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What changed in FRANKLIN ELECTRIC CO INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FRANKLIN ELECTRIC CO INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+148 added−127 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-23)

Top changes in FRANKLIN ELECTRIC CO INC's 2024 10-K

148 paragraphs added · 127 removed · 110 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe Company’s principal competitors in the specialty water products industry are Grundfos Management A/S, Pentair, Inc. and Xylem, Inc. 2023 Water Systems research and development expenditures were primarily related to the following activities: • Electronic variable frequency drives and controls for Pump and HVAC applications, including enhancements to include IOT capability for our drive and protection products and making our key platforms solar pumping capable • Development of integrated electronic pressure boosting systems for residential and commercial applications • Development of new standard electric skid pump package designs including the new "SmartPrime" variable frequency drive skid packages for mining and municipal dewatering markets • Greywater pumping equipment, including the development of 60Hz electrical submersible pumps from the acquisition of Minetuff and expansion of Non-Clog and grinder pumps for the Americas market • Submersible pumps for commercial, municipal, and agricultural applications including the development of a new cast stainless submersible turbine line, and upgrading the performance of the line shaft turbine product offering • Water treatment products focused on component performance improvements and IOT enabled sensing systems Fueling Systems Segment Fueling Systems is a global leader in the production and marketing of fuel pumping systems, fuel containment systems and monitoring and control systems.
Biggest changeThe Company’s principal competitors in the specialty water products industry are Grundfos Management A/S, Pentair, Inc. and Xylem, Inc. 2024 Water Systems research and development expenditures were primarily related to the following activities: • Development of new integrated pressure boosting systems for residential and commercial applications • Electronic variable frequency drives and controls for Pump and HVAC applications, including enhancements to include tethering and IOT capability for our drives and making our key platforms easier to utilize by our customers • Development of expanded offering of standard electric skid pump package designs including the "SmartPrime" variable frequency drive skid packages and updated stackable units for rental and municipal dewatering markets • Development of new HVAC condensate product offerings including new externally mounted mini-condensate pump • Greywater pumping equipment, including the expansion of our electrical submersible pump lines with addition of range, materials, and control packages for the global market • Submersible pumps for commercial, municipal, and agricultural applications including the development of global standardization of updated cast iron submersible turbine hydraulics, and upgrading the performance of line shaft turbine product offering • Water treatment products focused on component performance improvements Energy Systems Segment Energy Systems is a global leader in the production and marketing of fuel pumping systems, fuel containment systems and monitoring and control systems.
Fueling Systems takes steps to ensure its products are installed and maintained properly through robust global certification tools for their third-party contractors. The segment serves other energy markets such as power reliability systems and includes intelligent electronic devices that are designed for online monitoring for the power utility, hydroelectric, rail, and telecommunication and data center infrastructure.
Energy Systems takes steps to ensure its products are installed and maintained properly through robust global certification tools for their third-party contractors. The segment serves other energy markets such as power reliability systems and includes intelligent electronic devices that are designed for online monitoring for the power utility, hydroelectric, rail, and telecommunication and data center infrastructure.
The Company makes available free of charge on or through its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.
The Company makes available free of charge on or through its website its annual 6 report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.
The Water Systems segment generates approximately 25 to 30 percent of its revenue in developing 4 markets, which often lack municipal water systems. As those countries install water systems and further develop with an expanding middle class or improving quality of living, the Company views those markets as an opportunity.
The Water Systems segment generates approximately 25 to 30 percent of its revenue in developing markets, which often lack municipal water systems. As those countries install water systems and further develop with an expanding middle class or improving quality of living, the Company views those markets as an opportunity.
Fueling Systems offers a complete array of components between the tank and the dispenser, including submersible pumps, motors, station hardware, piping, sumps, vapor recovery, corrosion control systems and electronic controls and monitoring. The Fueling Systems segment growth has been sustained by a commitment to protecting human health and the environment while delivering the lowest total cost of ownership.
Energy Systems offers a complete array of components between the tank and the dispenser, including submersible pumps, motors, station hardware, piping, sumps, vapor recovery, corrosion control systems and electronic controls and monitoring. The Energy Systems segment growth has been sustained by a commitment to protecting human health and the environment while delivering the lowest total cost of ownership.
The Company believes that availability of fuel and energy is adequate to satisfy current and projected overall operations unless interrupted by government direction, allocation or other disruption. Major Customers No single customer accounted for over 10 percent of net sales in 2023, 2022, or 2021.
The Company believes that availability of fuel and energy is adequate to satisfy current and projected overall operations unless interrupted by government direction, allocation or other disruption. Major Customers No single customer accounted for over 10 percent of net sales in 2024, 2023, or 2022.
These key factors for success are a roadmap for the Company's growth as a global provider of water and fuel systems, through geographic expansion and product line extensions, leveraging its global platform and competency in system design, all while consistently offering the best value to its customer.
These key factors for success are a roadmap for the Company's growth as a global provider of water and energy systems, through geographic expansion and product line extensions, leveraging its global platform and competency in system design, all while consistently offering the best value to its customer.
All backlog orders are expected to be filled in 2024. The Company’s sales in the first quarter are generally less than its sales in other quarters due to less water well drilling and overall product sales during the winter months in the Northern hemisphere.
All backlog orders are expected to be filled in 2025. The Company’s sales in the first quarter are generally less than its sales in other quarters due to less water well drilling and overall product sales during the winter months in the Northern hemisphere.
The Company’s Water Systems and Fueling Systems products and related equipment are sold to specialty distributors and some original equipment manufacturers (“OEMs”), as well as industrial and petroleum equipment distributors and major oil and utility companies. The Company’s Distribution segment sells products primarily to water well contractors.
The Company’s Water Systems and Energy Systems products and related equipment are sold to specialty distributors and some original equipment manufacturers (“OEMs”), as well as industrial and petroleum equipment distributors and major oil and utility companies. The Company’s Distribution segment sells products primarily to water well contractors.
Fueling Systems products are sold in highly competitive markets. The Company believes there is growth opportunity in developing markets. Fueling Systems competes in each of its targeted markets based on product design, quality, performance, availability and price.
Energy Systems products are sold in highly competitive markets. The Company believes there is growth opportunity in developing markets. Energy Systems competes in each of its targeted markets based on product design, quality, performance, availability and price.
The Fueling Systems segment designs, manufactures and sells pumps, motors, pipe, sumps, fittings, vapor recovery components, electronic controls, monitoring devices and related parts and equipment primarily for use in fueling system applications.
The Energy Systems segment designs, manufactures and sells pumps, motors, pipe, sumps, fittings, vapor recovery components, electronic controls, monitoring devices and related parts and equipment primarily for use in energy system applications.
The Company has not experienced any material costs in connection with environmental compliance, and does not believe that such compliance will have any material effect upon the financial position, results of operations, cash flows or competitive position of the Company. Human Capital Resources As of December 31, 2023, the Company had approximately 6,400 employees.
The Company has not experienced any material costs in connection with environmental compliance, and does not believe that such compliance will have any material effect upon the financial position, results of operations, cash flows or competitive position of the Company. Human Capital Resources As of December 31, 2024, the Company had approximately 6,300 employees.
With 2023 revenue of approximately $2.1 billion, the Company designs, manufactures and distributes water and fuel pumping systems, composed primarily of submersible motors, pumps, electronic controls, water treatment systems, and related parts and equipment. The Company’s water pumping systems move fresh and wastewater for the residential, agricultural and other industrial end markets.
With 2024 revenue of approximately $2.0 billion, the Company designs, manufactures and distributes water and fuel pumping systems, composed primarily of submersible motors, pumps, electronic controls, water treatment systems, and related parts and equipment. The Company’s water pumping systems move fresh and wastewater for the residential, agricultural and other industrial end markets.
No single customer accounted for over 10 percent of gross accounts receivable in 2023 and 2022.
No single customer accounted for over 10 percent of gross accounts receivable in 2024 and 2023.
Water Systems products are sold in highly competitive markets. Water Systems contributed about 60 percent of the Company’s total revenue in 2023. Significant portions of segment revenue come from selling groundwater and surface pumps, motors, and controls for residential and commercial buildings, as well as agricultural sales which are more seasonal and subject to commodity price changes.
Water Systems contributed about 60 percent of the Company’s total revenue in 2024. Significant portions of segment revenue come from selling groundwater and surface pumps, motors, and 4 controls for residential and commercial buildings, as well as agricultural sales which are more seasonal and subject to commodity price changes.
Highlights of the Distribution Segment geographic growth through acquisitions in the last three years are as follows: • 2021 - Acquired Blake Group Holdings, Inc., a professional groundwater distributor operating in the northeast • 2023 - Acquired substantially all of the assets of LCA Pump, LLC, which operates Water Works Pump, a professional groundwater distributor operating in the midwest Information Regarding All Reportable Segments Research and Development The Company incurred research and development expenses as follows: 5 (In millions) 2023 2022 2021 Research and development expenses $ 17.7 $ 16.7 $ 17.3 Expenses incurred were for activities related to the development of new products, improvement of existing products and manufacturing methods and other applied research and development.
In 2023, the Distribution segment acquired substantially all of the assets of LCA Pump, LLC, which operated Water Works Pump, a professional groundwater distributor operating in the Midwest. 5 Information Regarding All Reportable Segments Research and Development The Company incurred research and development expenses as follows: (In millions) 2024 2023 2022 Research and development expenses $ 21.5 $ 17.7 $ 16.7 Expenses incurred were for activities related to the development of new products, improvement of existing products and manufacturing methods and other applied research and development.
Segment and geographic information appears in Note 15 - Segment and Geographic Information to the consolidated financial statements. The market for the Company’s products is highly competitive and includes diversified accounts by size and type.
The Company does not allocate corporate expenses or intersegment eliminations to a reportable segment. Segment and geographic information appears in Note 15 - Segment and Geographic Information to the consolidated financial statements. The market for the Company’s products is highly competitive and includes diversified accounts by size and type.
Further information regarding its human capital details and initiatives can be found in the 2023 Franklin Electric Sustainability Report available for download on the Company's website. 6 Available Information The Company is a U.S. public reporting company under the Exchange Act and files reports, proxy statements and other information with the SEC, which can be accessed from the SEC's home page on the Internet at www.sec.gov .
Available Information The Company is a U.S. public reporting company under the Exchange Act and files reports, proxy statements and other information with the SEC, which can be accessed from the SEC's home page on the Internet at www.sec.gov . The Company’s website address is www.franklin-electric.com .
Backlog The dollar amount of backlog by segment was as follows: (In millions) February 7, 2024 February 6, 2023 Water Systems $ 120.2 $ 228.2 Fueling Systems 16.9 43.9 Distribution 23.5 22.8 Consolidated $ 160.6 $ 294.9 The backlog is composed of written orders at prices adjustable on a price-at-the-time-of-shipment basis for products, primarily standard catalog items.
Backlog The dollar amount of backlog by segment was as follows: (In millions) February 5, 2025 February 7, 2024 Water Systems $ 98.4 $ 120.2 Energy Systems 21.5 16.9 Distribution 20.8 23.5 Consolidated $ 140.7 $ 160.6 The backlog is composed of written orders for products for which prices are typically established at the time the order is placed, primarily standard catalog items.
The Company is committed to providing safe work environments for its employees, prioritizing wellness, health and safety best practices and requiring ethical compliance with established policies.
The Company is committed to providing safe work environments for its employees, prioritizing wellness, health and safety best practices and requiring ethical compliance with established policies. Further information regarding its human capital details and initiatives can be found in the 2024 Franklin Electric Sustainability Report available for download on the Company's website.
Markets and Applications The Company’s business consists of three reportable segments based on the principal end market served: Water Systems, Fueling Systems, and Distribution. The Company includes unallocated corporate expenses in an “Intersegment Eliminations/Other” segment that, together with the Water Systems, Fueling Systems, and Distribution segments, represent the Company.
Markets and Applications The Company’s business consists of three reportable segments based on the principal end market served: Water Systems, Energy Systems, and Distribution. The Company changed the name of the Fueling Systems segment to Energy Systems to reflect its diverse portfolio and growth strategy, as well as to better reflect the markets and customers served by the segment.
The Company’s principal competitors in the petroleum equipment industry are Vontier Corporation, formerly a part of Fortive Corporation, and Dover Corporation. 2023 Fueling Systems research and development expenditures were primarily related to the following activities: • Developed and launched On-Prem, server software to collect data from battery monitoring, battery testers, and distribution monitoring, tailored to the U.S. railroad market • Developed OM3 TripCoil transformer monitoring instrument • Developed and launched EVO-Edge, a carwash fluids monitoring system • Developed and launched Hybrid Battery Control Unit (HBCU), with wireless (WiFi) connectivity • Developed CVM fuel dispensing and monitoring control system • Developed EV-Controls NexPhase 600 & 800, electric vehicle charger switchgear Distribution Segment The Distribution segment is operated as a collection of wholly owned leading groundwater distributors known as the Headwater Companies.
The Company’s principal competitors in the petroleum equipment industry are Vontier Corporation and Dover Corporation. 2024 Energy Systems research and development expenditures were primarily related to the following activities: • Developed new overfill protection valve for the Indian market with a more robust valve design • Developed Distribution Transformer Monitoring antenna, which allows for improved wireless monitoring transmission • Developed new fiberglass tank sump and cover to withstand increased weight and side compression • Developed Remote Integration Panel to allow remote control and power cycling of breakers at fueling stations • Developed Trip Signature Monitor for continuous monitoring of substation circuit breakers • Developed EV-Controls NexPhase 800 & 2000A, an upgraded electric vehicle charger switchgear Distribution Segment The Distribution segment is operated as a collection of wholly owned leading groundwater distributors known as the Headwater Companies.
In the last three years, the Company acquired substantially all of the assets of Action Manufacturing & Supply, Inc. and all of the ownership interest of Puronics, Inc.; New Aqua, LLC; and B&R Industries, Inc. expanding its portfolio to include water treatment systems and acquired Minetuff Dewatering Pumps Australia Pty Ltd expanding its industrial dewatering product line.
In the three years ended December 31, 2024, the Company only completed one significant acquisition in the segment when it acquired substantially all of the assets of Action Manufacturing & Supply, Inc. in 2023 expanding its portfolio in water treatment systems. In February 2025, the Company acquired PumpEng Pty Ltd.
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("PumpEng"), a manufacturer of submersible pumps for the mining sector headquartered in Australia. Also in February 2025, the Company signed a definitive agreement to acquire Barnes de Colombia S.A. ("Barnes"), a leading manufacturer and distributor of industrial and commercial pumps based in Colombia. Water Systems products are sold in highly competitive markets.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA significant number of other countries are expected to also implement similar legislation with varying effective dates in the future. The Company does not expect Pillar 2 to have a material impact on its income tax liability, provision for income taxes, or effective tax rate.
Biggest changeIn 2024, Pillar Two did not have a material impact on the Company’s income tax liability, provision for income taxes, or effective tax rate, nor does the Company expect a material impact in the future. Risks Related to the Business The Company is exposed to political, economic and other risks that arise from operating a multinational business.
The Company experiences seasonal demand in a number of markets within the Water Systems segment. End-user demand in primary markets 9 follows warm weather trends and is at seasonal highs from April to August in the Northern Hemisphere. Demand for residential and agricultural water systems are also affected by weather-related disasters including heavy flooding and drought.
The Company experiences seasonal demand in a number of markets within the Water Systems segment. End-user demand in primary markets follows warm weather trends and is at seasonal highs from April to August in the Northern Hemisphere. Demand for residential 9 and agricultural water systems are also affected by weather-related disasters including heavy flooding and drought.
A decline in private and individual water well systems in the United States or other economies in the international markets the Company serves could reduce demand for the Company’s products and adversely impact sales, gross margins, and operating results. Demand for Fueling Systems products is impacted by environmental legislation which may cause significant fluctuations in costs and revenues.
A decline in private and individual water well systems in the United States or other economies in the international markets the Company serves could reduce demand for the Company’s products and adversely impact sales, gross margins, and operating results. Demand for Energy Systems products is impacted by environmental legislation which may cause significant fluctuations in costs and revenues.
The Company’s acquisition strategy entails expense, integration risks, and other risks that could affect the Company’s earnings and financial condition. One of the Company’s continuing strategies is to increase revenues and expand market share 8 through acquisitions that will provide complementary Water and Fueling Systems products, add to the Company’s global reach, or both.
The Company’s acquisition strategy entails expense, integration risks, and other risks that could affect the Company’s earnings and financial condition. One of the Company’s continuing strategies is to increase revenues and expand market share through acquisitions that will provide complementary Water and Energy Systems products, add to the Company’s global reach, 8 or both.
To the extent that these mitigating strategies are not successful, foreign currency rate fluctuations can have a material adverse impact on the Company’s international operations or on the business as a whole. In the second quarter of 2022, the Company concluded that Turkey represents a hyperinflationary economy as its three-year cumulative inflation rate exceeded 100 percent.
To the extent that these mitigating strategies are not successful, foreign currency rate fluctuations can have a material adverse impact on the Company’s international operations or on the business as a whole. In the second quarter of 2022, the Company concluded that Turkey represents a highly inflationary economy as its three-year cumulative inflation rate exceeded 100 percent.
Environmental legislation related to air quality and fuel containment may create demand for certain Fueling Systems products which must be supplied in a relatively short time frame to meet the governmental mandate.
Environmental legislation related to air quality and fuel containment may create demand for certain Energy Systems products which must be supplied in a relatively short time frame to meet the governmental mandate.
These risks include, but are not limited to, the following: • Difficulty in enforcing agreements and collecting receivables through foreign legal systems • Trade protection measures and import or export licensing requirements • Inability to obtain raw materials and finished goods in a timely manner from foreign suppliers • Imposition of tariffs, exchange controls or other restrictions • Difficulty in staffing and managing widespread operations and the application of foreign labor regulations • Compliance with foreign laws and regulations • Changes in general economic and political conditions in countries where the Company operates Additionally, the Company’s operations outside the United States could be negatively impacted by changes in treaties, agreements, policies, and laws implemented by the United States.
These risks include, but are not limited to, the following: • Difficulty in enforcing agreements and collecting receivables through foreign legal systems • Trade protection measures and import or export licensing requirements • Inability to obtain raw materials and finished goods in a timely manner from foreign suppliers • Imposition of tariffs, exchange controls or other restrictions (including recent U.S. tariffs imposed or threatened to be imposed on China, Canada and Mexico and other countries and any retaliatory actions taken by such countries) • Difficulty in staffing and managing widespread operations and the application of foreign labor regulations • Compliance with foreign laws and regulations • Changes in general economic and political conditions in countries where the Company operates Additionally, the Company’s operations outside the United States could be negatively impacted by changes in treaties, agreements, policies, and laws implemented by the United States.
Turkey and Argentina becoming hyperinflationary economies has had a material adverse effect on the Company’s consolidated results of operations and further inflation may have additional adverse effects on the Company's consolidated financial position, results of operations, or cash flows in future periods.
Turkey and Argentina becoming highly inflationary economies has had an adverse effect on the Company’s consolidated results of operations and further inflation may have additional adverse effects on the Company's consolidated financial position, results of operations, or cash flows in future periods.
On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive.
On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework.
Risks Related to the Business The Company is exposed to political, economic and other risks that arise from operating a multinational business. The Company has significant operations outside the United States, including Europe, South Africa, Brazil, Mexico, India, China, Turkey, Canada and Argentina. Further, the Company obtains raw materials and finished goods from foreign suppliers.
The Company has significant operations outside the United States, including Europe, South Africa, Brazil, Mexico, India, China, Turkey, Canada and Argentina. Further, the Company obtains raw materials and finished goods from foreign suppliers. Accordingly, the Company’s business is subject to political, economic, and other risks that are inherent in operating a multinational business.
The application of these tax laws and related regulations is subject to legal and factual interpretation, judgment, and uncertainty. The Company cannot predict whether any proposed changes in tax laws will be enacted into law or what, if any, changes may be made to any such proposals prior to their being enacted into law.
The Company cannot predict whether any proposed changes in tax laws will be enacted into law or what, if any, changes may be made to any such proposals prior to their being enacted into law.
Since the Company operates in different countries and is subject to taxation in different jurisdictions, the Company’s future effective tax rates could be impacted by changes in such countries’ tax laws or their interpretations. Both domestic and international tax laws are subject to change as a result of changes in fiscal policy, legislation, evolution of regulation and court rulings.
Changes in tax legislation regarding the Company’s U.S. or foreign earnings could materially affect future results. Since the Company operates in different countries and is subject to taxation in different jurisdictions, the Company’s future effective tax rates could be impacted by changes in such countries’ tax laws or their interpretations.
After the Company’s customers have met the compliance requirements, the Company’s revenues and profitability may decrease significantly as the demand for certain products declines substantially.
After the Company’s customers have met the compliance requirements, the Company’s revenues and profitability may decrease significantly as the demand for certain products declines substantially. The risk of not reducing production costs in relation to the decreased demand and reduced revenues could have a material adverse impact on gross margins and the Company’s results of operations.
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The risk of not reducing production costs in relation to the decreased demand and reduced revenues could have a material adverse impact on gross margins and the Company’s results of operations. 7 Changes in tax legislation regarding the Company’s U.S. or foreign earnings could materially affect future results.
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Both domestic and international tax laws 7 are subject to change as a result of changes in fiscal policy, legislation, evolution of regulation and court rulings. The application of these tax laws and related regulations is subject to legal and factual interpretation, judgment, and uncertainty.
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Accordingly, the Company’s business is subject to political, economic, and other risks that are inherent in operating a multinational business.
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A significant number of countries have enacted portions, or all, of the OECD proposal with effective dates in 2024 and 2025 for different aspects of the directive, with many additional countries expected to implement similar legislation with varying effective dates in the future.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAny incident assessed as potentially being or potentially becoming material is immediately escalated for further assessment, and then reported to designated members of Senior Leadership. A key area for the Cybersecurity Program is employee cybersecurity education. The Company’s employees play a key role in cybersecurity and receive mandatory cybersecurity training, phishing attack simulations, educational events, and news bulletins.
Biggest changeA key area for the program is employee cybersecurity education. The Company’s employees play a key role in cybersecurity and participate in mandatory cybersecurity training, phishing attack simulations, educational events, and receive news bulletins. The Company’s data protection and privacy program is designed to adhere to and adapt to global privacy and data protection laws.
For more information on the Company’s information technology related risks, see Item 1A Risk Factors of this Annual Report on Form 10-K. 10
For more information on the Company’s information technology related risks, see Item 1A Risk Factors of this Annual Report on Form 10-K. 11
Third parties are engaged to assess the Company’s cybersecurity posture and adherence to the NIST Cybersecurity Framework, and the Company evaluates cybersecurity risks as part of its annual risk assessment process. Cybersecurity risk mitigation strategies and initiatives are developed based on these assessments.
Third parties are engaged to assess the Company’s cybersecurity posture and adherence to the NIST Cybersecurity Framework and CIS Controls, and the Company evaluates cybersecurity risks as part of its annual risk assessment process. Cybersecurity risk mitigation strategies and initiatives are developed based on these assessments.
In addition, Senior Leadership updates the Board of Directors, as necessary, regarding any significant cybersecurity incidents. The Board of Directors and Senior Leadership review the strategy, tools, metrics and latest trends affecting cybersecurity and utilizes the National Institute of Standards and Technology (NIST) Cybersecurity Framework as the foundation for its cybersecurity strategy and approach.
The Board of Directors and Senior Leadership review the strategy, tools, metrics and latest trends affecting cybersecurity utilizing the NIST Cybersecurity Framework and CIS Controls as the foundation for its cybersecurity strategy and approach.
The Company’s cybersecurity program and approach is overseen by its Board of Directors, in coordination with the Audit Committee, and Senior Leadership, along with its Senior Director of Global Information Technology Operations and Infrastructure who has expertise around global cybersecurity matters. The Board of Directors receives annual reports from Senior Leadership on the Company’s cybersecurity risks.
Governance The Company’s cybersecurity program and approach is overseen by its Board of Directors, in coordination with the Audit Committee, and Senior Leadership, along with its Vice President, Information Technology. The Vice President, Information Technology reports to the Chief Administration Officer and has more than 25 years of IT experience with over 10 years of cybersecurity and international business experience.
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ITEM 1C. CYBERSECURITY Data and information systems are a key part of how the Company delivers value to its customers, employees and stakeholders, and the Company’s cybersecurity program is committed to protecting its customers, employees, partners, infrastructure and systems.
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ITEM 1C. CYBERSECURITY Risk Management and Strategy The Company’s data protection and privacy program is designed to help it assess, identify, manage, and mitigate risks relating to cybersecurity threats and incidents.
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The Company’s data protection and privacy program is designed to adhere to and adapt to global privacy and data protection laws.
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The Company designs its cybersecurity standards, policies, processes and controls to operate in an integrated manner, leveraging applicable industry standards and security frameworks, including the National Institute of Standards and Technology (NIST) Cybersecurity Framework and Center for Internet Security, Inc (CIS) Controls, as guides in supporting its ability to perform such functions.
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The Company manages its data protection and privacy program, fostering collaboration with partners across business units and functional areas to identify and assess material cybersecurity threats, evaluate their severity, and explore ways to mitigate and manage such risks.
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As part of the Company’s data protection and privacy program, it maintains a cyber risk management program that seeks to address key risk management concepts, including mission and vision, escalation path for risk mitigation, risk assessments, and risk treatment.
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The Company does so by conducting a variety of planning and preparedness activities, including employing monitoring tools to identify suspicious or anomalous activity, vulnerabilities, or signs of compromise across its networks, systems, and data. The Company utilizes data from attack surface management tools to produce a prioritized set of vulnerabilities for remediation.
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The Company has established policies, processes, and controls that are designed to monitor, detect, investigate, respond to, and escalate management of cybersecurity threats and incidents.
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If the Company experiences a cybersecurity incident, the Company activates an incident response plan, which includes processes to enable it to triage, assess severity of, escalate, contain, 10 investigate, and remediate the incident, as well as to comply with applicable legal obligations and mitigate brand and reputational harm.
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Based on initial investigation into such incident’s impact to the Company, the actor(s) involved, and other factors, the Company assigns a severity level to an incident, which dictates the escalation path for a given incident.
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Incidents rising to higher levels of severity and potential materiality are escalated to designated members of the Company’s senior management for further assessment, response, and remediation. Additionally, the Company has established a Cyber Crisis Management Team, responsible for addressing and responding to the most severe cyber incidents.
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If warranted, senior management notifies the Audit Committee and/or the full Board of Directors, as appropriate. Throughout this process, the Company continues to investigate the incident and, as its understanding of the incident evolves, updates its severity assessment, as necessary.
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The Board of Directors receives annual reports from Senior Leadership on the Company’s cybersecurity risks. In addition, Senior Leadership updates the Board of Directors, as necessary, regarding any significant cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeBesides the owned corporate facility, the Company considers the following to be principal properties: Location / Segment Purpose Own/Lease Santa Catarina, Brazil / Water & Fueling Manufacturing/Distribution/Sales Own Sao Paulo, Brazil / Water & Fueling Manufacturing/Distribution/Sales Own Jiangsu Province, China / Water & Fueling Manufacturing Own Brno, Czech Republic / Water Manufacturing Own Vicenza, Italy / Water Manufacturing Own Nuevo Leon, Mexico / Water & Fueling Manufacturing Own Edenvale, South Africa / Water Manufacturing Own Izmir, Turkey / Water & Fueling Manufacturing/Distribution/Sales/R&D Own Indiana, United States / Water Manufacturing/Distribution/Sales Lease Montana, United States / Distribution Distribution Own North Carolina, United States / Distribution Distribution Own Oklahoma, United States / Water Manufacturing Own Oregon, United States / Water Manufacturing/Distribution/Sales/R&D Lease Wisconsin, United States / Fueling Manufacturing/Distribution/Sales/R&D Own The Company also owns and leases other smaller facilities which serve as manufacturing locations and distribution warehouses.
Biggest changeBesides the owned corporate facility, the Company considers the following to be principal properties: Location / Segment Purpose Own/Lease Santa Catarina, Brazil / Water & Energy Manufacturing/Distribution/Sales Own Sao Paulo, Brazil / Water & Energy Manufacturing/Distribution/Sales Own Jiangsu Province, China / Water & Energy Manufacturing Own Brno, Czech Republic / Water Manufacturing Own Vicenza, Italy / Water Manufacturing Own Nuevo Leon, Mexico / Water & Energy Manufacturing Own Edenvale, South Africa / Water Manufacturing Own Izmir, Turkey / Water & Energy Manufacturing/Distribution/Sales/R&D Own Indiana, United States / Water Manufacturing/Distribution/Sales Lease Montana, United States / Distribution Distribution Own North Carolina, United States / Distribution Distribution Own Oklahoma, United States / Water Manufacturing Own Oregon, United States / Water Manufacturing/Distribution/Sales/R&D Lease Wisconsin, United States / Energy Manufacturing/Distribution/Sales/R&D Own The Company also owns and leases other smaller facilities which serve as manufacturing locations and distribution warehouses.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor a description of the Company's material legal proceedings, refer to Note 16 - Commitments and Contingencies, in the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K, which is incorporated into this Item 3 by reference.
Biggest changeFor a description of the Company's material legal proceedings, refer to Note 7 - Commitments and Contingencies, in the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K, which is incorporated into this Item 3 by reference.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeGrandon 48 Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary 2016 - present Kenneth Keene 60 Vice President, Global Supply 2022 - present Vice President, EMEA Manufacturing 2021 - 2022 Vice President, Global Sourcing 2018 - 2021 Vice President, Sales - US 2014 - 2018 All executive officers are elected annually by the Board of Directors at the Board meeting held in conjunction with the annual meeting of shareholders.
Biggest changeGrandon 49 Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary 2016 - present All executive officers are elected annually by the Board of Directors at the Board meeting held in conjunction with the annual meeting of shareholders.
ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 11 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Current executive officers of the Company, their ages, current position, and business experience during at least the past five years as of December 31, 2023, are as follows: Name Age Position Held Period Holding Position Gregg C.
ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 12 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Current executive officers of the Company, their ages, current position, and business experience during at least the past five years as of December 31, 2024, are as follows: Name Age Position Held Period Holding Position Gregg C.
All executive officers hold office until their successors are duly elected or until their death, resignation or removal by the Board. 12 PART II
All executive officers hold office until their successors are duly elected or until their death, resignation or removal by the Board. 13 PART II
Levine 50 Vice President and President, Global Water 2023 - present President and CEO, Motion Control and Drives, Nidec Corporation 2020-2023 President, Motion Control, Nidec Corporation 2016-2020 Jay J. Walsh 54 Vice President and President, Fueling Systems 2019 - present President, Fueling Systems 2017 - 2019 Jonathan M.
Levine 51 Vice President and President, Global Water 2023 - present President and CEO, Motion Control and Drives, Nidec Corporation 2020-2023 President, Motion Control, Nidec Corporation 2016-2020 Jay J. Walsh 55 Vice President and President, Energy Systems 2019 - present Jonathan M.
Spikes 52 Vice President, Global Manufacturing 2022 - present Vice President, Global Water Engineering 2020 - 2022 Vice President, Manufacturing & Manufacturing Engineering 2019 - 2020 Director, Manufacturing & Manufacturing Engineering 2018 - 2019 Director, Advanced Manufacturing 2014 - 2018 DeLancey W. Davis 58 Vice President and President, Headwater Companies 2017 - present Greg M.
Spikes 53 Vice President, Global Manufacturing 2022 - present Vice President, Global Water Engineering 2020 - 2022 Vice President, Manufacturing & Manufacturing Engineering 2019 - 2020 DeLancey W. Davis 59 Vice President and President, Headwater Companies 2017 - present Greg M.
Sengstack 65 Chairperson of the Board and Chief Executive Officer 2015 - present Jeffery L. Taylor 57 Vice President, Chief Financial Officer 2021 - present Chief Financial Officer, Blue Bird Corporation 2020 - 2021 Senior Vice President and Chief Financial Officer, Wabash National Corporation 2014 - 2020 Brent L.
Taylor 58 Vice President, Chief Financial Officer 2021 - present Chief Financial Officer, Blue Bird Corporation 2020 - 2021 Senior Vice President and Chief Financial Officer, Wabash National Corporation 2014 - 2020 Brent L.
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Sengstack 66 Chairperson of the Board 2015 - present Chief Executive Officer 2015 - 2024 Joseph A. Ruzynski 49 Chief Executive Officer 2024-present President of Enclosures, nVent Electric plc 2018-2024 Jeffery L.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+3 added−1 removed4 unchanged
Biggest changeThe Company repurchased 144,137 shares for approximately $12.6 million under this plan during the fourth quarter of 2023. The maximum number of shares that may still be purchased under this plan as of December 31, 2023 is 916,655.
Biggest changeThe maximum number of shares that may still be purchased under this plan as of December 31, 2024 is 1,367,593.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES The number of shareholders of record as of February 7, 2024 was 591. The Company’s stock is traded on the NASDAQ Global Select Market under the symbol FELE.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES The number of shareholders of record as of February 5, 2025 was 554. The Company’s stock is traded on the NASDAQ Global Select Market under the symbol FELE.
Dividends paid per common share as quoted by the NASDAQ Global Select Market for 2023 and 2022 were as follows: Dividends per Share 2023 2022 1st Quarter $ .225 $ .195 2nd Quarter $ .225 $ .195 3rd Quarter $ .225 $ .195 4th Quarter $ .225 $ .195 The Company has increased dividend payments on an annual basis for 31 consecutive years.
Dividends paid per common share as quoted by the NASDAQ Global Select Market for 2024 and 2023 were as follows: Dividends per Share 2024 2023 1st Quarter $ .250 $ .225 2nd Quarter $ .250 $ .225 3rd Quarter $ .250 $ .225 4th Quarter $ .250 $ .225 The Company has increased dividend payments on an annual basis for 32 consecutive years.
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Period Total Number of Shares Repurchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares that may yet to be Repurchased October 1 - October 31 80,000 $ 85.55 80,000 980,792 November 1 - November 30 56,718 $ 88.42 56,718 924,074 December 1 - December 31 7,419 $ 93.85 7,419 916,655 Total 144,137 $ 87.11 144,137 916,655 Stock Performance Graph The following graph compares the Company’s cumulative total shareholder return (Common Stock price appreciation plus dividends, on a reinvested basis) over the last five fiscal years with the Guggenheim S&P Global Water Index and the Russell 2000 Index. 13 Hypothetical $100 invested on December 31, 2018 (fiscal year-end 2018) in Fra nklin Electric common stock (FELE), Guggenheim S&P Global Water Index, and Russell 2000 Index, assuming reinvestment of dividends: YE 2018 2019 2020 2021 2022 2023 FELE $ 100 $ 134 $ 161 $ 221 $ 188 $ 202 Guggenheim S&P Global Water 100 132 150 195 152 176 Russell 2000 100 124 146 166 132 155 14
Added
In October 2024, the Company’s Board of Directors approved a plan to increase the number of shares remaining for repurchase by an additional 1,000,000 shares. The Company did not repurchase any shares under this plan during the fourth quarter of 2024.
Added
Stock Performance Graph The following graph compares the Company’s cumulative total shareholder return (Common Stock price appreciation plus dividends, on a reinvested basis) over the last five fiscal years with the Guggenheim S&P Global Water Index and the Russell 2000 Index.
Added
Hypothetical $100 invested on December 31, 2019 (fiscal year-end 2019) in Fra nklin Electric common stock (FELE), Guggenheim S&P Global Water Index, and Russell 2000 Index, assuming reinvestment of dividends: YE 2019 2020 2021 2022 2023 2024 FELE $ 100 $ 121 $ 165 $ 141 $ 151 $ 156 Guggenheim S&P Global Water 100 114 147 115 133 136 Russell 2000 100 118 135 107 125 140 14

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

52 edited+20 added−12 removed25 unchanged
Biggest changeSales decreased less than 1 percent in 2023 due to the negative impact from foreign exchange rates, as compared to prior year. In 2023, sales of large dewatering equipment increased 63 percent, sales of groundwater pumping equipment decreased 10 percent and sales of all other surface pumping equipment decreased 1 percent compared to 2022.
Biggest changeThis sales decline was primarily due to lower volumes, which decreased due to weaker end market demand for large dewatering equipment. Additionally, net sales decreased 2 percent in 2024 due to the negative impact from foreign exchange rates, as compared to prior year while the incremental sales impact from recent acquisitions favorably impacted sales 1 percent in 2024.
The Company expects that ongoing requirements for operations, capital expenditures, pension obligations, dividends, share repurchases, and debt service will be adequately funded from cash on hand, operations, and existing credit agreements. As of December 31, 2023, the Company had a $350.0 million revolving credit facility. The facility is scheduled to mature on May 13, 2026.
The Company expects that ongoing requirements for operations, capital expenditures, pension obligations, dividends, share repurchases, and debt service will be adequately funded from cash on hand, operations, and existing credit agreements. As of December 31, 2024, the Company had a $350.0 million revolving credit facility. The facility is scheduled to mature on May 13, 2026.
There were no material changes to estimates or methodologies used to develop those estimates in 2023. The Company’s critical accounting estimates are identified below: Inventory Valuation The Company uses certain estimates and judgments to value inventory. Inventory is recorded at the lower of cost or net realizable value. The Company reviews its inventories for excess or obsolete products or components.
There were no material changes to estimates or methodologies used to develop those estimates in 2024. The Company’s critical accounting estimates are identified below: Inventory Valuation The Company uses certain estimates and judgments to value inventory. Inventory is recorded at the lower of cost or net realizable value. The Company reviews its inventories for excess or obsolete products or components.
CAPITAL RESOURCES AND LIQUIDITY Sources of Liquidity The Company's primary sources of liquidity are cash on hand, cash flows from operations, revolving credit agreements, and long-term debt funds available. The Company believes its capital resources and liquidity position at December 31, 2023 is adequate to meet projected needs for the foreseeable future.
CAPITAL RESOURCES AND LIQUIDITY Sources of Liquidity The Company's primary sources of liquidity are cash on hand, cash flows from operations, revolving credit agreements, and long-term debt funds available. The Company believes its capital resources and liquidity position at December 31, 2024 is adequate to meet projected needs for the foreseeable future.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Discussion of the year-over-year comparison of changes in the Company's financial condition and results of operation as of and for the fiscal years ended December 31, 2022 and December 31, 2021 can be found in Part II, Item 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Discussion of the year-over-year comparison of changes in the Company's financial condition and results of operation as of and for the fiscal years ended December 31, 2023 and December 31, 2022 can be found in Part II, Item 7.
In addition, due to the timing of funding in future periods being uncertain and dependent on future movements in interest rates, investment returns, changes in laws and regulations and other variables, the table above excludes the non-current liability of $29.5 million for cash outflows related to the Company's pension plans.
In addition, due to the timing of funding in future periods being uncertain and dependent on future movements in interest rates, investment returns, changes in laws and regulations and other variables, the table above excludes the non-current liability of $24.1 million for cash outflows related to the Company's pension plans.
The Company also has unrecognized tax benefits, none of which are included in the table above. The unrecognized tax benefits of approximately $0.8 million have been recorded as liabilities and the Company is uncertain as to if or when such amounts may be settled.
The Company also has unrecognized tax benefits, none of which are included in the table above. The unrecognized tax benefits of approximately $1.3 million have been recorded as liabilities and the Company is uncertain as to if or when such amounts may be settled.
Using input from these consultations such as long-term investment sector expected returns, the correlations and standard deviations thereof, and the plan asset allocation, the Company will use an expected long-term rate of return on plan assets of 6.20 percent in measuring net periodic cost for 2024.
Using input from these consultations such as long-term investment sector expected returns, the correlations and standard deviations thereof, and the plan asset allocation, the Company will use an expected long-term rate of return on plan assets of 5.75 percent in measuring net periodic cost for 2025.
Market conditions have caused the weighted-average discount rate to move from 5.15 percent last year to 4.90 percent this year for the domestic pension plans and from 5.08 percent last year to 4.88 percent this year for the postretirement health and life insurance plan.
Market conditions have caused the weighted-average discount rate to move from 4.90 percent last year to 5.48 20 percent this year for the domestic pension plans and from 4.88 percent last year to 5.47 percent this year for the postretirement health and life insurance plan.
The effective tax rate differs from the U.S. statutory rate of 21 percent primarily due to the recognition of the U.S. foreign-derived intangible income (FDII) provisions, foreign earnings taxed at rates below the U.S. statutory rate, certain incentives, and discrete events partially offset by state taxes.
The effective tax rate differs from the U.S. statutory rate of 21 percent, primarily due to U.S. states taxes, foreign earnings taxed at rates higher than the U.S. statutory rate, and nondeductible officer’s compensation, partially offset by the recognition of the U.S. foreign-derived intangible income (FDII) provisions, certain incentives, and discrete events.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. 2023 vs. 2022 OVERVIEW Net sales in 2023 increased 1 percent compared to the prior year.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. 2024 vs. 2023 OVERVIEW Net sales in 2024 decreased 2 percent co mpared to the prior year.
The payment schedule for these contractual obligations is as follows: (In millions) More than Total 2024 2025-2026 2027-2028 5 years Debt $ 100.6 $ 12.4 $ 78.1 $ 2.8 $ 7.3 Debt interest 13.8 7.6 4.8 0.7 0.7 Operating leases 61.9 19.5 26.6 12.3 3.5 Purchase obligations 11.1 11.0 0.1 — — Income Taxes-U.S.
The payment schedule for these contractual obligations is as follows: (In millions) More than Total 2025 2026-2027 2028-2029 5 years Debt $ 129.5 $ 117.8 $ 3.0 $ 2.9 $ 5.8 Debt interest 9.4 7.5 1.0 0.5 0.4 Operating leases 73.5 22.7 30.2 13.9 6.7 Purchase obligations 12.6 12.6 — — — Income Taxes-U.S.
A change in the long-term rate of return selected by the Company of 25 basis points would result in a change of about $0.3 million of employee benefit expense. 20 FACTORS THAT MAY AFFECT FUTURE RESULTS This annual report on Form 10-K contains certain forward-looking information, such as statements about the Company’s financial goals, acquisition strategies, financial expectations including anticipated revenue or expense levels, business prospects, market positioning, product development, manufacturing re-alignment, capital expenditures, tax benefits and expenses, and the effect of contingencies or changes in accounting policies.
FACTORS THAT MAY AFFECT FUTURE RESULTS This annual report on Form 10-K contains certain forward-looking information, such as statements about the Company’s financial goals, acquisition strategies, financial expectations including anticipated revenue or expense levels, business prospects, market positioning, product development, manufacturing re-alignment, capital expenditures, tax benefits and expenses, and the effect of contingencies or changes in accounting policies.
Gross Profit and Expense Ratios Fiscal Year (In Millions) 2023 % of Net Sales 2022 % of Net Sales Gross Profit $ 697.0 33.8 % $ 691.4 33.8 % Selling, General and Administrative Expense 433.5 21.0 % 432.1 21.1 % Gross Profit The gross profit margin ratio was 33.8 percent in 2023 and 2022.
Gross Profit and Expense Ratios Fiscal Year (In Millions) 2024 % of Net Sales 2023 % of Net Sales Gross Profit $ 717.3 35.5 % $ 697.0 33.8 % Selling, General and Administrative Expense 470.1 23.3 % 433.5 21.0 % Gross Profit The gross profit margin ratio was 35.5 percent and 33.8 percent in 2024 and 2023, respectively.
Related to the unrecognized tax benefits, the Company has also recorded a liability for potential penalties and interest of $0.1 million. 18 ACCOUNTING PRONOUNCEMENTS For information regarding recent accounting pronouncements, refer to Note 2 - Accounting Pronouncements , in the Notes to Consolidated Financial Statements in the sections entitled ""Adoption of New Accounting Standards" and "Accounting Standards Issued But Not Yet Adopted", included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
ACCOUNTING PRONOUNCEMENTS For information regarding recent accounting pronouncements, refer to Note 2 - Accounting Pronouncements , in the Notes to Consolidated Financial Statements in the sections entitled ""Adoption of New Accounting Standards" and "Accounting Standards Issued But Not Yet Adopted", included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Net Income Net income for 2023 was $194.7 million compared to 2022 net income of $188.8 million. Net income attributable to Franklin Electric Co., Inc. for 2023 was $193.3 million, or $4.11 per diluted share, compared to 2022 net income attributable to Franklin Electric Co., Inc. of $187.3 million, or $3.97 per diluted share.
Net Income Net income for 2024 was $181.6 million compared to 2023 net income of $194.7 million. Net income attributable to Franklin Electric Co., Inc. for 2024 was $180.3 million, or $3.86 per diluted share, compared to 2023 net income attributable to Franklin Electric Co., Inc. of $193.3 million, or $4.11 per diluted share.
Water Systems sales in markets outside the U.S. and Canada increased 3 percent in 2023, as compared to the prior year. Sales decreased 11 percent in 2023 due to the negative impact from foreign exchange rates, as compared to prior year.
Water Systems net sales in markets outside the U.S. and Canad a increased 4 percent in 2024 , as compared to the prior year. Sales decreased 4 pe rcent in 2024 due to the negative impact from foreign exchange rates, as compared to prior year.
Cash Flows from Investing Activities 2023 vs. 2022 Net cash used in investing activities was $74.3 million in 2023 compared to $43.1 million in 2022. The increase was primarily attributable to increased acquisition activity in 2023.
Cash Flows from Investing Activities 2024 vs. 2023 Net cash used in investing activities was $45.6 million in 2024 compared to $74.3 million in 2023. The change in investing cash flow was primarily attributable to decreased acquisition activity in 2024.
The sales increase in 2023 was primarily due to price realization, partially offset by the negative impact of foreign currency translation and lower volumes. The Company's consolidated gross profit was $697.0 million for 2023, an increase of $5.6 million from the prior year.
The sales decrease in 2024 was primarily due to lower volumes and the negative impact of foreign currency translation, partially offset by the incremental sales impact from recent acquisitions. The Company's consolidated gross profit was $717.3 m illion for 2024, an increase of $20.3 million from the prior year.
The intersegment elimination of operating income effectively defers the operating income on sales from Water Systems to Distribution in the consolidated financial results until such time as the transferred product is sold from the Distribution segment to its end third party customer. General and administrative expenses increased $1.0 million, compared to the prior year.
The intersegment profit elimination impact in 2024 compared to 2023 was an unfavorable $2.7 million. T he intersegment elimination of operating income effectively defers the operating income on sales from Water Systems to Distribution in the consolidated financial results until such time as the transferred product is sold from the Distribution segment to its end third party customer.
Tax Cuts and Jobs Act transition tax $ 8.7 $ 3.9 $ 4.8 $ — $ — $ 196.1 $ 54.4 $ 114.4 $ 15.8 $ 11.5 Interest payments on debt obligations are calculated for future periods using interest rates in effect at the end of 2023.
Tax Cuts and Jobs Act transition tax $ 4.8 $ 4.8 $ — $ — $ — $ 229.8 $ 165.4 $ 34.2 $ 17.3 $ 12.9 Interest payments on debt obligations are calculated for future periods using interest rates in effect at the end of 2024.
Certain of these projected interest payments may differ in the future based on interest rates or other factors or events. The projected interest payments only pertain to obligations and agreements outstanding at December 31, 2023.
Certain of these projected interest payments may differ in the future based on interest rates or other factors or events.
There is currently no need to repatriate these funds in order to meet domestic funding obligations or scheduled cash distributions. 17 Cash Flows The following table summarizes significant sources and uses of cash and cash equivalents: (in millions) 2023 2022 Cash flows from operating activities $ 315.7 $ 101.7 Cash flows from investing activities $ (74.3) $ (43.1) Cash flows from financing activities $ (192.2) $ (48.5) Impact of exchange rates on cash and cash equivalents $ (10.0) $ (4.9) Change in cash and cash equivalents $ 39.2 $ 5.2 Cash Flows from Operating Activities 2023 vs 2022 Net cash provided by operating activities was $315.7 million for 2023 compared to $101.7 million for 2022.
Cash Flows The following table summarizes significant sources and uses of cash and cash equivalents: (in millions) 2024 2023 Cash flows from operating activities $ 261.4 $ 315.7 Cash flows from investing activities $ (45.6) $ (74.3) Cash flows from financing activities $ (74.1) $ (192.2) Impact of exchange rates on cash and cash equivalents $ (6.1) $ (10.0) Change in cash and cash equivalents $ 135.6 $ 39.2 Cash Flows from Operating Activities 2024 vs 2023 Net cash provided by operating activities was $261.4 million for 2024 compared to $315.7 million for 2023.
In addition, the Company maintains an uncommitted and unsecured private shelf agreement with NYL Investors LLC, an affiliate of New York Life, and each of the undersigned holders of Notes (the "New York Life Agreement") with a remaining borrowing capacity of $125.0 million as of December 31, 2023. The New York Life Agreement matures on July 30, 2024.
In addition, the Company maintains an uncommitted and unsecured private shelf agreement with NYL Investors LLC, an affiliate of New York Life, and each of the undersigned holders of Notes (the "New York Life Agreement").
The Company has pension and other post-retirement benefit obligations not included in the table above which will result in estimated future payments of approximately $0.8 million in 2024.
The projected interest payments only pertain to obligations and agreements outstanding at December 31, 2024. 18 The Company has pension and other post-retirement benefit obligations not included in the table above which will result in estimated future payments of approximately $7.3 million in 2025.
AGGREGATE CONTRACTUAL OBLIGATIONS The majority of the Company’s contractual obligations to third parties relate to debt obligations. In addition, the Company has certain contractual obligations for future lease payments and purchase obligations.
In addition, the Company has certain contractual obligations for future lease payments and purchase obligations.
Interest Expense Interest expense was $11.8 million in 2023 and $11.5 million in 2022, respectively. The increase in 2023 was primarily driven by higher interest rates, partially offset by lower average borrowings in 2023. Other Income or Expense Other income (expense), net was a benefit of $3.7 million in 2023 and an expense of $3.2 million in 2022.
The decrease in 2024 was primarily driven by lower average borrowings in 2024. Other Income or Expense Other income (expense), net was a benefit of $1.3 million in 2024 and $3.7 million in 2023.
Operating income margin increased in Fueling Systems primarily due to price realization, a favorable product and geographic sales mix shift and disciplined cost management. Operating Income-Distribution Distribution operating income decreased $20.2 million in 2023, as compared to the prior-year period. The 2023 operating income margin was 5.1 percent compared to 8.2 percent of net sales in 2022.
Operating income and operating margin increased primarily due to a favorable geographic mix of sales, price realization and cost management. Operating Income-Distribution Distribution operating income in 2024 was $24.3 million, a decrease of $10.0 million as compared to the prior-year period.
Indefinite-Lived Intangible Asset and Goodwill Impairment Evaluation According to FASB ASC Topic 350, Intangibles - Goodwill and Other , intangible assets with indefinite lives must be tested for impairment at least annually or more frequently as warranted by triggering events that indicate potential impairment. The Company uses a variety of methodologies in conducting impairment assessments including income and market approaches.
There is inherent uncertainty in forecasted future cash flows and therefore, actual results may differ and could result in subsequent impairment charges of acquired intangible assets and/or goodwill. 19 Indefinite-Lived Intangible Asset and Goodwill Impairment Evaluation According to FASB ASC Topic 350, Intangibles - Goodwill and Other , goodwill and other intangible assets with indefinite lives must be tested for impairment at least annually or more frequently as warranted by triggering events that indicate potential impairment.
As of December 31, 2023, the Company had $335.4 million borrowing capacity under the Credit Agreement as $3.6 million in letters of commercial and standby letters of credit were outstanding and undrawn and $11.0 million in revolver borrowings were drawn and outstanding, which were primarily used for funding working capital requirements.
As of December 31, 2024, the Company had $304.1 million borrowing capacity under the Credit Agreement as $4.5 million in letters of commercial and standby letters of credit were outstanding and undrawn and $41.4 million in revolver borrowings were drawn or outstanding.
Further, an extended downturn in the economy may impact certain components of the operating segments more significantly and could result in an impairment determination.
The sensitivity analysis required the use of numerous subjective assumptions, which, if actual experience varies, could result in material differences in the requirements for impairment charges. Further, an extended downturn in the economy may impact certain components of the operating segments more significantly and could result in an impairment determination.
Operating income and operating income margin decreased primarily due to unfavorable pricing of commodity-based products sold through the business. Operating Income-Eliminations/Other 16 Operating income-eliminations/other is composed primarily of intersegment sales and profit eliminations and unallocated general and administrative expenses. The intersegment profit elimination impact in 2023 compared to 2022 was a favorable $6.2 million.
Operating income and operating income margin decreased in 2024 primarily due to the negative impact on sales from wet weather across much of the United States, decreases in pricing of commodity-based products sold through the business and increased SG&A costs. 16 Operating Income-Corporate Expenses and Eliminations Operating income-corporate expenses and eliminations is composed primarily of intersegment sales and profit eliminations and unallocated general and administrative expenses.
The favorable benefit in 2023 was due to higher interest income as a result of favorable interest rates and lower benefit costs related to the Company’s employee benefit plans. Foreign Exchange Foreign currency-based transactions produced an expense of $12.1 million in 2023 and $7.2 million in 2022, respectively.
The benefit in 2024 was lower than 2023 due to lower interest income realized in Argentina as excess cash balances and interest rates have declined in 2024 compared to 2023. Foreign Exchange Foreign currency-based transactions produced an expense of $6.8 million in 2024 and $12.1 million in 2023, respectively.
These cash flows consider factors regarding expected future operating income and historical trends, as well as the effects of demand and competition. The Company is required to record an impairment if these assumptions and estimates change whereby the fair value of the reporting units is below their associated carrying values.
The income approach utilizes assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. These cash flows consider factors regarding expected future operating income and historical trends, as well as the effects of demand and competition.
Significant judgment is required to determine if an indication of impairment has taken place. Factors to be considered include the following: adverse changes in operating results, decline in strategic business plans, significantly lower future cash flows, and sustainable declines in market data such as market capitalization.
Factors to be considered include the following: adverse changes in operating results, decline in strategic business plans, significantly lower future cash flows, and sustainable declines in market data such as market capitalization. A 10 percent decrease in the estimated fair value of any of the indefinite-lived trade names would not have changed this determination.
The increase in cash provided by operating activities was primarily due to actions the Company took to improve working capital including inventory reductions as its supply chain resiliency and lead times improved during the back half of the year.
The change in operating cash flow was primarily attributable to changes in working capital and lower earnings. In 2023, the Company's cash flow benefited from actions it took to improve working capital including inventory reductions as its supply chain resiliency and lead times improved significantly compared to 2022.
Cash Flows from Financing Activities 2023 vs. 2022 Net cash used by financing activities was $192.2 million in 2023 compared to $48.5 million in 2022. The change in financing cash flow was primarily attributable to net borrowings under the Company's revolving credit facility in 2022 compared to net repayments in 2023.
Cash Flows from Financing Activities 2024 vs. 2023 Net cash used by financing activities was $74.1 million in 2024 compared to $192.2 million in 2023.
The gross profit margin was favorably impacted in 2023 by price realization, product mix and lower freight costs in Water Systems and Fueling, partially offset by margin compression from unfavorable pricing of commodity-based products sold through the Distribution business. Selling, General and Administrative (“SG&A”) SG&A expenses were $433.5 million in 2023 compared to $432.1 million in 2022.
The gross profit margin was favorably impacted in 2024 by cost management, including lower freight costs in Water Systems and Energy Systems, and a favorable product and geographic sales mix shift. Selling, General and Administrative (“SG&A”) SG&A expenses wer e $470.1 m illion in 2024 compared to $433.5 million in 2023.
In 2023 excluding the impact of foreign currency translation, sales increases in EMEA and Latin America more than offset sales declines in the Asia Pacific markets. Net Sales-Fueling Systems Fueling Systems sales decreased 11 percent in 2023, as compared to the prior year.
In 2024 excluding the impact of foreign currency translation, sales increased in all three major regions: EMEA, Latin America and Asia Pacific. Net Sales-Energy Systems Energy Systems net sale s decreased 8 percent in 2024 , as compared to the prior year. This sales decline was primarily due to lower volumes.
RESULTS OF OPERATIONS Net Sales Net Sales (In millions) 2023 2022 2023 v 2022 Water Systems $ 1,203.7 $ 1,157.5 $ 46.2 Fueling Systems 296.5 334.1 (37.6) Distribution 673.3 668.1 5.2 Eliminations/Other (108.4) (116.0) 7.6 Consolidated $ 2,065.1 $ 2,043.7 $ 21.4 Net sales increased 1 percent in 2023 compared to the prior year.
Net Sales (In millions) 2024 2023 2024 v 2023 Water Systems $ 1,184.0 $ 1,203.7 $ (19.7) Energy Systems 273.7 296.5 (22.8) Distribution 685.5 673.3 12.2 Eliminations (121.9) (108.4) (13.5) Consolidated $ 2,021.3 $ 2,065.1 $ (43.8) Net Sales-Water Systems Water Systems net sales decreased 2 percent in 2024, as compared to the prior year.
The Company reports the results of its subsidiaries in Argentina and Turkey using highly inflationary accounting, which requires that the functional currency of the entity be changed to the reporting currency of its parent. Income Taxes The provision for income taxes in 2023 and 2022 were $47.5 million and $46.4 million, respectively.
The expense in 2024 and 2023 was primarily due to transaction losses associated with the Turkish Lira and A rgentine Peso relative to the U.S. dollar. The Company reports the results of its subsidiaries in Argentina and Turkey using highly inflationary accounting, which requires that the functional currency of the entity be changed to the reporting currency of its parent.
Partially offsetting the increase, sales decreased 5 percent in 2023 due to the negative impact from foreign exchange rates, as compared to prior year. Water Systems sales in the U.S. and Canada increased 4 percent in 2023, as compared to the prior year.
Water Systems net sales in the U.S. and Canada d ecreased 5 percent in 2024, as compared to the prior year.
Operating income (loss) (In millions) 2023 2022 2023 v 2022 Water Systems $ 196.6 $ 172.3 $ 24.3 Fueling Systems 92.7 96.8 (4.1) Distribution 34.3 54.5 (20.2) Eliminations/Other (61.2) (66.4) 5.2 Consolidated $ 262.4 $ 257.2 $ 5.2 Operating Income-Water Systems Water Systems operating income increased $24.3 million in 2023, as compared to the prior-year period, primarily due to price realization and cost management, including lower freight costs.
Operating income (loss) (In millions) 2024 2023 2024 v 2023 Water Systems $ 197.9 $ 196.6 $ 1.3 Energy Systems 93.6 92.7 0.9 Distribution 24.3 34.3 (10.0) Corporate Expenses and Eliminations (72.2) (61.2) (11.0) Consolidated $ 243.6 $ 262.4 $ (18.8) Operating Income-Water Systems Water Systems operating income in 2024 was $197.9 million, an increase of $1.3 million as compared to the prior year.
Market conditions have caused the expected long-term rate or return to increase from 5.70 percent as used in measuring net periodic cost for 2023.
Market conditions have caused the expected long-term rate or return to decrease from 6.20 percent as used in measuring net periodic cost for 2024. A change in the long-term rate of return selected by the Company of 25 basis points would result in a change of about $0.3 million of employee benefit expense.
Operating income decreased in Fueling Systems primarily due to lower sales volumes, partially offset by a favorable product and geographic mix of net sales and disciplined cost management. The 2023 operating income margin was 31.3 percent compared to 29.0 percent of net sales in 2022.
The 2024 operating income margin was 16.7 percent, an increase of 40 basis points from 16.3 percent in 2023 . Operating income and operating margin increased in 2024 primarily due to price realization, cost management and a favorable product and geographic sales mix shift.
The market value approach compares the reporting units’ current and projected financial results to entities of similar size and industry to determine the market value of the reporting unit. The income approach utilizes assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets.
The Company uses a variety of methodologies in conducting impairment assessments including qualitative reviews as well as quantitative reviews using the income and market approaches. The market value approach compares the reporting units’ current and projected financial results to entities of similar size and industry to determine the market value of the reporting unit.
Restructuring expenses were primarily from continued miscellaneous manufacturing realignment activities, branch closings and consolidations. Operating Income Operating income increased 2 percent in 2023, as compared to the prior year.
Restructuring Expenses Restructuring expenses were $3.5 million and $1.1 million in 2024 and 2023, respectively. Restructuring actions in 2024 were primarily related to headcount reductions and facility closures to optimize the Company's cost structure. Restructuring expenses in 2023 were primarily from continued miscellaneous manufacturing realignment activities, branch closings and consolidations.
Outside the U.S. and Canada, Fueling Systems sales decreased 19 percent in 2023, as compared to the prior year, due primarily to the divestiture of the above ground storage tank business in 2022 and lower sales in China. 15 Net Sales-Distribution Distribution sales increased 1 percentage point in 2023, as compared to the prior year.
Energy Systems net sales in the U.S. and Canada decreased 3 percent in 2024, as compared to the prior year. Outside the U.S. and Canada, Energy Systems sales decreased 18 percent in 2024, as compared to the prior year.
The Distribution segment sales increase was primarily due to higher volumes, partially offset by lower commodity-driven pricing.
The Distribution segment sales increase was primarily due to the incremental sales impact from a recent acquisition, which favorably impacted net sales by 3 percent, partially offset by the negative impact of commodity pricing declines and unfavorable weather.
SG&A expenses increased by less than 1 percent in 2023 primarily due to higher compensation costs, partially offset by lower advertising and marketing expenses . The SG&A expenses ratio was 21.0 percent and 21.1 percent in 2023 and 2022, respectively. Restructuring Expenses Restructuring expenses were $1.1 million and $2.2 million in 2023 and 2022, respectively.
SG&A expens es increased i n 2024 primarily due to higher employee compensation costs, including incremental expenses associated with the Company's CEO transition, and the incremental expense impact of recent acquisitions. The SG&A expenses ratio was 23.3 percent and 21.0 percent in 2024 and 2023, respectively.
The effective tax rate for 2023 was about 20 percent and before the impact of discrete events was about 21 percent. The effective tax rate for 2022 both before and after the impact of discrete events was about 20 percent.
Income Taxes The provision for income taxes in 2024 and 2023 were $50.2 million and $47.5 million, respectively. The effective tax rate for 2024 was about 22 percent and included a favorable benefit from discrete events of 1 percent. The effective tax rate for 2023 was about 20 percent and included a favorable benefit from discrete events of 1 percent.
The Company also has other long-term debt borrowings outstanding as of December 31, 2023. See Note 10 - Debt for additional specifics regarding these obligations and future maturities. At December 31, 2023, the Company had $69.6 million of cash and cash equivalents held in foreign jurisdictions, which the Company intends to use to fund foreign operations.
The maturity dates of both agreements were extended from July 30, 2024 to May 15, 2027. 17 At December 31, 2024, the Company had $47.1 million of cash and cash equivalents held in foreign jurisdictions, which the Company intends to use to fund foreign operations.
Removed
Diluted earnings per share was $4.11 for 2023, an increase of $0.14 or 4 percent from the prior year.
Added
Diluted earnings per share was $3.86 for 2024, a decrease of $0.25 or 6 percent from the prior year. RESULTS OF OPERATIONS Net Sales Net sales in 2024 were $2.0 billion and decreased 2 percent co mpared to the prior year. Sales were negatively impacted by changes in foreign exchange rates, principally due to the strengthening of the U.S.
Removed
Foreign currency unfavorably impacted net sales by 3 percentage points during 2023, principally due to the strengthening of the U.S. Dollar relative to the Turkish Lira and Argentine Peso. Net Sales-Water Systems Water Systems sales increased 4 percent in 2023, as compared to the prior year. This sales growth was primarily due to price realization.
Added
Dollar relative to the Argentine Peso, Turkish Lira and Brazilian Real. However, the Company increases prices in the local currency to offset the impact of currency devaluation in the Argentina and Turkey highly inflationary economies. As a result, the net negative impact of foreign currency exchange rates on net sales was 1 percent in 2024.
Removed
This sales decline was primarily due to lower volumes driven by customer inventory destocking as well as higher interest rates, labor constraints, and permitting delays causing some new station build plans to move into 2024. Fueling Systems sales in the U.S. and Canada decreased 9 percent in 2023, as compared to the prior year.
Added
In 2024, sales of large dewatering equipmen t decreased 41 percent, s ales of water treatment products increased 11 percent, sales of groundwater pumping equipme nt increased 4 percent an d sales of all other surface pumping equipment increased 5 percent compared to 2023.
Removed
The decrease was primarily in dispensing and piping equipment.
Added
The decreases were across all product lines. 15 Net Sales-Distribution Distribution net sale s increased 2 percent in 2024 , as compared to the prior year.
Removed
The 2023 operating income margin was 16.3 percent compared to 2022 operating income margin of 14.9 percent of net sales. Operating income margin increased in Water Systems primarily due to price realization and operating leverage on higher sales. Operating Income-Fueling Systems Fueling Systems operating income decreased $4.1 million in 2023, as compared to the prior-year period.
Added
Operating Income Operating income decreased 7 per cent in 2024, as compared to the prior year.
Removed
The expense in 2023 was primarily due to transaction losses associated with the Turkish Lira, A rgentine and Mexican Peso relative to the U.S. dollar. The expense in 2022 was primarily due to transaction losses associated with the Argentine Peso and Turkish Lira.
Added
Operating Income-Energy Systems Energy Systems operating income in 2024 was $93.6 million, an increase of $0.9 million as compared to the prior year. The 2024 operating income margin was 34. 2 percent, an increase of 290 basis points from 31.3 percent in 2023.
Removed
There is inherent uncertainty in forecasted future cash flows and therefore, actual results may differ and could result in subsequent impairment charges of acquired intangibles and/or goodwill.
Added
The 2024 operating income margin was 3. 5 percent, a decrease of 160 basis points from 5.1 percent in 2023.
Removed
For indefinite-lived assets apart from goodwill, primarily trade names for the Company, if the fair value is less than the carrying amount, an impairment charge is recognized in an amount equal to that excess. The Company has not made any material changes to the method of evaluating impairments during the last three years.
Added
General and administrative expense s increased $8.3 million, co mpared to the prior year. The increase was primarily driven by to higher employee compensation costs, including incremental expenses associated with the Company’s CEO transition. Interest Expense Interest expense wa s $6.3 million in 2024 and $11.8 million in 2023, respectively.
Removed
In compliance with FASB ASC Topic 350, goodwill is not amortized. Goodwill is tested at the reporting unit level for impairment annually or more frequently as warranted by triggering events that indicate potential impairment.
Added
On May 15, 2024, the Company entered into Amendment No. 1 that increased the total available facility amount from lenders to $250.0 million from $200.0 million. As of December 31, 2024, the remaining borrowing capacity on the New York Life Agreement was $175.0 million.
Removed
Reporting units are operating segments or one level below, known as components, which can be aggregated for testing purposes. 19 In assessing the recoverability of goodwill, the Company determines the fair value of its reporting units by utilizing a combination of both the market value and income approaches.
Added
The Company also maintains an uncommitted and unsecured note purchase and private shelf agreement with PGIM, Inc. and its affiliates (the "Prudential Agreement"). On May 15, 2024, the Company entered into Amendment No. 1 that increased the total available facility amount from lenders to $250.0 million from $150.0 million.
Removed
Goodwill included on the balance sheet as of the year ended December 31, 2023 was $342.4 million. During the fourth quarter of 2023, the Company completed its annual impairment test of goodwill and indefinite-lived trade names and determined the fair value of all intangibles were substantially in excess of the respective carrying values.
Added
There is currently no need to repatriate these funds in order to meet domestic funding obligations or scheduled cash distributions.
Removed
A 10 percent decrease in the estimated fair value of any of these intangible assets would not have changed this determination. The sensitivity analysis required the use of numerous subjective assumptions, which, if actual experience varies, could result in material differences in the requirements for impairment charges.
Added
In February 2025, the Company acquired 100 percent of the ownership interests of PumpEng for a purchase price of AUD 24.0 million (approximately $15 million), subject to working capital and net debt closing adjustments.
Added
Also in February 2025, the Company signed a definitive agreement to acquire Barnes for an enterprise value of $110.0 million, subject to working capital and net debt closing adjustments. The acquisition is subject to customary closing conditions, including Colombian antitrust clearance, and is expected to close on or about March 1, 2025.
Added
The change in financing cash flow was primarily due to net borrowings under the Company's credit facility in 2024 compared to net repayments in 2023, partially offset by lower proceeds from option exercises, increased share repurchase activity and higher dividends. AGGREGATE CONTRACTUAL OBLIGATIONS The majority of the Company’s contractual obligations to third parties relate to debt obligations.
Added
Related to the unrecognized tax benefits, the Company has also recorded a liability for potential penalties and interest of $0.1 million.
Added
The Company has the option to assess goodwill and other indefinite-lived intangible assets for impairment by initially performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying amount.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeCommodity Price Exposures Portions of the Company’s business are exposed to volatility in the prices of certain commodities, such as copper, steel and aluminum, among others. The primary exposure to this volatility resides with the use of these materials in purchased component parts.
Biggest changeThe Company also has exposure to changes in interest rates in the form of the fair value of outstanding fixed rate debt fluctuating in response to changing interest rates. 21 Commodity Price Exposures Portions of the Company’s business are exposed to volatility in the prices of certain commodities, such as copper, steel and aluminum, among others.
Based on the 2023 mix of foreign currencies, the Company estimates that a hypothetical strengthening of the US Dollar by about 2 percent would have reduced the Company’s 2023 sales by less than 1 percent.
Based on the 2024 mix of foreign currencies, the Company estimates that a hypothetical strengthening of the US Dollar by about 2 percent would have reduced the Company’s 2024 sales by less than 1 percent.
Based on the 2023 use of commodities, the Company estimates that a hypothetical 10 percent adverse movement in prices for raw metal commodities would result in less than 1 percent decrease of gross margin as a percent of net sales. 21
Based on the 2024 use of commodities, the Company estimates that a hypothetical 10 percent adverse movement in prices for raw metal commodities would result in less than 1 percent decrease of gross margin as a percent of net sales. 22
Borrowings in EUR under the Credit Agreement may be made either at (i) a Euro Interbank Offer Rate (EURIBOR) Term Benchmark plus an applicable margin or (ii) an alternative base rate as defined in the Credit Agreement. The Company had $11.0 million borrowings at year-end 2023 under the Credit Agreement.
Borrowings in EUR under the Credit Agreement may be made either at (i) a Euro Interbank Offer Rate (EURIBOR) Term Benchmark plus an applicable margin or (ii) an alternative base rate as defined in the Credit Agreement. The Company had $41.4 million borrowings at year-end 2024 under the Credit Agreement.
The Company generally maintains long-term fixed price contracts on raw materials and component parts; however, the Company is prone to exposure as these contracts expire.
The primary exposure to this volatility resides with the use of these materials in purchased component parts. The Company generally maintains long-term fixed price contracts on raw materials and component parts; however, the Company is prone to exposure as these contracts expire.
The Company estimates that a hypothetical increase of 100 basis points in interest rates would have increased interest expense by $0.7 million during 2023. The Company also has exposure to changes in interest rates in the form of the fair value of outstanding fixed rate debt fluctuating in response to changing interest rates.
The Company estimates that a hypothetical increase of 100 basis points in interest rates would have increased interest expense by $0.3 million during 2024.

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