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Badger Meter Reports Second Quarter 2019 Results

MILWAUKEE--(BUSINESS WIRE)--

Badger Meter, Inc. (BMI) today reported results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights

  • Net sales for the second quarter of 2019 were $103.5 million, compared to $113.6 million in the comparable prior year quarter.
  • Gross profit margins improved 240 basis points year-over-year to 38.9%.
  • GAAP net earnings and diluted earnings per share (EPS) were $11.4 million and $0.39, respectively, compared to $6.2 million and $0.21 in the comparable prior year period.
  • Excluding the $8.2 million pre-tax, or $6.1 million and $0.21 per share after-tax pension termination settlement charge in the prior year comparable quarter, adjusted EPS was $0.39 compared to $0.42 for the second quarter of 2018.
  • $23.1 million of cash provided by operations representing strong earnings conversion.

Second Quarter Operating Results

“As a technology leader, we have encountered innovation-driven order postponements during new product launch windows. We believe we experienced that impact during the second quarter as customers, eager to adopt our new leading-edge solutions, are actively pilot testing products prior to system-wide deployment or are awaiting new product releases. While this phenomenon creates sales unevenness in the short-term, we believe being at the forefront of new technologies benefits us and our prudent customers given the long term horizon over which their decisions are based,” said Kenneth C. Bockhorst, President and Chief Executive Officer of Badger Meter.

Municipal water sales declined 9.6% from the comparable prior year quarter as customers deferred orders to obtain the latest version of advanced technology products. This is most evident with ORION® Cellular LTE-M endpoints where customer pilots and testing continue without issue. In addition, the company further advanced its quality-focused launch process for the new three- and four-inch commercial E-Series® Ultrasonic meters expected to begin shipping later this year. Finally, prior year municipal water sales included a large Middle East order, which did not repeat. Sales of flow instrumentation products were 6.6% lower year-over-year with declines across most industrial end markets.

Operating margins increased 10 basis points to 14.5% in the second quarter of 2019 from 14.4% in the comparable prior year quarter. Gross profit margins were strong at 38.9%, a 240 basis point increase over the prior year’s 36.5% despite the lower sales volume. Gross profit benefited from positive product and regional sales mix, as well as favorable price/cost dynamics.

Selling, engineering and administration (“SEA”) expenses in the second quarter of 2019 of $25.2 million were flat with the prior year, however given the lower sales volume, SEA as a percent of sales was elevated. The tax rate of 23.8% was in line with the prior year’s adjusted 23.6%.

Cash from operations of $23.1 million increased 25.3% or $4.7 million year-over-year, primarily associated with improved working capital management.

Bockhorst continued, “I am encouraged by the market interest and pilot testing of our leading technologies, which continues at a robust pace. Our gross profit margins improved year-over-year for the fourth consecutive quarter. Our working capital management helped generate robust cash from operations and our continuous improvement focus on metrics including SQDC (safety, quality, delivery and cost) is evident across the organization. I want to express my appreciation to the dedicated team of Badger Meter professionals for their focus on customer quality and continuous improvement.”

Outlook

“Our backlog and new opportunity funnel remain solid, underscored by a high level of interest in our innovative smart water solutions. This includes both the larger size E-Series Ultrasonic meters and ORION Cellular LTE-M radios, which significantly improve performance and functionality. Further, I remain positive on municipal spending trends and our competitive share and positioning. Our customers are making 15 to 20 year investment decisions for their water management solutions and as such, product quality, features and breadth remain of utmost importance.” Bockhorst concluded, “Our smart water solution offerings and strong balance sheet give us confidence in our long term growth outlook as we help 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 second quarter 2019 results today, Thursday July 18, 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 1988338. 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 Six Months Ended
June 30, June 30, June 30, June 30,

2019

 

2018

 

2019

 

2018

(Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Net sales

$

103,542

$

113,648

$

208,423

$

218,689

 
Cost of sales

 

63,266

 

72,144

 

127,690

 

140,437

 
Gross margin

 

40,276

 

41,504

 

80,733

 

78,252

 
Selling, engineering and administration

 

25,243

 

25,153

 

51,373

 

51,927

 
Operating earnings

 

15,033

 

16,351

 

29,360

 

26,325

 
Interest expense, net

 

85

 

409

 

214

 

699

Other pension and postretirement costs

 

35

 

8,031

 

82

 

8,012

 
Earnings before income taxes

 

14,913

 

7,911

 

29,064

 

17,614

 
Provision for income taxes

 

3,555

 

1,757

 

6,882

 

3,914

 
Net earnings

$

11,358

$

6,154

$

22,182

$

13,700

 
Earnings per share:
 
Basic

$

0.39

$

0.21

$

0.76

$

0.47

 
Diluted

$

0.39

$

0.21

$

0.76

$

0.47

 
Shares used in computation of earnings per share:
 
Basic

 

29,027,887

 

28,963,373

 

29,024,543

 

28,965,735

 
Diluted

 

29,211,533

 

29,133,443

 

29,224,552

 

29,159,400

 
   
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   Six Months Ended
June 30, June 30,   June 30, June 30,

2019

2018

 

2019

2018

(Unaudited) (Unaudited)   (Unaudited) (Unaudited)
   
Net earnings (GAAP measure)

$

11,358

$

6,154

 

$

22,182

$

13,700

   
Pension termination settlement charge, net of tax

 

-

 

6,134

 

 

-

 

6,134

   
Adjusted net earnings

$

11,358

$

12,288

 

$

22,182

$

19,834

   
Diluted earnings per share (GAAP measure)

$

0.39

$

0.21

 

$

0.76

$

0.47

   
Pension termination settlement charge, net of tax

 

-

 

0.21

 

 

-

 

0.21

   
Adjusted diluted earnings per share

$

0.39

$

0.42

 

$

0.76

$

0.68

   
 
BADGER METER, INC.
 
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
 
 
Assets June 30, December 31,

2019

2018

(Unaudited)
 
Cash

$

23,894

$

13,086

Receivables

 

60,294

 

66,300

Inventories

 

83,319

 

80,804

Other current assets

 

8,037

 

4,469

Total current assets

 

175,544

 

164,659

 
Net property, plant and equipment

 

88,512

 

90,321

Intangible assets, at cost less accumulated amortization

 

51,717

 

55,418

Other long-term assets

 

17,830

 

11,035

Goodwill

 

71,258

 

71,258

Total assets

$

404,861

$

392,691

 
 
Liabilities and Shareholders' Equity
 
Short-term debt

$

4,560

$

18,060

Payables

 

29,556

 

22,469

Accrued compensation and employee benefits

 

12,256

 

13,768

Other current liabilities

 

7,935

 

5,718

Total current liabilities

 

54,307

 

60,015

 
Deferred income taxes

 

3,233

 

3,332

Long-term employee benefits and other

 

30,869

 

25,841

Shareholders' equity

 

316,452

 

303,503

Total liabilities and shareholders' equity

$

404,861

$

392,691

 
BADGER METER, INC.
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,

2019

2018

2019

2018

(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Operating activities:
Net earnings

$

11,358

 

$

6,154

 

$

22,182

 

$

13,700

 

 

Adjustments to reconcile net earnings to net cash provided by operations:

 

Depreciation

 

3,085

 

 

2,719

 

 

6,063

 

 

5,894

 

Amortization

 

3,033

 

 

3,006

 

 

6,297

 

 

6,543

 

Deferred income taxes

 

(14

)

 

58

 

 

(15

)

 

59

 

Noncurrent employee benefits

 

(384

)

 

(10

)

 

(267

)

 

84

 

Pension termination settlement charges

 

-

 

 

8,168

 

 

-

 

 

8,168

 

Contribution to pension plan

 

-

 

 

(1,600

)

 

-

 

 

(1,600

)

Stock-based compensation expense

 

289

 

 

473

 

 

554

 

 

944

 

Changes in:

Receivables

 

7,971

 

 

(1,846

)

 

6,028

 

 

(6,765

)

Inventories

 

(2,731

)

 

(98

)

 

(2,565

)

 

167

 

Payables

 

4,601

 

 

3,224

 

 

9,141

 

 

(1,255

)

Prepaid expenses and other assets

 

(1,845

)

 

(1,515

)

 

(3,946

)

 

(3,101

)

Other liabilities

 

(2,275

)

 

(309

)

 

(2,569

)

 

2,361

 

Total adjustments

 

11,730

 

 

12,270

 

 

18,721

 

 

11,499

 

Net cash provided by operations

 

23,088

 

 

18,424

 

 

40,903

 

 

25,199

 

 
Investing activities:
Property, plant and equipment expenditures

 

(2,306

)

 

(2,199

)

 

(4,466

)

 

(5,242

)

Acquisitions, net of cash acquired and future payments

 

-

 

 

(8,048

)

 

-

 

 

(8,048

)

Net cash used for investing activities

 

(2,306

)

 

(10,247

)

 

(4,466

)

 

(13,290

)

 
Financing activities:
Net decrease short-term debt

 

(6,500

)

 

(5,500

)

 

(13,500

)

 

(2,000

)

Payment of contingent acquisition consideration

 

(650

)

 

-

 

 

(1,650

)

 

-

 

Dividends paid

 

(4,360

)

 

(3,772

)

 

(8,717

)

 

(7,542

)

Proceeds from exercise of stock options

 

277

 

 

-

 

 

748

 

 

231

 

Repurchase of treasury stock

 

(964

)

 

(370

)

 

(2,837

)

 

(1,989

)

Issuance of treasury stock

 

45

 

 

366

 

 

97

 

 

431

 

Net cash used for financing activities

 

(12,152

)

 

(9,276

)

 

(25,859

)

 

(10,869

)

Effect of foreign exchange rates on cash

 

231

 

 

(308

)

 

230

 

 

(79

)

 
Increase (decrease) in cash

 

8,861

 

 

(1,407

)

 

10,808

 

 

961

 

Cash - beginning of period

 

15,033

 

 

13,532

 

 

13,086

 

 

11,164

 

 
Cash - end of period

$

23,894

 

$

12,125

 

$

23,894

 

$

12,125

 

 

 

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