Badger Meter, Inc. (NYSE: BMI) today reported results for the
third quarter ended September 30, 2020.
Third Quarter 2020 Highlights
- Resiliency of municipal water market evident with consolidated
third quarter 2020 sales of $113.6 million, an increase of 5%
compared to $108.6 million in the comparable prior year quarter;
municipal water sales grew 11% year-over-year.
- Strong incremental profitability with a 210 basis point
increase in operating profit margins.
- Net earnings and diluted earnings per share (EPS) were $14.9
million and $0.51, respectively, compared to $12.7 million and
$0.44 in the comparable prior year period.
- Generated $21 million of cash provided by operations
representing strong earnings conversion, ending the quarter with
$94 million in cash on the balance sheet.
Overview
“During the quarter, we continued to effectively serve customers
while protecting the health, safety and well-being of our employees
and communities. We were pleased with the stability of municipal
water order rates from the second quarter trough, and with the
performance of our manufacturing operations which recovered
productivity and output. My thanks go to all the Badger Meter
employees who continue to adeptly serve our customers and keep our
operations running safely and efficiently,” said Kenneth C.
Bockhorst, Chairman, President and CEO of Badger Meter.
Third Quarter Operating Results
Municipal water sales increased 11% over the comparable prior
year quarter. Improving order rates, as well as the conversion of
backlog built last quarter, the result of modest manufacturing
interruptions resulting from the rapid onset of COVID-19,
contributed approximately equally to the sales growth in the
quarter. Demand for ultrasonic meter technology and ORION® Cellular
radios continued to grow, and existing AMI (advanced metering
infrastructure) project installation schedules progressed. Sales of
flow instrumentation products were 18% lower year-over-year, as the
anticipated weakness across the varied industrial end markets
served continued.
Operating margins of 17.2% were 210 basis points higher than the
prior year’s 15.1%. Gross profit margins were strong at 39.6%, a
120 basis point increase over the prior year’s 38.4%. The favorable
product sales mix trend continued with higher software-as-a-service
(SaaS), cellular radio and ultrasonic meter sales benefitting
margins. In addition, the prior year included a discrete,
non-recurring warranty provision for a previously installed product
solution outside North America.
Selling, engineering and administration (“SEA”) expenses in the
third quarter of 2020 of $25.5 million increased a modest $0.3
million from the prior year’s $25.2 million as higher personnel
costs were partially offset by lower travel and other
pandemic-impacted expenses. SEA leverage improved to 22.5% from
23.2% in the comparable prior year quarter. The tax rate of 23.9%
was slightly higher than the prior year’s 22.1%.
“In summary, I am proud of how our team performed in a
coordinated and collaborative way. We continue to make strong
progress on our strategic growth plans and providing the best
service possible to customers, while doing our part to limit the
spread of COVID-19,” stated Bockhorst.
Outlook
“As we look ahead, we will continue to adapt to and execute
through the far-reaching implications of the pandemic. While there
have been sporadic, short-term award delays, we have not
experienced cancellations and our backlog and bid funnel of
attractive opportunities remains solid. Unsettled market conditions
and related customer budget uncertainty, primarily in North
America, could impact a portion of our large and diverse customer
base, however, we anticipate the critical municipal water industry
in general will be more resilient, on a relative basis. End markets
and product applications served by the flow instrumentation product
line are expected to remain challenged.
We believe our long term opportunities for growth remain intact,
and COVID-19 has spotlighted some of the benefits of our smart
water solutions including remote-read AMI offerings and
remote-actuated flow control meters. Our infrastructure-free ORION®
Cellular radios and BEACON® software solution enable the safe,
efficient and sustainable delivery of actionable data and insights
to utilities allowing for remote monitoring and control of critical
operations. We are well-positioned to further augment these
data-driven technology solutions and help our customers
resourcefully address their varied challenges.
While we cannot control the cadence of orders, we can and will
build on our successes from the first nine months of the year and
leverage those in the fourth quarter and into 2021. Our strong cash
generation and balance sheet allow us to nimbly execute our capital
allocation strategy. This involves investing to grow our business
organically and through acquisitions that are consistent with our
vision and objectives, as well as returning cash to shareholders
via dividends, with this past August marking the 28th consecutive
year of increased dividends.”
Bockhorst concluded, "Badger Meter has performed well during the
pandemic due to the resiliency of our end markets and the
competitive advantages we have created with our innovative
offerings. With our deep customer and supplier relationships,
incredible employees and relentless innovation focus, I am
confident in our long term growth prospects. As the world evolves
with the pandemic, we remain focused on our goal of protecting 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 2020 results today, Friday October 16,
2020 at 10:00 AM Central/11:00 AM Eastern time. The call and
related presentation can be accessed via webcast through the
Investor section of our website. Participants can also register to
take part in the call using this online registration link:
http://www.directeventreg.com/registration/event/4885843. After
registering, instructions will be shared on how to join the call.
If online registration is unavailable, registration can also be
accomplished by calling 888-869-1189 or 706-643-5902 and providing
the conference ID number: 4885843. 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, Inc.
(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.
Potential factors that could affect such forward-looking statements
include the duration, severity and geographic spread of the
COVID-19 pandemic, government actions to address or mitigate the
impact of the COVID-19 pandemic, and the potential negative impacts
of COVID-19 on the global economy, the company’s operations and
those of our customers and suppliers. In addition, the company’s
results are 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 Securities and Exchange Commission for
further information regarding risk factors, which are incorporated
herein by reference. 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 and other fluids, and are known for
accuracy, long-lasting durability and for providing valuable and
timely measurement data. For more information, visit
www.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,
2020
2019
2020
2019
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net sales
$
113,587
$
108,646
$
313,214
$
317,069
Cost of sales
68,564
66,976
189,019
194,666
Gross margin
45,023
41,670
124,195
122,403
Selling, engineering and administration
25,509
25,225
76,001
76,598
Operating earnings
19,514
16,445
48,194
45,805
Interest (income) expense, net
(46
)
66
18
280
Other pension and postretirement costs
21
41
109
123
Earnings before income taxes
19,539
16,338
48,067
45,402
Provision for income taxes
4,678
3,617
11,818
10,499
Net earnings
$
14,861
$
12,721
$
36,249
$
34,903
Earnings per share:
Basic
$
0.51
$
0.44
$
1.25
$
1.20
Diluted
$
0.51
$
0.44
$
1.24
$
1.19
Shares used in computation of earnings per share:
Basic
29,048,683
29,013,573
29,049,675
29,022,080
Diluted
29,220,497
29,193,338
29,219,537
29,215,192
BADGER METER, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (in
thousands)
Assets
September 30,
December 31,
2020
2019
(Unaudited)
Cash and cash equivalents
$
93,901
$
48,871
Receivables
57,706
61,365
Inventories
76,987
81,948
Other current assets
4,156
7,910
Total current assets
232,750
200,094
Net property, plant and equipment
82,435
85,761
Intangible assets, at cost less accumulated amortization
42,884
48,163
Other long-term assets
19,309
16,617
Goodwill
71,258
71,258
Total assets
$
448,636
$
421,893
Liabilities
and Shareholders' Equity
Short-term debt
$
-
$
4,480
Payables
37,791
31,523
Accrued compensation and employee benefits
12,671
12,754
Other current liabilities
9,730
8,490
Total current liabilities
60,192
57,247
Deferred income taxes
2,649
876
Long-term employee benefits and other
34,252
32,702
Shareholders' equity
351,543
331,068
Total liabilities and shareholders' equity
$
448,636
$
421,893
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,
2020
2019
2020
2019
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Operating activities: Net earnings
$
14,861
$
12,721
$
36,249
$
34,903
Adjustments to reconcile net earnings to net cash provided by
operations: Depreciation
3,154
2,625
9,132
8,688
Amortization
3,320
3,026
9,803
9,323
Deferred income taxes
9
33
401
18
Noncurrent employee benefits
114
117
571
(150
)
Stock-based compensation expense
336
328
1,041
882
Changes in: Receivables
(3,454
)
(1,473
)
3,184
4,555
Inventories
118
(1,694
)
5,188
(4,259
)
Payables
2,599
1,744
(2,175
)
10,885
Prepaid expenses and other current assets
(575
)
(1,860
)
6,485
(5,806
)
Other current liabilities
910
4,669
3,799
2,100
Total adjustments
6,531
7,515
37,429
26,236
Net cash provided by operations
21,392
20,236
73,678
61,139
Investing activities: Property, plant and equipment
expenditures
(2,276
)
(1,123
)
(5,855
)
(5,589
)
Net cash used for investing activities
(2,276
)
(1,123
)
(5,855
)
(5,589
)
Financing activities: Net decrease short-term debt
(4,600
)
-
(4,600
)
(13,500
)
Payment of contingent acquisition consideration
-
-
-
(1,650
)
Dividends paid
(5,230
)
(4,936
)
(15,108
)
(13,652
)
Proceeds from exercise of stock options
27
215
505
963
Repurchase of treasury stock
(61
)
(522
)
(2,934
)
(3,358
)
Issuance of treasury stock
33
46
126
142
Net cash used for financing activities
(9,831
)
(5,197
)
(22,011
)
(31,055
)
Effect of foreign exchange rates on cash
(585
)
(82
)
(782
)
147
Increase in cash and cash equivalents
8,700
13,834
45,030
24,642
Cash and cash equivalents - beginning of period
85,201
23,894
48,871
13,086
Cash and cash equivalents - end of period
$
93,901
$
37,728
$
93,901
$
37,728
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201016005040/en/
Karen Bauer at (414) 371-7276 kbauer@badgermeter.com
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