Badger Meter Reports Second Quarter 2020 Results

Badger Meter, Inc. (NYSE: BMI) today reported results for the second quarter ended June 30, 2020.

Second Quarter 2020 Highlights

  • Navigated rapidly changing COVID-19 circumstances and the resulting second quarter 2020 market dynamics delivering net sales of $91.1 million, a decrease of 12% compared to $103.5 million in the comparable prior year quarter, with municipal water sales only 9% lower year-over-year.
  • Implemented cost control actions helped deliver net earnings and diluted earnings per share (EPS) of $9.5 million and $0.33, respectively, compared to $11.4 million and $0.39 in the comparable prior year period.
  • Generated $21.7 million of cash provided by operations representing strong earnings conversion, ended the quarter with $85.2 million in cash on the balance sheet.

Overview

"I am proud of the response of our employees globally to the unprecedented and far-reaching impact of COVID-19, both to them personally and to our company. While April was certainly a challenging month, with 95% of the US on some type of stay-at-home order, we saw improving levels of municipal water demand off of that bottom in the ensuing months, while flow instrumentation demand has remained sluggish. The cost actions we took in the quarter allowed us to preserve profitability and cash flow despite the rapid demand disruption. Our primary focus continues to be on serving customers while protecting the health, safety and well-being of our employees and all our constituencies," said Kenneth C. Bockhorst, Chairman, President and CEO of Badger Meter.

Second Quarter Operating Results

Municipal water sales declined 9% from the comparable prior year quarter, with improving order demand from the month of April low point which corresponded to the widespread lock-down of activity across the US. Backlog increased as orders exceeded sales in the quarter, the result of modest manufacturing interruptions which limited output at certain of our manufacturing facilities. Existing project installation schedules remained largely on track, and demand for ultrasonic meter technology and ORION Cellular LTE-M radios continued to gain traction. As expected, sales of flow instrumentation products were more significantly impacted and were 22% lower year-over-year, with weak demand throughout the quarter across the array of end markets served.

Operating margins of 13.9% were 60 basis points below the prior year’s 14.5%, representing decremental margins on the sales decline of approximately 20%. During the quarter, the company proactively implemented cost containment actions, including reductions in discretionary spending, a hiring freeze, reduced work hour furloughs and executive salary reductions to mitigate the impact of the sales decline on profitability and cash flows.

Gross profit margins were strong at 39.3%, a 40 basis point increase over the prior year’s 38.9%. Despite lower manufacturing output, the benefit of cost actions as well as favorable sales mix and price cost dynamics, contributed to the gross margin improvement.

Selling, engineering and administration ("SEA") expenses in the second quarter of 2020 of $23.2 million were down from the prior year’s $25.2 million as a result of the cost reduction actions taken, partially offset by business optimization investments. The tax rate of 24.3% was modestly higher than the prior year’s 23.8%.

"In summary, I am pleased with the resilience of our financial performance in relation to the economic severity of this unprecedented crisis," stated Bockhorst. "The level of commitment with which our organization collectively responded to this pandemic, responsibly working to enact and support protocols and other measures to keep all of us safe while serving our customers in critical and essential industries, is commendable."

Outlook

"As we finish the second quarter and look to the back half of the year and beyond, we remain optimistic about our long term opportunities for growth. Our backlog and bid funnel remain healthy, and interest in our solutions is strong. However, we remain cognizant of the fact that while economic activity is improving, data and market sentiment suggest the potential for a protracted recovery as coronavirus-related disruption and uncertainty may weigh on demand, supply chain and manufacturing output, as well as municipal budgets moving forward.

Given this uncertainty, we will remain nimble and focused on what we can control, keeping the health and safety of our employees, customers and other constituencies at the heart of every decision we make. We are committed to driving innovation forward, even in these challenging times, with the launch of new product offerings, including our recently released E-Series Ultrasonic Plus with integrated valve, which allows water utilities to remotely restrict water flow. Our operations teams are adapting manufacturing processes to increase output while optimizing safety. We are managing cash flow and working capital, with $85.2 million of cash on the balance sheet as of June 30, 2020 and $125 million in revolving credit available to fund capital allocation priorities. Finally, our M&A posture remains measured and we will continue pursuing strategic, tuck-in acquisitions at reasonable valuations."

Bockhorst concluded, "I am continually impressed by how our sales, service and office staff around the globe embraced new ways of working to increase productivity while reducing expenses, and how our operations and supply chain teams were able to respond despite the broad-based economic disruption caused by the virus. This reinforces the resilience of our business model, our offerings and our culture as we protect 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 2020 results today, Thursday July 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 or by dialing 1-833-921-1631 (US) or 1-236-714-2109 (International) and entering the passcode 6378486. 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, 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 www.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,

2020

 

2019

 

2020

 

2019

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

$

91,119

$

103,542

$

199,627

$

208,423

 
Cost of sales

 

55,269

 

63,266

 

120,455

 

127,690

 
Gross margin

 

35,850

 

40,276

 

79,172

 

80,733

 
Selling, engineering and administration

 

23,186

 

25,243

 

50,493

 

51,373

 
Operating earnings

 

12,664

 

15,033

 

28,679

 

29,360

 
Interest expense, net

 

32

 

85

 

63

 

214

Other pension and postretirement costs

 

44

 

35

 

88

 

82

 
Earnings before income taxes

 

12,588

 

14,913

 

28,528

 

29,064

 
Provision for income taxes

 

3,054

 

3,555

 

7,140

 

6,882

 
Net earnings

$

9,534

$

11,358

$

21,388

$

22,182

 
Earnings per share:
 
Basic

$

0.33

$

0.39

$

0.74

$

0.76

 
Diluted

$

0.33

$

0.39

$

0.73

$

0.76

 
Shares used in computation of earnings per share:
 
Basic

 

29,047,297

 

29,027,887

 

29,046,277

 

29,024,543

 
Diluted

 

29,265,719

 

29,211,533

 

29,246,367

 

29,224,552

BADGER METER, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
 
 

Assets

June 30,

 

December 31,

2020

 

2019

(Unaudited)
 
Cash and cash equivalents

$

85,201

$

48,871

Receivables

 

54,021

 

61,365

Inventories

 

76,846

 

81,948

Other current assets

 

7,339

 

7,910

Total current assets

 

223,407

 

200,094

 
Net property, plant and equipment

 

83,190

 

85,761

Intangible assets, at cost less accumulated amortization

 

44,638

 

48,163

Other long-term assets

 

17,040

 

16,617

Goodwill

 

71,258

 

71,258

Total assets

$

439,533

$

421,893

 
 

Liabilities and Shareholders' Equity

 
Short-term debt

$

4,480

$

4,480

Payables

 

35,449

 

31,523

Accrued compensation and employee benefits

 

9,678

 

12,754

Other current liabilities

 

13,094

 

8,490

Total current liabilities

 

62,701

 

57,247

 
Deferred income taxes

 

2,555

 

876

Long-term employee benefits and other

 

33,134

 

32,702

Shareholders' equity

 

341,143

 

331,068

Total liabilities and shareholders' equity

$

439,533

$

421,893

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,

2020

 

2019

 

2020

 

2019

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

$

9,534

 

$

11,358

 

$

21,388

 

$

22,182

 

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

 

3,003

 

 

3,085

 

 

5,978

 

 

6,063

 

Amortization

 

3,227

 

 

3,033

 

 

6,483

 

 

6,297

 

Deferred income taxes

 

-

 

 

(14

)

 

392

 

 

(15

)

Noncurrent employee benefits

 

369

 

 

(384

)

 

457

 

 

(267

)

Stock-based compensation expense

 

398

 

 

289

 

 

705

 

 

554

 

Changes in:
Receivables

 

5,253

 

 

7,971

 

 

6,638

 

 

6,028

 

Inventories

 

(2,367

)

 

(2,731

)

 

5,070

 

 

(2,565

)

Payables

 

(631

)

 

4,601

 

 

3,886

 

 

9,141

 

Prepaid expenses and other current assets

 

(991

)

 

(1,845

)

 

(1,600

)

 

(3,946

)

Other current liabilities

 

3,953

 

 

(2,275

)

 

2,889

 

 

(2,569

)

Total adjustments

 

12,214

 

 

11,730

 

 

30,898

 

 

18,721

 

Net cash provided by operations

 

21,748

 

 

23,088

 

 

52,286

 

 

40,903

 

 
Investing activities:
Property, plant and equipment expenditures

 

(1,637

)

 

(2,306

)

 

(3,579

)

 

(4,466

)

Net cash used for investing activities

 

(1,637

)

 

(2,306

)

 

(3,579

)

 

(4,466

)

 
Financing activities:
Net decrease short-term debt

 

-

 

 

(6,500

)

 

-

 

 

(13,500

)

Payment of contingent acquisition consideration

 

-

 

 

(650

)

 

-

 

 

(1,650

)

Dividends paid

 

(4,940

)

 

(4,360

)

 

(9,878

)

 

(8,717

)

Proceeds from exercise of stock options

 

-

 

 

277

 

 

478

 

 

748

 

Repurchase of treasury stock

 

(406

)

 

(964

)

 

(2,873

)

 

(2,837

)

Issuance of treasury stock

 

38

 

 

45

 

 

93

 

 

97

 

Net cash used for financing activities

 

(5,308

)

 

(12,152

)

 

(12,180

)

 

(25,859

)

Effect of foreign exchange rates on cash

 

22

 

 

231

 

 

(197

)

 

230

 

 
Increase in cash and cash equivalents

 

14,825

 

 

8,861

 

 

36,330

 

 

10,808

 

Cash and cash equivalents - beginning of period

 

70,376

 

 

15,033

 

 

48,871

 

 

13,086

 

 
Cash and cash equivalents - end of period

$

85,201

 

$

23,894

 

$

85,201

 

$

23,894

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200716005096/en/

Contacts

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

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