8-K
BADGER METER INC (BMI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
_______________________
| Date of Report | |
|---|---|
| (Date of earliest event reported) | February 5, 2020 |
BADGER METER INC
(Exact name of registrant as specified in its charter)
| Wisconsin | 001-06706 | 39-0143280 |
|---|---|---|
| (State or other<br><br> <br>jurisdiction of<br><br> <br>incorporation) | (Commission File<br><br> <br>Number) | (IRS Employer<br><br> <br>Identification No.) |
4545 W. Brown Deer Rd., Milwaukee, Wisconsin 53223
(Address of principal executive offices, including zip code)
(414) 355-0400
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
_______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | BMI | New York Stock Exchange LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition . |
|---|
On February 5, 2020, Badger Meter, Inc. (the “Company”) issued a press release announcing its quarterly financial results for the 2019 fourth quarter ended December 31, 2019.
A copy of the press release issued by the Company announcing the foregoing is furnished herewith as Exhibit 99.1.
| Item 9.01 | Financial Statements and Exhibits . |
|---|---|
| (a) | Not applicable. |
| --- | --- |
| (b) | Not applicable. |
| (c) | Not applicable. |
| (d) | Exhibits . The exhibit furnished herewith is as listed in the accompanying Exhibit Index. |
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| (99.1) | Badger Meter, Inc. Press Release, dated February 5, 2020. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BADGER METER, INC. | ||
|---|---|---|
| Date: February 5, 2020 | By: | /s/ Robert A. Wrocklage |
| Robert A. Wrocklage | ||
| Senior Vice President – Chief Financial Officer |
Exhibit 99.1
Badger Meter Reports Fourth Quarter and Full Year 2019 Results
MILWAUKEE--(BUSINESS WIRE)--February 5, 2020--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 115^th^ 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