Franklin Electric Co Inc (FELE) Q1 2021 Earnings Call Transcript

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Franklin Electric Co Inc (FELE 1.54%)
Q1 2021 Earnings Call
Apr 27, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Franklin Electric reports First Quarter 2021 Sales and Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. John Haines, Chief Financial Officer.

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

Thank you, Stacey, and welcome everyone to Franklin Electric's first quarter 2021 earnings conference call. With me today is Gregg Sengstack, our Chairperson and CEO. On today's call, Gregg will review our first quarter business highlights and I will review our first quarter financial results in more detail. 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 -- 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 Chairperson and CEO, Gregg Sengstack.

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

Thank you, John. Thank you all for joining us. We're very happy with our first quarter results. We see the momentum that was building in the back half of last year continuing and presenting us with robust demand environments for most of the end markets we serve. Our financial results and just about every measure were records for any first quarter in our history, including net sales, gross profit, operating income, net income, and earnings per share. Our strategy to grow as a global provider of water and fuel systems through geographic expansion and product line extensions, leveraging our global platform and competency and system design continue to produce strong results as expected.

During the first quarter, we continue to expand our water treatment adjacency in Water Systems and the Distribution segment achieved tremendous organic growth. Our Water Systems business had a record quarter, generating overall revenue growth of 20% and organic revenue growth of 18%. We see multiple signs of demand strength in the Water Systems end-markets, including a strong housing market, the global recovery of commodity prices, drier weather, and robust demand in developing regions.

Our Water Systems revenues also grew by over 3% from price actions realized in the quarter, which were necessary, given the significant raw material inflation we continue to experience. Although, our dewatering equipment sales declined by about 4% in the quarter, sequentially this decline is much lower than what we had experienced in 2020 due in part to greater international demand. Although still a headwind, foreign currency translation was a lesser impact on our top line than it has been in recent memory at just over 2%.

In the US, strong housing and agricultural demand combined with continued dry weather drove a 24% increase in groundwater pumping systems revenue in the quarter. Overall, organic growth in the U.S. Water Systems was 11%. Outside the US, organic Water Systems growth was 26%, led by our businesses in Latin America, in the Middle East, and Asia-Pacific, all of which continue to see pandemic recovery demand. With notable strength in Brazil, Turkey, and Thailand.

Our U.S. Distribution business had an exceptional first quarter. Favorable weather in most of the US, pent-up demand for well equipment, and the Gicon acquisition we made at the end of last year, were all factors that drove overall first quarter revenue growth of 58% and 31% organic revenue growth. Revenue growth in Distribution was broad-based across all geographies and product lines. The lowest revenue increase in any one of our legacy distribution businesses in the first quarter was 23% over the first quarter last year. Gicon started the year strong and benefited in the quarter from the winter storm in Texas, it caused multiple equipment failures and replacements in that state. The Gicon integration is going well and we've already completed the combination of two branches with those from our legacy businesses.

Overall, our Distribution customers are experiencing some product shortages notably pipe and well casing. That puts [Indecipherable] and COVID demand on some of these products. As a result of these revenue achievements, our distribution business made money in the first quarter for the first time in its history. Reversing the $2.2 million loss from the first quarter of 2020 to $2 million of operating income in this year's first quarter.

Our Fueling Systems business picked up momentum in the first quarter growing revenue by 3% overall and 1% organically. A meaningful sequential improvement from the overall fourth quarter 2020 decline of 15%. The fueling growth was being led by end markets outside of North America, notably, Europe, the Middle East and Africa were up 30% and Latin America was up 19%. Sales in the US-Canada were flat to last year's first quarter and sales in China declined by about 19%.

Despite the pandemic related slowdown in new filling station builds, we believe major marketers continue to see filling stations as good investments and express their intention to ramp up builds in 2021. We also believe environmental challenges like corroding of underground storage tanks caused by alternative fuels creates new opportunities, especially in developing regions where liquid fuel consumption is increasing, and greater protection of the environment is necessary. Even with 3% revenue growth, Fueling Systems achieved a record first quarter operating income of $14.9 million and operating income margin of 26.2% because of price achievement and fixed cost leverage.

Due to better first quarter earnings and April 1, 2021 completion of the acquisition of Puronics, we're raising our full-year 2021 revenue estimates to be in the range of $1.45 billion to $1.48 billion and full-year 2021 earnings per share before restructuring expenses to be in the range of -- from $2.80 to $3.00. Raising our financial guidance, we have assumed there will be no worsening impacts from the global pandemic and we will continue to offset raw material cost inflation with price.

I will now turn the call back over to John.

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

Thanks, Greg. Our fully diluted earnings per share were a record for any first quarter in the Company's history of $0.59 for the first quarter of 2021 versus $0.23 for the first quarter of 2020. First quarter EPS before the impact of restructuring expenses was also $0.59, compared to 2020 first quarter EPS before restructuring of $0.24. Restructuring expenses in the first quarter of 2021 were $0.2 million and were related to various manufacturing realignment activities in the Water and Distribution segments and had no impact on earnings per share in the first quarter of 2021. Restructuring expenses in the first quarter of 2020 were $0.9 million and were primarily related to various manufacturing realignment activities in the Water segment and resulted in a $0.01 impact on earnings per share in the first quarter of 2020.

First quarter 2021 sales were $333 million, compared to 2020 first quarter sales of $266.8 million. The sales increase from acquisition related sales was $23.5 million. Sales revenue decreased by $2.9 million or about 1% in the first quarter of 2021 due to foreign currency translation.

Water Systems sales in the U.S. and Canada were up about 21%, compared to the first quarter of 2020 due to volume, price, and acquisition-related sales. In the first quarter 2021, sales from businesses acquired since the first quarter of 2020 were $7.2 million. Sales of groundwater pumping equipment increased by about 24%. Sales of surface pumping equipment increased by about 10% versus the first quarter of 2020 due to strong end market demand, and in part due to lower sales last year due to the pandemic. These increases were offset by lower sales of the watering equipment, which were down by about 8% due to lower sales in the rental channel.

Water Systems sales in markets outside of the U.S. and Canada increased by 20% overall. Foreign currency translation decreased sales by 6%. Outside the U.S. and Canada, Water Systems organic sales increased by 26%, driven by higher sales in all regions of the world; Latin America, Asia Pacific, Europe, and Middle East and Africa markets.

Water Systems operating income was $31.3 million in the first quarter of 2021, compared to $18.8 million in the first quarter of 2020, driven by price realization, product sales mix, and cost management.

Distribution sales were a record at $95.7 million in the first quarter 2021 versus first quarter 2020 sales of $60.4 million. In the first quarter of 2021 sales from businesses acquired since the first quarter of 2020 were $16.3 million. The Distribution segment organic sales increased 31%, compared to the first quarter of 2020. Revenue growth was driven by broad-based demand in all regions and product categories, the Gicon acquisition, some customer purchase pull forwards, and the Texas winter storm. The Distribution segment operating income was a record for any first quarter at $2 million, compared to a loss of $2.2 million in the first quarter of 2020.

Fueling Systems sales in the United States and Canada increased by about 1%, compared to the first quarter of 2020. The increase was due to higher demand for Pumping and Fuel Management Systems. Outside the U.S. and Canada, Fueling Systems revenues increased by about 7%, driven by higher sales in Latin America and EMEA.

Fueling Systems operating income was a record for any first quarter at $14.9 million, compared to $12.1 million in the first quarter of 2020, driven by price realization and cost management. The Company's consolidated gross profit was $115.5 million for the first quarter of 2021, an increase from the first quarter 2020 gross profit of $90.3 million. The gross profit as a percentage of net sales was 34.7% in the first quarter of 2021, versus 33.9% in the first quarter of 2020, and improved by 80 basis points, primarily due to better price realization, product sales mix, and cost management.

Selling, general and administrative expenses were $81.6 million in the first quarter of 2021, compared to $75.6 million in the first quarter of 2020. SG&A expenses from acquired businesses were $4.9 million. Excluding acquisitions, SG&A expenses were higher by about 1%, primarily due to variable compensation expense, partially offset by foreign currency translation.

The effective tax rate for the first quarter of 2021 was about 14%, compared to 19% in the first quarter last year due to larger net favorable discrete events, which include tax benefits from share-based compensation and deferred tax benefit from a tax reduction [Phonetic] made in a foreign jurisdiction. The tax rate as a percent of pre-tax earnings for the balance of 2021 is projected to be about 20% before discrete adjustments.

As Gregg mentioned, the Company is raising its guidance for full year earnings per share before restructuring expenses to $2.80 to $3.00, basically on the strength of the first quarter results and the recently announced Water Treatment acquisitions. We expect revenue in the $1.45 billion to $1.48 billion range and our free cash flow conversion to be 115% or better for the full year of 2021. Although end market demand for most of our products remains strong, ongoing impacts of the pandemic, global raw material and component availability and costs are key factors potentially impacting the balance of 2021 results.

The Company ended the first quarter of 2021 with a cash balance of $118.3 million and generated a record $5.4 million of net cash flows from operations during the first quarter of 2021, versus a negative $4.7 million in the first quarter of 2020. The increase was primarily due to higher net income and lower net working capital requirements.

The Company's total incremental borrowing capacity was about $645 million at the end of the first quarter 2021. Yesterday, the Company announced a quarterly cash dividend of $0.175 that will be paid on May 20 to shareholders of record on May 6. The Company purchased 14,000 shares for about $1.1 million of its common stock in an open market during the first quarter 2021. At the end of the first quarter, the total remaining authorized shares that may be repurchased is about 919,000.

This concludes our prepared remarks and we'd now like to turn the call over for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Mike Halloran from Baird.

Mike Halloran -- Baird -- Analyst

So, a handful of questions here. First, maybe you could just talk a little bit about underlying supply chain trends, how you're looking at pricing and how you think price cost balances out for the remainder of the year?

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

Mike, good morning. This is Gregg. On the supply chain continues to be an [Indecipherable] of whack-a-mole. We continue to have challenges around the globe and the team is responding tremendously, admirably to the challenges that are in front of us, to keep the supply chain moving. We're seeing in all the headline commodities and semiconductors were everyone else is saying, so they don't think there's anything new on that front. They continue to be a daily battle on that side. As to the cost input and price realization, I'll turn that over to John.

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

Yeah. So Mike, we saw very significant input raw material inflation in our manufacturing entities in the first quarter. I'll quantify that as twice as high on a percentage basis as any first quarter in the last five years. So we are going to respond to that with price actions. This is mostly in Water Systems segment, although it will impact Fueling as well. So we will respond to that with incremental price actions later this quarter in U.S., in Europe, specifically. And then, when we look at the inflation price on an output basis that was all on an input basis, when you look at it on an output basis through cost of goods sold, because you know the input stuff gets hung up on the balance sheet for a period and then flows into cost of goods sold. When you look at it on an output basis, we maintain the spread of price over inflation in the first quarter. However, that spread measured in basis points is lower than what it has been for the last four quarters and was lower than what it was in the first quarter of 2020. So, we knew this was coming at us, we took price actions late last year, earlier this year in anticipation of that. We saw even more in the first quarter than we had expected in our annual operating plan and we are now going to respond to that with additional price action. Our guidance assumes that we will continue to maintain this positive spread of price over inflation for the balance of the year, despite the fact that it is narrowing in the first quarter.

Mike Halloran -- Baird -- Analyst

So that's helpful. And just to clarify maybe Gregg's comments. I know you mentioned that Headwater was seeing some product shortages. It felt like non-Franklin Electric water product shortages. Are you seeing any shortages or supply chain pressures that are impacting your ability to put content into the market in Fueling or Water or is that comment just limited to Headwater?

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

No, it's across the board, Mike. We're seeing some challenges in the manufacturing space. That's really where my comments responded to is that across the globe we are just continuing to have challenges with suppliers that gets shut down on a temporary basis because of COVID, because of availability of parts. We're expediting a lot of products and components. We're dealing with the tank -- the -- that the -- the transport of containers on ships that get stuck off at Port of LA and just as -- just pretty much anything you're reading in top line or the headlines of newspapers, it's impacting us as well.

Mike Halloran -- Baird -- Analyst

So in guidance, from a top line perspective, maybe you could just walk through what's embedded in it as in, are you assuming pretty normal sequentials from here, an improvement deceleration in any specific markets. Any markets where you think there was some pull forward in the short-term or do you think that there is a lot of -- more backlog that still needs to be let out. Just some context and what the underlying thoughts are within the guidance?

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

Yeah, in the manufacturing entities, the backlog might remain very strong. As a matter of fact, it's -- when you measure the backlog and what we can measure from a backlog perspective, it's basically double at the end of the first quarter of 2021 than it was at the end of the first quarter last year. So, we continue to expect the kind of strong organic growth in both Water and Distribution, but we're not going to say that we're going to expect a strong growth -- organic growth that we saw in the first quarter. We also announced an acquisition in Water Treatment on April 1st that estimates [Indecipherable] Puronics is in our guidance as well. So, we see a lot of opportunity and tailwind, but these issues that Gregg just described, combined with the inflation that comes with them is what's causing us a bit of a pause, and want to make sure that we see this play itself out in the second quarter in the manufacturing entities.

In Distribution, again as we mentioned, there is a lot of underlying demand strength and I'm not sure of the kind of organic growth that we saw in the first quarter 31% should be expected for the full year, but we are clearly discussing or thinking about solid double-digit organic growth for distributions, we look at the balance of the year. And then there are issues again are -- they're not issues unique to Headwater, but there are issues again, and they are starting to feel some change from a supply perspective and we'll have to wait and see how that plays itself out in terms of their top line. But Headwater got a lot of momentum, broad-based momentum, Gicon has a lot of momentum, and we expect strong results from them for the balance of the year.

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

And Mike, on the Fueling side, great rebound, and again, it really didn't start to see a slowdown outside of Asia Pacific from the pandemic in the first quarter last year. So strong results outside of North America, outside of China. China is still, kind of, offline for us for the initiatives we were looking forward to and still look forward to in China on in-station diagnostics. But in the U.S. market where Fueling, it was flat, there is a strong sense that we're going to see, the rebound, in-station builds here in the U.S.. And actually one of the constraints there is that resin supplies for fiberglass tanks is in critical supply and it may cause a push out of some of these availability for people with water tanks. We haven't seen that impact us yet, but we've heard in the marketplace that there is limited availability of underground tanks on a go-forward basis, which may dampen, would not -- or push out some revenue, but we still see a robust business in the U.S. for Fueling as well.

Mike Halloran -- Baird -- Analyst

Great stuff. Thanks, guys. Appreciate it.

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

Thank you, Mike.

Operator

Your next question comes from Walter Liptak from Seaport.

Walter Liptak -- Seaport Global -- Analyst

Hi, thanks. Good morning, guys.

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

Good morning, Walt.

Walter Liptak -- Seaport Global -- Analyst

I wanted to stick with the discussion about the Distribution segment. And congratulations on getting the $2 million of profit, and I -- you guys have made a lot of progress with it, but I wonder what does that imply for the full-year profits that you've turned the corner during the first quarter with profitability, and then, you've owned this business for a while. I'm just wondering, why first quarters tend to be losses, is it like an overhead absorption thing or they are front-loaded cost for the year or something that run through Distribution?

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

Yeah, Walt, so on the full year, as I said, we expect really robust organic growth in Headwater. We've talked about 4% to 6% operating income margins in this business. We've been short of that, kind of, throughout its history. We expect to be solidly in the middle of that range or better for the full year 2021. Other than these, some of these supply, kind of, concerns around certain products this business again has a tremendous amount of momentum going right now.

In terms of the first quarter, I think it's more seasonal really, Walt than anything. It's not really accounting driven, per se, it's in the U.S.. This is the lowest season. The ground -- it's winter, the ground is frozen, some of this work is necessary is, it's just not able to be done because the wells and work sites can't be reached or can't be accessed because of the weather and that typically is what's driven the lower top line. And then of course with the lower top line, you have a lower -- you lose the leverage on the fixed cost base that we have in the business. So we saw the reverse to that thankfully here in the first quarter of 2021 and that's a big driver. The top-line growth and then of course the fixed cost leverage that we get on top of that is driving the profitability in the first quarter.

Walter Liptak -- Seaport Global -- Analyst

Okay, great. Okay, all right. But for the full year, you're thinking in that range of 4% to 6% operating profit margins?

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

Yes, sir.

Walter Liptak -- Seaport Global -- Analyst

Okay. All right, great. And I wanted to ask about the profitability in the Fueling Systems business. I think you called out the strong $14.9 million in profit as a result of mix. I wonder if there is -- and then you also talked about cost management, I wonder if you could talk about which one of those was more meaningful in the quarter and if some of that is sustainable through the rest of the year?

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

Yes. Fueling Systems is, we've mentioned in the past, they've done a really nice job of managing the fixed cost base, the SG&A base. It's a little more flexible there than what you might see in the water -- in the Water Systems segment, Walt. And they have done a good -- they did a good job in 2020 of lowering that fixed cost base, it's coming back slowly. We continue to want to support the international growth that we're seeing here. We saw that in the first quarter, we will continue to see it. But the incremental margins here are really, really strong and it's because the business doesn't have to add much fixed cost when their top line grows. So that really is the key formula here. They did achieve price as well. All of our segments achieved strong price. That was a contributor to their profitability in the first quarter as well.

Walter Liptak -- Seaport Global -- Analyst

Okay. Got it. Okay. Thank you.

Operator

Your next question comes from Matt Summerville from D.A. Davidson.

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

Hey, thanks. Couple of questions. First, I want to make sure I'm clear. What was the magnitude of uplift you saw maybe from the Texas weather situation as well as buy ahead you referenced in the quarter?

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

Yeah, we think both of those things. Matt, we're in the $6 million range in total, $6 million to 7 million.

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

About half and half, Matt. About half from Texas, about half of the buy end [Phonetic].

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

Perfect. And then what exactly, I understand the Texas thing, but what would have prompted the buy ahead. And just in the business overall, what's your assessment of channel inventories currently?

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

So, Matt, when contractors need piping to install the pumping systems and when supplies get tight, they buy pipes. And because if they don't buy, they can't install. I mean, you need all the other products as well, but pipe it was -- is a critical item. And again, an event like you had in Texas, you get hurricanes or something like that, everyone starts buying a pipe. And so, that's what we are seeing. That said, because of generally some supply constraints we're seeing, I don't get a sense that there is a whole lot of channel inventory that is out there. Our working capital actually declined on a trailing 12-month basis at our Distribution business and Headwater. So I just -- the -- what they're buying, they're putting in the ground with the exception of again maybe they'll buy forward on the pipe product.

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

And then as a follow-up, with respect to North America groundwater, in one of your comments, I think it was mentioned that it was up 24%. Can you attempt to parse out, kind of, what you're seeing in Resi versus Ag around that 24% number?

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

Yeah, the Resi is up more than that. Ag was up about 11%, Matt. So our Ag, we isolate certain product categories that we call Ag and when you look at those in North America, they were up about 11%. The residential product categories were up more significantly.

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

Got it. And then just maybe two other quick ones. You mentioned, I think in the Water business, you talked about 300 basis points of price on a year-over-year basis in Q1. A question asked earlier on the call, in order to maintain the price cost equation you referenced John, based on where spot prices are for things like steel, copper, resin and aluminum, etc, all things you use in fairly large quantities. How much additional price do you think you need to take in that business?

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

Yeah. So it depends on the end market, Matt, but the big thing is this inflation exceeding expectation on an input basis in the first quarter. So, I think it's in the 75 basis point to 100 basis point range or something like that, that as we see the cycle later start to flow through in the second and third quarter, we're going to have these higher input costs in them and we need to have more price to offset that. So that pricing is my best estimate on the Water Systems side.

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

Got it. And then just lastly, one of you mentioned China Fueling down 19%, not necessarily a surprise, but maybe looking for an update on, are you seeing -- starting to see any movement at all on that ISD initiative. Do you think it's sort of a mute issue in '21 not going to happen? What -- what I guess is the right way to think about that?

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

Yeah, Matt, it's tough. We aren't -- we're seeing a little bit of activity and a little bit maybe less than 10% of the market's activity. And the challenge you've always had with China is, it has been rather opaque. And so, when it comes on and how fast it comes on is not evident to us at this point. It's out there, the regs are out there, the needs are out there, but when it turns on and how fast it turns on is not necessarily apparent at this point.

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

Got it. Thanks very much guys.

Operator

Your next question comes from Chris McGinnis from Sidoti & Company.

Chris McGinnis -- Sidoti & Company -- Analyst

Good morning. Thanks for taking my question. Nice quarter. I was just wondering if you could talk a little bit about the Puronics acquisition, how that adds to the business and I think that's the third acquisition since November. Can you just talk about the landscape for M&A going forward as well? Thanks.

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

Sure, Chris. So yeah, this is the third acquisition since we got into Water Treatment, now little over a year ago. And what we're doing is, we see an opportunity, it's a very fragmented business. It's also a business that is a nice adjacency for Franklin because much of the product goes through professional contractors whether they're water quality dealers, they're plumbing contractors through the plumbing channel, or through our strong position in the groundwater channel. So, we just see this as just being a natural and growing adjacency for us and we've been learning a lot about the space and about the product requirements and about the key factors for serving the industry and that's what we've been doing over time.

And as you've seen, Franklin, in the past, we'll buy smaller businesses, we put them together, we get operating leverage, we learn about the industry that allows us to grow them organically. And you can see, it will be like what we do with Distribution, we both have blocked businesses and put them together, then we -- once we combine them, we get that operating leverage, and then get some nice organic growth. So, we see Water Treatment again as being an important space, rapidly -- relatively rapidly growing space and one is natural adjacency here in North America. And then, because we have reach outside of North America and expect the Water Treatment is going to be the demand across the globe. We'll see how we do that over time as well.

Chris McGinnis -- Sidoti & Company -- Analyst

Great. I appreciate that. And I guess just the landscape for additional M&A going forward. Is there a good market, as things starting to rebound and as evaluation start to pick back up, maybe just any color you can add? Thank you.

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

Yeah, I think, Chris, the pipeline is fairly robust. I would say that the expectation, sellers' expectations are high, certainly historically higher than where Franklin is typically transacted. Gregg mentioned that this Water Treatment space, which is a target adjacency for us right now, it's highly fragmented. So, we think there is going to continue to be opportunities. We see some opportunities in the Water Treatment space. And every deal is different, but there is the real possibility that we could continue to see opportunity there.

The same is true really on the distribution side. I mean there's fewer kind of end properties out there right now, we would say that might be the kind of property we didn't want to own, but there are some. And we've done a fair number of acquisitions here, so we can be fairly selective, we think we know how to value these properties, kind of, the right way. But they're out there and we continue to look at a handful of those types of properties as well. So I would say generally that, you know, the climate for M&A is -- it's not bad right now. And we've got a reasonable pipeline and have a look at a few things and we expect that to continue. I -- what we saw last year, and I think we may again see this year is, a lot of these sellers are taking the read on tax law as, kind of, their indicator of what to do and we -- if the U.S. tax situation moves away with it, it is expected to move, we might see more people interested in transacting before those changes take effect. I don't know, but we know that for the kind of sellers that we're talking to that tends to be a pretty big issue.

There's one additional point is that, over the last several years, I think, last 10 deals for Franklin have all been in the U.S. and Canada. And that's not for lack of interest or effort outside the U.S. and Canada, but again for the properties we're looking for, these are family held businesses, it needs to be timing for the family or an event, but we continue to look at growing globally. And we have an appetite to do transactions outside the U.S. before as well we've done many of them in the past and I think we've been pretty good at it. So, we continue to look for deals across the globe. It's just been more opportunity for us in the last couple of years have been in the U.S. and Canada.

Chris McGinnis -- Sidoti & Company -- Analyst

I appreciate the color. Thanks for taking my questions and good luck in Q2.

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

Thank you, Chris.

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

Thank you.

Operator

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Gregg Sengstack.

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

Thank you, Stacey. We appreciate you joining us today. I look forward to speaking to you in July with our -- reviewing our second quarter results. You all have a good week.

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

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

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

Mike Halloran -- Baird -- Analyst

Walter Liptak -- Seaport Global -- Analyst

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

Chris McGinnis -- Sidoti & Company -- Analyst

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