model in for 2014?

Right now we are at this moment not focusing on launching additional DCs in ’14. As John mentioned we are focused on hopefully getting one or two transactions done that will give us additional distribution in areas of the world that we think have very good potential growth. David Rose – Wedbush Securities : Okay, that’s helpful. Thank you very much.

Thank you. I’m showing no further questions at this time. I’d like to hand the conference back over to Mr. Scott Trumbull for closing remarks.

Well, I’ve had a great ride over the last eleven years. I will be eternally grateful for having the opportunity to lead Franklin Electric and thank you for your attention.