Gregg Sengstack - Chairman and CEO John Haines - VP and CFO.

Edward Marshall - Sidoti & Company Ryan Cassil - Seaport Global Ryan Connors - Boenning Matt Summerville - Alembic Global Spencer Joyce - Hilliard Lyons.

Good day, ladies and gentlemen. I would like to introduce your host for today's conference Mr. John Haines, Chief Financial Officer. You may begin..

Thank you, Amanda and welcome, everyone, to Franklin Electric's First Quarter 2017 Earnings Conference Call. With me today are Gregg Sengstack, our Chairman and Chief Executive Officer. On today's call, Gregg will review our first quarter business results and then I'll review our first quarter financial results.

When I'm 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 as 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 Chief Executive Officer, Gregg Sengstack..

Thank you, John. Outside of U.S. groundwater business, we had a good start to the year with organic sales growth of approximately 5% led by our Fueling Systems business and our Latin America water business. Our fueling business continues to grow globally. Organic sales increased 7% in the U.S. and Canada and 11% internationally.

Our strategy of focusing on safety and lowest total cost of ownership continues to gain traction. The development of our Site Builder website and FFS PRO University, we're winning business in North America with major marketers, as well as distributor discretionary business.

With the stabilization of oil prices outside of North America, we're seeing pockets of increased demand for our products and systems as well. For example, during the quarter we had a definite uptick in demand China market where we see carrying on through the balance of the year. We are also seeing strength in our water business in developing regions.

Latin America growth accelerated to over 10%. Southern Africa while still soft had better results than last year and even with a particularly tough comp Asia-Pacific peaked out an increase. We had another record quarter to local currency in Turkey, although Europe and the net balance of the Middle East remain relatively flat.

Focusing on the U.S., our de-watering equipment business was up about 12% as we're seeing increased backlog in coating activity. Revenue of our other surface pumping equipment declined by 3%. In our U.S. groundwater business, we saw $7 million decrease in sales, as compared to the first quarter of 2016.

Excluding sales to the headwater distribution entities, still the groundwater pumping systems were down about $1 million.

Weather in the Western Canada was great and we had very strong finish to last year in this channel with the year-end price increase and 2016 was a better year than 2015 many distributors stretch for volume rebates to expect challenged inventory to be healthy.

As John will explain in a minute, the Headwater water distributors that we are acquiring this quarter had different matters to consider but in short there is nothing to gain by increasing the purchases by significant quarter and we had no incentives to promote more sales to them. So our U.S.

water sales were down and those margins on groundwater pumping systems are higher than our corporate average due to vertical integration, our operating income for the quarter suffered.

One other data point, on a pro forma basis the first quarter revenue of the four entities that we’re acquiring to form a Headwater Company overcame a 10% decline in sales in the West Coast and we’re up 4% on consolidated basis in the quarter. So, as we look forward to the balance of 2017 despite a slow start in the U.S.

and Canada groundwater markets, we remain positive about our ability to achieve organic topline growth in the 5% to 7% for our pre-acquisition segments. This growth allows to reaffirm our 2017 adjusted earnings per share guidance range of $1.77 to $1.87. I’ll now turn the call back over to John..

Thank you, Gregg. Our fully diluted earnings per share were $0.33 for the first quarter 2017 versus $0.28 for the first quarter of 2016, an increase of 18%. First quarter 2017 sales were $220.3 million, an increase of 1% compared to 2016 first quarter sales of $218.4 million.

The Company's organic sales growth was 1% as the impact of foreign currency translation was not significant. The Company is not reporting non-GAAP adjustments in the first quarter of 2017 as we are now reporting the first quarter 2016 operating income in the same format.

The $0.3 million of restructuring expense reported in the first quarter is related to the ongoing restructuring effort in Brazil. Water systems sales were $167.2 million in the first quarter 2017, a decrease of $1.6 million or about 1% versus the first quarter 2016 sales of $168.8 million.

Water systems organic sales were also down about 1% compared to the first quarter 2016.

As Gregg already mentioned sales of groundwater pumping equipment in the United States and Canada declined in total $7 million, however about $6 million was due to reduced sales to the Headwater distribution entities that the company announced the acquisition of on April 10.

There was no incentive for these entities to buy inventory from Franklin in the quarter especially considering their larger fourth quarter purchases in weak end market conditions in the Western United States.

Likewise, due to the deferral of profit recognition on sales between the water systems segment and Headwater, until the product is sold to the Headwater customer there was also no rationale for the water systems segment to incentivize or promote hard sales to these customers in the first quarter.

The profit recognition deferral is elongated by the amount of Franklin inventory the Headwater Companies had on and at time of the acquisition were completed.

We estimate that the lower sales of groundwater pumping equipment to the Headwater Companies explains about $0.04 difference in EPS from the first quarter of 2016 to the first quarter of this year.

Water systems operating income was $21.4 million in the first quarter of 2017 down $2.8 million or 12% versus the first quarter of 2016 and operating income margin was 12.8% a decline of 150 basis points from 14.3% in the first quarter of 2016.

Water systems first quarter 2017 operating income and operating margins before restructuring expenses were $21.7 million and 13% respectively the decline in water systems operating income and operating income margin is primarily attributed to lower sales volume and higher marketing and selling expenses which increased about $2.7 million from the first quarter of the prior year.

Fueling Systems sales were 53.1 million in the first quarter of 2017 an increase of $3.5 million or about 7% versus the first quarter of 2016 sales of $49.6 million. Fueling Systems sales decreased by $28 million or about 2% in the quarter due to foreign currency translation.

Fueling Systems sales increased about 9% after excluding foreign currency translation. Fueling Systems operating income was $11 million in the first quarter of 2017 up about $28 million or about 8% compared to $10.2 million in the first quarter of 2016.

In the first quarter operating income margin was 20.7% an increase of 10 basis points from 20.6% of net sales in the first quarter of 2016. The company's consolidated gross profit was $75.8 million for the first quarter of 2017 and increase of $1.6 million or about 2% from the first quarter 2016 gross profit of $74.2 million.

The gross profit as percentage of net sales was 34.4% in the first quarter of 2017 an increased about 40 basis points versus 34% during the first quarter of 2016. The gross profit margin increase was primarily due to favorable pricing and lower direct material cost partially offset by higher fixed cost.

Selling, general and administrative expenses were $57 million in the first quarter of 2017 compared to $52.3 million in the first quarter of the prior year an increase of $4.7 million or about 9%.

Sales related to work costs including marketing and selling related expenses increased by about $3.3 million and transaction and other costs associated with the recently acquired distribution companies were about $0.8. Additionally, foreign currency translation increased SG&A about $0.6 million in quarter.

The Company realized discrete income tax benefits related to foreign net operating losses and currency exchange losses in the first quarter of 2017 which lowered the consolidated effective tax rate to about 1%. The effective tax rate in the first quarter of 2016 was about 27%.

The company entered the first quarter of 2017 with a cash balance of about $71 million versus about $104 million at the end of 2016 down due primarily with increase inventory. Inventory levels at the end of the first quarter 2017 were $236 million versus year end 2016 of $203 million.

The inventory increase is primarily due to seasonal demand and due to lower than anticipated sales of groundwater pumping equipment in the United States and Canada markets. The Company had no borrowings on its revolving debt facilities at the end of the Q1 2017 or year-end 2016.

The Company did not purchase any shares of its common stock in the open market during the first quarter of 2017 as of the end of the first quarter 2017 the total remaining authorized shares that may be repurchased is about $2.2 million. This concludes our prepared remarks and we now like to turn the call over for questions..

[Operator Instructions] Our first question comes from the line of Edward Marshall of Sidoti & Company. Your line is open..

So I wanted to ask in the original guidance was, did you plan on the discrete tax item at that point and is there anything else that you can see in the financials that would lead you to think that will continue throughout the year?.

Yes, a portion of it certainly was planned but a portion was not planned, so the discrete benefit that we got in the first quarter was a little bit better than we had originally believed it would be but when we reaffirmed the guidance today the dollar to midpoint, we’re considering several different plusses and minuses so yes we’re going to get a bit of a plus on the tax side we think but there's a few other minuses that get us back to that $1.02.

So the answer is part of it was assumed but a portion of it was not as well..

And so following on that what do you think the tax rate for the year was going to be?.

I think our best view right now before the impact of discrete items is doing that 26 to 27 range, after the impact of discrete items it is going to be more in the 20 to 22 range..

Okay.

And last couple weeks back when you had the acquisition call, you confirmed your outlook and said it was going to be neutral to earnings now what they mean looking at the kind of the first quarter and some of the other items that are following through, is there a language change there or do you still expect it to be kind of neutral for 2017?.

Yes, it’s all part of that same math Ed..

Okay..

We were trying to estimate several moving pieces here as it relates to the distribution acquisitions, the amount of income they'll generate on their own kind of from May 1 on when we own them. The added costs.

We had some costs in the first quarter we’re trying to think through the amount of reduced sales that we would have in the first quarter to them which obviously impacted our first quarter results. And then the most important thing is this deferral the recognition of profit that will take place when these are wholly owned subsidiaries.

So as we’ve explained a couple of times, we won't be able to recognize profit on sales from the water systems segment to the distribution segment until the distribution segment completes the sale of that Franklin product all the way through to their end customer that there contractor installed.

So all those variables are in place and what we’re trying to do say, okay based on all that, based on our first quarter results that had pluses and minuses in it, we still think the 182 midpoint is where we’ll be for 2017..

Got it, sounds like you have a tough job to help us out, so we appreciate it. I guess let's talk about the core business and then add in the acquisitions on it.

You had relatively higher SG&A in the first quarter on the core business itself is that kind of the run rate for the year or was it something specific that drove that higher and that absent acquisitions I know that number is going to change?.

I guess to get yes, the SG&A was up $3.3 million in the quarter related to specifically to sales and marketing related activities globally and across those segments so that was true for water, it was true for fueling, fueling is but you know when you think about it, we had 4% water organic growth outside of the U.S.

and Canada and we had 9% organic growth in fueling in the first quarter and we’re also reaffirming the belief that our core entities, the core Franklin before the acquisition is going to achieve between 5% and 7% organic growth for the full year. So we’re hanging on to that guidance as well.

So in retrospect you have some higher sales and marketing expense from our perspective is, it is to be expected now. The good news about SG&A is that we can kind of turn that down and turn that off if we proceed through 2017 here and see some of these growth rates are not materializing the way that we want them to.

So the entire $3.3 million was related to sales and marketing except we really said there is a lot of a one-time stuff about $600,000 that it was related to FX so that was a driver in our total SG&A as well.

Does that answer it for you?.

No, it does I appreciate the comments. Thanks guys..

Ed thanks for recognizing John and his team efforts. There are a lot of moving parts and they’ve done a fine job trying to keep this all in front of everybody..

I agree. Thanks..

Thank you. Our next question is from the line of Ryan Cassil of Seaport Global. Your line is open..

Hi, good morning.

I was wondering if you could just parse out I guess some of the higher selling costs between the segments you know just looking at fueling really nice volume growth as you pointed out the incremental margins just sort of low double-digits is sort of lower than we expected was that mix related or did you have – it was more of that selling costs and fueling perhaps if any color that would be great?.

Yes, I think there was a portion of it that mixed related Ryan as I said the marketing and selling was up and fueling as well. The other thing I guess I would point to in fueling is they didn’t have quite as high price realization in the quarter as what we would expect and it was sub 200 basis points.

So the other thing that we’re trying to balance this year was our price increases as you know the balance of raw material inflation coming at it offset by price. And I think gross profit margin is probably the best place to look at how that’s working and we did incrementally improve our gross profit margin.

So I think that might be the only other factor along with mix in fueling and you’ll recall I hope from prior conversations that when fueling was kicking around in mid 20 had an operating income margin we always said hey that’s pretty high you know there is a lot of factors that are going really well for them and that I don’t know 22 to 24 might be a more reasonable point for fueling..

Right, that’s kind of where I was going.

You guys have always - it seems like this segment was sort of out earning so to feel like we’re sort of normalizing maybe or is it may be a change in the competitive landscape that we see it going 22 mid to low 20s margin rate over the longer term and I guess how quickly do you think that might?.

Ryan there is enough different factors that are moving around quarter-to-quarter we don’t see a fundamental underlying change in the competitive landscape over last year and half. I guess there has been some consolidation of the spending space but that is not impacted our business.

It’s a function of where the world is sold, what product line is sold, there are different margin compared with different product line and a different regions.

And so that’s why when we’re out talking with people we say as John planned out low 20s is kind of what you expect if it’s better than that it is particularly quarter and here again this idea of turning on turning off fixed costs we need to continue invest our fueling business to continue to get the topline growth as in the high single-digit.

So we’re going to do that where it’s appropriate then we’ll get leverage on that as we go..

Understood, appreciate it.

And then just lastly on the water side you guys reiterated your confidence in the organic outlook 5% to 7% have you seen things kind of snap back or could you give any commentary just respect to groundwater systems early here in Q2?.

Yes, this is always because the critical time or tough time to call that because it’s still late April the second quarter when things start moving along but it is, we don’t want to over point weather but weather is the component when the business starts in the U.S. outside the U.S. the groundwater business has been as we point out pretty solid.

It’s been not particularly strong in Europe but outside U.S. and other parts of world it has been continuously very strong, but specific to your question in the U.S. we are seeing good order flow rates, we’re seeing kind of normal seasonality, but if you start call the second quarter that would be premature..

Okay, I appreciate it. Thanks for the color..

Thank you. Our next question is from the line of Ryan Connors of Boenning. Your line is open..

Great, thank you. My question has to do with just trying to get a better understanding of this destocking by your – to be acquired entities and exactly how the classical dynamics so that work so they’re I mean they’re going to destock.

How does that impact their ability to meet demand in the very near term and is there other competitive dynamics that arise there and how quickly do you sort of scale up your own inventory to meet that demand if you kind of just walk us through how that dynamics works?.

Sure Ryan. Again in Q1 people or companies like Franklin here are promoting to move parts on the shelves of distribution in anticipation of seasonality in North America and that was kind of normal Q1 cadence that what didn’t occur once it was clear of these owners that we were going to proceed with purchasing them.

You notice that Franklin’s inventories were up availability we talk to you about it is a strategic imperative for Franklin only next to quality.

And so we got these inventories we can deliver on relatively short basis we see an opportunity logistically with these entities to work on that supply chain aspect to increase service levels maintain or increase service levels with less overall inventory.

And John can take you through again the menace of how inventory at closing has this intercompany profit aspect to it in more detail.

But from a standpoint of the business there is no incentive for you guys to buy we knew we can deliver as necessary to supply the markets as Franklin Electric manufacturing we’re confident we can to do that for our piece of it we are obviously going to continue buy from other suppliers as well.

And then on the math yes specific question again for John he can show on that piece..

Great, that’s very helpful, thanks.

And then just one other quick one I did notice you may have mentioned but I have missed it but there is a line in the press release about a 12% increase in de-watering which looked actually pretty positive wondering if you kind of just talk to us about some of the drivers behind that and how that change the outlook for that business?.

Yeah Ryan we talk about de-watering and we talk about the Pioneer product line and you may recall that business back in 2014 was 100 million topline with a fall off in oil prices that business dropping about half and were more than half in 2015 it’s recovered a little bit.

And as we have now repositioned that business and are growing with customers not only in the oil and gas channel but other channels as well. We’re just seeing a nice little pick up in there. So we’re very pleased to see that people working hard we gotten more feet on the street not only in the U.S.

but around the globe and the business is beginning to grow nicely..

Great, well thanks for your time this morning..

Thank you. Our next question is from the line of Matt Summerville of Alembic Global. Your line is open..

Thanks, good morning.

John kind of get to this - the Headwater acquisitions and I guess what is your topline assumption in terms of your sell into the Headwater Companies during the period you own them in 2017 so let’s call it seven months seven and a half months whatever the right figure is so you have a sell in assumption and I would I assume you have a sell through assumption as well if you could help us you know from a modeling standpoint how your thinking about those figures that would be helpful?.

Yes Matt, as we said the volume that we sold through the Headwater Companies in 2016 is about $50 million given the first quarter result here I think what we’ll sell in for them in 2017 is probably more in mid 40s I think there is going to be some growth but I think the first quarter is what is and that was there is certainly a decline there.

In terms of their sell through of Franklin product only, I am not sure that I have a real current estimate of that what we’re trying to do is understand more of the timing of that Matt then really then anything because the timing what’s going to influence the ultimate recognition of our profit.

So the factor in the first quarter that’s most meaningful is that – our sales were down by $6 million which is obviously very meaningful to groundwater and to the U.S.

results that was a little bit more than we had expected we expected them to be down and we attribute that little bit more to kind of the underlying market conditions on the West Coast which is very high growth and to a large extent to them operate they were not very favorable during the first quarter..

And then I guess maybe Gregg as you’re out speaking with other distributors which you do not own and will be directly competing with them given the footprint you’re acquiring.

What kind of feedback are you getting from your other distribution folks that you deal with?.

We're getting the range of feedbacks we're not expecting the situation. We have - again for Franklin’s piece it is we have flexed the distribution and so but for an ownership change nothing else fundamentally has changed there.

But I said - the range or reaction, cautious to wait and see, again what you guys are doing and it’s somewhat opening for some of these guys and there’s potentially somebody out there that has now created an energy that they may be able to sell their business to at some point in the future. So we’ve got the range you'd expect..

I guess thinking longer term recognizing you just now kind have gone this route from a vertical integration standpoint into distribution, but again thinking longer term, what is the next logical acquisitive step for Franklin in North America distributions? Is it a geographic play? Is it a product set play? Talk about that a little bit.

And then also, Gregg is this model that you’re moving forward within North America, does it fit anywhere else geographically speaking outside of the U.S.?.

Okay Matt, several questions buried in early, see if I can pick them off, one at a time.

If you look at the footprints that we have, there are logical geographies where we could extend if there was appropriate to do so keeping in mind as you pointed out, we’re doing this business for two weeks and so we’ve got a lot to do just to integrate these four businesses under one platform and move forward.

But you can look at, if there is a logical look and say, there are geographic opportunities to extend. The other point is very well taken which is that, if you look at each of these entities, they all had niche businesses that were adjacent to their core groundwater, hydro was strong, and commercial in California.

You've got few other strong in turf irrigation. DSI has got some strength in the waste water or green water space. So these are all kind of logical adjacencies for us to look at cross-selling and then for us to also potentially look at as manufacturer of increasing our footprint in those situations.

So it really does give us, as we said back 12 years ago, before we integrated the pumps giving us more headroom for growth, this also gives us more headroom for growth. Your question about outside U.S. is really interesting because it’s a little bit market-to-market. The core groundwater challenge is rather unique to the U.S. market.

But as we look around the world and we've expanded through our acquisition and developing platforms, I can take it to the example of Brazil which has worked out very well for us. The Schneider acquisition was principally a surface of pumping business. They had sold some in the past, they have sold Franklin Electric motors and fuels pumps.

So they had access to the channel. But they, I think had 5,000 customers. So in effect, we are going to Brazil where we are buying a really strong brand with a really strong reach but either average customer buys just few thousand dollars or ten thousand dollars a year, not hundreds of thousands of dollars. It’s a much more fragmented customer base.

But going into Brazil and having that distribution reach allowed us again to accelerate. The penetration in the market was - I mean, groundwater side which kept us - put pressure on a couple of competitors and kept dialog on [indiscernible] Franklin groundwater. And you look at Turkey, Turkey there are couple of people that are market for us.

We have about 300 distributors. Other competitors in Turkey have less - few distributors are more like master distributors. So we've been steadily kind of pushing down our position in each of these markets to be closer and closer to the end customer. But the U.S. is really, it has most unique platform in the submersible space in the world..

Got it. And then you mentioned pricing I think pertaining to the fueling business.

What was your realization in the water system segment in Q1? And what would your full year expectation be for purely overall?.

Water was about 280 basis points, Matt, in first quarter. Our expectation is slightly below that for the full year..

Got it. And then just to follow-up and get back to the organic guidance of 5 to 7 for the whole company, I assume the water is squarely in kind of down the fairway - if you will. You are starting out the year down one. You face - I'm going to call a normal comps in Q2 and Q3 and a big comp in Q4.

I guess what help - give me comfort that the math sort of works there to get to the midpoint of that fair way given what I sort of articulated with how you came into Q1, and then how your comp looks in Q4..

Again I think, Matt, when you look at outside the U.S. and Canada, it was renewable organic growth story on the water side of about 4%.

And when you consider this Headwater, call it inventory adjustment or reduction in buy that happened in the first quarter, we think that that was more of a one-time kind of impact in the first quarter that is not likely to see in the subsequent quarters. So I’d say those are the primary factors that give us confidence.

I think fueling at 9% is off to a good start. And mostly indicators on the fueling side are positive. So we have a lot of confidence that that will be above that range which is what our assumptions was all along..

Thanks guys..

[Operator Instructions] Our next question is from the line of Spencer Joyce of Hilliard Lyons. Your line is open..

Hi, good morning guys. Thanks for taking the call. To piggy back a little of both Ryan and Matt's questions earlier, I want to talk a little bit about the Headwater acquisitions here. So the delays and the destocking, I thought you all did a good job explaining that to us.

But I guess my question is, we should see a little bit of that phenomenon play out in the second quarter as well.

Is that right, or were those inventory levels substantially alleviated kind of before these deals close?.

What I'm understanding Spencer your question that the phenomena of profit recognition by the consolidated entity will start - the deferral that profit recognition will start in the second quarter. It is impacted by how much inventory these units have on hand to start with.

So as we said, when we announced on April 10, and we said again this morning, if they are selling inventory or selling Franklin products if they have an inventory, that we’ve already recognized profit on because we’ve already sold it to them right, then Franklin consolidate is not going to recognize any profit on sales to these entities until all of that inventory is sold, they’ll buy new inventory and sell that.

So that's what giving rise to this period of deferrals. So certainly from Franklin's perspective and that was the point we were trying to make this morning, from our perspective, it’s better that they have lower inventory because they’ll sell that faster and then buy more and then we'll get back to the profit recognition more quickly.

And as we also said, they really didn't have a financial or closing in or proceeds advantage of building more inventory in the first quarter either. So that was part of the thinking there. So that’s basically what we are facing up again.

But if your question is, is this going to start to impact us in the second quarter, the answer is absolutely yes, it is..

Okay. That's very helpful. Sticking with Headwater here for a second, so we have the three acquisitions here right off the back which I’m assuming still leaves us with a segment that's even much smaller than fueling and presumably at lower operating margins.

I'm just wondering what the plan is kind of over the next six to 12 months or perhaps six to 18 months as far as getting that up to kind of critical mass? Whether it be perhaps an escalation of organic CapEx or is there still a pretty robust pipeline of another 4, 5, 6 other tuck-in type deals that you could do here..

Well, the run rate of this business is going to be around 275 million on an annual basis. That’s going to be actually a little bit larger than fueling. Although, to your point, the operating margins and distribution are lower and as we’ve discussed they were called couple of weeks ago. We’ve got plan to do with these business.

The scale of opportunities we have is getting everybody on a single platform, and really working on both the input value streams. So we are getting a really good flow of inventory from all suppliers into the entities and also increasing service levels so that we continue to win customers on the sales side.

So this is the largest entity that we believe by branch count, by employment, we think our revenue run rate, we know this is visible to everybody, in this space. So we think we’ve got the scale. Just got plenty of work to do to get these entities all integrated into one platform and the increasing service levels throughout the supply chain.

So that’s really the focus for the next period of time..

Okay, that's helpful as well. I guess a couple of kind of housekeeping questions and I apologize I've had kind of jumped on and off here a little bit. John, did you mentioned or give us any kind of guidance to tax items for the balance of the year.

Are the NOL items from Q1 contained to Q1, or we should be modeling fairly normal over the balance of the year?.

Again we talk about our tax rate expenditure in two pieces before the discrete items. So that’s the 26%, 27% range. And then we have from time to time these discrete benefits, sometimes they are not benefits, sometimes they go to elsewhere but we have these discrete items that lower our effective rate.

So what we are saying, I don’t know if it was Ryan or somebody asked the question earlier, the 26% to 27% before the discrete items, we think with the discrete items is 20% to 22% and that assumes not only the first quarter discrete items that we’ve already recognized but then some estimates of what the balance of the year might be.

So that's how we are currently thinking about it. Some of these things are really hard to predict as you might guess. You don’t really know if you’re going to get them until you actually get them. So that what makes kind of putting some of these into the forecast and talking confidently about them difficult..

Okay. So we are looking at 20 to 22 for the full year including the discrete items..

Including, yes..

And is some of the discrete items we might see related to the new share-based compensation accounting guidance? I know we’ve seen that pop-up for a lot of companies kind of across sectors? Are you all dealing with that at all?.

No, that's certainly playing into it, Spencer. I would not say that - those were the critical drivers in the first quarter. In the first quarter, we realized the foreign currency translation loss on the repayment of new company loan. That gave us a permanent tax benefit.

The other thing that happened in the first quarter as we completed a international tax jurisdiction restructuring that we leased a valuation allowance on differed tax asset that gave us a big benefit in the first quarter. So the answer to your question is yes.

The share-based comp is impacting the tax rate but the bigger impact in the first quarter were these two items that I just mentioned..

All right. That’s all I had. Thanks guys..

Thank you. And at this time, I'm showing no further question. I’d like to turn the call back over to Mr. Gregg Sengstack for closing remarks..

Thank you, Amanda. We appreciate everybody joining us on this first quarter conference call. We look forward to speaking to you all after the second quarter. Have a good day..

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everybody have a great day..