<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-6706
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BADGER METER, INC.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0143280
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4545 West Brown Deer Road, Milwaukee, Wisconsin 53223
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 355-0400
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None
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(Former name, former address and former fiscal year, if
changed since last report.)
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 X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 11, 1997 *
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Common Stock, $1.00 par value 2,428,408
Class B Common Stock, $.10 par value 1,125,570
*All share amounts and number of shares data have been restated to reflect the
2-for-1 stock split payable April 18, 1997.
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BADGER METER, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I. Financial Information:
Item 1 Financial Statements:
Consolidated Condensed Balance Sheets - -
March 31, 1997 and December 31, 1996 3
Consolidated Condensed Statements of Operations - -
Three Months Ended March 31, 1997 and 1996 4
Consolidated Condensed Statements of Cash Flows - -
Three Months Ended March 31, 1997 and 1996 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information:
Item 6(a) Exhibits 8
Item 6(b) Reports on Form 8-K 8
Exhibit Index 10
</TABLE>
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<PAGE> 3
Part I - Financial Information
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BADGER METER, INC.
Item 1 Financial Statements
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CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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Assets (Unaudited)
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<S> <C> <C>
Current assets:
Cash $ 537 $ 1,123
Receivables 19,851 15,498
Inventories:
Finished goods 2,973 3,577
Work in process 8,859 8,466
Raw materials and purchased parts 6,314 5,463
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Total inventories 18,146 17,506
Prepaid expenses 1,091 918
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Total current assets 39,625 35,045
Property, plant and equipment, at cost 58,240 57,111
Less accumulated depreciation (38,702) (37,751)
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19,538 19,360
Intangible assets, at cost less accumulated amortization 821 878
Prepaid pension 7,041 7,102
Deferred income taxes 1,252 1,257
Deferred charges and other assets 2,555 2,491
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Total assets $ 70,832 $ 66,133
========= ========
<CAPTION>
Liabilities and Shareholders' Equity
------------------------------------
<S> <C> <C>
Current liabilities:
Short-term debt $6,003 $2,634
Payables 7,543 7,102
Accrued compensation and employee benefits 3,713 4,763
Other accrued liabilities 2,387 1,929
Income and other taxes 1,604 972
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Total current liabilities 21,250 17,400
Accrued non-pension postretirement benefits 8,043 8,106
Other accrued employee benefits 3,122 2,899
Long-term debt 1,076 1,091
Shareholders' equity:
Common Stock 3,185 3,154
Class B Common Stock 112 112
Capital in excess of par value 7,124 6,803
Reinvested earnings 29,130 28,200
Less:Employee benefit stock (1,044) (1,053)
Treasury stock, at cost (1,166) (579)
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Total shareholders' equity 37,341 36,637
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Total liabilities and shareholders' equity $70,832 $66,133
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 4
BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
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<S> <C> <C>
Net sales $ 31,702 $ 26,635
Operating costs and expenses:
Cost of sales 20,224 16,714
Marketing and administrative 7,434 6,799
Research and engineering 1,851 1,559
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29,509 25,072
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Operating earnings 2,193 1,563
Interest expense 101 118
Other deductions 13 54
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Earnings before income taxes 2,079 1,391
Provision for income taxes 769 503
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Net earnings $ 1,310 $ 888
========= =========
Per share amounts:*
Net earnings:
Primary $ .35 $ .25
========= =========
Fully Diluted $ .35 $ .25
========= =========
Dividends declared - Common Stock $ .11 $ .10
========= =========
Dividends declared - Class B Common Stock $ .10 $ .09
========= =========
Shares used in computation:
Primary 3,762,719 3,624,130
========= =========
Fully Diluted 3,784,576 3,625,362
========= =========
</TABLE>
* All per share amounts and number of shares data have been restated to reflect
the 2-for-1 stock split payable April 18, 1997.
Earnings per share is computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share does not
necessarily equal the total for the year.
See accompanying notes to consolidated condensed financial statements.
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BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
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<S> <C> <C>
Operating activities:
Net earnings $ 1,310 $ 888
Adjustments to reconcile net
earnings to net cash provided
by (used for) operations:
Depreciation 960 964
Amortization 177 208
Noncurrent employee benefits 230 82
Deferred income taxes 5 (88)
Other 34 14
Changes in:
Receivables (4,353) (1,140)
Inventory (640) (1,445)
Current liabilities other than short-term debt 481 927
Prepaid expenses (173) 9
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Total adjustments (3,279) (469)
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Net cash provided by (used for) operations (1,969) 419
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Investing activities:
Property, plant and equipment (1,188) (775)
Other - net (183) (6)
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Net cash provided by (used for) investing activities (1,371) (781)
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Financing activities:
Bank borrowings (repayments) 3,369 (211)
Dividends (380) (343)
Stock options and ESSOP 352 115
Purchase of treasury stock (587) 0
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Net cash provided by (used for)
financing activities 2,754 (439)
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Increase (decrease) in cash (586) (801)
Beginning of year 1,123 1,177
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End of period $ 537 $ 376
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Supplemental disclosures of cash flow information:
Cash paid (refunded) during the period for:
Income taxes $ 61 $ 57
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Interest $ 96 $ 106
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 6
BADGER METER, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the consolidated
condensed financial position at March 31, 1997 and the results of
operations for the three-month periods ended March 31, 1997 and 1996 and
the cash flows for the three-month periods ended March 31, 1997 and 1996.
The results of operations for the three-month period ended March 31, 1997,
are not necessarily indicative of the results to be expected for the full
year. The consolidated condensed balance sheet at December 31, 1996, was
derived from amounts included in the Annual Report to Shareholders which
was incorporated by reference in the Company's annual report on Form 10-K
for the year ended December 31, 1996.
2. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which is required to be adopted
on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact is expected to result in an increase in primary
earnings per share for the quarter ended March 31, 1997 from $.35 to $.37
per share. The impact of Statement No. 128 on the calculation of fully
diluted earnings per share for the quarter is not expected to be material.
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<PAGE> 7
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
Record sales caused receivables to increase 28%, or $4,353,000, from
the seasonally low December 31, 1996 balance. Inventories increased 4%, or
$640,000, primarily to support future sales needs. Payables increased 6%, or
$441,000, due to increased inventory purchases and other trade payables since
December 31, 1996. Accrued compensation decreased 22%, or $1,050,000, due
primarily to payment of 1996 incentives during the first quarter of 1997.
Other accrued liabilities increased 24%, or $458,000, due to additional
reserves for after-sale costs. Income and other taxes payable increased
$632,000 due to accruals related to increased profits and timing of estimated
tax payments.
Short-term debt increased $3,369,000 since December 31, 1996. These
borrowings, along with funds generated by net earnings, were used to fund the
net working capital requirements, capital additions of $1,188,000, and treasury
stock repurchases of $587,000. These cash requirements also resulted in a net
reduction in cash of $586,000 during the first quarter of 1997.
As of March 31, 1997, the company had approximately $27,000,000 of credit lines
with domestic and foreign banks of which $5,943,000 was in use. This compares
to $5,304,000 in use at March 31, 1996 and $2,574,000 at December 31,1996. The
company believes that the present lines of credit are adequate to meet
operating requirements.
Results of Operations
Net sales for the first quarter of 1997 of $31,702,000 reflect a 19% increase
over sales of $26,635,000 for the same period in 1996. The increase was
primarily related to higher unit sales of lubrication meters and of
residential, commercial and industrial water meters and related systems. Gross
profit margins declined from 37.2% for the first quarter of 1996 to 36.2% for
the first quarter of 1997, due primarily to changes in product mix.
Marketing and administrative costs increased 9% for the quarter ended March 31,
1997 as compared to the same period of 1996 due to general wage and cost
increases. Research and engineering expenses increased 19% between the periods
due to costs associated with continued product development initiatives.
Interest expense decreased 14% due to lower average debt balances outstanding
between the periods. Other deductions decreased $41,000 primarily due to gains
on asset disposals and foreign currency transactions.
The effective tax rate for the first quarter of 1997 was estimated to be 37.0%,
which is higher than the 36.2% used for the first quarter of 1996, due to
changes in estimated deductions and tax credits for 1997.
Earnings for the first quarter of 1997 of $1,310,000 have increased 48% over
first quarter 1996 earnings of $888,000, due primarily to the higher sales.
Earnings per share increased 40%, which was slightly lower than the percentage
increase in earnings due to the impact of dilutive options in 1997.
Other Matters
The company is subject to contingencies relative to environmental laws and
regulations. Currently, the company is in the process of resolving a suit
alleging violation of California's Proposition 65. The company does not
believe the ultimate resolution of this suit will have a material adverse
effect on the company's financial position or results of operations. Provision
has been made for known settlement costs. No other risks or uncertainties were
identified that could have a material impact on operations and no long-lived
assets have become permanently impaired in value.
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<PAGE> 8
Part II - Other Information
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
(11.0) Computation of fully diluted earnings per share
(27.0) Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the three months ended
March 31, 1997.
-8-
<PAGE> 9
SIGNATURE
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 thereunto duly authorized.
BADGER METER, INC.
Dated: April 11, 1997 By /S/ Richard A. Meeusen
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Richard A. Meeusen
Vice President - Finance and Treasurer
Chief Financial Officer
By /S/ William J. Shinners
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William J. Shinners
Vice President - Controller
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<PAGE> 10
<TABLE>
<CAPTION>
EXHIBIT INDEX
Page Number
<S> <C>
(11.0) Computation of fully diluted earnings per share 11
(27.0) Financial Data Schedule
</TABLE>
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<PAGE> 1
Exhibit (11.0)
BADGER METER, INC.
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE *
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
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March 31,
---------
1997 1996
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<S> <C> <C>
PRIMARY
Shares
Average shares outstanding 3,557,737 3,521,568
Shares issuable upon exercise of
stock options 204,982 102,562
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Total 3,762,719 3,624,130
========= =========
Earnings
Net earnings applicable to adjusted
common shares $ 1,310 $ 888
========= =========
Per share amounts
Net earnings per share ** $ .35 $ .25
========= =========
FULLY DILUTED
Shares
Average shares outstanding 3,557,737 3,521,568
Shares issuable upon exercise of
stock options 226,839 103,794
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Total 3,784,576 3,625,362
========= =========
Earnings
Earnings applicable to adjusted
common shares $ 1,310 $ 888
========= =========
Per share amounts
Net earnings per share ** $ .35 $ .25
========= =========
</TABLE>
*All per share amounts and number of shares data have been restated to reflect
the 2-for-1 stock split payable April 18, 1997.
**Earnings per share is computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share does not
necessarily equal the total for the year.
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 537
<SECURITIES> 0
<RECEIVABLES> 19,851
<ALLOWANCES> 0
<INVENTORY> 18,146
<CURRENT-ASSETS> 39,625
<PP&E> 58,240
<DEPRECIATION> (38,702)
<TOTAL-ASSETS> 70,832
<CURRENT-LIABILITIES> 21,250
<BONDS> 0
0
0
<COMMON> 2,131
<OTHER-SE> 35,210
<TOTAL-LIABILITY-AND-EQUITY> 70,832
<SALES> 31,702
<TOTAL-REVENUES> 31,702
<CGS> 20,224
<TOTAL-COSTS> 29,509
<OTHER-EXPENSES> 13
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> 2,079
<INCOME-TAX> 769
<INCOME-CONTINUING> 1,310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,310
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
