Jeff Frappier – Treasurer Gregg Sengstack – Chief Executive Officer John Haines – Chief Financial Officer.

Michael Halloran – Robert W. Baird David Rose – Wedbush Securities Edward Marshall – Sidoti & Company Kevin Bennett – Sterne Agee.

Good day, ladies and gentlemen, and welcome to the Franklin Electric Company Inc 2015 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 follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce your host for today’s conference, Mr. Jeff Frappier, Treasurer. Sir, you may begin..

Okay. Thank you, Amanda. And welcome, everyone, to Franklin Electric’s first quarter 2015 earnings conference call. With me today are Gregg Sengstack, our CEO; John Haines, our CFO. On today’s call, Gregg will review our first quarter business results, and then John will review our first quarter financial results.

When John is through, we will have some time for questions and answers. Before we begin, let me remind you that as we conduct this call, we will be making 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.

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.

During this call, we will also discuss certain non-GAAP financial measures, which the company believes helps investors understand underlying trends in the company’s business more easily. A full reconciliation of non-GAAP to GAAP financial measures is included in today’s earnings release, which you can find on Franklin Electric’s website.

With that, I will now turn the call over to our CEO, Gregg Sengstack..

Thank you, Jeff, and good morning everyone. The first quarter started strong with slow measurably in the back half. While our GAAP earnings per share were 17% higher than last year, our operating earnings were well below our expectations and guidance, for the same two reasons decided by most global companies. Maternal strengthening of the U.S.

dollar and dramatically lower oil prices. These two factors accounted for the majority of the $9.5 million decline in our adjusted operating income. The impact of these two factors was greater than we originally forecasted and overshadowed our continued positive organic growth across many markets. Specifically, the strengthening of the U.S.

dollar reduced our report sales 7% and adjusted operating income by about 10% as compared to the first quarter of last year due to translation effects. In addition, our pioneer pump unit which drives the vast majority of the domestic revenue either directly or indirectly from the upstream oil and gas market to our sales decline by 50% in the U.S.

as compared to last year. Even with the continued growth in offshore sales, total pioneer brand of sales declining by over 30% during the quarter.

Most of the balances of decline in our adjusted operating is a result of two additional factors, first, raw material cost at several of our overseas units increased since these units purchased several raw materials that are priced globally in U.S. dollars. We have implemented price increases in those units to offset the cost increases.

We should start to see the impact of these price increases during the second quarter and second, with the challenge of weak demand due to multiple factors in the U.S. market, we incur higher promotional cost in the quarter.

So while we continue to be impacted by currency and the soft oil and gas market, we are taking steps to move our profitability fact to historical levels. Turning to our Water Systems business, in the United States and Canada which represents 35% of consolidated sales in the quarter.

The silver mining of the pioneer brand of the water and pump sales requirement was the variable margin of pioneer products was back at historical levels and in line with the balance of our surface pump product lines. The sales other surface water pumps increased during the quarter where we continue to get traction with the new products.

In groundwater pump channel sales decline by 6%.

As I mentioned last quarter, groundwater demand continues to be uneven, in general groundwater distributors are cautious to take inventory even with promotions, and they are still relatively high levels of inventory groundwater pumps and key irrigation markets like West Texas and many other parts of the lower Midwest and central plain states, where it has been wet and the growing season started later than normal.

In Latin America, excluding acquisitions there will be four foreign translations our sales grew 16% through the record results in Mexico and in Brazil. However, this entire increase was wiped up when translated back to U.S. dollars. In Brazil the integration of the Bombas Leao business we acquired last June continues on plan.

Overall, margins were impacted in Brazil due to higher input cost both from domestic sources and product imported in dollars. We have taken pricing actions offset thus far. Moving to Africa, our team in Southern Africa turning us solid quarter with revenue up 20% in local currency over relatively easy comparison to last year.

We are not expecting that kind of growth in Q2, as we expect a seasonal slowdown in the second quarter to be exacerbated by weak quarter cost and depressed crop prices. However, a new distribution center in Zambia is operational and should help offset the weaker markets in South Africa.

Moving to the Middle East and North Africa, there are a lot of moving parts [indiscernible]. Our business in Turkey which principally sells impel branded products and buy themselves in three currencies in Turkish Lira, Euros and U.S. dollars had record sales of local currency, well, again so our margin’s impression due to input cost.

Here again the local team is continuing to take actions to address this issue. Overall when we include export sales into the regions from our European operations, sales decline in the region before translation by about 5%, due to lower sales in Saudi Arabia and continued political unrest in the region.

In Asia Pacific we saw similar sales decline before translation are 5%. We view this decline would be more from customers delaying orders since we sell products in several markets in U.S. dollars and for other reasons, although business in China all be at small was not robust in the quarter.

Revenue in our Pluga joint venture business in India is behind plan, we have taken steps to address the situation.

Europe, like Latin America and Southern Africa had strong organic sales up 15% before translation but after considering a 26% negative impact for foreign currency translation reported sales actually decline a 11% with earnings taking an even bigger hit.

Some of this is attributable to the previously discussed move a production from Germany to Czech Republic with strong demand, we’ve had to occur additional cost to maintain deliveries. We expect these costs to abate by midyear.

If you count us on our Fueling System business, after double digit sales growth last year, our Fueling Systems business slowed down this quarter. However, with organic growth before translation of 5%, our fueling team posted record operating income in the first quarter. In the U.S.

and Canada, Fueling Systems sales were up 5% before translation with fuel management system and service station hardware posting double digit gains due in part to new product introductions.

Internationally, during sales before translations grew approximately 5% as well, across all regions in most product lines, again led by fuel management systems to a public systems and service station hardware. There were three pockets of weaknesses – weakness internationally, each contributing about 1% headwind to consolidated Fueling Systems sales.

First, storage tanks in the UK to support oil field activities in North Sea have decline with this plan in oil prices.

Pumping systems sales in Russia have declined due to the contraction of the Russian economy and descending system sales in China which we believe is due to the publicize investigation of corruptions into the Chinese state on oil companies.

As you look forward to Q2, we see both of the factors that contributed to our weak performance in Q1 namely, the impact is foreign dollar and weaker oil prices continuing. Further in the U.S. unfavorable early season weather and higher to normal inventories will be a drag in our groundwater sales.

Offsetting these headwinds, our strong organic growth in Europe and developing regions, pricing actions with vapor controls that we have in place.

Because of these factors we estimate that our second quarter 2015 Water Systems net sales will be flat to the second quarter of last year and our Water Systems adjusted operating income to decline by 6% to 8% as compared to the 33% decline in the first quarter.

We have sacred Fueling Systems segment where we had seen a general slowdown in quote and order activity from two principle markets, India and China, net sales and adjusted operating income to be flat to grow 3% as compared to last year’s second quarter results. Overall, we expect our second quarter earnings to be within a range of $0.54, $0.58.

I would now like to turn the call over to John Haines, our CFO..

Thank you, Gregg. Our fully diluted earnings per share as reported were $0.41 for the first quarter of 2015 versus $0.35 for the first quarter of 2014. 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 that 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. When current transactions are related to previous period transactions that were called non-GAAP, the current period impact is also called on GAAP to be consistent.

Non-GAAP expenses for the first quarter 2015 were $0.8 million and included $25 million in restructuring costs, primarily for the continuing European manufacturing realignment started by the company last year, and $0.3 million of other non-GAAP expenses related to retired executive pension costs.

The company acquired a minority share holdings of pioneer during the first quarter.

This transaction created subtle significant financial benefits for the company, but first was the reversal of the differed tax liability created in 2012 when the company acquired a controlling interest in the pioneer subsidiary and realized the gain on then equity investment in pioneer.

The first quarter tax benefit, this first quarter tax benefit of about $4.8 million was treated as the non-GAAP adjustments to the company’s earnings because the transaction in 2012 that gave right to the gain and the tax liability was treated as the non-GAAP adjustment as well.

The first quarter 2015 non-GAAP adjustments had a net EPS impact that reduced earnings by $0.09. There were no adjustments to EPS for non-GAAP items in the first quarter of 2014.

So after considering these non-GAAP items, first quarter 2015 adjusted EPS is $0.32, which is down 9% to the $0.35 adjusted EPS the company reported in the first quarter of 2014.

It is worth noting that the company estimates in the first quarter 2015 adjusted earnings per share was negatively impacted by $0.04 due to the translation impact to loan of foreign exchange. As Gregg noted, we saw a significant strengthening of the U.S.

dollar versus many key currencies which we do business in, including the euro, Brazilian reals, South African rand and Turkish lira during the quarter. This strengthening causes the earnings of these units to be translated back to fewer U.S. dollars.

Consolidated net sales in the first quarter of 2015 were $225.7 million, an decrease of $5.7 million or about 2% compared to the first quarter of 2014 sales of $231.4 million. The incremental impact of sales from acquired businesses was $8.9 million or about 4%.

Sales revenue decreased by $16.5 million or about 7% in the first quarter of 2014 due to foreign currency translation. And as I said, this translation effect reduced our adjusted earnings per share by about $0.04 in the first quarter.

The sales change in the first quarter of 2015, excluding acquisitions and foreign currency translation was an increase of $1.9 million or about 1%. Water Systems sales excluding acquisition and foreign currency translation were flat to the first quarter of 2014.

Water Systems’ operating income after non-GAAP adjustments was $19.7 million in the first quarter 2015, down a $9.6 million versus the first quarter 2014. The first quarter operating income margin after non-GAAP adjustments was 11%, down 490 basis points from 15.9% in the first quarter of 2014.

Operating income after non-GAAP adjustments decreased in Water Systems primarily due to foreign currency translation and reduced sales of pioneer branded equipment for the oil and gas industry. The strengthening U.S. dollar Gregg said, also lowered margins in foreign business units due to the increased cost of U.S.

dollars worth products in advanced of offsetting price increases. Additionally, higher promotional activity in the U.S. contributed to the decline in operating income and operating income margins.

Fueling Systems sales represent 21% consolidated sales and were $46.5 million in the first quarter 2015, a decrease of $0.3 million or about 1% versus the first quarter 2014 sales of $46.8 million. Fueling Systems sales decreased by $2.7 million or about 6% in the quarter, due to foreign currency translation.

Sales from acquired businesses were $0.1 million, excluding acquisitions and the impact of foreign currency translation, Fueling Systems sales increased about 5% compared to the first quarter of 2014.

Fueling Systems sales growth was primarily from fuel management systems and pressure pumping systems partially offset by the client sales in dispensing systems and storage tanks.

Fueling Systems operating income after non-GAAP adjustments was a record $9.8 million in the first quarter of 2015 compared to $9.2 million after non-GAAP adjustments in the first quarter of 2014, an increase of about 7%.

The first quarter operating income margin after non-GAAP adjustments was 21.1%, an increase of 140 basis points from the 19.7% net sales in the first quarter of 2014. The increase was driven by a positive product sales mix.

The company’s consolidated gross profit was $71.5 million for the first quarter of 2015, a decrease of $6.6 million, or about 8%, from the first quarter of 2014 gross profit of $78.1 million. The gross profit as a percent of net sales was 31.7% in the first quarter of 2015, declined by 210 basis points, versus 33.8% during the first quarter 2014.

The gross profit margin increased decreased for zoo and Water Park for the same factors and impact of the Water Systems operating income after non-GAAP adjustments.

Selling, general, and administrative expenses were $55.2 million in the first quarter of 2015 compared to $52 million in the first quarter of the prior year, an increase of $32 million or about 6%. The increase in SG&A expenses from acquired businesses was $2 million.

Excluding the acquisitions, the company’s overall SG&A expenses in the first quarter of 2015 increased by $1.2 million or 2% to prior year first quarter. As we said, the company acquired the remaining minority shares representing about 30% of pioneer pump during the first quarter for about $20 million.

This transaction created a significant benefits below the operating income line that are accretive to the earnings per share of the company.

The first was a reversal and differed tax liability already mentioned, that was created in 2012 when the company acquired the controlling interest in the pioneer subsidiary and realized gain on then equity investment in pioneer.

This first quarter tax benefit of about $4.8 million was treated as a non-GAAP adjustment because in 2012 we treated the gain as the non-GAAP adjustment, we are now consistently treating reversal with tax liability related to that gain is the non-GAAP adjustment and reducing our reported earnings per share in the first quarter by $0.10 as indicated in the table on page two of the earnings release.

The Company also realized a gain on the redeemable non-controlling interest liability in the first quarter of this year of about $2.7 million which is included in other income.

This purchase transaction also resulted in other tax benefits of about $2.5 million which were expensed through the company’s earnings in prior years as well as the current period benefit of about $1 million related to the 2015 gains.

Because these benefits were not called out as non-GAAP adjustments is burdened as then reported earnings of the company when reported we are not now calling out the reversal as non-GAAP adjustments to ensure the treatment and disclosure is consistent.

Due primarily to the [indiscernible] mentioned, above related to pioneer, the first quarter 2015 had a net patch credited removing these discreet items of tax rate for the first quarter of 2015 was 27% and in first quarter of 2014 was about 25%. The full year 2015 rate is estimated to be about 27% before discreet events.

The Company ended the first quarter of 2015 with the cash balance of $69.6 million which was $10.5 million higher at the end of 2014. The cash balance increase is primarily due to borrowing on the revolver of pump pioneer purchase and working capital needs.

The company has of $70 million of borrowing on its revolving debt facilities at the end of first quarter of 2015 and has about $15 million in borrowings at the end of first quarter of 2014. The company purchased about 51,000 shares of its common stock for approximately $1.7 million in the open market during the first quarter 2015.

The total remaining authorized shares at May repurchased is about 820,000. 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 Mike Halloran with Robert Baird. Your line is now open..

Good morning, guys..

Good morning, Mike..

Good morning, Mike.

So, could you talk about some of the pricing initiatives and the cost initiatives you guys are doing out there? What about the product categories or the environment enables you to take some of these pricing initiatives and have them be successful, that’s the first question.

And secondarily just kind of go through some of the fixed cost changes you guys are making..

Sure. Mike, I’ll speak to the pricing first.

You take an economy like Brazil where inflation is not 1% to 2% that is more of a high single digits and where the economy – they’re custom to seeing when their input cost increase in pricing actions it’s pretty straight forward, we’ll follow right for example, when they’re changing the motor pricing along with their pump pricing, and we can also do that on imported product.

Similarly in Southern Africa where we are in a competitive market where the vast majority of the product is coming in from Europe and or the United States rather areas of the world, again there is an expectation that you’re going to respond with market base pricing based on the cost in the import exist.

And it kind of goes on throughout the developing regions of the world there all these expectations and you can move on pricing. With respect to fixed cost, certainly we are continuing to integrate in Brazil we mentioned Real it’s been a nice acquisition, it’s moving on schedule.

We’ve talked earlier about the fixed cost takeout we’re doing in Europe with the consolidation of facilities there.

We are balancing in North America, the balance of fixed cost with also increasing promotional activity which you can look at being variable but as part of our SG&A expense as we’re balancing that to maintain demand and maintain sales in the market place.

So those would be kind of some general buckets, John you may help someone in that?.

Now, I would just say Michael on the fixed cost line that there is a public specific projects in the U.S. relative to facilities that we’re working through right now, those will have some benefit in 2015. And as Gregg said, the balance of trying to draw the organic growth with taking out fixed costs where it makes sense.

So I think we’ll stay very attentive to that and make sure that these effort to lower, structurally lower some of the fixed costs that we have continue to progress..

Thanks for that.

And then could you just provide an update on how the distribution channel changes are going in North America?.

Sure. As you may recall, we announced changes about early last year in 2014 that impact with the business, for instance with the east Mississippi River and Western Rockies where continues to be good traction of those areas.

We’ve announced the change at the end of last year for the central region and that is underway and it’s unrolling, we’re getting positive feedback in the field but we haven’t minimally touched the situation with respect to weather, with respect to Ag and so that’s going to be little slower to come about but we’re clearly getting attraction we expected Eastern Mississippi and Western Rockies..

Okay, so just in line with expectations less the weather which leads to my last question here, maybe just give us a sense for how much inventory you guys think for the channel, is it a month or two of inventory that you guys need to work through, maybe not even remotely that high, and kind of what the core underlying demand looks like if you can kind of strip out the weather somehow?.

Okay, we don’t have that level of visibility, it’s all anecdotal but I’ll make the following observation specific to agricultural activities. Yeah, if you follow the irrigation companies for example, their sales have been reported to off I guess in the mid 20s percent.

And as most of that would take new activity and let’s say new activity for them is about half of our business. Well new activity for us would be maybe 20% of our business, because 80% of our are slow are principally replacement. So you’d say the math we work out would maybe 10% impact on the irrigation piece of our business.

We saw that our sales decline was in the mid single digits, so you sense that there is just a level of inventory and again I think there is a level of conservatism because there has been a couple growing seasons like this where your people are just very cautious about taking additional product, but I can’t give you a specific number beyond that..

No, but that’s certainly helpful in triangulating. So I appreciate the time guys..

Sure..

Thank you. Our next question comes from David Rose with Wedbush Securities. Your line is now open..

Good morning, gentlemen. Thanks for taking my call. .

Good morning, David..

If I can just intake a couple of these and I’ll get back in the queue with some additional ones, maybe a little bit more on the distributor change in the central region, have you started it, how far along are you, because I got the impression you are underway at the last call, can you give us a little bit more color in terms of how much longer you have given where you in the process?.

Sure. I mean we’re underway, we have all of our new distribution appointments and it’s just a question I think of distributions that we used to do business with working off inventories and distributors that we have added to start selling our product in addition to products they were already selling.

And we mentioned in the last call we think that kind of works through the first half of the year in that region, certainly there is a weather [indiscernible] reason, it just takes a little time for people work through this. Again, we saw and are moving the coast that we’re getting the traction we expected this year..

So how are you measuring, I mean what are the metrics that you’ve seen in the coast that for margin comfort, is it on sales per distributor, is it profitability, is it combination of the two?.

Yeah, it’s a growth and sales with our distribution partners or distribution partners we did business with in the past that are rejoined us, as seeing their growth and as seeing the growth relative to prior years..

And we have this groundwater market share measure Dave that we discussed in the past that as an independent compilation of every specific products and that’s something we watch and so far we have been kind of neutral or flat in the first quarter or year-over-year.

So, yeah that’s another indication of kind of what our shares doing versus what else is happening out there I think as Gregg said, all of it is crowded by this backdrop of not so ideal weather conditions and then we have to deal with that and everybody else does as well, but it’s difficult to parse through or specifically say, this is because of weather or this is because of new distribution or this is because of another factor but generally it’s going a way we thought it would..

Okay.

And then if maybe we can switch gears a little bit on the impact from pioneer going forward, you have a larger piece of it, so I’m assuming that it’s going to be given where your pump sales were down 50%, it’s going to be a negative on the margin front in the second quarter versus the first quarter, is that fair?.

Well again, they’re down 50% in the U.S., down 30% globally. The pioneer margins in the back half of last year contribution variable margins were low because we were adding a lot of cost by outsourcing, we don’t want to do that.

So the pioneer margins on variable basis are consistent with our surface pumping margin, but overall we’re going to get delivered on the pioneer fixed cost and we’ve taking steps to reduce fixed cost there as well but we have a 50% decline in one market and 30% decline in raw, maybe it’s not going to respond that fast on your fixed cost base because we want to maintain a base to continue to grow that business as we have successfully gotten outside the U.S..

Okay, that’s helpful.

And then the last one, I’ll get back in the queue, can you give us a little bit more color on the fixed hike and the debt, I’m assuming some of it was for the debt from pioneer piece but what was the remainder of that?.

Yeah, so the borrowings that you saw David, three things coming out of it, the minority pioneer purchase that we discussed. Then we have our first installment on the prudential firm debt, there was a $30 million installment coming up on that in this month.

And just seasonally when you look at our company this was seasonally when we have the highest investments in working capital. So those – that higher debt was mainly anticipation goes three times..

Okay, great. Thank you, I’ll get back in the queue..

[Operator Instructions] Our next question comes from Edward Marshall with Sidoti & Company. Your line is now open..

Good morning..

Good morning, Edward..

Good morning, Edward..

So, you mentioned the actions of control fixed cost and I just wanted to kind of maybe circle back to that if I could and I don’t know that you had quantified new benefits that you anticipate or maybe even better the timing of those cost actions that you’re planned to take.

Do you have any kind of understanding maybe to put some numbers around that – those targets for me?.

Well, we haven’t issued specific benefits and when you look at our SG&A generally you’ll see 4% to 5% growth in SG&A, the benefits from the European restructuring is underway, we talked about that a little bit.

Some of the other stuff we’re just not a point of disclosing specific benefits but as I said, there are action some of them related to facilities here in the U.S.

that we have started to take action on that we’ll have some incremental benefit to our fixed costs, not measured in tens of millions but measured in millions that we’ll start to see the benefit from..

And anything on the timing of that or is it just too early to tell?.

No, I think you’ll start to see some of that in the back half of the year. We’ll certainly start to see some of the benefits from the European restructuring in the back half of the year as we get through most of the moves than disruption of that. Some of the other stuff that’s going on you’ll start to see benefits from in the back half of the year..

Okay. And when you talked about taxes, and I’d note the $4.8 million gain, I think you gave some others in there as well, I know you said there was a $2.5 million gain in other and then there was another $1 million gain on that in the tax line.

Can you kind of walk me through kind of how you got back to the 27% effective again because I missed a lot of that..

Yeah, what we’re saying is that these gains runs through the tax line that are discrete items. So the 27% is what our company would view is the effective tax rate before the discrete items, if you consider the discrete items then we would call out, the one tax rate and the 27% for all 2015 might be more in the 24%, 25% range.

But what we’re talking about was to this pioneer transaction was, there was a differed tax liability that was reversed that was the $4.8 million that related all the way back to the transaction in 2012 and therefore we called out it with the time reduction because when we did it in 2012 we call that on GAAP and now reversal or the benefit of it we’re going to call non-GAAP in 2015.

The second piece is there is actually two pieces, the $3.5 million of discrete tax items in total, $2.5 million of that was taken in previous periods and burned the previous period’s earnings, and then a million of it was taken in the first quarter.

So what we’re saying is that that because that tax item burned in the previous quarter’s earning when we reversed it now we’re not going to call that out non-GAAP, and that is related to the gain on the final minority purchase.

So we paid basically $20 million for that minority position in pioneer, so we had a liability of about $3.3 million established.

So two pieces that are flown through one is the gain, the absolute gain of $2.7 million which is another income and then this $3.5 million of differed tax liability or the reversal of differed tax liability that’s in the tax profit..

Okay, got you.

So there is about $4.8 million of additional – I’m sorry, $8.3 million of unusual, what I’d characterize is unusual tax items in Q1?.

The $2.7 million and the $3.5 million..

Got it, okay.

Mobile pumps I think you said was down 50% in 1Q, is that first of all all-pioneer? And secondly I guess the veteran continue in 2Q?.

The 50% decline was in the North American market, overall decline was 30%. And we expect sequentially the second quarter to have higher revenue than the first quarter, but we also said that the there will be a decline year-over-year in the second quarter from the second quarter of 2014..

Okay, now based on the timing of the remaining acquisition of that 30% of pioneer, first, was that consolidated priority and then reported back as a minority interest or was that – or were you receiving 70% of pioneer? And secondly….

Yeah, we’ve consolidated all of that and then reported a portion of borrowings [indiscernible] potion of borrowings out for the minority interest..

Got it.

So essentially revenue line will be a light comparison on the top line going forward?.

Say that again, I’m sorry..

So, essentially it wouldn’t be – I wouldn’t look at an additional 30% coming on from pioneer in that business, essentially you’ve been consolidating a 100%....

Yes, that’s correct, that’s correct..

Okay.

And then finally, when I look at the fueling guidance, does that include the impact of FX like you included on the water business?.

Yeah, it includes our current view of FX, yes..

Okay.

And so when I look at maybe the largest zones that might be of interest to you, I guess India and China probably smaller and I know you called those as negatives for the fueling division but when I look at the two biggest impacts, would it be Brazil and Europe would be the two places that I think would have the biggest impact overall on the company? And maybe not necessarily the fueling business with the company as a whole and is it also right to think that maybe that had a left of an impact of fueling business more on the water side?.

Okay, let me answer maybe a different approaches little bit probably. The fueling business like the water business, well the water business is about 45% of, we’ll call at U.S. Canada and then 55% of the rest of the globe. Joint business is similar rated, just almost 50-50.

The fueling business have pretty big positions in India and China, larger in China than India actually. Maybe the fueling business is not particularly strong in Brazil although we do a decent business in Latin America outside of Brazil.

So, if you think about fueling business the slowdowns we’re seeing where as you pointed out, we have a business in fueling that makes large underground tanks that are also used above ground and on the oil fields of the North Sea, that piece has been impacted.

We see a slowdown in Russia because of the Russian economy and we’re seeing a slowdown in China which we believe is related to some of the political issues within the Chinese oil companies.

And in India, the business is lumpy, it comes in tender business over a period of time and we have strong tender year last year, we’re not seeing that just yet this year, but the Indian [indiscernible] people want to see how that unfolds. So we won’t point that out to people.

Generally in fueling business, maybe that was little soft in Europe but most of that has been the Russian business, so that’s kind of the view of fueling. Now if you look at water, we’ve had again great growth throughout Latin America where we have a very strong position and we’re expecting to continue growth.

We’ve had – we have a solid business in Southern Africa, we had a lot of disruptions last year that’s settled down now, we got a nice solid business there and we have a very solid business in the Middle East, North Africa.

Again we deal with political challenges there but we have a very solid based and you just have to kind of deal with the fact that Libya is offline this year, you have [indiscernible] and so, but then Algeria is doing very well, so we see that.

We’ve made an conscious effort to invest in our business, in our water business be in Europe or increasing our pump distribution in Europe. And so we’re very pleased to see the organic growth in Europe and again a little currency, a lot of this kind of comes back U.S. dollars unfortunately.

And then we look at our APAC business, and again we saw [indiscernible] Q1 because some of our APAC business is in dollars so we realized that these customers are going to hold back, maybe lesser inventories were down but eventually they got to buy and we expect Q2 could be our new quarter in Asia Pacific.

But – and then you can look at our news release you can get the general feel for the percentage of our business in each of those regions, and you can put that into your thinking..

Okay, great. Thanks guys..

Thank you. Our next question comes from Kevin Bennett with Sterne Agee. Your line is now open..

Hey guys, good morning..

Good morning, Kevin.

Good morning, Kevin.

First on the water, can you remind us about the timing of the ramp in surface from the URI national pump acquisition, I’m just wondering kind of when the comps are going to get a little bit easier in that piece of the business?.

Yeah, the URI acquisition, I don’t know exactly but we think it’s completed about a year ago and the ramp really came in the back half of the year, so the comps will be easier at the back half of the year and the margin comps will be better as well..

So the top line comps will be tougher in the back half and then, but the margins will be easier?.

I’m sorry, yeah the top line will be tougher but the margins will be better fairly..

Got it, thanks Gregg.

And then on the promotions in North America, is that primarily related to the weak Ag markets as well as the distributor reset or are you seeing weakness in the residential piece as well?.

Well, we commented that our residential business was off a few percent, so it wasn’t naturally robust and there would be general activity, certainly again the Ag market is the big part of it because it’s a central region, it’s where we are focused our attention right now.

So I’d say it’s a little bit of both but I wouldn’t say that the residential market is way off, it’s just low..

Okay. And then lastly Gregg, your organic growth rate total company has been kind of in a high single digits in the recent years.

I’m wondering if you think any of the headwinds affecting your business right now will affect that longer term or are all of these things temporary?.

That’s a big question. From the same kind of [indiscernible], you look back and say, okay what was Franklin’s strategy over the years, okay, and our strategy to grow through geographic expansion and product line extension is serving the markets globally.

We have – we’re very fortunate to have almost 40% of our revenue coming from developing regions in our water business, not quite that much yet in fueling but fueling is growing rapidly in those regions as well.

And that’s where 80% of the people are and that’s where, as people move into the middle class they’re going to consume typically more water, they’re going to consume more fuel and that all I think goes well for continue strong organic growth.

We’ve seen in the North America market where we have – we’re repositioning our distribution, we expect then to see good organic growth there. And keep in mind, we continue to have robust pipeline of introductions as well so that would be a product line extension as mentioned, so we think that is also a good piece of our organic growth.

But when you have currencies move tens of percent relative to the dollar, it just don’t come back to dollars, but the underlying growth demand we don’t see [indiscernible] matter of fact our argument can be seen as the world economy stabilizes we think like hit on cylinders could actually accelerate..

Sure, that’s helpful.

And the last question, kind of what you mentioned I was – do you have any update on the artificial list that you guys are working on given what oil and gas is done, are you slowing down on that or?.

We have – we continue to invest a level of consistent with prior years in artificial list, with the gas price in North America that we’ve sold for $3 there is not a lot of demand here.

Gas prices outside North America is higher, we have better connections again in China with the oil companies, in India, in Turkey, these are markets that have higher prices and have more immediate demand.

So we are continuing to protest systems in these markets, we haven’t had a major top yet but we will continue to focus and we have these connections with closer to the field. So we remain optimistic and we’ll continue to invest in the business..

That’s great. Thank you guys..

Thank you. I’m showing no further questions at this time. Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect..