<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, 1999
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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 ________________
Commission File Number 1-6706
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
--- ---
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 14, 1999
- ------------------------------------ -----------------------------
Common Stock, $1.00 par value 2,591,985
Class B Common Stock, $.10 par value 1,081,846
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BADGER METER, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
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Part I. Financial Information:
<S> <C>
Item 1 Financial Statements:
Consolidated Condensed Balance Sheets - -
March 31, 1999 and December 31, 1998 3
Consolidated Condensed Statements of Operations - -
Three Months Ended March 31, 1999 and 1998 4
Consolidated Condensed Statements of Cash Flows - -
Three Months Ended March 31, 1999 and 1998 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 9
Item 6(b) Reports on Form 8-K 9
Exhibit Index 11
</TABLE>
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<PAGE> 3
Part I - Financial Information
BADGER METER, INC.
Item 1 Financial Statements
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Assets March 31, December 31,
------ 1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 1,097 $ 2,371
Receivables 20,368 19,814
Inventories:
Finished goods 4,477 5,270
Work in process 9,690 10,089
Raw materials and purchased parts 6,417 7,044
-------- --------
Total inventories 20,584 22,403
Prepaid expenses 1,165 1,064
-------- --------
Total current assets 43,214 45,652
Property, plant and equipment, at cost 82,959 79,934
Less accumulated depreciation (44,071) (42,523)
-------- --------
38,888 37,411
Intangible assets, at cost less accumulated amortization 1,403 1,452
Prepaid pension 6,139 6,262
Deferred income taxes 2,947 2,930
Other assets 3,372 3,238
-------- --------
Total assets $ 95,963 $ 96,945
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Short-term debt $ 12,137 $ 14,315
Payables 9,482 10,174
Accrued compensation and employee benefits 4,290 5,521
Other accrued liabilities 4,429 4,386
Income and other taxes 1,768 480
-------- --------
Total current liabilities 32,106 34,876
Accrued non-pension postretirement benefits 7,290 7,459
Other accrued employee benefits 4,298 4,162
Long-term debt 2,600 2,600
Shareholders' equity:
Common Stock 3,426 3,392
Class B Common Stock 108 111
Capital in excess of par value 13,201 12,732
Reinvested earnings 40,728 39,198
Less: Employee benefit stock (2,600) (2,606)
Treasury stock, at cost (5,194) (4,979)
-------- --------
Total shareholders' equity 49,669 47,848
-------- --------
Total liabilities and shareholders' equity $ 95,963 $ 96,945
======== ========
</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 Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 38,397 $ 33,499
Cost of sales 23,623 20,056
---------- ----------
Gross margin 14,774 13,443
Selling, engineering and
administration 11,016 10,706
---------- ----------
Operating earnings 3,758 2,737
Interest expense 260 144
---------- ----------
Earnings before income taxes 3,498 2,593
Provision for income taxes 1,347 996
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Net earnings $ 2,151 $ 1,597
========== ==========
Per share amounts: *
Earnings per share:
Basic $ .58 $ .44
========== ==========
Diluted $ .55 $ .41
========== ==========
Dividends declared -
Common Stock $ .18 $ .15
========== ==========
Dividends declared -
Class B Common Stock $ .16 $ .14
========== ==========
Shares used in computation of:
Basic 3,679,033 3,613,471
Impact of dilutive stock
options 239,804 301,208
---------- ----------
Diluted 3,918,837 3,914,679
========== ==========
</TABLE>
* 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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<PAGE> 5
BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1999 1998
---- ----
<S> <C> <C>
Operating activities:
Net earnings $ 2,151 $ 1,597
Adjustments to reconcile net
earnings to net cash provided
by (used for) operations:
Depreciation 1,548 1,290
Amortization 49 33
Noncurrent employee benefits 96 336
Deferred income taxes (17) 3
Changes in:
Receivables (554) 472
Inventory 1,819 61
Current liabilities other than short-term debt (592) (139)
Prepaid expenses and other (101) (90)
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Total adjustments 2,248 1,966
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Net cash provided by (used for) operations 4,399 3,563
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Investing activities:
Property, plant and equipment (3,025) (2,331)
Other - net (134) 358
------- -------
Net cash provided by (used for) investing activities (3,159) (1,973)
------- -------
Financing activities:
Bank borrowings (repayments) (2,178) (2,581)
Dividends (621) (545)
Stock options and ESSOP 500 1,580
Treasury stock transactions (215) (141)
------- -------
Net cash provided by (used for)
financing activities (2,514) (1,687)
------- -------
Increase (decrease) in cash (1,274) (97)
Beginning of year 2,371 1,055
------- -------
End of period $ 1,097 $ 958
======= =======
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the period for:
Income taxes $ 182 $ 699
Interest ======= =======
$ 252 $ 168
======= =======
</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 of Badger Meter, Inc. (the "Company")
contain all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the consolidated condensed financial position
at March 31, 1999 and the results of operations for the three-month periods
ended March 31, 1999 and 1998 and the cash flows for the three-month
periods ended March 31, 1999 and 1998. The results of operations for any
interim period are not necessarily indicative of the results to be expected
for the full year. Certain reclassifications have been made to the 1998
data to conform to the 1999 presentation.
2. The consolidated condensed balance sheet at December 31, 1998, 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, 1998. Refer to the footnotes in those reports
for a description of the accounting policies, which have been continued
without change, and additional details of the Company's financial
condition. The details in those notes have not changed except as a result
of normal transactions in the interim.
3. During the three months ended March 31, 1999, the Company repurchased 7,082
shares of common stock for an aggregate purchase price of $236,369.
4. The Company continues to address the year 2000 software issues as discussed
in the Company's Annual Report to Shareholders for the year ended December
31, 1998. All upgrades are expected to be completed in the summer of 1999
and management does not expect to incur any significant costs in excess of
normal software upgrade costs. Testing has begun and will continue until
the implementation is complete. If this issue is not properly addressed by
the Company and its vendors, the Company could incur additional transaction
processing costs and there could be interruptions in the Company's supply
chain, resulting in increased costs as the Company obtains alternate
vendors. However, the Company does not expect to have any significant
problems with its products, systems or vendors as a result of this issue.
5. The various trusts of the Wright Family Voting Trust ("WFVT") continue to
sell Company common stock for diversification purposes. The WFVT released
for sale 34,984 shares in 1995, 38,850 shares in 1996, 21,400 shares in
1997, 49,450 shares in 1998 and no shares in the period ended March 31,
1999. The WFVT has indicated that these trusts presently intend to continue
diversifying in the future. The Company does not have a commitment to
purchase any of these shares.
6. In the ordinary course of business, the Company enters into various
material purchase agreements with its vendors, some of which contain
minimum purchase quantity commitments extending beyond one year. Future
purchase commitments are not expected to exceed normal usage requirements.
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<PAGE> 7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
While sales increased 11.3% for the first quarter of 1999 compared to the fourth
quarter of 1998, receivables as of March 31, 1999 increased only 2.8%, or
$554,000, from the December 31, 1998 balance due to improved collections.
Inventories decreased 8.1% as the production requirements were offset by
efficient inventory management. Property, plant and equipment (at cost)
increased $3,025,000 in connection with completion of the Milwaukee facility
expansion and remodeling plus other equipment purchases. Prepaid pension
decreased $123,000 since December 31, 1998, due to the recording of normal
pension expense with no funding payments required due to the overfunded status
of the plan.
Payables decreased $692,000 since December 31, 1998 due to timing of payments.
Accrued compensation and employee benefits decreased $1,231,000 primarily due to
payments of 1998 incentive compensation during the first quarter of 1999. Income
and other taxes payable increased $1,288,000 due to the timing of estimated tax
payments. Changes in accrued non-pension postretirement benefits and other
accrued employee benefits since December 31, 1998, were due primarily to the
timing of benefit payments.
Since December 31, 1998, common stock and capital in excess of par value both
increased due to new shares issued in connection with stock options exercised
and ESSOP purchases. Treasury stock increased due to shares repurchased by the
Company.
The Company paid down short-term debt by $2,178,000 since December 31, 1998 as
cash generated by operations exceeded cash requirements for fixed asset
additions and dividends.
As of March 31, 1999, the Company had approximately $39,800,000 of credit lines
with domestic and foreign banks of which $12,137,000 was in use. This compares
to $8,780,000 in use at March 31, 1998 and $14,315,000 at December 31, 1998. 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 1999 of $38,397,000 reflect a 14.6% increase
over sales of $33,499,000 for the same period in 1998, primarily due to higher
sales of both residential and commercial/industrial water meters. Gross margins
decreased from 40.1% in the first quarter of 1998 to 38.5% in the first quarter
of 1999. During 1998, the Company's water meter manufacturing facilities were
operating at near-capacity levels, generating significant favorable variances.
Manufacturing capacity was expanded through capital expenditures made during
1998 and 1999 to date, resulting in a return to more normal operating levels.
Selling, engineering and administrative costs increased 2.9% for the first
quarter of 1999 compared to the same quarter in 1998 due to normal salary and
expense increases. Interest expense increased between the periods due to higher
debt balances, partially offset by lower interest rates. Also, interest related
to the Milwaukee facility expansion was capitalized during the first quarter of
1998, but no such offset was made in 1999 due to completion of the expansion.
The effective tax rate for the first quarter of 1999 was estimated to be 38.5%,
which is comparable to the same period in 1998.
Earnings for the first quarter of 1999 were $2,151,000, an increase of 34.7%
over first quarter 1998 earnings of $1,597,000. This increase was due primarily
to 14.6% higher sales (partially offset by lower margins) while the Company's
selling, engineering and general expenses increased only 2.9%.
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<PAGE> 8
Other Matters
The Company is subject to contingencies relative to environmental laws and
regulations. Currently, the Company is in the process of resolving issues
relative to two landfill sites and litigation filed by the owner of property
near one of the Company's plants, which alleges damage to property value by
virtue of alleged spillage from past Company operations. Also, the Company is in
the process of settling a suit alleging violation of Proposition 65,
California's environmental regulation. The Company does not believe the ultimate
resolution of these claims will have a material adverse effect on the Company's
financial position or results of operations. Provision has been made for all
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> 9
Part II - Other Information
Item 6 Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits:
(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, 1999.
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<PAGE> 10
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 21, 1999 By /S/ Richard A. Meeusen
-----------------------
Richard A. Meeusen
Vice President - Finance and Treasurer
Chief Financial Officer
By /S/ Beverly L.P. Smiley
------------------------
Beverly L.P. Smiley
Corporate Controller
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<PAGE> 11
EXHIBIT INDEX
Page Number
(27.0) Financial Data Schedule
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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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,097
<SECURITIES> 0
<RECEIVABLES> 20,368
<ALLOWANCES> 0
<INVENTORY> 20,584
<CURRENT-ASSETS> 43,214
<PP&E> 82,959
<DEPRECIATION> (44,071)
<TOTAL-ASSETS> 95,963
<CURRENT-LIABILITIES> 32,106
<BONDS> 0
0
0
<COMMON> 3,534
<OTHER-SE> 46,135
<TOTAL-LIABILITY-AND-EQUITY> 95,963
<SALES> 38,397
<TOTAL-REVENUES> 38,397
<CGS> 23,623
<TOTAL-COSTS> 34,639
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260
<INCOME-PRETAX> 3,498
<INCOME-TAX> 1,347
<INCOME-CONTINUING> 2,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,151
<EPS-PRIMARY> .58
<EPS-DILUTED> .55
</TABLE>
