Badger Meter, Inc. (NYSE: BMI) today reported results for the
third quarter ended September 30, 2019.
Third Quarter 2019 Highlights
- Net sales for the third quarter of 2019 were $108.6 million
compared to $110.6 million in the comparable prior year quarter;
domestic water utility sales increased 2% year-over-year.
- Gross profit margins remain strong at 38.4%.
- GAAP net earnings and diluted earnings per share (EPS) were
$12.7 million and $0.44, respectively, compared to $2.9 million and
$0.10 in the comparable prior year period.
- Excluding the impact of pension termination settlement and
executive retirement charges in the prior year period, adjusted EPS
was $0.44 compared to $0.46 for the third quarter of 2018. (See
2018 adjusted results in the attached GAAP to Non-GAAP
reconciliation).
- $20.2 million of cash provided by operations representing solid
earnings conversion.
Third Quarter Operating Results
“We were pleased with the sequential improvement in sales, with
growth in the domestic municipal water market against a difficult
comparison, and continued interest in our new technology products.
In the latter half of the quarter, we began shipping our new three
and four-inch ultrasonic meters incorporating our D-Flow
technology. ORION® LTE-M radio installations at early adopters and
several key customers are ramping, while pilot testing at others
continues. Our margins and cash flow results demonstrate the impact
of our continuous improvement efforts. Overall, it was a solid
quarter across a variety of operational and financial measures and
I want to thank my Badger Meter colleagues across the globe for
their efforts,” said Kenneth C. Bockhorst, President and Chief
Executive Officer of Badger Meter.
Municipal water sales decreased 3% from the strong comparable
prior year quarter; however, domestic municipal water sales grew by
2%. International municipal water utility sales declined as
anticipated, as last year’s large Middle East order did not repeat.
The domestic increase, despite a near-record comparable, was the
result of solid market demand, the launch of the new three and
four-inch commercial E-Series® Ultrasonic meters and initiation of
recent key customer project wins. A variety of additional customers
are undergoing pilot tests of newer technologies, most notably with
ORION® Cellular LTE-M endpoints, a common practice that can result
in order deferments. Sales of flow instrumentation products grew 1%
year-over-year with modest increases across most industrial end
markets.
Adjusted operating margins were 15.1% in the third quarter of
2019 compared to 16.1% in the comparable prior year period. Gross
profit margins were strong at 38.4%, reflective of positive product
and regional sales mix, as well as favorable, but moderating,
price/cost dynamics. However, they declined year-over-year due
entirely to the Company’s recording of a discrete warranty
provision associated with a sourced system integration module for a
previously installed solution sold only outside North America.
Selling, engineering and administration (“SEA”) expenses in the
third quarter of 2019 totaled $25.2 million compared to an adjusted
$26.1 million in the prior year. Adjusted SEA leverage improved 40
basis points to 23.2% from 23.6% in the prior year. The income tax
rate of 22.1% was in line with the prior year’s adjusted 22.8%.
Cash from operations of $20.2 million increased 37% or $5.5
million year-over-year, primarily associated with improved working
capital management.
Outlook
Bockhorst continued, “The municipal spending market remains
healthy and we continue to be encouraged by the interest level,
engagement and pilot testing of our leading technologies. As we
have historically experienced, the introduction of innovative
solutions in our markets can create order pauses and sales
unevenness in the short-term. However, our customers contemplate
the long-term in making their smart water investments and
therefore, we continue to support technology and capabilities that
offer improved performance and economics over that horizon.
Looking beyond demand trends, our profit margins continue to
benefit from positive sales mix and continuous improvement
activities across all aspects of our operations, and our balance
sheet provides ample capacity to execute on disciplined, strategic
acquisitions.” Bockhorst concluded, “We remain confident in our
long term outlook as our broad range of proven smart-water
solutions solve customer challenges and work to preserve the
world’s most precious resource.”
Conference Call and Webcast
Information
Badger Meter management will hold a conference call to discuss
the company’s third quarter 2019 results today, Thursday October
17, 2019 at 10:00 AM CT / 11:00 AM ET. The call and related
presentation can be accessed via webcast through the Investor
section of our website or by dialing 1-877-823-9761 (US) or
1-647-689-5327 (Intl) and entering the passcode 6591119. The
webcast will be archived on the company’s website until its next
earnings release.
Safe Harbor Statement
Certain statements contained in this news release, as well as
other information provided from time to time by Badger Meter (the
“company”) or its employees, may contain forward looking statements
that involve risks and uncertainties that could cause actual
results to differ materially from those statements. The company’s
results are also subject to general economic conditions, variation
in demand from customers, continued market acceptance of new
products, the successful integration of acquisitions, competitive
pricing and operating efficiencies, supply chain risk, material and
labor cost increases, tax reform and foreign currency risk. See the
company’s Form 10-K filed with the SEC for further information
regarding risk factors. Badger Meter disclaims any obligation to
publicly update or revise any forward-looking statements as a
result of new information, future events or any other reason.
About Badger Meter
Badger Meter is an innovator in flow measurement, control and
communications solutions, serving water utilities, municipalities,
and commercial and industrial customers worldwide. The company’s
products measure water, oil, chemicals, and other fluids, and are
known for accuracy, long-lasting durability and for providing
valuable and timely measurement data. For more information, visit
badgermeter.com.
BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
(in thousands, except share and
earnings per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2019
2018
2019
2018
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net sales
$
108,646
$
110,630
$
317,069
$
329,319
Cost of sales
66,976
66,684
194,666
207,121
Gross margin
41,670
43,946
122,403
122,198
Selling, engineering and administration
25,225
28,212
76,598
80,139
Operating earnings
16,445
15,734
45,805
42,059
Interest expense, net
66
295
280
994
Other pension and postretirement costs
41
11,787
123
19,799
Earnings before income taxes
16,338
3,652
45,402
21,266
Provision for income taxes
3,617
801
10,499
4,715
Net earnings
$
12,721
$
2,851
$
34,903
$
16,551
Earnings per share: Basic
$
0.44
$
0.10
$
1.20
$
0.57
Diluted
$
0.44
$
0.10
$
1.19
$
0.57
Shares used in computation of earnings per share:
Basic
29,013,573
28,989,205
29,022,080
28,983,115
Diluted
29,193,338
29,197,160
29,215,192
29,181,543
BADGER METER, INC.
RECONCILIATION OF NON-GAAP
PERFORMANCE MEASURES TO GAAP PERFORMANCE MEASURES
(in thousands, except share and
earnings per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2019
2018
2019
2018
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Selling, engineering and administration (GAAP measure)
$
25,225
$
28,212
$
76,598
$
80,139
Executive retirement charges
-
2,098
-
2,098
Adjusted selling, engineering and administration
$
25,225
$
26,114
$
76,598
$
78,041
Operating earnings (GAAP measure)
$
16,445
$
15,734
$
45,805
$
42,059
Executive retirement charges
-
2,098
-
2,098
Adjusted operating earnings
$
16,445
$
17,832
$
45,805
$
44,157
Net earnings (GAAP measure)
$
12,721
$
2,851
$
34,903
$
16,551
Executive retirement charge, net of tax
-
1,998
-
1,998
Pension termination settlement charge, net of tax
-
8,652
-
14,786
Adjusted net earnings
$
12,721
$
13,501
$
34,903
$
33,335
Diluted earnings per share (GAAP measure)
$
0.44
$
0.10
$
1.19
$
0.57
Executive retirement charge, net of tax
-
0.07
-
0.07
Pension termination settlement charge, net of tax
-
0.29
-
0.50
Adjusted diluted earnings per share
$
0.44
$
0.46
$
1.19
$
1.14
BADGER METER, INC.
CONSOLIDATED CONDENSED BALANCE
SHEETS
(in thousands)
Assets
September 30,
December 31,
2019
2018
(Unaudited)
Cash
$
37,728
$
13,086
Receivables
61,406
66,300
Inventories
84,835
80,804
Other current assets
7,572
4,469
Total current assets
191,541
164,659
Net property, plant and equipment
86,657
90,321
Intangible assets, at cost less accumulated amortization
49,934
55,418
Other long-term assets
18,100
11,035
Goodwill
71,258
71,258
Total assets
$
417,490
$
392,691
Liabilities
and Shareholders' Equity
Short-term debt
$
4,360
$
18,060
Payables
32,363
22,469
Accrued compensation and employee benefits
12,814
13,768
Other current liabilities
9,308
5,718
Total current liabilities
58,845
60,015
Deferred income taxes
3,077
3,332
Long-term employee benefits and other
31,929
25,841
Shareholders' equity
323,639
303,503
Total liabilities and shareholders' equity
$
417,490
$
392,691
BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS
(in thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2019
2018
2019
2018
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Operating activities: Net earnings
$
12,721
$
2,851
$
34,903
$
16,551
Adjustments to reconcile net earnings to net cash provided
by operations: Depreciation
2,625
2,902
8,688
8,796
Amortization
3,026
3,132
9,323
9,675
Deferred income taxes
33
73
18
132
Noncurrent employee benefits
117
177
(150
)
261
Pension termination settlement charges
-
11,732
-
19,900
Contribution to pension plan
-
(1,260
)
-
(2,860
)
Stock-based compensation expense
328
2,430
882
3,374
Changes in: Receivables
(1,473
)
(4,697
)
4,555
(11,462
)
Inventories
(1,694
)
1,242
(4,259
)
1,409
Payables
1,744
(1,213
)
10,885
(2,468
)
Prepaid expenses and other assets
(1,860
)
(2,474
)
(5,806
)
(5,573
)
Other liabilities
4,669
(213
)
2,100
2,148
Total adjustments
7,515
11,831
26,236
23,332
Net cash provided by operations
20,236
14,682
61,139
39,883
Investing activities: Property, plant and equipment
expenditures
(1,123
)
(1,977
)
(5,589
)
(7,219
)
Acquisitions, net of cash acquired and future payments
-
-
-
(8,048
)
Net cash used for investing activities
(1,123
)
(1,977
)
(5,589
)
(15,267
)
Financing activities: Net decrease short-term debt
-
(6,433
)
(13,500
)
(8,433
)
Payment of contingent acquisition consideration
-
(2,034
)
(1,650
)
(2,034
)
Dividends paid
(4,936
)
(4,351
)
(13,652
)
(11,895
)
Proceeds from exercise of stock options
215
702
963
933
Repurchase of treasury stock
(522
)
(2,462
)
(3,359
)
(4,451
)
Issuance of treasury stock
46
98
143
529
Net cash used for financing activities
(5,197
)
(14,480
)
(31,055
)
(25,351
)
Effect of foreign exchange rates on cash
(82
)
279
147
200
Increase (decrease) in cash
13,834
(1,496
)
24,642
(535
)
Cash - beginning of period
23,894
12,125
13,086
11,164
Cash - end of period
$
37,728
$
10,629
$
37,728
$
10,629
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191017005101/en/
Karen Bauer at (414) 371-7276 kbauer@badgermeter.com
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