UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the quarterly period ended
or
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
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Smaller reporting company |
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Accelerated filer |
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Emerging growth company |
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Non‑accelerated filer |
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of April 13, 2022 there were
BADGER METER, INC.
Quarterly Report on Form 10-Q for the Period Ended March 31, 2022
Index
2
Special Note Regarding Forward Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q, as well as other information provided from time to time by Badger Meter, Inc. (the “Company” or "Badger Meter") 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 words “anticipate,” “believe,” “estimate,” “expect,” “think,” “should,” “could” and “objective” or similar expressions are intended to identify forward looking statements. All such forward looking statements are based on the Company’s then current views and assumptions and involve risks and uncertainties. See Item 1A "Risk Factors" of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for further information regarding risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward looking statements. The Company disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.
3
Part I – Financial Information
Item 1 Financial Statements
BADGER METER, INC.
Consolidated Condensed Balance Sheets
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March 31, |
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December 31, |
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(Unaudited) |
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(In thousands) |
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2022 |
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2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables |
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Inventories: |
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Finished goods |
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Work in process |
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Raw materials |
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Total inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, at cost |
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Less accumulated depreciation |
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Net property, plant and equipment |
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Intangible assets, at cost less accumulated amortization |
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Other assets |
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Deferred income taxes |
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Goodwill |
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Total assets |
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$ |
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$ |
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Liabilities and shareholders’ equity |
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Current liabilities: |
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Payables |
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$ |
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$ |
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Accrued compensation and employee benefits |
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Warranty and after-sale costs |
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Other current liabilities |
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Total current liabilities |
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Other long-term liabilities |
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Deferred income taxes |
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Accrued non-pension postretirement benefits |
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Other accrued employee benefits |
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(Note 5) |
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Shareholders’ equity: |
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Common stock |
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Capital in excess of par value |
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Reinvested earnings |
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Accumulated other comprehensive (loss) income |
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Less: Treasury stock, at cost |
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( |
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( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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See accompanying notes to unaudited consolidated condensed financial statements.
4
BADGER METER, INC.
Consolidated Condensed Statements of Operations
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Three Months Ended March 31, |
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(Unaudited) |
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(In thousands except share and per share amounts) |
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2022 |
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2021 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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Gross margin |
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Selling, engineering and administration |
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Operating earnings |
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Interest expense, net |
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Other pension and postretirement costs |
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Earnings before income taxes |
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Provision for income taxes |
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Net earnings |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Dividends declared per common share |
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$ |
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$ |
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Shares used in computation of earnings per share: |
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Basic |
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Impact of dilutive securities |
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Diluted |
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See accompanying notes to unaudited consolidated condensed financial statements.
5
BADGER METER, INC.
Consolidated Condensed Statements of Comprehensive Income
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Three Months Ended March 31, |
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(Unaudited) |
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(In thousands) |
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2022 |
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2021 |
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Net earnings |
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$ |
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$ |
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Other comprehensive loss: |
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Foreign currency translation adjustments |
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Pension and postretirement benefits, net of tax |
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- |
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Comprehensive income |
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$ |
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$ |
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See accompanying notes to unaudited consolidated condensed financial statements.
6
BADGER METER, INC.
Consolidated Condensed Statements of Cash Flows
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Three Months Ended March 31, |
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(Unaudited) |
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2022 |
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2021 |
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Operating activities: |
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Net earnings |
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$ |
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$ |
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Adjustments to reconcile net earnings to net cash provided by operations: |
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Depreciation |
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Amortization |
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Deferred income taxes |
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Noncurrent employee benefits |
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Stock-based compensation expense |
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Changes in: |
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Receivables |
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Inventories |
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Payables |
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Prepaid expenses and other assets |
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Other liabilities |
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Total adjustments |
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Net cash provided by operations |
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Investing activities: |
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Property, plant and equipment expenditures |
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Acquisitions, net of cash acquired |
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- |
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Net cash used for investing activities |
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( |
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Financing activities: |
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Dividends paid |
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Proceeds from exercise of stock options |
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- |
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Issuance of treasury stock |
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- |
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Net cash used for financing activities |
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( |
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( |
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Effect of foreign exchange rates on cash |
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Increase (Decrease) in cash and cash equivalents |
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Cash and cash equivalents – beginning of period |
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Cash and cash equivalents – end of period |
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$ |
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$ |
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See accompanying notes to unaudited consolidated condensed financial statements.
7
BADGER METER, INC.
Consolidated Condensed Statements of Shareholders’ Equity
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Quarter ended March 31, |
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Common |
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Capital in |
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Reinvested |
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Accumulated |
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Treasury |
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Total |
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(Unaudited) |
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(In thousands except share and per share amounts) |
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Balance, December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net earnings |
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- |
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- |
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- |
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- |
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Pension and postretirement benefits |
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- |
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- |
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- |
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- |
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Foreign currency translation |
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- |
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- |
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- |
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( |
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- |
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( |
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Cash dividends of $ |
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- |
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- |
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( |
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- |
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- |
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( |
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Stock options exercised |
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- |
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- |
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- |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Issuance of treasury stock ( |
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- |
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( |
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- |
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- |
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Balance, March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Balance, December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net earnings |
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- |
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- |
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- |
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- |
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Foreign currency translation |
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- |
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- |
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- |
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( |
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- |
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( |
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Cash dividends of $ |
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- |
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- |
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( |
) |
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- |
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- |
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( |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Issuance of treasury stock ( |
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- |
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( |
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- |
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- |
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- |
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Balance, March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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*
See accompanying notes to unaudited consolidated condensed financial statements.
8
BADGER METER, INC.
Notes to Unaudited Consolidated Condensed Financial Statements
Note 1 Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Badger Meter contain all adjustments (consisting only of normal recurring accruals except as otherwise discussed) necessary to present fairly the Company’s consolidated condensed financial position at March 31, 2022 and December 31, 2021, results of operations, comprehensive income, cash flows and statements of shareholders’ equity for the three-month periods ended March 31, 2022 and 2021. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to current year presentation.
Note 2 Additional Financial Information Disclosures
The consolidated condensed balance sheet at December 31, 2021 was derived from amounts included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Refer to the notes to consolidated financial statements included in that report for a description of the Company’s accounting policies and for additional details of the Company’s financial condition. The details in those notes have not changed except as discussed below and as a result of normal adjustments in the interim.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of ninety days or less to be cash equivalents.
Warranty and After-Sale Costs
The Company estimates and records provisions for warranties and other after-sale costs in the period in which the sale is recorded, based on a lag factor and historical warranty claim experience. After-sale costs represent a variety of activities outside of the written warranty policy, such as investigation of unanticipated problems after the customer has installed the product, or analysis of water quality issues.
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March 31, |
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(In thousands) |
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2022 |
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2021 |
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Balance at beginning of period |
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$ |
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$ |
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Net additions charged to earnings |
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Costs incurred |
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Balance at end of period |
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$ |
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$ |
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Note 3 Accumulated Other Comprehensive (Loss) Income
Components of and changes in accumulated other comprehensive loss at March 31, 2022 are as follows:
(In thousands) |
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Unrecognized |
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Foreign currency |
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Total |
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Balance at beginning of period |
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$ |
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$ |
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$ |
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Other comprehensive loss before reclassifications |
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( |
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( |
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Accumulated other comprehensive loss |
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$ |
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$ |
( |
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$ |
( |
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9
Components of and changes in accumulated other comprehensive income at March 31, 2021 are as follows:
(In thousands) |
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Unrecognized |
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Foreign currency |
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Total |
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Balance at beginning of period |
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$ |
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$ |
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$ |
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Other comprehensive income before reclassifications |
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( |
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( |
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Amounts reclassified from accumulated other comprehensive income, net of tax of ($ |
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Net current period other comprehensive income, net of tax |
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( |
) |
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( |
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Accumulated other comprehensive income |
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$ |
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$ |
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$ |
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Details of reclassifications out of accumulated other comprehensive income during the three months ended March 31, 2021 are immaterial.
Note 4 Acquisitions
Acquisitions are accounted for under the purchase method, and accordingly, the results of operations were included in the Company's financial statements from the date of acquisition. The acquisitions did not have a material impact on the Company's consolidated financial statements or the notes thereto.
Effective
The total purchase consideration for ATi, net of cash acquired, was $
Effective
The total purchase consideration for s::can, net of cash acquired, was $
Note 5 Contingencies, Litigation and Commitments
In the normal course of business, the Company is named in legal proceedings. There are currently no material legal proceedings pending with respect to the Company.
The Company is subject to contingencies related to environmental laws and regulations. A future change in circumstances with respect to specific matters or with respect to sites formerly or currently owned or operated by the Company, off-site disposal locations used by the Company, and property owned by third parties that is near such sites, could result in future costs to the Company and such amounts could be material. Expenditures for compliance with environmental control provisions and regulations during 2021 and the first quarter of 2022 were not material.
10
The Company relies on single suppliers for most brass castings and certain resin and electronic subassemblies in several of its product lines. The Company believes these items would be available from other sources, but that the loss of certain suppliers could result in a higher cost of materials, delivery delays, short-term increases in inventory and higher quality control costs in the short term. The Company attempts to mitigate these risks by working closely with key suppliers, purchasing minimal amounts from alternative suppliers and by purchasing business interruption insurance where appropriate.
The Company reevaluates its exposures on a periodic basis and makes adjustments to reserves as appropriate.
Note 6 Income Taxes
The Company is subject to income taxes in the United States and numerous foreign jurisdictions. The Company’s income tax positions are based on interpretations of income tax laws and rulings in each of the jurisdictions that the Company operates. Significant judgment is required in determining the worldwide provision for income taxes and recording the related deferred tax assets and liabilities. The Company’s deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income for the years in which the assets or liabilities are expected to be realized or settled. Interim provisions are tied to an estimate of the overall annual rate which can vary due to the relationship of foreign and domestic earnings, state taxes and available deductions, credits and discrete items.
The Company’s earnings before incomes taxes, provision for income taxes, and effective income tax rate are as follows:
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Three months ended March 31, |
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(In thousands) |
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2022 |
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2021 |
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Earnings before income taxes |
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$ |
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$ |
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Provision for income taxes |
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Effective income tax rate |
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% |
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% |
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Note 7 Fair Value Measurements of Financial Instruments
The Company applies the accounting standards for fair value measurements and disclosures for its financial assets and financial liabilities. The carrying amounts of cash and cash equivalents, receivables and payables in the financial statements approximate their fair values due to the short-term nature of these financial instruments. Included in other assets are insurance policies on various individuals who were previously employed by the Company. The carrying amounts of these insurance policies approximate their fair value.
Note 8 Subsequent Events
Note 9 Revenue Recognition
Revenue for sales of products and services is derived from contracts with customers. The products and services promised in contracts include the sale of utility water and flow instrumentation products, such as flow meters and radios, quality sensing equipment, software access and other ancillary services. Contracts generally state the terms of sale, including the description, quantity and price of each product or service. Since the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the majority of the Company's contracts do not contain variable consideration. The Company establishes a provision for estimated warranty and returns as well as certain after sale costs as discussed in Note 2 "Additional Financial Information Disclosures" in the Notes to Unaudited Consolidated Condensed Financial Statements.
The Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.
11
Information regarding revenues disaggregated by geographic area is as follows:
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Three months ended March 31, |
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(In thousands) |
2022 |
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2021 |
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Revenues: |
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United States |
$ |
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|
$ |
|
||
Foreign: |
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Asia |
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|
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|
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Canada |
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Europe |
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Mexico |
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Middle East |
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Other |
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|
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Total |
$ |
|
|
$ |
|
||
Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows:
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|
Three months ended March 31, |
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(In thousands) |
|
2022 |
|
2021 |
||||||
Revenue recognized over time |
|
$ |
|
|
$ |
|
||||
Revenue recognized at a point in time |
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|
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|
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Total |
|
$ |
|
|
$ |
|
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The majority of the Company's revenue that is recognized over time relates to the BEACON® AMA software as a service, but also includes training, certain installation and other revenues. The majority of the Company's revenue recognized at a point in time is for the sale of utility and flow instrumentation products. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer during shipping.
The Company performs its obligations under a contract by shipping products or performing services in exchange for consideration. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable to the Company is established. The Company, however, recognizes a contract liability when a customer prepays for goods or services and the Company has not transferred control of the goods or services.
The closing balances of the Company's receivables and contract liabilities are as follows:
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March 31, |
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December 31, |
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(In thousands) |
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