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