Badger Meter, Inc. (NYSE: 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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190718005094/en/
Karen Bauer at (414) 371-7276 kbauer@badgermeter.com
Badger Meter (NYSE:BMI)
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