Badger Meter Earnings 2020-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

bmi-10q_20200331.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-06706

BADGER METER, INC.

(Exact name of registrant as specified in its charter)

Wisconsin		39-0143280
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4545 W. Brown Deer Road Milwaukee, Wisconsin		53233
(Address of principal executive offices)		(Zip code)

	(414) 355-0400
	(Registrant’s telephone number, including area code)

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

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

Large accelerated filer	☒	Smaller reporting company	☐
Accelerated filer	☐	Emerging growth company	☐
Non‑accelerated filer	☐

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 8, 2020, there were 29,117,383 shares of Common stock outstanding with a par value of $1 per share.

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BADGER METER, INC.

Quarterly Report on Form 10-Q for the Period Ended March 31, 2020

Index

		Page No.

Part I. Financial Information:

Item 1	Financial Statements (unaudited):	4

	Consolidated Condensed Balance Sheets - March 31, 2020 and December 31, 2019	4

	Consolidated Condensed Statements of Operations - Three Months Ended March 31, 2020 and 2019	5

	Consolidated Condensed Statements of Comprehensive Income - Three Months Ended March 31, 2020 and 2019	6

	Consolidated Condensed Statements of Cash Flows - Three Months Ended March 31, 2020 and 2019	7

	Consolidated Condensed Statements of Shareholders’ Equity – Three Months Ended March 31, 2020 and 2019	8

	Notes to Unaudited Consolidated Condensed Financial Statements	9

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3	Quantitative and Qualitative Disclosures about Market Risk	19

Item 4	Controls and Procedures	19

Part II. Other Information:

Item 1A	Risk Factors	20

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 6	Exhibits	21

Signatures		22

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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 in the forward looking 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. Some risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward looking statements include those described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and in Part II, Item 1A of this Quarterly Report on Form 10-Q.

All of these factors are beyond the Company's control to varying degrees. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward looking statements contained in this Quarterly Report on Form 10-Q and are cautioned not to place undue reliance on such forward looking statements. The forward looking statements made in this document are made only as of the date of this document and the Company assumes no obligation, and disclaims any obligation, to update any such forward looking statements to reflect subsequent events or circumstances.

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Part I – Financial Information

Item 1 Financial Statements

BADGER METER, INC.

Consolidated Condensed Balance Sheets

	March 31,			December 31,
	(Unaudited)
	(In thousands)
	2020			2019
Assets
Current assets:
Cash and cash equivalents	$	70,376		$	48,871
Receivables		59,164			61,365
Inventories:
Finished goods		19,469			22,946
Work in process		16,776			17,728
Raw materials		38,185			41,274
Total inventories		74,430			81,948
Prepaid expenses and other current assets		7,459			7,910
Total current assets		211,429			200,094
Property, plant and equipment, at cost		211,457			209,825
Less accumulated depreciation		(126,887	)		(124,064	)
Net property, plant and equipment		84,570			85,761
Intangible assets, at cost less accumulated amortization		46,396			48,163
Other assets		15,288			15,875
Deferred income taxes		2,015			742
Goodwill		71,258			71,258
Total assets	$	430,956		$	421,893
Liabilities and shareholders’ equity
Current liabilities:
Short-term debt	$	4,400		$	4,480
Payables		35,915			31,523
Accrued compensation and employee benefits		9,181			12,754
Warranty and after-sale costs		5,981			5,583
Other current liabilities		4,979			2,907
Total current liabilities		60,456			57,247
Other long-term liabilities		23,093			22,980
Deferred income taxes		2,428			876
Accrued non-pension postretirement benefits		5,721			5,711
Other accrued employee benefits		3,537			4,011
Commitments and contingencies (Note 6)
Shareholders’ equity:
Common stock		37,220			37,200
Capital in excess of par value		42,690			41,956
Reinvested earnings		292,785			285,879
Accumulated other comprehensive (loss) income		(201	)		425
Less: Employee benefit stock		(154	)		(154	)
Treasury stock, at cost		(36,619	)		(34,238	)
Total shareholders’ equity		335,721			331,068
Total liabilities and shareholders’ equity	$	430,956		$	421,893

See accompanying notes to unaudited consolidated condensed financial statements.

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BADGER METER, INC.

Consolidated Condensed Statements of Operations

	Three Months Ended March 31,
	(Unaudited)
	(In thousands except share and per share amounts)
	2020		2019
Net sales	$	108,508	$	104,881
Cost of sales		65,186		64,424
Gross margin		43,322		40,457
Selling, engineering and administration		27,307		26,130
Operating earnings		16,015		14,327
Interest expense, net		31		129
Other pension and postretirement costs		44		47
Earnings before income taxes		15,940		14,151
Provision for income taxes		4,086		3,327
Net earnings	$	11,854	$	10,824

Earnings per share:
Basic	$	0.41	$	0.37
Diluted	$	0.41	$	0.37

Dividends declared per common share	$	0.17	$	0.15

Shares used in computation of earnings per share:
Basic		29,042,158		29,028,964
Impact of dilutive securities		181,757		209,660
Diluted		29,223,915		29,238,624

See accompanying notes to unaudited consolidated condensed financial statements.

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BADGER METER, INC.

Consolidated Condensed Statements of Comprehensive Income

	Three Months Ended March 31,
	(Unaudited)
	(In thousands)
	2020			2019
Net earnings	$	11,854		$	10,824
Other comprehensive income:
Foreign currency translation adjustments		(627	)		(257	)
Pension and postretirement benefits, net of tax		1			(12	)
Comprehensive income	$	11,228		$	10,555

See accompanying notes to unaudited consolidated condensed financial statements.

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BADGER METER, INC.

Consolidated Condensed Statements of Cash Flows

	Three Months Ended March 31,
	(Unaudited) (In thousands)
	2020			2019
Operating activities:
Net earnings	$	11,854		$	10,824
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation		2,975			2,978
Amortization		3,256			3,264
Deferred income taxes		392			(1	)
Noncurrent employee benefits		88			117
Stock-based compensation expense		307			265
Changes in:
Receivables		1,385			(1,943	)
Inventories		7,437			166
Payables		4,517			4,540
Prepaid expenses and other current assets		(609	)		(2,101	)
Other liabilities		(1,064	)		(294	)
Total adjustments		18,684			6,991
Net cash provided by operations		30,538			17,815
Investing activities:
Property, plant and equipment expenditures		(1,942	)		(2,160	)
Net cash used for investing activities		(1,942	)		(2,160	)
Financing activities:
Net decrease in short-term debt		-			(7,000	)
Payment of contingent acquisition consideration		-			(1,000	)
Dividends paid		(4,938	)		(4,357	)
Proceeds from exercise of stock options		478			471
Repurchase of treasury stock		(2,467	)		(1,873	)
Issuance of treasury stock		55			52
Net cash used for financing activities		(6,872	)		(13,707	)
Effect of foreign exchange rates on cash		(219	)		(1	)
Increase in cash and cash equivalents		21,505			1,947
Cash and cash equivalents – beginning of period		48,871			13,086
Cash and cash equivalents – end of period	$	70,376		$	15,033

See accompanying notes to unaudited consolidated condensed financial statements.

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BADGER METER, INC.

Consolidated Condensed Statements of Shareholders’ Equity

	Quarter-to-date ended March 31,
	Common Stock at $1 par value*		Capital in excess of par value			Reinvested earnings			Accumulated other comprehensive income (loss)			Employee benefit stock			Treasury stock (at cost)			Total
	(Unaudited)
	(In thousands except share and per share amounts)
Balance, December 31, 2018	$	37,198	$	38,082		$	257,313		$	580		$	(306	)	$	(29,364	)	$	303,503
Net earnings		-		-			10,824			-			-			-			10,824
Pension and postretirement benefits (net of $4 tax effect)		-		-			-			(12	)		-			-			(12	)
Foreign currency translation		-		-			-			(257	)		-			-			(257	)
Cash dividends of $0.15 per share		-		-			(4,360	)		-			-			-			(4,360	)
Stock options exercised		2		397			-			-			-			72			471
Stock-based compensation		-		265			-			-			-			-			265
Purchase of common stock for treasury stock		-		-			-			-			-			(1,873	)		(1,873	)
Issuance of treasury stock (9 shares)		-		12			-			-			-			40			52
Balance, March 31, 2019	$	37,200	$	38,756		$	263,777		$	311		$	(306	)	$	(31,125	)	$	308,613

Balance, December 31, 2019	$	37,200	$	41,956		$	285,879		$	425		$	(154	)	$	(34,238	)	$	331,068
Net earnings		-		-			11,854			-			-			-			11,854
Pension and postretirement benefits (net of ($1) tax effect)		-		-			-			1			-			-			1
Foreign currency translation		-		-			-			(627	)		-			-			(627	)
Cash dividends of $0.17 per share		-		-			(4,948	)		-			-			-			(4,948	)
Stock options exercised		20		438			-			-			-			20			478
Stock-based compensation		-		307			-			-			-			-			307
Purchase of common stock for treasury stock		-		-			-			-			-			(2,467	)		(2,467	)
Issuance of treasury stock (15 shares)		-		(11	)		-			-			-			66			55
Balance, March 31, 2020	$	37,220	$	42,690		$	292,785		$	(201	)	$	(154	)	$	(36,619	)	$	335,721

*	Each common share of stock equals $1 par value; therefore, the number of common shares is the same as the dollar value.

See accompanying notes to unaudited consolidated condensed financial statements.

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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, 2020 and December 31, 2019, results of operations, comprehensive income, cash flows and statements of shareholders’ equity for the three-month periods ended March 31, 2020 and 2019. 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.

Note 2 Additional Financial Information Disclosures

The consolidated condensed balance sheet at December 31, 2019 was derived from amounts included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. 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. Changes in the Company’s warranty and after-sale costs reserve are as follows:

	Three months ended March 31,
(In thousands)	2020			2019
Balance at beginning of period	$	5,583		$	4,206
Net additions charged to earnings		1,161			465
Costs incurred		(763	)		(353	)
Balance at end of period	$	5,981		$	4,318

Note 3 Employee Benefit Plans

The Company maintains supplemental non-qualified plans for certain officers and other key employees, and an Employee Savings and Stock Ownership Plan for the majority of the U.S. employees.

The Company additionally has a postretirement healthcare benefit plan that provides medical benefits for certain U.S. retirees and eligible dependents hired prior to November 1, 2004. Employees are eligible to receive postretirement healthcare benefits upon meeting certain age and service requirements. No employees hired after October 31, 2004 are eligible to receive these benefits. This plan requires employee contributions to offset benefit costs.

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The following table sets forth the components of net periodic benefit cost for the three months ended March 31, 2020 and 2019 based on December 31, 2019 and 2018 actuarial measurement dates, respectively:

	Defined pension plan benefits				Other postretirement benefits
(In thousands)	2020		2019		2020		2019
Service cost – benefits earned during the year	$	13	$	37	$	31	$	29
Interest cost on projected benefit obligations		2		10		41		53
Amortization of net loss (benefit)		1		9		-		(25	)
Net periodic benefit cost	$	16	$	56	$	72	$	57

The Company disclosed in its financial statements for the year ended December 31, 2019 that it estimated it would pay $0.4 million in other postretirement benefits in 2020 based on actuarial estimates. As of March 31, 2020, $0.1 million of such benefits have been paid. The Company continues to believe that its estimated payments for the full year are reasonable. However, such estimates contain inherent uncertainties because cash payments can vary significantly depending on the timing of postretirement medical claims and the collection of the retirees’ portion of certain costs. The amount of benefits paid in calendar year 2020 will not impact the expense for postretirement benefits for 2020.

Note 4 Accumulated Other Comprehensive Income (Loss)

Components of and changes in accumulated other comprehensive income (loss) at March 31, 2020 are as follows:

(In thousands)

Unrecognized

pension and

postretirement

benefits

Foreign currency

Total

Balance at beginning of period

263

162

425

Other comprehensive (loss) before reclassifications

Price	53.83	EPS	2
Shares	29	P/E	34
MCap	1,573	P/FCF	26
Net Debt	-38	EBIT	57
TEV	1,535	TEV/EBIT	27
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-03-31	Filed 2020-04-29
10-K	2019-12-31	Filed 2020-02-21
10-Q	2019-09-30	Filed 2019-10-25
10-Q	2019-06-30	Filed 2019-07-30
10-Q	2019-03-31	Filed 2019-04-30
10-K	2018-12-31	Filed 2019-02-26
10-Q	2018-09-30	Filed 2018-10-24
10-Q	2018-06-30	Filed 2018-07-25
10-Q	2018-03-31	Filed 2018-04-24
10-K	2017-12-31	Filed 2018-03-01
10-Q	2017-09-30	Filed 2017-10-25
10-Q	2017-06-30	Filed 2017-07-26
10-Q	2017-03-31	Filed 2017-04-24
10-K	2016-12-31	Filed 2017-02-28
10-Q	2016-09-30	Filed 2016-10-27
10-Q	2016-06-30	Filed 2016-07-22
10-Q	2016-03-31	Filed 2016-04-26
10-K	2015-12-31	Filed 2016-02-26
10-Q	2015-09-30	Filed 2015-10-29
10-Q	2015-06-30	Filed 2015-07-27
10-Q	2015-03-31	Filed 2015-04-23
10-K	2014-12-31	Filed 2015-03-04
10-Q	2014-09-30	Filed 2014-10-31
10-Q	2014-06-30	Filed 2014-07-24
10-Q	2014-03-31	Filed 2014-04-23
10-K	2013-12-31	Filed 2014-02-20
10-Q	2013-09-30	Filed 2013-10-28
10-Q	2013-06-30	Filed 2013-07-26
10-Q	2013-03-31	Filed 2013-04-24
10-K	2012-12-31	Filed 2013-03-05
10-Q	2012-09-30	Filed 2012-10-30
10-Q	2012-06-30	Filed 2012-08-02
10-Q	2012-03-31	Filed 2012-04-26
10-K	2011-12-31	Filed 2012-03-08
10-Q	2011-09-30	Filed 2011-10-26
10-Q	2011-06-30	Filed 2011-08-03
10-Q	2011-03-31	Filed 2011-04-27
10-K	2010-12-31	Filed 2011-02-28
10-Q	2010-09-30	Filed 2010-10-26
10-Q	2010-06-30	Filed 2010-08-05
10-Q	2010-03-31	Filed 2010-04-23
10-K	2009-12-31	Filed 2010-02-23

8-K	2020-04-24
8-K	2020-04-16
8-K	2020-03-30
8-K	2020-02-26
8-K	2020-02-05
8-K	2019-12-03
8-K	2019-10-17
8-K	2019-07-18
8-K	2019-04-30
8-K	2019-04-17
8-K	2019-03-08
8-K	2019-03-01
8-K	2019-02-27
8-K	2019-02-05
8-K	2018-12-28
8-K	2018-10-17
8-K	2018-09-24
8-K	2018-07-18
8-K	2018-04-27
8-K	2018-04-17
8-K	2018-02-09
8-K	2018-02-05

EX-3	bmi-ex3_164.htm
EX-31.1	bmi-ex311_10.htm
EX-31.2	bmi-ex312_9.htm
EX-32	bmi-ex32_6.htm

BMI 10Q Quarterly Report

Badger Meter Earnings 2020-03-31