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Badger Meter Reports Third Quarter 2019 Results

October 17, 2019 8:30 AM

MILWAUKEE--(BUSINESS WIRE)-- Badger Meter, Inc. (NYSE: BMI) today reported results for the third quarter ended September 30, 2019.

Third Quarter 2019 Highlights

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

Karen Bauer at (414) 371-7276

[email protected]

Source: Badger Meter, Inc.

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