<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, 2000
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
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4545 West Brown Deer Road, Milwaukee, Wisconsin 53223
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 355-0400
None
---------------------------------------------
(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, 2000
- --------------------------- -----------------------------
Common Stock, $1.00 par value 3,370,391
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BADGER METER, INC.
INDEX
Page No.
Part I. Financial Information:
Item 1 Financial Statements:
Consolidated Condensed Balance Sheets - -
March 31, 2000 and December 31, 1999 3
Consolidated Condensed Statements of Operations - -
Three Months Ended March 31, 2000 and 1999 4
Consolidated Condensed Statements of Cash Flows - -
Three Months Ended March 31, 2000 and 1999 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
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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,
------ 2000 1999
---- ----
Unaudited)
<S> <C> <C>
Current assets:
Cash $ 911 $ 3,752
Receivables 27,280 24,278
Inventories:
Finished goods 5,099 4,077
Work in process 8,762 8,347
Raw materials and purchased parts 7,976 6,582
--------- ---------
Total inventories 21,837 19,006
Prepaid expenses 1,167 943
--------- ---------
Total current assets 51,195 47,979
Property, plant and equipment, at cost 89,167 87,733
Less accumulated depreciation (47,271) (45,617)
--------- ---------
41,896 42,116
Intangible assets, at cost less accumulated amortization 1,065 1,095
Prepaid pension 5,648 5,791
Deferred income taxes 2,236 2,213
Other assets 3,721 3,892
--------- ---------
Total assets $ 105,761 $ 103,086
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 15,108 $ 11,702
Current portion of long-term debt 4,976 4,887
Payables 9,857 10,499
Accrued compensation and employee benefits 4,231 5,914
Other accrued liabilities 3,785 3,716
Income and other taxes 1,273 111
--------- ---------
Total current liabilities 39,230 36,829
Accrued non-pension postretirement benefits 6,846 7,014
Other accrued employee benefits 4,741 4,741
Long-term debt 10,213 11,493
Shareholders' equity:
Common Stock 4,584 4,531
Capital in excess of par value 14,051 13,382
Reinvested earnings 48,090 46,445
Less: Employee benefit stock (2,600) (2,600)
Treasury stock, at cost (19,394) (18,749)
--------- ---------
Total shareholders' equity 44,731 43,009
--------- ---------
Total liabilities and shareholders' equity $ 105,761 $ 103,086
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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BADGER METER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
2000 1999
---- ----
<S> <C> <C>
Net sales $ 36,907 $ 38,397
Cost of sales 22,618 23,623
----------- -----------
Gross margin 14,289 14,774
Selling, engineering and
administration 10,701 10,877
----------- -----------
Operating earnings 3,588 3,897
Interest expense 515 260
Other expense (income), net (716) 139
------------ -----------
Earnings before income taxes 3,789 3,498
Provision for income taxes 1,432 1,347
-------- -----------
Net earnings $ 2,357 $ 2,151
=========== ===========
Per share amounts: *
Earnings per share:
Basic $ .71 $ .58
=========== ===========
Diluted $ .67 $ .55
=========== ===========
Dividends declared -
Common Stock $ .22 $ .18
=========== ===========
Dividends declared -
Class B Common Stock $ .00 $ .16
=========== ===========
Shares used in computation of:
Basic 3,310,517 3,679,033
Impact of dilutive stock
options 196,536 239,804
----------- -----------
Diluted 3,507,053 3,918,837
=========== ===========
</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. All of the outstanding Class B Common
Stock was converted to Common Stock on August 17, 1999.
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,
---------
2000 1999
---- ----
<S> <C> <C>
Operating activities:
Net earnings $ 2,357 $ 2,151
Adjustments to reconcile net
earnings to net cash provided
by (used for) operations:
Depreciation 1,654 1,548
Amortization 30 49
Noncurrent employee benefits (25) 96
Deferred income taxes (23) (17)
Changes in:
Receivables (3,002) (554)
Inventory (2,831) 1,819
Current liabilities other than debt (1,094) (592)
Prepaid expenses and other (224) (101)
------------ -----------
Total adjustments (5,515) 2,248
------------ -----------
Net cash provided by (used for) operations (3,158) 4,399
------------ -----------
Investing activities:
Property, plant and equipment (1,434) (3,025)
Other - net 171 (134)
----------- ------------
Net cash provided by (used for) investing activities (1,263) (3,159)
----------- ------------
Financing activities:
Net increase (decrease) short-term debt 3,406 (2,178)
Repayments of long-term debt (1,191) 0
Dividends (712) (621)
Stock options and ESSOP 722 500
Treasury stock transactions (645) (215)
------------ ------------
Net cash provided by (used for)
financing activities 1,580 (2,514)
----------- -----------
Increase (decrease) in cash (2,841) (1,274)
Beginning of year 3,752 2,371
----------- -----------
End of period $ 911 $ 1,097
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the period for:
Income taxes $ 156 $ 182
=========== ============
Interest $ 523 $ 252
=========== ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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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, 2000 and the results of operations for the three month periods
ended March 31, 2000 and 1999 and the cash flows for the three-month
periods ended March 31, 2000 and 1999. 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 1999
data to conform to the 2000 presentation.
2. The consolidated condensed balance sheet at December 31, 1999, 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, 1999. 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 discussed
below and as a result of normal transactions in the interim.
3. Other expense (income), net includes foreign currency gains and losses,
which are recognized as incurred. The Company's functional currency for all
of its foreign subsidiaries is the U.S. dollar. Other income for the first
quarter of 2000 also includes $750,000 of business interruption insurance
proceeds related to lost sales and margins as a result of a fire at a
vendor's facility during 1999.
4. 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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Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
Receivables as of March 31, 2000 increased 12.4%, or $3,002,000, from the
December 31, 1999 balance primarily due to extended terms offered to domestic
distributors and certain customers in Mexico. Inventories increased 14.9% as the
company increased stocking levels of certain long-lead electronic items.
Property, plant and equipment (at cost) increased $1,434,000 due to normal
equipment purchases during the quarter. Prepaid pension decreased $143,000 since
December 31, 1999, due to the recording of normal pension expense with no
funding payments required due to the overfunded status of the plan.
Since December 31, 1999, short-term debt increased $3,406,000 to fund increased
working capital, fixed asset additions and repayment of long-term debt. Payables
decreased $642,000 due to regular timing of payment processing. Accrued
compensation and employee benefits decreased $1,683,000 due primarily to payment
of 1999 incentives during the first quarter of 2000. Income and other taxes
payable increased $1,162,000 due to the timing of estimated tax payments.
Changes in accrued non-pension postretirement benefits and other accrued
employee benefits since December 31, 1999, were primarily due to the timing of
benefit payments. Long-term debt and the current maturities of long-term debt
decreased $1,191,000 due to regular monthly debt repayments.
Since December 31, 1999, 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 during
the quarter.
As of March 31, 2000, the Company had approximately $54,200,000 of credit
facilities with domestic and foreign banks of which $30,297,000 was in use. This
compares to $14,737,000 in use at March 31, 1999 and $28,082,000 at December 31,
1999. The Company believes that the present lines of credit are adequate to meet
operating requirements and future capital needs.
Results of Operations
Net sales for the first quarter of 2000 of $36,907,000 reflect a 3.9% decrease
over the first quarter of 1999. This decrease was primarily due to lower sales
of certain utility products due to several factors. A September 1999 fire at the
facility of one of the company's principal vendors continued to negatively
impact sales in the first quarter of 2000, although the impact of those lost
sales on net income was offset by business interruption insurance proceeds. The
six-month Federal Communications Commission freeze, which ended in December
1999, continued to have an impact on first quarter sales of certain automatic
meter reading products due to the disruption of the sales cycle. In addition, a
major automated meter reading systems alliance partner filed bankruptcy during
the first quarter of 2000, which created confusion in the market place and
impacted sales opportunities for products that were under development with that
partner. Finally, competitive market pressures had a negative impact on sales of
certain industrial flow meters. Management expects that these factors will
continue to impact the Company for an indefinite period of time.
Gross margins remained relatively flat, at 38.7% for the first quarter of 2000
compared to 38.5% for the first quarter of 1999. Selling, engineering and
administrative costs decreased 1.6% for the first quarter of 2000 compared to
the same quarter in 1999 due primarily to lower environmental accruals. Interest
expense increased between the periods due to higher debt balances, primarily the
long-term debt issued in August 1999 to repurchase stock.
Other expense (income), net, for the first quarter of 2000 included $750,000 of
business interruption insurance proceeds related to lost sales and margins as a
result of a fire at a vendor's facility in 1999. The effective tax rate for the
first quarter of 2000 was 37.8%, down from 38.5% in 1999 due primarily to the
favorable settlement of a tax audit in late 1999.
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<PAGE> 8
Earnings for the first quarter of 2000 were $2,357,000, an increase of 9.6% over
first quarter 1999 earnings of $2,151,000. The impacts of lower sales and higher
interest expense were offset by the insurance proceeds, and marketing and
administrative expenses for the quarter.
Basic and diluted earnings per share increased 22.4% and 21.8%, respectively,
for the first quarter of 2000 compared to the same quarter of 1999. These higher
increases (when compared to the 9.6% increase in net earnings) were due to the
reduction in shares outstanding as a result of stock repurchases.
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. 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.
Forward Looking Statements
Certain statements in this report, as well as other information provided from
time to time by 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 in the forward looking statements. The words
"anticipate," "believe," "estimate," "expect," "think," "should" and "objective"
or similar expressions are intended to identify forward looking statements. The
forward looking statements are based on the Company's current views and
assumptions and involve risks and uncertainties that include, among other
things: the success or failure of new product offerings; the actions and
financial condition of competitors and alliance partners; changes in domestic
conditions, including housing starts; changes in foreign economic conditions,
including currency fluctuations; changes in laws and regulations; changes in
customer demand and fluctuations in the prices of and availability of purchased
raw materials and parts. Some or all of these factors are beyond the Company's
control. Shareholders, potential investors and other readers are urged to
consider these factors carefully in evaluating the forward looking statements
and are cautioned not to place undue reliance on such forward looking
statements. The forward looking statements made herein are made only as of the
date of this document and the Company undertakes no obligation to publicly
update such forward looking statements to reflect subsequent events or
circumstances.
-8-
<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, 2000.
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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 20, 2000 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
Vice President - Controller
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<PAGE> 11
EXHIBIT INDEX
Page Number
(27.0) Financial Data Schedule
-11-
<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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 911
<SECURITIES> 0
<RECEIVABLES> 27,280
<ALLOWANCES> 0
<INVENTORY> 21,837
<CURRENT-ASSETS> 51,195
<PP&E> 89,167
<DEPRECIATION> (47,271)
<TOTAL-ASSETS> 105,761
<CURRENT-LIABILITIES> 39,230
<BONDS> 0
0
0
<COMMON> 4,584
<OTHER-SE> 40,147
<TOTAL-LIABILITY-AND-EQUITY> 105,761
<SALES> 36,907
<TOTAL-REVENUES> 36,907
<CGS> 22,618
<TOTAL-COSTS> 33,319
<OTHER-EXPENSES> (716)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 515
<INCOME-PRETAX> 3,789
<INCOME-TAX> 1,432
<INCOME-CONTINUING> 2,357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,357
<EPS-BASIC> .71
<EPS-DILUTED> .67
</TABLE>
