Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Franklin Electric Co Inc (NASDAQ:FELE)
Q4 2019 Earnings Call
Feb 18, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Franklin Electric Reports Fourth Quarter and Full Year 2019 Sales and Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. [Operator Instructions] I would now like to hand the conference to your speaker today, John Haines, Chief Financial Officer. Please go ahead, sir.

John J. Haines -- Vice President, Chief Financial Officer

Thank you, Jewel and welcome everyone to Franklin Electric's fourth quarter 2019 earnings conference call. With me today is Gregg Sengstack, our Chairman and Chief Executive Officer. On today's call, Gregg will review our fourth quarter business results and I will review our fourth quarter financial results. When I'm through, we'll 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. With that I will now turn the call over to our Chairman and CEO, Gregg Sengstack.

Gregg C. Sengstack -- Chairman of the Board and Chief Executive Officer

Thank you, John. As we expected, our revenue and operating income were essentially flat to the fourth quarter of last year. Organic growth in both Fueling Systems and Distribution offset negative organic growth in Water Systems. Fueling Systems led the way with another record quarter on strong volume in the U.S. and mix. Distribution sales were also a record, however, the segment's fourth quarter operating loss was similar to last year. Our Water Systems business saw modest top-line growth globally, but not enough to offset lower large dewatering pumps sales in the U.S. Recall that environmental regulations, the requirement to move to Tier 4 diesel engines in 2019 drove large Pioneer pump sales in Q4 of 2018, making for a very tough comp.

For the year, consolidated sales were up 1%, operating income was down 3% and earnings per share was down 9%. While 2019 earnings were below plan in last year, I am pleased to report that our focus on working capital resulted in free cash flow conversion of 163% of net income or about $3.35 per share, a record for any year in our history.

Returning to the fourth quarter, I will start with Distribution. The business continue to improve in Q4 with organic growth of about 6%. However, this came at a cost as our team moved out some more commodity type materials at lower margins, resulting in an operating loss in the quarter, similar to the loss in the fourth quarter of last year. In our Water Systems segment, revenue from our U.S. surface pump product line declined modestly in the quarter, while U.S. groundwater product line revenue grew modestly. Our U.S. large dewatering pump revenue trailed last year's record results as continued push out of orders and slowing demand in rental and oil and gas end markets compounded the challenging comparisons to the strong fourth quarter last year.

At the same time, our operations team continues to improve their ability to flex the operating cost base to maintain margins in this most cyclical business. Outside the U.S., sales in Latin America, accelerated. Compared to last year, the team achieved 20% organic growth in the quarter. All Latin American markets grew organically with particularly strong results in Brazil and the Southern Cone.

In Europe, the Middle East and Africa, our water business improved modestly. The continued recovery in our business in the Middle East, particularly Turkey offset modest declines in Europe and Africa. And consistent with prior quarters, our water business in Asia Pacific, grew modestly as well.

Our U.S. Fueling business continued to deliver strong growth driving another record quarter. However, in China, fourth quarter results were essentially flat sequentially but down significantly from last year. Business in China was below our expectations as the conversion of underground piping systems appears to be winding down faster than anticipated. Strength across the rest of our international Fueling markets essentially offset the sales decline in China. So overall, our Fueling business achieved about 4% organic growth in the quarter.

Turning to 2020, with more normal weather patterns, we believe our Distribution business will experience growth in the 5% to 7% range. The business is well-positioned, working capital is trending lower, the restructuring of our footprint in California is essentially complete, as is the integration of Milan Supply, which was acquired in early 2019. Again, with more normal weather in our strengthening Latin American business, we believe our global Water Systems segment will experience growth in the 5% to 7% range as well. We expect the U.S. Fueling business to continue to post strong results.

Outside of China, we expect our international Fueling business to grow modestly. While we expected 2020 Fueling sales in China to continue to decline on lower sales in underground pipe, we have planned that the regulatory initiatives around the installation of in-station diagnostics for ISD would partially offset this decline. This view has changed over the last month. The uncertainty of a negative impact on economic growth from the current coronavirus outbreak will likely delay the start of installations of ISDs. Beyond the impact of the current coronavirus outbreak on the China economy, our supply chain leadership continues to monitor the post Chinese New Year start up of our supply base to best anticipate the potential disruptions, both direct and indirect, to our supply chain. While we are encouraged with the information that our own factory and many of our Tier 1 suppliers' factories have reopened, it's still unclear as to the degree delivery commitments will be impacted. Our global supply organization continues to monitor the situation daily and has contingency plans in place for many, but not all sourced items.

So with that as a backdrop, we are initiating our 2020 guidance for earnings per share before restructuring expenses at $2.25 to $2.35. However, where our Fueling and large dewatering business has started 2019 strong and weakened later in the year, we are anticipating the opposite pattern in 2020. We believe the challenges in China and their impact on our Fueling Systems business, combined with a slow start for the sale of our large dewatering equipment sales into rental and oil and gas applications will result in our overall sales and earnings pattern for 2020 to start off weak and accelerate throughout the course of the year.

We anticipate that due to our continued focus on our working capital, 2020 will be another strong year for cash generation. I will now turn the call over to John to discuss the numbers in more detail. John.

John J. Haines -- Vice President, Chief Financial Officer

Thank you, Gregg. Our fully diluted earnings per share were $0.42 for the fourth quarter of 2019 versus $0.51 for the fourth quarter of 2018. Fourth quarter EPS before the impact of restructuring expenses was $0.43 compared to 2018 fourth quarter EPS before restructuring of $0.52. Restructuring expenses in the fourth quarter of 2019 were $0.8 million in the Water segment were related to various manufacturing realignment activities and resulted in a $0.01 impact on earnings per share in the fourth quarter. Restructuring expenses in the fourth quarter of 2018 were $0.7 million, primarily related to branch consolidations and other asset rationalizations in the Distribution segment, as well as, various manufacturing realignment activities in the Water and Fueling segments and resulted in a $0.01 impact on earnings per share in the fourth quarter of 2018.

Fourth quarter 2019 sales were $320.1 million compared to 2018 fourth quarter sales of $316.7 million, an increase of 1%. Sales revenue decreased by $5.8 million or 2% in the fourth quarter of 2019 due to foreign currency translation and we estimate this revenue decline lowered our earnings per share in the fourth quarter by about $0.02 versus the fourth quarter of 2018.

Water Systems sales were $188.2 million in the fourth quarter of 2019 versus the fourth quarter 2018 sales of $196.9 million. Water Systems organic sales decreased by about 3% compared to the fourth quarter of 2018. Water Systems sales in the U.S. and Canada decreased by 10% overall compared to the fourth quarter of 2018, primarily due to lower sales volumes of dewatering equipment. Sales of dewatering equipment decreased by nearly 50% due to lower sales in rental channels and a surge of sales in the fourth quarter of 2018, driven by regulatory demand.

Sales of groundwater pumping equipment increased by 4% versus the fourth quarter of 2018. The increase in groundwater pumping systems was primarily due to increased sales of residential Water Systems. Sales of surface pumping equipment decreased by 5% on lower sales of both wastewater and water transfer systems. Water Systems operating income was $24.5 million in the fourth quarter of 2019, compared to $27 million in the fourth quarter of 2018, primarily driven by lower revenues.

Fueling System sales were $77.3 million in the fourth quarter of 2019 compared to fourth quarter of 2018 sales of $75 million and were a record for any fourth quarter. Fueling Systems, organic sales increased about 4% compared to the fourth quarter of 2018. Fueling System sales in the U.S. and Canada increased by 7% compared to the fourth quarter of 2018. The increase was principally in the pumping and fuel management systems product lines.

Outside the United States and Canada, Fueling Systems revenues were flat as increased sales in Europe, India and Latin America were offset by lower sales in China, which declined by about 40% in the fourth quarter and about 14% for the full year 2019 versus 2018. Fueling Systems operating income was a record for any fourth quarter at $20.2 million compared to $17 million in the fourth quarter of 2018. Fueling Systems operating income was higher in the quarter due to favorable product sales mix.

Distribution sales were $64.4 million in the fourth quarter of 2019 versus fourth quarter 2018 sales of $56 million. In the fourth quarter of 2019, sales from businesses acquired since the fourth quarter of 2018 were $4.8 million. The Distribution segment sales grew about 6% organically compared to the fourth quarter of 2018. The Distribution segment recorded an operating loss of $2.5 million in the fourth quarter of 2019 compared to a loss of $2.9 million in the fourth quarter of 2018. Higher product costs, higher sales mix of commodity type products, little price achievement, and higher operating expenses contributed to the Distribution segment's earnings loss.

The company's consolidated gross profit was $101.3 million for the fourth quarter of 2019, a decrease from the fourth quarter of 2018 gross profit of $104.3 million. The gross profit decrease was primarily driven -- was primarily due to lower Water Systems sales, which were only partially offset by higher gross profit from increased Fueling Systems and Distribution sales. The gross profit as a percent of net sales was 31.6% in the fourth quarter versus 33% in the fourth quarter of 2018.

Selling, general and administrative expenses were $71.9 million in the fourth quarter of 2019, compared to $75 million in the fourth quarter of 2018. SG&A expenses from acquired businesses was $1.8 million and excluding the acquired entities, the company's SG&A expenses in the fourth quarter of 2019 were $70.1 million, a decrease of 7% from the fourth quarter of 2018, partially due to lower variable performance-based compensation expenses and due to the offsetting effect of foreign currency translation versus the prior year.

During the first quarter of 2019, the company changed the management reporting for certain transfers and manufactured products between the Water and Fueling segments. This change was made to better align the production of certain products by reportable segment and sales to third-party customers. To consistently compare 2019 results to the prior year, certain 2018 net sales and operating income reclassifications were made. These reclassifications resulted in lowering fourth quarter 2018 results of Fueling Systems and increasing fourth quarter 2018 results of Water Systems net sales by about $0.9 million and operating income was unchanged versus what was reported in this period last year. There is no impact on the company's previously reported consolidated financial statements.

As you can see on our income statement, the company recorded $3.8 million of transactional FX losses below the operating income line in the fourth quarter of 2019 and $2.4 million of FX gains in the fourth quarter of 2018, which is a negative $0.11 swing in our earnings per share from the fourth quarter of 2018. Transactional FX losses for the full year 2019 were $1.6 million. Historically, going back five years, the below-the-line transactional FX gains or losses have generally been less than $2 million each year. For all of 2018, they were a $0.7 million loss and in 2017, they were a $1 million gain. The company's primary method of mitigating these transactional FX losses is by minimizing cross currency balances to the extent possible in settling those cross currency accounts receivable and accounts payable balances in a timely manner. As a reminder, these losses are non-cash and do not reflect the operational performance of the company.

Since the fourth quarter of 2018, however, the transactional FX losses below the operating income line has become much more volatile, and this is mostly the result of our acquisition last year of Industrias Rotor Pump in Argentina, which has been characterized as a hyperinflation economy and is subject to special accounting rules. The Rotor Pump business primarily distributes pump products imported into Argentina from all over the world. Beginning, primarily in the third quarter, the business in Argentina began to build inventory and accounts payable rapidly in preparation for their primary selling season. This acceleration at exactly the same time the Argentinian peso was weakening, significantly drove meaningful period to period unmatched balance sheet positions and subsequent volatility in the third and fourth quarters.

In the second half of 2019, despite the unsettled economic and political environment that exists there, our business in Argentina grew in constant currency by 3%. Although the full year 2019 FX loss of $1.6 million is within our historical range, we have seen more volatility in the quarter-to-quarter fluctuations, primarily due to the business unit in Argentina. At the end of the third quarter, when we were discussing fourth quarter and full year 2019 results, we did not anticipate this magnitude of transactional FX loss recorded in the quarter.

So, as Gregg said, with the exception of some variances between individual business units, our fourth quarter operational results were consistent with the fourth quarter of last year and our expectations. In the fourth quarter of 2019, our effective tax rate net of discrete events was about 13.5%, slightly lower than the 2018 effective tax rate of about 14%. The 2019 full year effective tax rate is about 18% compared to the 2018 full year tax rate of about 12.5%. For the full year of 2020, the company expects the effective tax rate net of discrete events to be between 18% and 20%. The company ended the fourth quarter of 2019 with a cash balance of $64.4 million, which was $5.2 million higher than at the end of 2018. The company had $19 million in borrowings on its revolving debt facilities at the end of the fourth quarter of 2019 and $77 million in borrowing at the end of the fourth quarter of 2018.

As of January 1, 2019, the company adopted the new lease standard and has recognized additional operating liabilities of about $28 million for its outstanding operating leases with corresponding right-of-use assets of the same amount. The impact of this new accounting standard is non-cash in nature and does not affect the company's cash position. The company does not consider the impact of this standard to be material to the consolidated results of operation or to the cash flows.

Cash from operations for 2019 was about $178 million compared to $128 million in 2018, an increase of $50 million or almost 40%. Our free cash flow, cash from operations less capital expenditures net of proceeds from the sale of property, plant and equipment is about $157 million and is 163% of net income compared to about 100% for the full year 2018. This improvement in cash flow is primarily due to reductions in working capital, which remains a key strategic focus for the company. The company did not repurchase any shares of its common stock in the open market during the fourth quarter of 2019. At the end of the fourth quarter of 2019, the total remaining authorized shares that may be repurchased is about 1.3 million.

On January 27, the company announced a quarterly cash dividend of $0.155, a 7% increase from the 2019 dividend. The dividend will be paid February 20, to shareholders of record on February 6. This concludes our prepared remarks and we would now like to turn the call over for questions.

Questions and Answers:

Operator

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

Edward Marshall -- Sidoti & Company -- Analyst

Gregg and John, Good morning.

Gregg C. Sengstack -- Chairman of the Board and Chief Executive Officer

Good morning, Ed.

John J. Haines -- Vice President, Chief Financial Officer

Good morning, Ed.

Edward Marshall -- Sidoti & Company -- Analyst

So I wanted to ask about the ISD impact as it relates to China and I'm curious what your -- what the guidance is baking into from the negative effects of that -- of that situation.

Gregg C. Sengstack -- Chairman of the Board and Chief Executive Officer

Sure, Ed. So as we look at -- we had our ISD system approved late in 2019. We had a handful of installations in late 2019. We expected several million dollars, less than $10 million in 2020 of ISD installations and that's effectively kind of what we've pushed out or taken out. This is a -- the opportunity of long-term price, these, though is going to be, as we see it, more significant than the double wall piping initiative. Our revenue per station, we expect, would be about double and we think that it will be a longer term than the couple of three years we saw for the double wall pipes. So we think it's going to be a more systemic growth in the business in China, over time.

Edward Marshall -- Sidoti & Company -- Analyst

Got it. And previously you've talked about buy local, is that a theme that ISD will affect ISD or is that just on the underground piping systems?

Gregg C. Sengstack -- Chairman of the Board and Chief Executive Officer

I think my view is that if you go back to the time when that specification for double wall pipe was reopened, it was when there was a pretty contentious trade environment with the U.S. and it seems the trade tensions are at least directionally trending down and given that the electronic sophistication or the sophistication of the product rise, I suspect that there is going to be a -- and this is also again a government mandate and the whole idea is for government connection and oversight of fueling station operations, we would expect that that's going to be a pretty good situation for western technology in general.

Edward Marshall -- Sidoti & Company -- Analyst

Got it. And as I look into 2020 and we talk about -- you've given us some good margin, rather top-line guidance, I'm curious if you talk about the margin in Fueling, John, I think you've said in the past that you anticipate that the high-20s, which is where it's been trending is likely too high. Just any clarity you could provide on that.

John J. Haines -- Vice President, Chief Financial Officer

Yeah. Our guidance assumes mid-20s Fueling margin for 2020.

Edward Marshall -- Sidoti & Company -- Analyst

Okay. And then, John, do you have the -- you said Latin America was up 20% in Water. Do you have the constant currency impact in Latin America? Have you done that math?

John J. Haines -- Vice President, Chief Financial Officer

Well, the 20% is the organic -- what we would call the organic growth, which would take the opex out.

Edward Marshall -- Sidoti & Company -- Analyst

Okay. So that is -- so that is constant currency. Okay.

John J. Haines -- Vice President, Chief Financial Officer

Yeah, that's the -- that takes out both the acquisition impact and which is zero because we've lapped the IRP acquisition and it takes out the opex. So the opex impact, if you look at that table on page three of the release, was about $3.7 million or 12% in the quarter for Latin America. So, if we take the total -- when we take the reported growth and add that back, that's how we get to the 20%.

Edward Marshall -- Sidoti & Company -- Analyst

Got it. Perfect. And then last one from me. When you look at your guidance for 2020, you talked about the cadence being first half weaker, second half stronger. I'm just curious about the Q1, you had a pretty soft Q1 in 2019. Do you anticipate that to be down year-over? If you could frame that out.

John J. Haines -- Vice President, Chief Financial Officer

Yeah, we are intentionally not giving guidance in the first quarter, Ed for these reasons. It's difficult for us to predict. What we can say to you is that we do expect a weak first quarter but as you rightfully pointed out, we had a weak first quarter in 2019. So I think about that we could say is that, as Greg said in his comments, Fueling is going to move to the right throughout the year. So we have some tough comps there and we don't expect Fueling to be up. We don't -- we expect for sure that our dewatering equipment sales are going to be down fairly significantly. They are also facing some very difficult comparables. The balance of the Water businesses and our Distribution business should have a decent quarter. So we're not optimistic about the first quarter, Ed, but we're also not prepared to give specific quarter guidance either.

Edward Marshall -- Sidoti & Company -- Analyst

Got it. Thanks very much for your comments.

John J. Haines -- Vice President, Chief Financial Officer

Thank you, Ed.

Operator

Thank you. Our next question comes from Walter Liptak with Seaport Global. Your line is now open.

Walter Liptak -- Seaport Global Securities -- Analyst

Hi, thanks, good morning guys.

Gregg C. Sengstack -- Chairman of the Board and Chief Executive Officer

Good morning, Walter.

John J. Haines -- Vice President, Chief Financial Officer

Good morning, Walter.

Walter Liptak -- Seaport Global Securities -- Analyst

I've got one on China. I think you mentioned that China was down 30% in the fourth quarter. And so I wonder if you can give us an idea of directionally, is that out more in the quarter -- are you starting to see any turn in China this quarter?

Gregg C. Sengstack -- Chairman of the Board and Chief Executive Officer

Yeah, so our -- our thinking for China is no, we don't see any turn -- maybe the second part of that question first of all. We're concerned about -- we think the opportunity is great, the pipe and containment opportunity is basically one that is great, so the IoT opportunities are a great opportunity for our company. But given the economic uncertainty and the virus uncertainty kind of the -- the situation on the ground as we understand it there right now, we just see this opportunity pushing right in 2020. So we think it's there, we think we'll win our fair share. But we think it's going to be the latter half of the year as opposed to the first half of the year. Now what we can say is that our estimate for revenue in China is dropping to about $30 million in total from $45 million in 2019 and about $53 million in 2018. So a meaningful decline there, and again just reemphasis on back half loaded.

Walter Liptak -- Seaport Global Securities -- Analyst

Okay, great. I also wanted to ask about just generally the comments about the first half being weaker because of Fueling and some of the Water retail, I'm sorry, rental. Those are a couple of your more -- that's better mix products. So as we're modeling this out, are you -- I guess the profit mix should be back half weighted too. Is that right?

John J. Haines -- Vice President, Chief Financial Officer

Yeah, and Walter, that's why we wanted to point that out in our prepared remarks is that we just see that, as you pointed out correctly, the Fueling business and the dewatering business, which are higher margin businesses, where they're going and particularly where the dewater business is going, those are the businesses we expect are going to start the year slow. We do expect the Water business to do certainly better than the last year's first half, but that's a lower margin business so, water distribution. So that's why we see the mix and the expectations for earnings to accelerate through the year, but to start the year slow.

Walter Liptak -- Seaport Global Securities -- Analyst

Okay, got it. And then a last one on Argentina. Thanks for pointing out the volatility around that currency. Is there anything that you're doing differently in 2020 to mitigate the currency or how should we think about the kind of impact that Argentina currency could have on 2020?

Gregg C. Sengstack -- Chairman of the Board and Chief Executive Officer

Yeah, we -- a couple of things, we do have our hedge positions in place, Walt, that are really protecting us for the downside of the peso strengthening against the U.S. dollar. That's a catastrophic kind of situation for us, not to be over -- over excited about it or dramatic about it, but -- so we do have positions like that in place. I think the key learning is less working capital, settle accounts payable, as I pointed out, one of our issues here is that we've got product coming in from all over the world, both Franklin facilities non-Franklin products and selling those at those APs quicker is really important and that should be made easier by the fact that we're trying to lower the level of working capital everywhere. So if we have less inventory, that should contribute to that as well. So those are some of the things we're doing, but it is highly volatile, the peso to the dollar, the Argentinean peso to the dollar loss about 30% just in the third quarter and then it went beyond that, lost additional value in the fourth quarter. So we'll do what we can to live in that kind of volatile world.

Walter Liptak -- Seaport Global Securities -- Analyst

Okay, great. Thank you.

Operator

Thank you. Our next question comes from Matt Summerville with D.A. Davidson. Your line is now open.

Matt Summerville -- D.A. Davidson -- Analyst

Thanks. Can you maybe put a little bit of a finer point on the earnings cadence as you expected throughout the year? Clearly the first quarter sounds like it's going to be the low point. I guess I'm wondering if the underlying trends in Fueling and dewatering shift out that normal Q2, Q3 high earnings watermark for the company. So maybe put down a little bit of context, because, I guess I'm just having a hard time given the North America groundwater has such an easy comparison in the first half of the year and given that, that is, at least in my opinion, a pretty good margin business for the company, especially in the AG motor-only stuff that you guys sell. I guess I'm just having a little bit of a hard time with the earnings came. So maybe, can you put a finer point on that?

John J. Haines -- Vice President, Chief Financial Officer

Yeah, Matt, I guess I would say that we certainly expect the first quarter to be the low point. As you know the Distribution business had a poor first quarter in 2019, but the first quarter is still the off quarter for Distribution. So, even if we recover in the first quarter, the first quarter is never a great -- a great quarter. And then, as Gregg pointed out, the comp is easier in North America for the balance of Water and we would expect that to improve for sure, but those products margins are not the same as what we see when we talk about Fueling and dewatering -- large de-watering. So that is really the caution that we have, I think that the peak being in the second and third quarters, from an earnings perspective, will remain the same. I do think the fourth quarter will be significantly better than the first quarter. And that's kind of the way we're thinking about it right now.

Matt Summerville -- D.A. Davidson -- Analyst

Got it. And then with respect to Pioneer, I believe, in the past, you've publicly stated in '18, that business did around $120 million in revenue. Can you maybe talk about how it performed in '19 and what your underlying assumption is for that, excuse me, for that piece in 2020?

John J. Haines -- Vice President, Chief Financial Officer

Yes, Matt, we can. In 2000 -- let me just get to the right page here, yeah, in 2019, we did about $109 million full year in Pioneer, that includes all of the international operations and the rental business. That same number for 2018 was about $119 million. And in 2020, we see that going down just marginally or being pretty close to flat. So we're not expecting growth in that business in 2020.

Matt Summerville -- D.A. Davidson -- Analyst

Got it. And then with respect to the profit outlook for Distribution, I think when you originally made the forward moves into the channel, you talked about that business getting into an operating profit range of 4% to 6%. Obviously, you were below that in '18, below that again in '19. What's the sort of expectation you have for that business in '20 and do you need to make incremental structural changes to the business to generate that level of profitability?

Gregg C. Sengstack -- Chairman of the Board and Chief Executive Officer

So, Matt, we are planning for the Distribution business to be within that range in 2020. Many of the structural steps to get there were taken in 2019. And that's why we wanted to convey in my comments that things have settled down. The focus is on the West. I think we have to step back and say that in 2019 and what were really tough market conditions, the Distribution business actually was flat organically and that had to do with the focus by the leader De Davis and his team on cross-pollination, getting into businesses that are less impacted by the cyclicality of the weather impact, for example, the AG as you pointed out earlier, so they're getting more into turf and treatment and wastewater to grow that business and then on that report [Phonetic] get an opportunity to have a more normal weather year to grow the business in the area of submersible pumping systems and lines, you have turbine pumping systems, which are more focused on the West and the margin profile in the West is generally more positive when there is strength there. So we think that the structure is in place, the team is in place. Obviously, it's not laid on hand. It's been a pretty competitive pricing environment with the weak business and the weak general climate -- business climate in 2019. We got a little bit upside down, we acquired some commodity products in the middle of summer when pricing was a little stronger. And as I pointed out, we sold some of that off, it will continue to add some margin pressure, I think, in Q1, until we come into the season, but expecting a more normal year, our plan is for the business to be within the range that we originally talked about three years ago.

Matt Summerville -- D.A. Davidson -- Analyst

And then maybe lastly, just in terms of pricing, overall, for the company, what the average realization was in '19 and what you're expecting for 2020.

John J. Haines -- Vice President, Chief Financial Officer

Yeah. Our realization in 2019 was just over 200 basis points, Matt and we're assuming something consistent with that in 2020.

Matt Summerville -- D.A. Davidson -- Analyst

Thank you, guys.

Operator

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Gregg Sengstack for any closing remarks.

Gregg C. Sengstack -- Chairman of the Board and Chief Executive Officer

Thank you for joining us today on our conference call. We look forward to speaking to you in April after the first quarter results are published. Have a good week.

Operator

[Operator Closing remarks]

Duration: 38 minutes

Call participants:

John J. Haines -- Vice President, Chief Financial Officer

Gregg C. Sengstack -- Chairman of the Board and Chief Executive Officer

Edward Marshall -- Sidoti & Company -- Analyst

Walter Liptak -- Seaport Global Securities -- Analyst

Matt Summerville -- D.A. Davidson -- Analyst

More FELE analysis

All earnings call transcripts

AlphaStreet Logo