Badger Meter Reports Fourth Quarter and Full Year 2019 Results

Badger Meter, Inc. (NYSE: BMI) today reported results for the fourth quarter ended December 31, 2019.

Fourth Quarter 2019 Highlights

  • Net sales for the fourth quarter of 2019 were $107.6 million, an increase of 3% compared to $104.4 million in the comparable prior year quarter; municipal water sales increased 8% year-over-year.
  • GAAP net earnings and diluted earnings per share (EPS) were $12.3 million and $0.42, respectively, compared to $11.2 million and $0.39 in the comparable prior year period.
  • Excluding the impact of executive retirement charges in 2018, EPS of $0.42 in the fourth quarter of 2019 increased 5% from adjusted EPS of $0.40 in the fourth quarter of 2018. (See 2018 adjusted results in the attached GAAP to Non-GAAP reconciliation).

Full Year 2019 Highlights

  • Net sales in 2019 totaled $424.6 million compared to $433.7 million in the comparable prior year. Domestic municipal water sales increased 1% on a full year basis.
  • Gross profit margin for the year of 38.5%, an increase of 110 basis points year-over-year.
  • GAAP net earnings and EPS were $47.2 million and $1.61, respectively, compared to $27.8 million and $0.95 in the comparable prior year period.
  • Excluding the impact of pension termination settlement and executive retirement charges in the prior year, EPS of $1.61 increased 5% from the prior year’s adjusted EPS of $1.54. (See 2018 adjusted results in the attached GAAP to Non-GAAP reconciliation).
  • Record cash provided by operations of $80.7 million.

Fourth Quarter Operating Results

“We are very pleased with the strong growth in our domestic municipal water revenue and continued interest in our newer technology products. Flow instrumentation demand was tepid, as global industrial activity was soft in the quarter. Our operating margins improved year-over-year and cash flow remains strong. Overall, it was a solid finish to the year and I want to express my appreciation to all of our Badger Meter colleagues across the globe for the progress made this year,” said Kenneth C. Bockhorst, Chairman, President and Chief Executive Officer of Badger Meter.

Municipal water sales increased 8% year-over-year with robust demand for the new three and four-inch ultrasonic meters incorporating our D-Flow technology, as well as ORION® Cellular LTE-M radio installations including those at key customer projects announced earlier in the year. Customer feedback on implementation has been very positive. Sales of flow instrumentation products declined 11% year-over-year across the array of industrial end markets served globally due to sluggish market demand.

Operating margins were 15.2% in the fourth quarter of 2019 compared to an adjusted 14.6% in the comparable prior year period. Gross profit margins were strong at 38.2%, reflective of positive product sales mix, most notably commercial ultrasonic meters and cellular radio solutions.

Selling, engineering and administration (“SEA”) expenses in the fourth quarter of 2019 totaled $24.8 million compared to an adjusted $24.9 million in the prior year. Adjusted SEA leverage improved 80 basis points to 23.0% from 23.8% in the prior year comparable quarter. The income tax rate of 24.3% was modestly higher than the prior year’s adjusted 23.0%.

Full Year Recap and Outlook

Bockhorst continued, “As I reflect on our 2019 results and look ahead to 2020, a number of accomplishments stand out. We launched multiple, successful new products in 2019. Despite the innovation pause that it created mid-year, we grew domestic municipal sales for the full year and exited the year with momentum. We made significant progress improving gross margins, consistently delivering in the upper half of our normalized range. Our SEA was well managed, and we launched a number of processes to strengthen our working capital management, leading to outstanding cash flow and earnings conversion for the year.”

“As we move into 2020, municipal water spending remains healthy and we continue to experience favorable feedback from installation and pilot testing of our leading technologies. We have several new products that will be launching, including the next generation of our residential ultrasonic meters and our flow restriction meter. While we expect a modest potential headwind from higher brass costs, our profit margins should continue to benefit from positive product and software sales mix and continuous improvement activities across all aspects of our operations. We have extensive available capital to deploy on internal research and development and disciplined, strategic acquisitions with an active funnel of opportunities.” Bockhorst concluded, “As we embark on our 115th year in business, we believe that our comprehensive portfolio of smart water solutions and commitment to innovation will continue to solve customer challenges and 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 fourth quarter 2019 results today, Wednesday, February 5, 2020 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 4995411. 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

Twelve Months Ended

December 31,

December 31,

December 31,

December 31,

2019

2018

2019

2018

(Unaudited)

(Unaudited)

(Unaudited)

 
Net sales

$

107,556

$

104,413

$

424,625

$

433,732

 
Cost of sales

66,431

64,262

261,097

271,383

 
Gross margin

41,125

40,151

163,528

162,349

 
Selling, engineering and administration

24,782

25,341

101,380

105,480

 
Operating earnings

16,343

14,810

62,148

56,869

 
Interest (income) expense, net

(27

)

163

253

1,157

Other pension and postretirement costs

165

61

288

19,860

 
Earnings before income taxes

16,205

14,586

61,607

35,852

 
Provision for income taxes

3,931

3,347

14,430

8,062

 
Net earnings

$

12,274

$

11,239

$

47,177

$

27,790

 
Earnings per share:
 
Basic

$

0.42

$

0.39

$

1.63

$

0.96

 
Diluted

$

0.42

$

0.39

$

1.61

$

0.95

 
Shares used in computation of earnings per share:
 
Basic

29,039,296

28,989,523

29,028,204

28,993,074

 
Diluted

29,227,804

29,178,969

29,220,165

29,189,257

 
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

Twelve Months Ended

December 31,

December 31,

December 31,

December 31,

2019

2018

2019

2018

(Unaudited)(Unaudited)(Unaudited)
 
Selling, engineering and administration (GAAP measure)

$

24,782

$

25,341

$

101,380

$

105,480

 
Executive retirement charges

-

477

-

2,575

 
Adjusted selling, engineering and administration

$

24,782

$

24,864

$

101,380

$

102,905

 
 
Operating earnings (GAAP measure)

$

16,343

$

14,810

$

62,148

$

56,869

 
Executive retirement charges

-

477

-

2,575

 
Adjusted operating earnings

$

16,343

$

15,287

$

62,148

$

59,444

 
 
Net earnings (GAAP measure)

$

12,274

$

11,239

$

47,177

$

27,790

 
Executive retirement charges, net of tax

-

359

-

2,357

 
Pension termination settlement charge, net of tax

-

-

-

14,786

 
Adjusted net earnings

$

12,274

$

11,598

$

47,177

$

44,933

 
 
Diluted earnings per share (GAAP measure)

$

0.42

$

0.39

$

1.61

$

0.95

 
Executive retirement charges, net of tax

-

0.01

-

0.09

 
Pension termination settlement charge, net of tax

-

-

-

0.50

 
Adjusted diluted earnings per share

$

0.42

$

0.40

$

1.61

$

1.54

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

Assets

December 31,

December 31,

2019

2018

(Unaudited)

 
Cash

$

48,871

$

13,086

Receivables

61,365

66,300

Inventories

81,948

80,804

Other current assets

7,910

4,469

Total current assets

200,094

164,659

 
Net property, plant and equipment

85,761

90,321

Intangible assets, at cost less accumulated amortization

48,163

55,418

Other long-term assets

16,617

11,035

Goodwill

71,258

71,258

Total assets

$

421,893

$

392,691

 
 

Liabilities and Shareholders' Equity

 
Short-term debt

$

4,480

$

18,060

Payables

31,523

22,469

Accrued compensation and employee benefits

12,754

13,768

Other current liabilities

8,490

5,718

Total current liabilities

57,247

60,015

 
Deferred income taxes

876

3,332

Long-term employee benefits and other

32,702

25,841

Shareholders' equity

331,068

303,503

Total liabilities and shareholders' equity

$

421,893

$

392,691

 
BADGER METER, INC.
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
 
 

Three Months Ended

Twelve Months Ended

December 31,

December 31,

December 31,

December 31,

2019

2018

2019

2018

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

$

12,274

$

11,239

$

47,177

$

27,790

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

2,881

2,558

11,569

11,354

Amortization

3,254

3,286

12,577

12,961

Deferred income taxes

(1,542

)

(5,401

)

(1,524

)

(5,269

)

Noncurrent employee benefits

110

203

(40

)

464

Pension termination settlement charges

-

-

-

19,900

Contribution to pension plan

-

-

-

(2,860

)

Stock-based compensation expense

332

800

1,214

4,174

Changes in:
Receivables

896

3,463

5,451

(7,999

)

Inventories

3,039

3,450

(1,220

)

4,859

Payables

757

(7,400

)

11,642

(9,868

)

Prepaid expenses and other current assets

(1,926

)

511

(7,732

)

(5,062

)

Other current liabilities

(500

)

7,710

1,600

9,906

Total adjustments

7,301

9,180

33,537

32,560

Net cash provided by operations

19,575

20,419

80,714

60,350

 
Investing activities:
Property, plant and equipment expenditures

(1,907

)

(1,424

)

(7,496

)

(8,643

)

Acquisitions, net of cash acquired and future payments

-

-

-

(8,048

)

Net cash used for investing activities

(1,907

)

(1,424

)

(7,496

)

(16,691

)

 
Financing activities:
Net decrease short-term debt

-

(12,579

)

(13,500

)

(21,012

)

Payment of contingent acquisition consideration

(905

)

-

(2,555

)

(2,034

)

Dividends paid

(4,943

)

(4,370

)

(18,595

)

(16,265

)

Proceeds from exercise of stock options

998

510

1,961

1,443

Repurchase of treasury stock

(1,848

)

(344

)

(5,207

)

(4,795

)

Issuance of treasury stock

44

42

187

523

Net cash used for financing activities

(6,654

)

(16,741

)

(37,709

)

(42,140

)

Effect of foreign exchange rates on cash

129

203

276

403

 
Increase in cash

11,143

2,457

35,785

1,922

Cash - beginning of period

37,728

10,629

13,086

11,164

 
Cash - end of period

$

48,871

$

13,086

$

48,871

$

13,086

Contacts:

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

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