Badger Meter Reports Second Quarter 2019 Results

MILWAUKEE--(BUSINESS WIRE)--July 18, 2019--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

Contacts

Karen Bauer at (414) 371-7276
kbauer@badgermeter.com